corporate recovery 23 Will zombie businesses fail?
Are we beginning to see the long-promised fall out of zombie companies and the onset of director fatigue? asks Carl Jackson, partner at Quantuma Restructuring, a restructuring and insolvency practice based in Southampton
Carl Jackson started his new business, at Oxford Street, Southampton, in January, and since then it has been involved in a variety of restructuring assignments in southern England, some with positive outcomes and others less so.
“On assignments to date,“ he said, “we have come across the whole gambit of reasons for difficulty or failure such as loss of largest customer where a business was too reliant upon one source of revenue; diversification into an unprofitable sideline which soaked up too much working capital; theft and embezzlement by a financial controller; inadequate working capital to fund business growth; a director/shareholder taking too much out in drawings and salary, leaving the balance sheet undercapitalised; and poor accounting and forecasting systems,
finance WK Corporate Finance – it‘s about
people and personal contacts I am always being asked what a corporate finance adviser does, so rather than write another article about buying or selling a business, I thought I would ring the changes and write something about that, writes Philippa Robinson, director, WK Corporate Finance
My main role is undertaking the WK Corporate Finance lead advisory side of any work that we do for our clients. Currently I am advising on four sale mandates, an advisory strategic planning piece and acquisition searches in the healthcare and manufacturing sectors.
As part of top 20 UK chartered accountancy firm Wilkins Kennedy LLP, we work with a variety of UK and overseas funders including venture capital providers, banks and asset-based lenders . We also have strong international connections though our long-standing membership of international accounting organisation IAPA.
So in order to do my job, I need to know the right people to go to
conference. This was an excellent opportunity to meet with fellow advisers from as far and wide as Canada, Australia and China as well as most European countries. I came away knowing the types of deals that they are looking for and also having a good understanding of how the M&A climates are in their territories.
and that means getting out there and talking to contacts, funders and other advisers, so in early June I returned from Bucharest where I was leading the Deals and Opportunities Forum at the IAPA
THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – JULY/AUGUST 2013
As I said, networking is an important part of what we do and I was pleased to attend the prestigious Business Magazine Solent Deal Awards, a great annual event to have back on the south coast – it was good to catch up with so many familiar faces.
I also recently organised the monthly event of my local women‘s networking club with 30 ladies
www.businessmag.co.uk
coming along to Wickham Vineyard for an informal evening of catching up and networking.
Finally, Wilkins Kennedy held a drinks party at Jury‘s Inn in Southampton to officially welcome me to the WK Corporate Finance team as director, so clients and contacts could meet and learn a bit about me. I particularly enjoy working with owner-managed businesses and I am really looking forward to working on many more corporate finance deals in the Thames Valley and Solent areas.
Details: Philippa Robinson Director Winchester, Guildford, Egham, Reading, Romsey 01962-852263
philippa.robinson@
wkcf.co.uk
Andy Coghlan Managing director London Bridge 020-7403-1877
andy.coghlan@
wkcf.co.uk
meaning it was too late to identify loss-making activities.“
Many directors of distressed businesses display the ‘ostrich characteristic,‘ Jackson added, stating they are often in denial until it is too late. However, he thinks times are changing: “One very common theme, coming through in a number of meetings recently, is what I would call ‘director fatigue‘.
“Directors have come to me to say they have had enough and they want to throw the towel in, in one or two cases, even where I thought there was a genuine, underlying viable business. Reasons for the fatigue were the long recession and not seeing an end in sight to the struggle; others had not taken any drawings nor salary for months and had used up personal funds to prop up the company, while others cited lenders‘ failure to support the business – and
lastly, a frank admission of being just too tired to carry on.“
Returning to the question “does this mean we are seeing the long-awaited fall out of zombie companies?“ Jackson observed: “I am not sure, but I do think the volume of true zombie companies in the UK has been overstated, and many will survive and prosper in the future with a proper restructuring plan. However, there is no doubt that because of the prolonged period of economic uncertainty, low growth and still lack of available external funding, many businesses within the zombie category will fail.
“I believe the driver for this will ultimately be the directors of those companies themselves, who have simply run out of steam. We shall see during coming months whether company failure rates reflect these views.
“However, the advice to all distressed businesses remains the same – identify and recognise problems as soon they occur, don‘t bury your head in the sand, but seek out advice from restructuring professionals and funders as soon as possible. This approach will significantly increase the odds of business survival.“
Details: Carl Jackson 023-8033-6464
carl.jackson@quantuma.com www.quantuma.com Follow: @quantuma1
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