Deloitte CF appointed administrator of PaperlinX UK

03 April 2015 Consultancy.uk

A number of PaperlinX UK businesses have gone into receivership, with 693 of its 1,200 UK staff made redundant as well as the prospective closure of the company’s sites. Deloitte has been called in to administrate the businesses involved, and is looking to realise the value of the businesses stock and asset as well as prospective buyers for the businesses.

PaperlinX is an international merchant of fine paper, industrial packaging products and equipment, communication materials, and diversified products and services. The company, which is founded in 2000 and headquartered in Australia, operates in 20 countries, with its brand name ‘PaperlinX’ in the UK and Europe and ‘Spicers’ In Canada, Asia and Australasia.

As a result of the continued lower demand for paper and decline in margins in the UK, the company commenced a strategic review in December last year. In February 2015, PaperlinX provided an update on the review and outlined Underlying EBIT losses for the European business of €14.9 million, mainly due to a “shortfall in earnings from Commercial Print divisions in the UK and the Benelux.”

Decreasing demand for physical services

Administration
Now, a month later, it is announced that a number of PaperlinX UK’s businesses have entered receivership, including the Robert Horne Group, Howard Smith Paper Group, The Paper Company, and PaperlinX Services (Europe). The UK packaging businesses - Parkside Packaging, 1st Class Packaging and Donington Packaging Supplies – are not involved in the administration.

To oversee the administration, Matt Smith and Neville Kahn from professional services firm Deloitte have been appointed Joint Administrators. In a statement, Smith says: “The administration appointment specifically relates to PaperlinX UK’s paper and visual technology solutions businesses. The industry has faced an increasingly challenging environment due to falling demand as digital communications have increased. We are investigating how best to maximise value in the businesses for the benefit its creditors.”

Deloitte appointed administrator of Paperlinx UK

The reality of the administration was delivered to the staff of PaperlinX’s affected businesses on the 1st of April. Whereby 693 of its 1,200 UK staff made redundant, as well as plans to close 14 of its sites disclosed, with many of its sales offices closed directly. “Employment specialists from the Joint Administrators team will be making sure affected employees are supported in making their claims to the Redundancy Payments Service for redundancy, pay in lieu of notice and any other appropriate claims. A dedicated email address and helpline for employees has also been established,” explains Smith.

In a bid to realise the value of the businesses stock and assets, some of the businesses would continue to operate “on a limited basis”. With Deloitte looking for buyers for the businesses involved in the administration as well as the wider PaperlinX UK businesses not pulled into administration. PaperlinX wider operations in Ireland, mainland Europe, Asia and Australasia are unaffected.

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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.