A sharp decline in sales and severe cash flow problems forced Bridisco, a London-based wholesaler and distributor, into administration late last year. The withdrawal of credit insurance was the final blow, resulting in the struggling business being unable to trade its electrical goods.
Credit insurance is vital to the supply chain, and once withdrawn suppliers can simply refuse to provide the goods, which can have devastating consequences.
In November, professional services firm Ernst & Young was called in to manage Bridisco’s bankruptcy with the objective of finding a potential buyer for the business, which in better days had turned over £140 million and employed 600 staff.
Nowhere to go
Although the business was sound, the liquidity crisis meant that senior management and shareholders were unable to raise sufficient funds to buy the business. This left the door open for the next tier of management to approach E&Y with an offer.
Gerry Hoare, managing director of corporate advisory house Deal Bureau, was introduced to the deal through BDC’s financial adviser. Hoare says, “The directors and shareholders couldn’t raise the funds needed because the credit crunch was starting to hit. There was no appetite for this kind of deal.”
Hoare was able to source £1.5 million through an invoice discounting facility provided by Bibby Financial Services and persuaded a hedge fund to invest
£4.3 million secured on stock. The management team also backed the deal with personal money.
Too good to refuse
Hoare says, “It’s rare to get a hedge fund involved. It was straightforward asset-based lending from the hedge fund with a good return.”
On 19 December, the management team bought the company, brand and stock out of administration with a new, streamlined business model. The 31 distribution centres housing 4,500 products were pared down to six depots stocked with 1,000 lines.
Hoare adds, “The new management team could see that the business had grown too quickly and needed to be focused on core activities.”