An informed view
Glass Times editor Nathan Bushell learns more about the sale of Synseal to Aperture.
I’ve been reading a pre-sale report by KPMG, the administrators involved in the prepack sale of Synseal to Aperture Trading last week, and it makes for interesting reading (a SIP 16 for those in the know).
The statement of affairs has yet to be published, which includes a full list of creditors, so we can’t yet fully explore the impact that the deal will have on the suppliers to Synseal (although that doesn’t stop the uninformed pitchfork-wielding mob on social media frothing at the mouth with unsubstantiated fury).
Pre-packaged deals are highly controversial, because they give the impression of somebody getting something for nothing, and injuring others in the process. However, it needs to be pointed out that I have had people standing on soap boxes in this magazine crying foul, only for themselves to be involved in something similar further down the line.
Rather than getting hot under the collar with indignation, it is worth standing back and understanding why decisions like this were made – bearing in mind that it is an entirely legal process, despite any ethical misgivings you may have.
I’m not going to recite the whole of the SIP 16, but I will try to give you a flavour – the report can be found in its entirety here.
The Synseal Group turned over £144 million in the year ending March 2018. However, throughout 2017 and 2018, the group experienced raw material price inflation, a weakened exchange rate, and reduced consumer spending.
This was on top of the group incurring costs associated with the integration of various acquisitions.
These factors impacted on the level of available capital to invest in its core business, which also had a negative impact on overall efficiency and trading performance.
Some level of refinancing achieved short term gains, but further market decline and trading underperformance, combined with reduced supplier credit terms and loss of credit insurance, continued to place the group under cash flow pressure.
“In light of the above, the group took a decision during the summer of 2018 to engage a Corporate Finance Boutique (‘CFB’) and commence a sale process, with a primary focus on the disposal of the loss-making Profile Extrusions division,” the SIP 16 said.
Therefore, the CFB approached a number of companies that would be interested in buying Synseal Extrusions, which ultimately came to nothing.
Other avenues were explored, including seeking a cash injection, running the business as administrators with a view to selling it as a going concern, and liquidation. All of which would cost more and result in a worse outcome for creditors.
Since no buyer could be found, an administration pre-pack sale to Aperture was determined to deliver most value to the creditors.
KPMG said the £38 million sale of Synseal Group to Aperture Trading maintained value in the companies through ensuring business continuity to its customers, while a liquidation or administration wind-down would result in the cessation of trade and cause significant disruption and financial loss to some of its customers. The latter option would also impact the value of the business and assets and the overall return to creditors.
And let’s not forget the 1,000+ jobs saved.
Needless to say, leaving suppliers out of pocket – sometimes for eye-watering sums – can be life changing, and it wouldn’t be surprising if jobs were lost as a result.
But, again, some perspective is needed: think about all the £millions held back in retentions by main contractors on a daily basis that regularly put smaller suppliers out of business because they can’t maintain their cash flow. And that is money that is owed, and not tied up in some accounting acrobatics; that should be a criminal offence.
It is also worth pointing out that those uninformed pitchfork-wielding keyboard warriors who take cheap shots at the industry are notably absent from the many industry events where the majority of us promote best practice and support hard-working companies. If some of those who were too busy hammering their keyboards with ham-fisted rage attended Pigs in Manchester last Thursday – two days after the sale of Synseal to Aperture – they would have been able to talk to the directors of Aperture and also their suppliers (and creditors) to get a better understanding of the situation.
I witnessed discussions between them and I was enlightened and surprised. Sometimes not everything is as it seems, and taking a step back gives you a better view.