This Advisory newsletter focuses on areas that our advisory practice has experienced growth in over the last 12 months which can broadly be categorised as follows:
- Solvent voluntary liquidations
- Acquisition and disposal of SME businesses
- Restructuring and Insolvency
Solvent voluntary liquidations
Those that had been contemplating the idea of retiring and/or exiting their business have accelerated this process by winding up their business and extracting cash. In some instances, this involved a disposal of the business to another party just prior to liquidation and in others it involved an accelerated orderly winding down and ceasing of operations.
Members voluntary liquidations are an efficient and effective way for shareholders to extract cash.
Acquisition and disposal of SME businesses
Prior to the pandemic this was an area that had been in growth phase as evidenced by the number of M&A transactions taking place. The pandemic did disrupt the flow of transactions. However, as 2020 progressed, transactions of businesses that had a solid core base and remained resilient throughout the pandemic did progress and complete.
While 2021 has gotten off to a slow start which we are attributing to the mindset caused from lockdowns, those that had been considering either a disposal or acquisition of a business have this now back on their agenda.
As the year progresses and indeed into 2022 and beyond, we predict that there will be an uplift in transactions with consolidation taking place in some sectors.
Restructuring and Insolvency
Leaving the risks posed to our health aside for the moment, the last 12 months have had a disruptive and challenging impact on businesses, with some having been affected more than others. Lots had been forced to close with uncertainty around when exactly they will be allowed to open. For others it is a question if they should ever reopen. For those that have managed to keep businesses trading, it hasn’t been easy.
Some have taken hard decisions and implemented actions necessary for the survival, the consequences of which have and will continue to have negative impact on their stakeholders. Those, that for one reason or another, have not taken the hard decisions, are still faced with an uphill challenge. Navigating your way and making these decisions is and will be hard but are absolutely necessary for survival.
Cash “€” still remains high on the list of priorities, closely followed by people and operations as Cash has and always will be King!
When faced with the prospect of corporate insolvency, so many questions are raised and with so many stakeholders to be considered including employees, suppliers, landlords, banks, shareholders among others. When the economy does finally open and stay open on a more sustained basis and government supports phased out, we anticipate that insolvency and the prospect of insolvency, will come more into focus.
Therefore, formulating survival strategies to avoid liquidation, which is some cases may require examinership and schemes of arrangement and working with banking and funding clients to formulate solutions to keep businesses alive. This will be very different to what we experienced in the 10 years post 2008, requiring creative workable solutions that can be implemented quickly.
We have found over the last 12 month that by looking at a business’s current position, future prospects and analysing the various options available it has resulted in a consensual resolution being agreed between all parties without the need to resort to a formal restructuring or insolvency process.
New Rescue Solution being considered: “Summary Rescue Process”
There is currently a proposed alternative to examinership which will not require the involvement of a Court. It is currently with the Minister Leo Varadkar and his Department for consideration. It is anticipated that it will be available later in the year and that it will be similar to examinership but without the need to involve the Court, which will make it a more attractive process for struggling businesses as the costs involved will be much lower. We will provide detail on this when it becomes live.
Our Team:
David, as a Chartered Accountant wearing his Insolvency Practitioner’s hat combined with his legal colleagues, allows us to give balanced practical advice to navigate your way in these highly unusual times. We anticipate that these three areas of our practice will see further activity as the economy re-opens, formulating survival and exit strategies and working with all stakeholders to formulate solutions.
Sean O’Riordan, Solicitor, advises shareholders and companies on both the buy side and sell of transactions and over the last 14 months has experienced an increase in activity from clients on planning for business exit and how best to maximise their options. E: seanoriordan@fitzsols.com
David Swinburne, Chartered Accountant is a member of Restructuring and Insolvency Ireland and sits on the Education and Technical sub-committee. David holds an Insolvency Practising Certificate from Chartered Accountants Ireland which allows him act as Examiner, Liquidator and Receiver and he has acted in such capacities in many high-profile cases throughout Munster. He also holds a Diploma in Personal Insolvency. E: davidswinburne@fitzsols.com
Sinead McNamara, Solicitor advises Examiners, Liquidators and Receivers and has worked in conjunction with David on many high-profile cases throughout Munster. Sinead also advises both lenders and borrowers in respect of funding facilities and security. E: sineadmcnamara@fitzsols.com
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