Common People Festival falls into administration

04 February 2019 Consultancy.uk

Corporate rescue and restructuring consultancy Begbies Traynor has been appointed administrator for the Common People Festival. The company behind music events in Oxford and Southampton owes creditors more than £500,000, and it is unclear whether it will be able to clear these debts during the liquidation process.

With consumer power having been severely impacted by stagnant wages and increasing household debt, many aspects of the UK leisure industry have been impacted in recent times. Even the music festival scene, which attracts roughly 14 million visitors to the UK every year, has taken a hit.

Last year, one of the 10 largest music festivals in the UK folded, following an expensive relocation to the Lulworth Estate in Dorset. The group behind Bestival collapsed into administration in September 2018, just months after the latest instalment of the event – which was headlined by the performers Chaka Khan, Grace Jones and Thundercat. Now, another festival group, which shares Bestival’s founder, has followed suit.Common People Festival falls into administration

Organised by DJ Rob da Bank, Common People Festival’s line-up in 2018 featured The Jacksons, James, Ride, Boney M, and Lily Allen. However, the company owes £543,546, according to a statement posted with Companies House, and has been unable to continue in its current form. As a result, consulting firm Begbies Traynor has been appointed to liquidate the company.

Talking to local paper the Daily Echo, Julie Palmer of Begbies Traynor stated it is unclear as to whether the companies will be able to clear the debts. She explained that "they have got some potential" to pay off the debts before adding "if there is a recovery it won't be a particularly large recovery."

There will be no edition of the event this year, meanwhile, which will likely impact the economies of Southampton and Oxford. A spokesman from Begbies Traynor, said, “Common People (Oxford) and Common People Festival went into liquidation and the business and its assets were not bought by any other company. As a result there will be no Common People festival in 2019.”

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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.