Duff & Phelps helps secure future of Banham Poultry

09 October 2018 Consultancy.uk

More than 1,000 jobs have been safeguarded by the sale of one of Norfolk’s largest employers. Banham Poultry had lapsed into administration; however, Duff & Phelps is understood to have helped broker a deal to keep the meat producer in business.

Banham Poultry has been trading since 1965 and has a turnover of approximately £100 million per year. The poultry producer is based in Attleborough, Norfolk, and is among the county’s largest employers, with a headcount in excess of 1,100. The business specialises in chicken production and its products are sold in grocery stores and small supermarkets around the UK, processing over 1,200,000 birds a week. Despite its long history, however, the company’s future in the region was suddenly cast into doubt in 2018, amid confusion surrounding a proposed sale.

Initially wrongfully reported by a local Member of Parliament as an administration procedure, the plant was in fact made available for purchase by its owners. George Freeman, the Conservative MP for Mid Norfolk, had tweeted that the company had gone into administration, but later issued a clarification. According to a further tweet from Freeman, “I understand not in administration but Lloyd’s bank pushing in that direction if a buyer cannot be secured.”

Duff & Phelps helps secure future of Banham Poultry

Banham’s Chief Executive Martyn Bromley denied this, instead stating it had been "a complete misunderstanding", and he was currently in discussions with Big Four auditing and advisory firm EY about "doing a deal." He added, "We're in negotiation to find the right home for the business... We have currently got the support of the bank and EY to make sure that all suppliers and employees are going to be paid until a transaction has been transacted."

According to Bromley, trade had "not been good for the last two or three months", and the news of the prospective sale came at a difficult time for the company. Earlier in October, two men – aged in their 30s and 40s – from a pest control company died at the poultry firm's factory, after a suspected gas leak.

At the time, Bromley suggested his "main objective" was to "maintain employment in Attleborough," but he also confirmed that the option of closure was indeed still on the table. As it turned out, the initial reporting of MP George Freeman had not been entirely wrong. While at that point, administrators had not been appointed, days later the firm was forced to do just that.

Allan Graham and Trevor Birch, both of Duff & Phelps, were appointed joint administrators, and on appointment, they secured the sale of the businesses, saving both jobs and guaranteeing no breach of animal welfare regulations in the process.

Allan Graham stated, “The business has faced a perfect storm in recent months, with increasing margin pressures from supermarket chains as a result of price competition, combined with increases in feed prices. It had been undertaking a number of capital projects designed to improve productivity in the longer term but these have impacted short term profitability which in turn has hit margin.”

In a statement following the purchase, Nadeem Iqbal, joint director of Chesterfield Poultry, told the media he saw a bright future for the company. He added, "All the jobs are secure. It's no good having a factory if we have not got a workforce... We see Banham Poultry as a growing business."

Banham Poultry had been bid for by two companies prior to administration, with one planning to shut the business down. Fortunately for the 1,000 strong workforce in Attleborough, Norfolk, that offer was declined in favour of Chesterfield Poultry.

Related: FRP to administrate farmer-owned Angus Cereals.


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.