Manufacturing Business – Case Study

Tue 19 Jul 2016

Mazars LLP were instructed to assist a company based in West Yorkshire which manufactured cylinders for a large customer base, many of which were based overseas.  However, they had been affected by the increase in competition from other manufacturers, many of whom were based abroad, which meant that they were struggling to compete on pricing.

The company had taken measures to reduce costs and had sold another property, however when the proceeds from that sale had diminished, they were forced to look at their insolvency options.

As the company had a large amount of work in progress at the date advice was sought, much of which was nearing completion, it was agreed that the best strategy would be to trade the business under an Administration, with a view to winding it down and selling the assets in due course.  This enabled the Administrators to complete as much of the work in progress as possible and to collect in the existing debtor book at the same time, therefore managing the secured creditors’ exposure.

At the outset, the Administrators made a large proportion of the workforce redundant, whilst retaining those employees who were required to complete the outstanding contracts which were profitable.  The Administrators then traded the business for a number of weeks, whilst their valuers sought potential buyers for the plant and machinery.

During this process, the Administrators were approached by a company which was backed by private investors, who were looking at purchasing an engineering/manufacturing business to add to their portfolio. Working alongside the valuers, the Administrators negotiated a sale of the business with the purchaser, which resulted in a sale of the business and certain assets as a going concern, together with the novation of the finance and hire purchase agreements to the purchaser. This preserved the goodwill and enabled the contracts to be completed, as well as saving the jobs of the remaining staff.