The COVID-19 pandemic has impacted on business on a level never seen before, forcing the UK government to bring in a number of unprecedented measures.
The introduction of the job retention scheme, the issuing of business grants and bounce back loan schemes and the three-month extension of the period when companies are protected from eviction (the original deadline was June 30th) have been a lifeline for many but have they merely served to delay the inevitable?
The grant money won’t last forever, if it hasn’t already run out, the bounce back loans have to eventually be repaid and staff will be returning back from furlough at a cost to the business that it may not be able to afford. Many companies may have to make a certain number of staff redundant which again is an additional cost at least in the short term.
In terms of rent, often one of the largest costs to a business, it is worth noting that the tenant is still liable for the rental payment over the six months – March 30th to September 30th – (unless a separate agreement has been made with landlord stipulating otherwise). If back-dated rent is due to the landlord after the 30th September 2020, the landlord is within his/her rights to start legal proceedings to recoup the money owed.
All these factors will create massive cashflow issues – even to some of the largest organisations in the country – and bad debt will also increase as this perfect storm gathers to send many businesses into insolvency. In many cases, there is very little time to prepare the distressed business for sale, but it is still important to present the company to the right clients in a professional manner.
Most UK businesses have had a “stay of execution” up until now but the reality is that the issues have not gone away, they’ve just have been pushed further down the line.
For many companies facing the prospect of ceasing trading, it is now a damage limitation exercise. As a specialist mergers and acquisitions business, we can find a buyer for your business before it comes too late.
Most ethical investors understand that what was once a solid business will have been affected by cashflow issues beyond the management’s control (Covid-19) and will pay a fair price for it if it is still trading. However, the more the company becomes distressed, the more the vultures start circulating. Those investors will be looking for a bargain, and therefore your return, if any, will be substantially less.
If you feel that you company will become distressed over the next few months, don’t delay. You need to act now to give us any chance of finding a buyer that will give you a fair return on your investment.
