Thursday 14 June 2012

Going into Administration, what then?

Given yesterday’s news of Peters Bakery collapse into administration, together with today’s report in DIY Week that Allders of Croydon are ‘facing administration’ it might be useful for NAMs & KAMs to explore the possible consequences and implications of such moves.

As a legal concept, administration is a procedure under UK insolvency laws. It functions as a rescue mechanism for insolvent entities and allows them to carry on running their business. The process – an alternative to liquidation – means a company in administration is operated by the administrator (as interim chief executive) on behalf of the creditors as a going concern while options are sought short of liquidation. These options include recapitalising the business, selling the business to new owners, or demerging it into elements that can be sold and closing the remainder.

Options for Peters Bakery
In the case of Peters Bakery, it might be assumed that the owners have already explored the options of recapitalising and/or selling off the business, leaving the option of demerging into elements that can be sold, i.e. the bakery and the shops (The mobile sales operation might remain with the bakery as the better option).

The bakery
The bakery with its relatively new plant and its supply arrangements with major retailers could be attractive as a buy-out by management or takeover by  another bakery where increased scale/synergies might add appeal, and some negotiation muscle ref the multiples.

The shops
Meanwhile, the 54 shops with their regional brand equity could also present viable options in terms of either management buyout or acquisition by another retailer. Given the parallels with Greggs shops in terms of positioning, possible acquisition might be worth adding as an agenda item  at the next meeting of the Greggs team…

Which options do you feel are best for Peters Bakery?

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