Administration sees Bloodhound 1,000mph car hit the brakes

22 October 2018 Consultancy.uk

Consulting firm FRP Advisory has been appointed to oversee the administration of the organisation behind the Bloodhound turbo-car. The project to break the world land-speed record stalled after a £25 million investment shortfall saw it unable to complete the car’s construction.

Bloodhound is a supersonic vehicle built to race at more than 1,000 miles per hour. Using the same jet technology which powers the Eurofighter-Typhoon, it is acknowledged as the most sophisticated land speed record car ever conceived.

With a Rolls-Royce Eurofighter jet engine bolted to a rocket, once it got going, it would likely smash the existing world record of 763 miles per hour by some distance, while computer simulations have also indicated that it ought to be capable of going even faster still. Despite R&D being complete and production on the vehicle itself nearing completion, however, the project has hit a major roadblock, as it needs a £25 million shot in the arm if it is to finally take to its track on a dried-out lakebed in South Africa.

Administration sees Bloodhound 1,000mph car hit the brakes

Without the funds, the project faces being wound up in the coming weeks. To that end, administrators have been appointed from FRP Advisory, in a bid to bail out the organisation and match it to a suitable buyer. FRP Advisory is reported to have already begun to talk to potential suitors, while hoping to hear from others soon.

Explaining the situation, Andrew Sheridan from FRP Advisory’s Bristol office, told the BBC, "We have a legal entity that has gone into administration because it hasn't got any more cash. But there is a project there that is very much alive and on the cusp of delivering its goal, which is ground-breaking with leading technology. However, it does need circa £25 million to get it over the line, and that now requires an investor, be that a wealthy individual or a corporate of some kind.”

The last three years have been an especially tough environment in which to raise financial support for projects such as this. With British markets still mired in uncertainty thanks to the unknown quantity of Brexit, many large brands that might once have been keen to get their name on the side of Bloodhound to build awareness are now using other cheaper marketing tools, such as social media. By going into administration, Bloodhound Programme, the company behind Project Bloodhound, gets some breathing space to allow it to find a solution to this.

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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.