The surface is beginning to bubble again. At least that's the feeling starting to emerge, as common sense finally gets to grips with reality. Then again others see a different future as Chris Ball of MBA Associates suggested just a couple of weeks ago in these pages, the re-appearance of 'pre-pack ' as a get out of jail free card was inevitable. That isn't what I was inferring in suggesting we're off, I was looking at the always positive push coming from the likes of Deceuninck, just 5% off its usual volumes. The majority of the industry is made up of those that spend their time pushing forward in a positive manner, they are the ones that should be highlighted and applauded.
However, it is clear some outfits have been poorly managed, as in they have been losing money hand over fist for some time. It is not about making mistakes or missteps it's about not having the passion and energy required as management. For those individuals the 'pre-pack ' is their personal life-line. To the rest of us, the taxpayer, the supply chain will be forced to pick up the tab, and then to rub it in, clear of the debt to maintain they get to undercut in the market place. The UK 'pre-pack ' was intended to save jobs just as it is with the Governments Furlough Scheme, nothing else. The UK version is distorted from the aspiration of the US chapter 11/22 version. There it is about buying time for management to take responsibility and restructure the business to regain a profitable footing. Instead the UK has evolved a structure of saving the skin of the poor performing management at the expense of those that contribute to an industry and the economy. The irony in this version is, while the management get to keep their jobs, their workers still get to lose theirs. Was that the intention for the system ?
In what for the moment will seem a mixed up World we will see going forward a whole raft of contrivances to enable an advantage to be gained. Some of it deserving, some of it border line deceit. As it is said, all is fair in love and war and business.
Volatility IS Opportunity?
Stormy seas are where money is made
We have many years of experience in mergers and acquisitions in the building products sector and can point to sector changing deals that we have been involved with both on the buy and sell side for clients. As a result our phones are now ringing with interested parties on both sides of that fence some who see market volatility as a crisis not to be wasted and some who see a last throw of the dice.
If you are on the buy side of a transaction the first thought is of course that prices will be depressed and that a bargain is there to be had and that's true but it's not as obvious as it looks. Sellers of what are good assets (cash generative, profitable, sustainable, well capitalised businesses) are unlikely to agree to a pitch that steals the business from them (as they would see it) for less than it's long term value based on what they may see as an 'event'rather than a long term destruction of their market or business model. So if you are on the buy side how do you value that opportunity? …»