Style Group Brands sold by KPMG administrators in bid to avoid mass layoffs

13 June 2017 Consultancy.uk

The iconic womenswear retailers Style Group Brands, which ran into financial strife earlier this year, has been sold to a subsidiary of Calvetron Style Holdings for an undisclosed sum, in a deal advised by KPMG administrators. While the chain’s acquisition is set to save around 1,719 jobs across its global network, including 1,272 in the UK, around 272 jobs are still to be cut.

Style Group Brands, founded in 1972, is a UK-based fashion house and womenswear concession retailer, with various brands under its belt – including Jacques Vert, Precis Petite, Eastex, and Dash. The company has since expanded around the world, with 318 concessions, and 22 standalone stores, in the UK and Ireland, 7 in Belgium, 51 in Canada and 14 in the Middle East.

Before entering administration earlier in 2017, the company employed around 1,900 staff. Since then, Style Group have been searching for a buyer to secure their future. At the start of June KPMG’s Will Wright and Rob Croxen were appointed joint administrators of Style Group Brands, and with the consulting firm’s representatives quickly completing an agreement to sell the majority of the business and assets to a subsidiary of Calvetron Style Holdings.

While the deal, the value of which has not been disclosed, is expected to preserve the majority of jobs across Style Group Brands, with some 1,719 staff are anticipated to be secure, KPMG have noted that around 272 people still stand to be made redundant, including 98 at the company’s Head Office in Shoreditch along with warehouse workers based in County Durham – largely due to 17 independent Jacques Vert stores not being part of the sale.

Style Group Brands sold by KPMG administrators in bid to avoid mass layoffs

The recently announced deal with Calvetron, a new investment vehicle for businessmen Sandeep Vyas and Haseeb Aziz, was also backed by former chairman of the British Fashion Council, Harold Tillman. The wider market remains tough for high-street retailers, with pure play players, new business models and growing international competition putting pressure on a range of iconic British brands.

Joint administrator Will Wright, of KPMG, commented, “The deal rescues one of the UK’s leading concession retailers and will see the continued trading of four high street brands, preserving a large number of jobs. It is a positive outcome given the challenging economic pressures faced by retailers across the UK.”

Wright added, “Whilst a significant number of jobs have been preserved, sadly redundancies will be made. Over the coming days, our priority is to ensure all employees who have been affected by redundancy receive the information and guidance they need in order to claim their entitlement from the Redundancy Payments Office.”

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8 tips for successfully buying or selling a distressed business

18 April 2019 Consultancy.uk

Embarking on the sale of a business is one of the most challenging experiences a management team can undertake. Even serial dealmakers acknowledge that the transaction process can be gruelling, exposing management to a level of scrutiny and challenge through due diligence that can be distinctly uncomfortable.

So, to embark on a sale process when a business is in distress is twice as challenging. While management is urgently trying to keep the business afloat, they are simultaneously required to prepare it for scrutiny by potential acquirers. Tim Wainwright, an experienced Transactions Partner with Eight Advisory, says that this dual requirement means sellers of distressed businesses must focus on presenting their business in a way that supports buyers in identifying value, whilst simultaneously being open about the causes of distress. 

According to Wainwright, sellers of distressed businesses should focus on eight key aspects to ensure they are as well prepared as possible:

  • Cash: In a distressed situation cash truly is king. Accurate forecasting and day-by-day cash balances are often required to ensure any buyer is confident that scarce cash reserves are under proper control. 
  • Equity story and turnaround plan: Any buyer is going to want to understand the proposed turnaround strategy: how is the business going to enact its recovery and what value can be created that means the distressed business is worth saving? Clear presentation of this strategy is essential.
  • The business model: Clear demonstration of how the business model generates cash is required, with analysis that shows how financial performance will respond to key changes – whether these are positive improvements (e.g., increases in revenue) or emerging risks that further damage the business.  Demonstrating the business is resilient enough to cope with these changes can go a long way to assuring investors there is a viable future.
  • Management team: As outlined above, this is a challenging process. The management team are in it together and need to be consistent in presenting the turnaround. Above all, the team needs to be open about the underlying causes that resulted in the distressed situation arising.  A defensive management team who fail to acknowledge root causes of distress are unlikely to resolve the situation.

8 tips for successfully buying or selling a distressed business

  • Financing: More than in any traditional transaction, distressed businesses need to understand the impact on working capital. The distressed situation frequently results in costs rising as credit insurance becomes more difficult to obtain or as customers and suppliers reduce credit. Understanding how these unwind will be important to the potential investors.
  • Employees: Any restructuring programme can be difficult for employees. Maintaining open communications and respecting the need for consultation is the basic requirement. In successful turnarounds, employees are often deeply engaged in designing and developing solutions. Demonstrating a supportive, flexible employee base can often support the sale process.
  • Structuring: Understanding how to structure the business for the proposed acquisition can add significant value. Where possible, asset sales may be preferred, enabling buyers to move forward with limited liabilities. However, impacts on customers, employees and other stakeholders need to be considered.
  • Off balance sheet assets: In the course of selling a distressed business, additional attention is often given to communicating the value of items that may not be fully valued in the financial statements. Brands, intellectual property and historic tax losses are all examples of items that may be of significant value to a purchaser. Highlighting these aspects can make an acquisition more appealing.

“These eight focus areas can help to sell a distressed business and are important in reaching a successful outcome, but it should be noted that it will remain a challenging process,” Wainwright explains. 

With recent studies indicating that the valuation of distressed business is trending north. With increased appetite from buyers who are accustomed to taking on these situations, it is likely that more distressed deals will be seen in the coming months. “Preparing management teams as best as possible for delivering these will be key to ensuring these businesses can pass on to new owners who can hopefully drive the restructuring required to see these succeed,” Wainwright added.