Opportunities to acquire insolvent businesses raise complex issues
Question : I have the resources to make acquisitions during the credit crunch — what should a shrewd investor consider when purchasing an insolvent business?
Andrew Harris, senior manager, corporate restructuring, ASM Horwath, replies:
As the credit crunch deepens opportunities will increase, however a ‘distressed’ acquisition is very different to a ‘conventional’ acquisition. The key areas in the acquisition process to consider are:
Evaluation of the target — your due diligence must be completed in a short timeframe and working with information of limited quality.
The process has to be rapid to minimise disruption to the business and preserve value. In practice, once appointed an insolvency practitioner will only be able to trade a business for a short time, if it all.
Purchase price — you need to reflect the risk involved with the acquisition in the price and pricing structure. It is unlikely an insolvency practitioner will offer any warranties to a purchaser.
I recommend you are prudent in your view of the future. Most investors underestimate the extent of the problems they need to turnaround, as well as the time and costs involved to do this.
Finally, professional advisors with relevant experience are a must — there are many complex legal and financial issues to consider against a backdrop of time pressure in order to complete a deal.
Question: With the downturn in sales in my company I have been under a lot of pressure and I can also see signs of stress in my employees. What can I do?
Grainne McCurry, from Invest NI’s business improvement services team, replies:
Stress can be very damaging both to yourself and to your business. If your employees are showing signs of stress you may also have noticed an increase in sick leave.
You need to be aware that you have a legal responsibility to ensure your employees don't become ill, either physically or mentally, because of work-related stress. There are lots of causes of stress including overwork, underwork, unrealistic targets, tension between workers and management and so on. What is causing you stress is probably different from what is causing your employees stress. However, you are both probably worried about the future.
The main thing I would suggest is keeping people informed about the business’s position as far as you can.
You can do this through individual meetings with them or collectively. Individual meetings may be better as they would give you an opportunity to find out what specific concerns each of your employees has and where the sources of stress are.
Taking time to speak to your employees will also help make them feel valued.
But you also need to deal with your own stress. If at all possible take some time out to relax and refocus.
You may find it helpful to talk to a business mentor.
The nibusinessinfo.co.uk website has a good section on the subject of tackling stress with links to websites that have specialist advice on managing stress.
Question: I employ security personnel in my business and understand that there will soon be new licensing laws for people working in the security industry. How will this affect me?
Frank Cullen, chief executive, Mercury Security Management, replies:
In December compulsory regulation will be introduced for the private security industry in Northern Ireland by the SIA (Security Industry Authority).
This will mean that each private contract security officer in Northern Ireland will need to undergo a training and application process in order to obtain a licence.
The new licensing will affect both those who work within the security sector and those who buy security services, bringing Northern Ireland into line with current legislation throughout the rest of the UK.
SIA Licensing will cover manned guarding (including security guarding, door supervision, close protection, cash and valuables in transit and public space surveillance using CCTV), key holding and vehicle immobilising.
Regulation is being introduced to increase professionalism and raise standards in the private security industry, by introducing compulsory training and vetting for security operatives.
Anyone who wishes to work in the industry will have to obtain a licence from the SIA.
The onus is on the individual applying to supply the right identification and details in time to get their application through. The rigidity of the licensing process is key to the success of private security industry regulation.
A criminality check by the use of Access NI will be undertaken before anyone can obtain a licence. The check covers existing and spent convictions, cautions and warnings.
It is also important to remember that the licence is ‘owned’ by the individual and not the company, so that if you agree to pay for your security staff to get the approved training, and they subsequently leave the company, the licence goes with them and you will need to ensure that any future staff you employ have their own individual licence.