Timely reminders on how to survive and thrive
HARDER economic times call for a radical change in business attitudes to identify new threats and opportunities, as Matt Collen, partner with Muckle LLP explains.
IT’S now nearly 20 years since the last recession and many business people have forgotten – or never had to learn – how to operate in that environment. So maybe, as the credit crunch bites, it’s time to remind ourselves of some of the problems, but also, some of the opportunities that can arise.
At Muckle LLP we have an experienced team of senior people in place who can offer detailed and practical advice across all sectors to businesses operating in a difficult economic environment.
It’s that testing environment which will allow quality businesses to show their strength. Astute businesses will see a slow down as the right time to get a better grip on their own organisation, reviewing what they have. Is it core? Is it delivering value? Are assets working hard enough? Can costs be cut and liabilities shed? Businesses that do not go through the process provide those that do with the opportunity to pick up customers, business, assets, property and good people. It is not survival of the fittest – more survival of the sensible – and opportunity for the fittest.
Businesses and investors looking for acquisitions may be presented with some real bargains. There is a great deal of difference between buying a business before it goes into administration, when goodwill will be worth something, and buying it when it is in administration, when the goodwill could be worth nothing. On the other hand, it might sometimes be worth making an offer before a business goes into formal administration and so avoid an auction.
But, if you are going to take up such opportunities, you have to move quickly. You must be properly resourced and have done your research. There’s plenty of funding out there for the right businesses and the right deals, but you have to know where to look and to find possible acquisition targets, we could talk to our extensive network of contacts, or the purchaser can be alert to rumours and intelligence within their particular sector.
Last year, for example, we advised Corbridge-based restaurant business Shire Group in its acquisition of London restaurant chain Smollensky’s in a deal which more than doubled Shire’s size.
Smollensky’s was bought out of administration in a deal which involved putting together a £10m funding package at short notice. The transaction gave Shire more southern outlets, with nine London restaurants to add to those it already had in the Midlands and the North West.
An economic downturn, however, does not just mean opportunities. Clearly it brings with it some real threats and difficulties and businesses cannot afford to ignore these. On the contrary a change of mindset is called for, a whole new way of looking at one’s own business and those of others.
At Muckle LLP, we have teams of leading experts who can help. Our debt recovery team can work with you to reduce debtors, debtor days and overall risk. The team can offer a powerful online tool for reviewing debt recovery matters instantly – Liberate On-line.
Most businesses buy and sell stock or products. Many do little else. It’s worth talking to us to establish where you would stand if a customer or supplier went bust. Don’t assume that just because you paid for kit it belongs to you and that you will be able to claim it in priority to others. Similarly don’t assume that a retention of title claim in your standard terms of supply will protect you in all circumstances. Risk levels have increased and the current environment justifies a more sophisticated approach to ensuring that you really can secure what’s yours: Muckle LLP has a range of creative solutions to protect you ranging from tightly drafted bespoke agreements, to registration of interests at Companies House or the Royal Courts of Justice.
Nor can a business afford to ignore the implications of different rules that apply to property. A landlord has legal remedies that are not available to other businesses, with a power of distraint over a tenant’s goods in the event of unpaid rent. This could effect a business if it has stock, which it owns, on the premises of a customer, supplier or a third party warehousing facility, which are struggling to pay their rent, giving rise to a risk that the landlord could seize the stock. On the other side of the fence, if you are a landlord and your tenant is defaulting on the rent, you must take care that any arrangement that you may enter into with your tenant for payment of the arrears, does not have the effect of waiving your rights to take enforcement action in the future.
Inevitably, and sadly, in any recession, employment is likely to be an issue and a business may well have to take advice on a redundancy programme or other reorganisation of its staffing needs.
It is even more important when the job market is tight to make sure you get any redundancy process correct; when a new job is easy to find, losses are smaller and an aggrieved employee might not be disposed to go to an employment tribunal but in harder times they may feel they have nothing to lose and everything to gain from a claim where an employee may be out of work for a considerable time.
Dealing appropriately and effectively with any redundancy programme can also be vitally important for retaining morale amongst the remaining workforce who will always be affected by seeing colleagues leave. At Muckle LLP we can provide advice on these and other issues or, if you are simply worried about the state of your business and its preparedness for the months ahead, we are happy to have a chat with you and maybe refer you to our other specialists in our extensive network of contacts among accountants, investors, bankers, insolvency practitioners and others. It may be that your fears are ungrounded, but it is better to seek advice at an early stage and not bury your head in the sand and hope that everything will turn out fine.
If you would like to talk to some, or all of Muckle LLP’s team of experts, call Matt Collen on (0191) 211-7962.
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