Landwood Group is a team of chartered surveyors, asset managers and auctioneers who provide an unrivalled service on all aspects of property, plant and machinery and business assets. Professional, experienced, friendly, focused and down to earth, the Landwood Group team cares about doing the best job they can for their clients. The service every client gets is director-led, personal and tailored to them.
We caught up with Mark to hear his insights on the current economic climate and how it affects businesses in the UK.
Given the toxic operating climate that many UK businesses are currently facing – with some reports stating that 600,000 UK businesses are experiencing severe financial distress -, what advice would you give to company directors who are considering taking their business into liquidation?
It is absolutely crucial to seek professional advice urgently. We know that the earlier you speak to expert insolvency professionals who can assist, the more options there are likely to be for saving the business or finding positive outcomes. This can often be the difference between restructuring the business or going into administration or liquidation. Insolvency professionals will be able to help the business navigate their way through the difficulties and if liquidation is the best option, they can manage the process for the business to achieve the best possible outcome.
What factors do you feel are currently driving the current wave of insolvencies, both voluntary and compulsory, and what headwinds should company directors be aware of in 2023?
There are currently a host of factors affecting businesses in the UK, including rapidly increasing costs of materials, unprecedented energy price inflation, interest rates returning to the long run average and of course changing consumer behaviour. We are also still seeing the impact of the shift to employees working from home and the effect this has on transport use and the city centre retail and restaurant/leisure sector.
With so many companies under pressure, how does your firm typically assist in the restructuring and recovery of a company?
Landwood Group provides business asset and property valuation plus appraisal advice to insolvency professionals and the businesses they advise. Valuations can also be used by businesses to help refinance and obtain a much-needed cash flow boost. The Landwood Group team also assists businesses with the sale of surplus assets and property to generate capital for reinvestment in the business or to help right-size its operations.
In the current climate, is securing more credit to aid recovery a viable option and what ‘tests’ would you typically undertake to determine if more funding is the right way forward?
Businesses often secure additional funding to assist with navigating a difficult period, buying them time to restructure and get onto an even keel. And while this is outside the Landwood Group offering and strict area of expertise in the right circumstances securing funding can provide the temporary lifeline a business needs to survive for the long term.
What are the challenges you face when attempting to appraise and value the assets of businesses that have gone into liquidation? What challenges present themselves when a company has overseas or offshore assets?
Appraising and valuing distressed business assets, whether in liquidation, administration or receivership can be challenging. Gaining access to the site can be problematic and depends on the directors and or the landlord cooperating. Access to MI systems and documentary evidence for the assets, stock and property is very important when gathering data for valuations, but this can also be hard to obtain if the owners and directors of the business don’t cooperate or have already walked away.
Valuing the goodwill, intellectual property and other intangible assets requires detailed information to support them. Again these can also be challenging to obtain in a distressed situation.
In essence, it is not unusual to have little – if any – information and help, meaning that we have to reconstruct and retrofit as much information as possible. This can have an adverse impact on valuations, for all the obvious reasons.
Asset and stock values will need to be on an ex-situ (or break up) basis, which is typically a heavily discounted value that reflects the potential sale realisations of the assets on the second-hand market. This can be most extreme when selling distressed stock which can often be valued as low as 10p in the £1. This reflects the often significant cost of removal, storage and sale of the stock.
Finally, overseas or offshore assets are not as common an issue, but where they exist they will be subject to the local jurisdiction and laws governing insolvency. The remote (from the UK) location of these assets also presents a challenge for physical inspection of the site and assets.
You are a full-service firm, which includes selling assets and property portfolios. What impact is the current economic environment having on the sale and disposal of assets?
The market for distressed assets usually remains resilient with experienced buyers ready and willing to act at short notice. Buyers of machinery and business assets tend to be savvy and well aware of the opportunities to be had in this environment. Both trader and end-user buyers are still prepared to buy if the deals are good enough.
However, traditional buyers of residential properties (owner-occupiers) are more cautious and lenders even more so, restricting their lending criteria even if they maintain their headline rates and messaging about the availability of mortgages. Cash is king in these circumstances.
Commercial property sale volumes have already slowed down and values have dropped across the UK. However, deals continue to happen albeit the practice of “price chipping” has returned with buyers seeking to take advantage of the position in the market.
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