Teneo selected for Cazoo administration

24 May 2024 Consultancy.uk 4 min. read
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Another of the world’s fabled tech unicorns has gone belly-up, with the news that car sales platform Cazoo has called in administrators. Having already laid off more than 1,400 staff since 2022, a further 200 jobs could still be on the line.

Founded in 2018 by Alex Chesterman, Cazoo is a British online car retailer based in London. It launched an online marketplace for used cars in December 2019, which became its primary business. With hype around digital platforms sweeping many similar “this, but online” companies to ‘unicorn’ status, Cazoo cashed in in 2021 by listing on the New York Stock Exchange.

As of its listing the company had a valuation of $8 billion – making it part of the infamous ‘unicorn’ club. This fuelled rapid expansion internationally, launching used car marketplaces in Germany and France, and in early 2022 expanded briefly into Italy and Spain. It also took on a number of lucrative sponsorship opportunities in sport – and may actually be better known among consumers as a shirt sponsor for the likes of Everton and Aston Villa, than as an automotive dealer.

Teneo selected for Cazoo administration

Certainly, it does not seem that many people actually knew the firm for its trading. Cazoo since entered a nosedive – and it lost over 97% of its market value, before Chesterman stepped down as CEO in January 2023. Before that, Cazoo had announced it would abandon its business in the European Union, closing its operations in France, Germany, Italy and Spain and making all 750 of its EU employees redundant, leaving only its UK operation in business. Since 2023, meanwhile, 15 of its 22 showrooms closed.

This major restructuring saw $630million worth of debt converted to just $200 million. But this still proved not to be enough, and Cazoo then said in 2024 it would no longer be buying and selling cars. It closed its remaining showrooms, aiming to become purely an online market place. This pivot led to a further 728 redundancies – but did not stave off the eventual news that Cazoo would be going into administration; placing its 208 remaining roles at risk of redundancy.

The online car retailer – formerly touted as ‘the Amazon of the vehicle dealership world’ has appointed Teneo as administrators, who will now be instructed to sell its assets.

Speaking on the news, joint administrator Matt Mawhinney said, “Following Cazoo’s decision to pivot to a marketplace model, the group has been winding down its legacy operations and sold a substantial number of its businesses and assets. These sales have generated additional value for creditors, preserved a significant number of jobs, and ensured that leases have been transferred to new operators to mitigate losses to landlords.”

He added that Teneo’s professionals would continue to progress discussions with “a number of interested parties on the marketplace business and remaining customer collections centres”. He also noted that the pivoted marketplace model was “performing ahead of expectations, with strong dealer sign-up”. This provides “an opportunity to secure a sale of the business over the course of coming weeks.”

Unicorn extinction

In business, a unicorn is a privately held startup company valued at over $1 billion. The term was first published in 2013, coined by venture capitalist Aileen Lee, choosing the mythical animal to represent the statistical rarity of such successful ventures – and has since been applied relentlessly to heavily hyped new businesses in every conceivable sector – often promising to leverage a vague suite of ‘digital’ tools and experiences to disrupt industry incumbents.

As demonstrated by names such as WeWork and now Cazoo, the material reality of this hype is often very different to the transformative stories sold by unicorn valuations, though. Providing services that consumers value to the extent they will spend billions on them is very different to being valued with a $1 billion dollar price tag ahead of an IPO. More often than not, for all the metrics deployed to justify them, market capitalisation prices for the total value of all a company's shares of stock reflect little more than a wild guess as to what said traders would do to a company given the chance – and are as definitive as the odds available to punters at a bookmaker.

In 2023, a study from PwC suggested that the 100 most prominent unicorns in global business attracted $10 billion less from investors in 2023 than the last year. Amid a ‘challenging macroeconomic environment’, the researchers suggested that investors were being more cautious with which firms they backed – and focusing more intently on profitability than previously.