Leonard Curtis to oversee administration of viral media firm Unilad

10 October 2018 Consultancy.uk

Partners from Leonard Curtis Business Rescue & Recovery have been appointed joint administrators of viral news and pop culture website Unilad. The site, best known for its regular updates on Facebook, collapsed after accruing debts of more than £6 million.

Launched in 2010 by Alex Partridge, then a 21-year-old student at Oxford Brookes University, Unilad is a digital media company which provides social news and entertainment – though its “social-first” approach means it is broadly associated with more sensationalised stories than hard-hitting journalism. Since its launch, the group has expanded to offices in London and Manchester, but its ownership has also changed hands in acrimonious circumstances, something at the heart of its current predicament.

In 2014, Liam Harrington and Sam Bentley acquired ownership of the brand name and inherited its Facebook page. Following his exit from the group, Alex Partridge took the holding company's new owners, Bentley Harrington, to court. Partridge successfully argued he had been cut out of the business, and Bentley Harrington was ordered to pay him the sum of £5 million. On top of this, earlier in October, the company was also found to owe HMRC an additional £1.5 million in taxes.

Leonard Curtis to oversee administration of viral media firm Unilad

Administration came after a hearing at a specialist Insolvency and Companies Court in London. During proceedings, Judge Clive Jones heard that a creditor and directors of the firm agreed that administrators should be appointed. As a result, two Partners at corporate recovery consultancy Leonard Curtis have been appointed as Unilad’s joint administrators.

Andrew Poxon and Andrew Duncan are now seeking offers for the business, as they look to “preserve jobs and maximise the return to creditors”. The company employs more than 200 people, and according to Leonard Curtis, Unilad regularly achieves four billion monthly video views across nine channels. The Unilad Facebook account alone has 39 million followers and posts viral videos and news stories.

According to reports circulated by the UK press, Unilad’s existing financial backer, Linton Capital, has offered the administrators £10 million in cash “to acquire the substantial part of the business”, as part of a joint bid with the internet investment company Rocket Sports. Rocket Sports, is a network of 300 news creators on social media.

Meanwhile, HM Revenue and Customs officials have issued a petition to wind up Bentley Harrington in separate litigation. That case will come to court on 31 October.

Related: Begbies Traynor quickly sells Bestival out of administration.

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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.