In years to come, the demise of dealer group Nectere will not be looked back upon as one of the UK business products industry’s finest hours. With the fate of the company shrouded in mystery and confusion, confirmation was finally received – literally minutes before the Jan/Feb issue of Workplace360 went to press – that the business was being placed into voluntary liquidation.
Following the return to work after the end-of-year break, the W360 phone lines were red hot with reports of Nectere having halted customer deliveries on behalf of its dealer partners just before Christmas. These same partners had also not been paid for the month of December, and they were unclear how the situation would unfold.
That was largely because they had received no warning – or any type of communication whatsoever – from either Nectere or its new minority shareholder, OT Group (OTG). After admitting in the first week of January that the business was “facing substantial challenges”, there was a period of radio silence that frustrated dealers, suppliers and other Nectere stakeholders.
Why that was and why Nectere hadn’t already entered administration is not clear. The business had not been trading for weeks, wholesaler partner Spicers (also owned by OTG) had it on stop, staff had been or were in the process of being laid off, and W360 learned that the Nectere office building – owned by founder and former shareholder Paul Musgrove – was being put up for sale.
The situation put enormous pressure on Nectere’s reseller partners. Under the organisation’s business model, the group invoiced clients and then forwarded the money to the partners after deducting its fee. Therefore, dealers’ income was essentially switched off overnight in December and they were then kept totally in the dark.
Those that hadn’t found new homes – many of them very small or micro businesses – were left with no system, no sales and no supply, and probably wondering how they were going to meet their next mortgage payment. Thankfully, some former Nectere dealers were able to find escape routes, such as Office Power, Prima Software and Unity – the platform run by Loughborough-based reseller Whittakers.
A contentious issue was the outstanding invoices due by Nectere’s end-user customers. Partners say the company was “aggressively chasing” clients for payment at the beginning of the year. In addition, debt recovery firm JP Associates (JPA) was subsequently appointed as the collection agent for RBS, Nectere’s invoice discounter. Dealers were clearly worried that funds collected by Nectere, and then JPA, would be used to pay off company debts, leaving them even further out of pocket.
Some questioned the legality of this process in light of Nectere’s contractual obligations to its partners, and the prospect of a looming preferential creditor issue was also mooted.
The end of nectere
In a LinkedIn post, W360 CEO Steve Hilleard described events as “shameful”, saying he had never seen anything like it in more than 30 years in the business products industry. The very next day, W360 received the following statement, confirming the end of Nectere:
“In December 2023, the board of Nectere conducted a comprehensive review of the business and its financial position. It is with deep regret that the board concluded that the company was insolvent and would require significant investment to continue operating. The board engaged Begbies Traynor, a specialist insolvency firm, to review all possible alternative options. In January 2024, the board formally resolved that steps should be taken to place the company into creditors’ voluntary liquidation.
“Notices concerning the liquidation process were issued to all creditors on 16 January 2024 by Begbies Traynor. From this point forward, any further queries relating to the liquidation process should be directed to Begbies Traynor. We recognise the gravity of this development, and we understand this is a distressing time for everyone involved – our employees, partners and suppliers.”
There are still some unanswered questions, but at least there is some form of closure.
The Nectere death spiral
Over the past 12 months, Workplace360 has given a lot of column inches to Nectere, supporting the company’s efforts to get back on track. It now appears we had the wool pulled over our eyes, along with many Nectere partners and suppliers who believed last summer’s “strategic investment” by OTG would secure its future.
OTG’s injection of capital into Nectere wasn’t done in bad faith, of course. It clearly believed the organisation had potential, otherwise it wouldn’t have brought in Adam Noble and then Adrian Reid (who has since moved to Office Depot) to try and steady the ship. However, it now appears that by November last year, it was already too late to save the business that had only officially had a change of ownership a few months earlier.
It’s difficult to point to a single reason for the downfall of Nectere; it seems to be more of a perfect storm of intertwined events that took place over a period of around 18 months.
The MBO, even though it had been some time in the making, obviously had a part to play. The departure of a company founder – especially one that is so closely associated with the business and its operating model – is tricky at the best of times. In fact, Paul Musgrove and his wife, Serena, are thought to have had little day-to-day involvement in the business since mid-2022 due to health issues, hence the appointment of Mike O’Reilly as Managing Director in May of that year.
Loss of confidence?
Did the ownership transition dent the industry’s confidence in the business? W360 understands wholesale partner VOW tightened credit terms at the end of 2022, which was likely a catalyst for Nectere’s new management team agreeing a multi-year deal with Spicers. At the time, Spicers was experiencing issues due to a new ERP implementation at owner OTG. The result was Nectere dealers suffering from a lack of product and under-par service levels.
Around this time, Nectere’s membership also began to fall. It had already taken a hit due to the pandemic, with pre-COVID numbers of around 220 down to around 140 in early 2023. With a model based on wafer-thin margins, scale was crucial – when a partner left, that revenue had to be replaced or offset by a reduction in costs. Neither happened; in fact, certain directors allegedly gave themselves a handsome pay rise.
Following the OTG investment, the final straw may have been related to an IT issue towards the end of last year. While the new management was grappling with the underlying business challenges, W360 understands there was a significant problem with Nectere’s automated processes. Without these – developed over several years and which underpinned the whole model – the system was crippled.
An unfortunate turn of events indeed, but one that could certainly have been better communicated, and which will undoubtedly make industry stakeholders more wary in the future.