Administrators from EY have provided more background into the collapse of UK dealer Complete Business Solutions and its acquisition by EVO.
Complete was bought out of administration by EVO in a pre-pack arrangement on 9 January after running into financial difficulties at the end of 2022. The transaction saw all of Complete’s 632 staff members move over to EVO.
EY said the reseller’s performance had been “materially impacted” by COVID lockdowns and subsequent structural market changes (such as hybrid working and the greater use of technology), which resulted in reduced demand for its products and services. That, combined with a funding structure and high debt levels, led to “significant cash pressures over an extended period”.
Complete took a number of steps to alleviate the situation. These included:
- Securing additional liquidity via a government COVID recovery loan to provide further time for the trading performance to recover
- Seeking to agree capital deferrals in respect of certain debt obligations
- Renegotiating an existing ‘time to pay’ (TTP) arrangement with HMRC (the UK tax authority)
Nevertheless, during 2022, the trading performance continued to be behind expectations and the level required to service the debt obligations. Complete could not meet the agreed TTP payments, and HMRC actually issued a winding up petition in August 2022 – although this was subsequently withdrawn and a revised TTP agreed.
EY continues: “The directors explored various options to secure additional funding, including a refinancing of the invoice finance facility, in conjunction with seeking to defer certain debt obligations. Unfortunately, [Complete was] unable to secure additional funding and the business continued to experience sales underperformance, adding to an already constrained liquidity position.
“By mid-December, [Complete] was unable to operate within its existing banking facilities and, absent further funding, it would not be able to avoid an insolvency. Accordingly, the directors instructed EY to commence an accelerated sale process on 16 December 2022.”
A notice of intention to appoint administrators was filed a few days later to allow this process to take place under protection from creditors.
Four entities were part of the administration: Complete Business Solutions Group (CBSG), Bluefish Office Products, Irongate Group and Ram Print (collectively, CBS) – although CBSG was the only of these that was actually trading.
A pre-packed insolvency transaction was agreed, and CBS was acquired by EVO subsidiary Banner on 9 January. The total purchase price was just over £11.5 million. This can be broken down as follows:
- Trade debtors: £10.25 million
Stock (including associated retention of title risk): £893,000
Other intangible assets: £400,000
Intellectual property: £5
- Goodwill of the four entities: £4,000
CBS operated from 19 sites across the UK, all of which were leased. Banner continues to occupy 13 of these locations under a licence to occupy agreement. EY said it will work to “undertake an orderly exit” from the six facilities not included.
In terms of amounts owed by CBS at the time of the administration, liabilities are estimated at just over £50 million. £12.8 million of that related to an invoice discounting facility with HSBC, with £10.3 million repaid as part of the sale. The bank also had more than £9 million outstanding from a loan and an overdraft, and is not expected to recoup that in full.
VAT and employee costs owed to HMRC are set to be at least £7.5 million, but EY said there are unlikely to be sufficient realisations to enable a distribution to be made.
Next come the trade creditors, to whom CBS owed just over £17 million. The largest creditor, not surprisingly, was EVO-owned VOW Wholesale (CBS’s main wholesaling partner), to the tune of £4 million.
In terms of direct suppliers, many well-known business products vendors are either not on the list or are owed minimal amounts. This, Workplace360 understands, was due to concerns with Complete’s lack of credit insurance, with products being supplied through VOW or other distributors.
That said, some suppliers, particularly in the printing, paper and furniture categories, were owed significant sums, including one amount of almost £2 million.