A Pre-pack is a sale of a business by a licensed insolvency practitioner acting as administrator almost immediately following his appointment. Most Pre-packs sell assets back to existing management. The correct name for the procedure is “Pre-packaged Administration”.
The benefits of purchasing a business back from an administrator are that you effectively acquire the assets, although value must be paid, and the administrator will then deal with the creditors of the business.
Pre-packs have been much criticised in the press, but they can represent a valuable restructuring tool where (for example) an administrator can not trade a business.
In practice a Pre-pack administration is very quick, and administrators can be appointed out of court and the business is usually sold 1-2 days following appointment.
The administrator will however require valuation evidence as to the the value of the assets, and will only sell the assets based upon fair value, and may consider advertising a business for a short period of time (i.e a distressed merger and acquisition process) in order to ascertain that no third party purchaser is prepared to offer a greater amount.
The main advantage of a Pre-pack is the continuity of the “business”.
You may believe that a Pre Pack is the best solution for your company; Contact TaxGone today to learn more on: 01302 815846.