How to turn a negative pre-pack situation into future acquisition success

A pre-pack administration deal is the pre-arranged transfer of a business in its entirety or the sale of the company’s assets to a buyer, negotiated through an administrator prior to the public notification of the administrators being appointed. Many people often become frustrated when contacting administrators about distressed businesses they are interested in purchasing, only to discover that the business has already been sold in a pre-pack deal organised by administrators.

This frustration is understandable, and often warranted, as many have argued that some distressed business deals would have had better outcomes for creditors if the administrator had advertised the business to a wider range of potential buyers. Many of our long-term subscribers understand the administration process and are able to turn negative pre-pack situations into more positive acquisition outcomes further down the line.

Using daily distressed notifications, resourceful subscribers are successfully contacting the administrators of distressed companies that present viable turnaround potential and directly lodging their interest, not just for the business in question but also for future distressed companies that may be in similar situations. Instead of being discouraged by the news that a business has been sold in a pre-pack deal they are using this knowledge as an opportunity to put themselves forward to administrators as suitable candidates for future opportunities.

It is this foresight and having the tools at hand to find distressed opportunities that has led many of our subscribers to achieve successful business turnarounds over the past few years.

By providing administrators with your acquisition profile you can drastically increase your chance of success with a distressed acquisition, placing yourself in the best possible position to be the party benefitting from a pre-pack deal in the future.

Insolvency practitioners are tasked with finding the most suitable buyers that are able to pay off the majority of creditors, and keep the business running as a going concern. Insolvency practitioners often factor in any relevant experience candidates may have that would positively support their ability to help the distressed company return to profit, so providing them with background information about yourself can be key to establishing an ongoing relationship.

Important things to keep in mind:

  • Have your acquisition profile clearly defined and ready to pass over to administrators. Sending a formal introduction letter and your acquisition profile is a great way to get to the top of the list for future opportunities. (Contact us if you need any advice on this.)

  • Proof of funds are important if you are to be taken seriously.

  • Time is of the essence as many deals take place very quickly.

  • Even missed opportunities can result in future success, always lodge your details with the administrators you contact.

  • Emails are great but the best way to ensure you are in the running for a distressed opportunity is to pick up the phone and speak to someone.

  • A long-term subscriber to our service and owner of a private limited company contacted us back in February last year asking for advice on purchasing a business out of administration. He had been using our distressed tools and alerts to keep track of distressed businesses in his area, however despite his vigilance and proactive nature he had somehow missed out on two ideal opportunities due to pre-pack deals. We recommended that he not give up. We told him to get back in contact with the administrator who had arranged the pre-pack deal and provide him with details of his company, proof of funds and additional details of successful acquisitions he had made in the past.

    This subscriber followed our advice and has since been able to set up arrangements with other administrators in his area who now provide him with details of commercial property and distressed assets that match the criteria he provided them.

    Failed acquisition attempts should not always be viewed as completely negative, you will often learn a lot from your endeavours and can make valuable contacts that may prove beneficial in the future.

    Remember, for anyone looking to buy a distressed business, keeping abreast of any winding-up petitions is a shrewd strategy. These notices are an indicator that a business may be heading for insolvency so may offer a great opportunity for investors. Click here to read our article “Finding distressed businesses at the right time”.

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