WHAT TO DO WHEN THE WORST HAPPENS: 5 WAYS TO MAKE RETAIL ADMINISTRATIONS AS PAINLESS AS POSSIBLE

For most retailers it doesn’t bear thinking about, but when the worst happens and a company falls into administration someone has to pick up the pieces and work out what has to be done next.

That’s where Retail Realisation comes in. We work with administrators to run insolvent businesses during that difficult period and help find the best – and speediest – solution for creditors and would-be buyers.

Take Pretty Green, the fashion brand backed by Liam Gallagher. The brand was one of many hit by the collapse of House of Fraser last summer. The £500k it was owed by the department store had a dramatic impact on what was still a relatively small brand, and earlier this year it plunged into administration.

When Moorfields was appointed as administrator, it brought in Retail Realisation to help.

Here’s five steps we took to make the process as smooth as possible:

STEP 1: CONTINGENCY PLANNING

Of course, administration doesn’t have to mean the death of a business, there are many possible outcomes. For a retailer, this could be a full sale, a sale of assets such as some or all stores, stock or intellectual property.

One of the reasons we were hired is to contingency plan. What would be the best option for creditors? How should the business be run in each possible exit scenario? How can you make sure the business and its assets are as saleable as possible and a transaction can be carried out quickly and efficiently?

Speed is of the essence. All of these questions have to be answered – and actioned – often within hours. That means comprehensively reviewing the business and understanding what the potential scenarios are and what each of them is worth.

But we don’t just come up with Plan A or Plan B, we must plan for scenarios C, D, E and F as well– and be willing to change tack based on the administrators progress with possible buyers.

Pretty Green was a case in point. A pre-pack administration was expected to take place, however, at the last minute the situation changed, and we needed to trade Pretty Green’s 12 stores. 

STEP 2: EXCELLENT EXECUTION OF YOUR PLAN

And that’s where the next great skill came to the fore – excellent execution. Keeping trading strong during this administration period is crucial. It makes the business more attractive to buyers and maximises the sale price.

We had to make sure all stores were open after the administration was announced – even if staff worried about their livelihood didn’t turn up.

Our experts with years of retail experience were there to make sure as far as customers were concerned it was business as usual.

STEP 3: MOTIVATING ANXIOUS WORKERS

Motivating staff that are staring into an uncertain future is no mean feat. Can you imagine what it feels like to come into work each morning not knowing if and when your contract will be terminated, and whether you’ll be paid?

That’s where our management expertise shines through. We’re retailers at heart with decades of experience in managing and motivating teams, even during the toughest of circumstances.

We reassure people and make them understand that, with their help, we can secure the best future for their business.

STEP 4: CLEAR COMMUNICATION

Being open, honest and clear to all stakeholders – be it administrators, staff or buyers of assets – is critical in fast-moving insolvency processes.

Issues we encounter might impact the sale process or stop the administrator delivering what potential buyers of a business want.

Staff might have quit, trading might be sluggish, or third parties might cut off supply or be unable to move stock quickly. It’s important to flag issues as soon as possible, as we were with Pretty Green’s administrator.

Moorfields partner Tom Straw says: “Retail Realisation provided timely, clear and effective communications to the administrators regarding key issues which were likely to adversely affect or undermine the sale process and ultimately the administrators were able to achieve a sale of the business, saving more than 70 jobs, and maximise the outcome for creditors.”

STEP 5: ACT WITH PACE AND ACCURACY

It’s also important to make any transaction following an administration as seamless as possible. This means transferring assets, such as stock and stores, as efficiently as possible to the buyer. In Pretty Green’s case, the buyer was JD Sports.

JD wanted Pretty Green’s brand and stock but opted to only keep Pretty Green’s Manchester flagship store open. That meant closing its 11 other stores and 33 House of Fraser concessions.

Once the deal was in place, we had to act as quickly as possible to deliver what the buyer wanted. For every day these shops remained open, JD would incur additional costs in rent and rates.

We managed to close all stores and concessions within three days, liaising with landlords, staff and the logistics company to make sure everything was done in a proper manner.

This means the property was clean and tidy, assets were transferred to the central warehouse, and all paperwork was in order.

Every ‘t’ was crossed and every ‘i’ was dotted to make sure no problems arose, or costs mounted, further down the line for either buyer or administrator.

Administration is a high-pressured, fast changing process and those managing it need to act with pace and accuracy. Running a steady ship during this process can ease the pain for all and help find the best solution for the business and its advisors. 

For Pretty Green, it was a pretty great result. 

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