RSM to administrate Northern Ireland drinks maker

30 July 2018 Consultancy.uk

RSM has been called in to administrate a drinks company set up by one of Northern Ireland's best-known industry figures. Botl Wine and Spirit Merchants was established by industry veteran Jim O’Neill, and while it became an industry leader in the distribution of spirits, heavy investment in new gin and rum offerings has seen the firm over-stretch before folding.

2017 saw another bumper year in UK gin sales, with over 50 million bottles sold for the first time, worth £1.2 billion. With such demand in Britain for gin, it is no surprise that the 21st century gin craze has led to a boom in the number of businesses centring on either distilling or selling the spirit, with a growing number of ‘gin palaces’ doing both. However, the trend has understandably drawn comparisons with the great wine bar bubble of the 1970s and early 80s, and like the wine bar craze, the bubble is finally showing signs of bursting.

After almost a decade of exponential growth in gin sales in the UK, the collapse of a firm previously riding high on that wave of consumption suggested that others in the crowded sector might soon feel the pinch. Now, just weeks after Begbies Traynor was appointed to oversee the administration of GinFestival.com, which encountered financial troubles having over-stretched its e-commerce platform, another business placing its hopes on gin consumption has folded.

RSM to administrate Northern Ireland drinks maker

This time, it is a spirit producer itself which has collapsed, as Botl Wine and Spirit Merchants has gone into administration after financial difficulties, culminating in the loss of at least 10 jobs. The Belfast-based company entered insolvency proceedings following an extended period of product expansion, which notably saw the organisation spend £500,000 to launch Butterfly Cane Rum, an import from Trinidad sold in supermarkets including Asda, and Belfast 1912 Cask Gin, which announced a listing with Tesco last year.

Botl was launched by drink industry veteran Jim O'Neill – a former managing director of United Wine Merchants – in 2007 as a drinks wholesaler and distributor. O’Neill’s son Conor is sales director. While the group was profitable initially, margins had notably tightened in Botl's most recent accounts, with it reporting in the year ending September 30, 2015, that turnover had reduced to £10.7 million, down slightly from £11.7 million a year earlier, while pre-tax profits were down from £137,000 to £109,000. Moves in the gin and rum market were designed to appeal to new customers to buck this trend, with O'Neill commenting last year that the launch of Butterfly Cane Rum had been part of a bid to target a younger drinker.

The firm is likely to have fallen victim to heightened competition amid a bloated spirits market, but also to Brexit pressures, as importing ingredients for production with a pound decreasing in value will have become more pricey since 2016. Global consulting network RSM has been called in to oversee the winding down, with Stephen Armstrong and Jeremy Woodside being appointed joint-administrators.

A spokesperson for RSM said of the news, "The company was a leading distributor and wholesaler of wine and spirits working with bars, restaurants, retailers, wholesalers and national multiples across Northern Ireland and had 10 employees… The company was unable to continue to trade due to financial difficulties, so the decision was made to appoint administrators. All employees have been made redundant and administrators are working with them regarding their claims."

Related: RSM UK rescues boutique hotel with sale to Leeds entrepreneur.

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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.