corporate recovery 11


How smart footwork can bring a team back from the brink of defeat


As we write this article in June 2012 there is one thing other than the ongoing economic crisis which none of us can get away from: football. England has just qualified for the knockout stages of Euro 2012, the men and women of Team GB are shortly to take on the world in the Olympics and, on August 18, the new Premier League season begins. Meanwhile, football has become more visible than ever in the courtroom and by availing itself of corporate recovery services


In this article, Mike Pavitt and Richard Atcherley of Paris Smith LLP look briefly at how insolvency has become commonly associated with football clubs and then, putting the boot on the other foot, ask what football can teach the business world about the use of corporate recovery to avoid own goals and to build from the back, ensuring future success and the rewards that go with it.


Stage one: Assess the conditions


Just as Roy Hodgson would not put out a team without carefully researching his opponent and fielding the best starting line-up to meet the threat, so businesses need to be aware of subtle changes in their marketplace.


There is no doubt that the 2011- 2012 season was a tough one for the UK economy. Its first double- dip recession in 37 years coincided with the likes of Portsmouth FC and Glasgow Rangers going into administration (and having a torrid time trying to exit through CVAs) while on the high street massive brands such as Game, Clintons and Blacks all had to seek administration protection. Most recently one of the world‘s largest gym operators, Poole- based Fitness First had proposed a CVA. The professional services sector has not been immune to the squeeze either, with a succession of law firms failing including the US-based giant Dewey & Leboeuf, whose London operation went into administration in May. There is of course no one common thread to such insolvencies save that many of these entities would at one time have been thought too big to be allowed to fail, and in some cases fail repeatedly. As a consequence, insolvency and corporate recovery have become front, back and business page news. Even the BBC has finally, it seems, learned the


Mike Pavitt


difference between administration and liquidation and stopped (wrongly) calling them both bankruptcy.


Paris Smith‘s insolvency & recovery group has followed developments very closely. We have dealt with every manner of increasingly- common insolvency exposure, from representing professional footballers owed money by their former clubs, to advising major landlords and suppliers attempting to navigate high-profile retail administrations and helping to guide a number of owners and managers of long-established companies through some of the toughest periods in their histories. We have seen everything from generations-old car dealerships going into administration to new start-up night clubs shutting the doors after only a couple of weeks of trading. Along the way we have concluded some of the highest value administration sales and purchases in the south in the face of some unusually difficult challenges to which we and our clients have had to adapt repeatedly.


Stage two: Adjust your game plan


The best starting line-up in the world can still be neutralised and broken down with the right tactics.


THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – JULY/AUGUST 2012 Richard Atcherley


The key is knowing when to make a change, and who to bring on as your 70th minute super-sub. The UK‘s corporate recovery industry has at its disposal some of the best and most adaptable tools available anywhere in the world, but it is not always able to deploy them to optimum effect.


The attention of the insolvency profession‘s trade bodies such as R3 has been largely diverted towards averting ill-conceived proposals for changes in insolvency legislation such as new pre-pack administration notice requirements, and forging a temporary carve out for insolvency litigation against the government‘s sweeping reforms to the recoverability of legal costs. Meanwhile, in the courts we have had to contend with a series of contradictory and unhelpful decisions on the validity of administration appointments and the continuation of structures such as the so-called ‘Football Creditor Rule‘ which has thus far survived a challenge which could have helped dozens of businesses whose exposures to failing football clubs and their trading partners have been exacerbated by the priority afforded to the proponents of ‘the beautiful game‘. To deal with these threats and opportunities it has often been


necessary to adopt a wait-and-see approach, other times to engage in fancy footwork.


Much of Paris Smith‘s time in this respect has been given over to helping businesses keep track of these fast-moving developments, putting out an almost daily stream of client guides and briefings in order that businesses can be best positioned to take advantage of the limited opportunities which do still arise. The launch of the Paris Smith Business Club has been an important part of this strategy.


Stage three: Perseverance


As anyone who has followed the Euro 2012 group stages or the recent history of Southampton FC would testify, one loss is not the end of a campaign. By the same token, recourse to corporate recovery procedures is no bar to long-term success. As Saints celebrate their return to the Premiership and a level of funding untasted in recent years, they can look back on their post-administration period which led to back-to-back promotions as an overall positive experience.


The lesson for other businesses is clear: not to allow a temporary setback to stifle your goals. It is important therefore to realise that corporate recovery services are a valuable means to an end. They allow us to change our system to cope with a difficult opposition and to turn a half-time deficit into a full-time win. It follows that as a business community we should, when appropriate, embrace them.


Details:


Mike Pavitt Lead insolvency partner Insolvency & recovery group 023-8048-2275 mike.pavitt@parissmith.co.uk


Richard Atcherley Senior associate Insolvency & recovery group 023-8942-4105 richard.atcherley@parissmith.co.uk


www.businessmag.co.uk


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