Pre Pack Administration Examples: Successes and Failures

Pre Pack Administration is a process that allows a company to sell its assets to a new entity, often its existing management team or to a third-party buyer, immediately after appointing an administrator. The aim of Pre Pack Administration is to rescue a financially troubled company quickly, preserving jobs and maximising returns for creditors. 

As insolvency experts, the team at Bridge Newland can provide professional advice and support to businesses that are facing financial difficulties and might be considering Pre Pack Administration as an option. However, while Pre Pack Administration can be a useful tool for struggling companies, there have been both successes and failures associated with the process. Here are a number of high-profile examples of both successful and failed Pre Pack cases, along with an evaluation from the experts at Bridge Newland.

Dreams

Undoubtedly, one of the most successful Pre Pack Administration cases involved UK-based bed retailer Dreams. After going into Company Administration, Dreams was immediately bought out in a Pre Packaged sale by private equity firm Sun Capital Partners. 

What were the successes of this case?

• The retail giant has not faced insolvency since the Pre Pack sale
• A massive 75p of each pound owed to creditors was paid
• The process allowed for all customer deposits and warranties to be honoured
• Dreams had failed previously in part due to experiencing high expansion costs due to its rapid rise in the retail market, therefore the investment was best recouped in a Pre Packaged sale which would otherwise be lost in a break-up sale
• The purchaser was sufficiently qualified to run the bed chain given its large portfolio of successful businesses which already included another bed retailer (Sharps)
• The purchaser was not burdened with non-profitable stores as they chose to only take on 171 of its 266 stores, instead of all of them. This meant redundancies were minimised (around 400 jobs were lost, which are often unavoidable) and the company did not spread itself too thin in a small amount of time

Examples of other successful Pre Packaged Administration cases 

• Fashion retailer Oasis was sold via Pre Pack Administration to Boohoo Group, saving more than 1,800 jobs and allowing the brand to continue trading online
• Shoe retailer Clarks was sold via Pre Pack Administration to a private equity firm based in Hong Kong, saving around 2,500 jobs and allowing Clarks to continue operating
• UK furniture company Harveys was sold via Pre Pack Administration to SKG Capital, saving around 1,600 jobs and allowing the brand to continue trading

La Senza & Jane Norman

One of the most high-profile failures involved Jane Norman and La Senza. Both of these fashion chains went into Administration and were brought out in a Pre Packaged sale. However, since their purchase, they have both been placed into Administration for a second time – at which point, both businesses decided that a period of trading and marketing of the businesses were required, rather than immediate Pre Packaged sales. This approach meant that all remaining stock was sold off and buyers found as many stores or assets as possible, which in their cases was just a fraction.

Why do our experts at Bridge Newland believe this particular Pre Pack sale failed?

• Too many of the non-profitable stores were taken on (or the purchasers were not sufficiently capable of achieving the required turnaround for these stores)
• The businesses had not changed with evolving times, which meant they were unable to compete in the changing market (La Senza struggling to compete with growing trends and supermarket prices and Jane Norman witnessed a decrease in their target market)
• Inadequate funding and/or cash flow issues for the purchasing businesses

Could failure have been avoided?

As insolvency experts, the team at Bridge Newland would have advised that viability reviews on the intended purchasers should have been completed ahead of the sale. This would have allowed La Senza and Jane Normal to find more suitable buyers if necessary or at least a duplication of administrator’s fees with fewer stores being Pre Packed originally to give themselves a better chance of success. 

Examples of other failed Pre Packaged Administration cases

• When department store chain Debenhams was sold via Pre Pack Administration to Boohoo Group, although the deal saved some jobs, most of the company’s stores were closed, resulting in around 12,000 redundancies
• Fashion retailer Warehouse was also sold to Boohoo Group via Pre Pack Administration and although the brand was relaunched online, no physical stores were reopened, which led to the loss of 1,800 jobs
• Menswear retailer Moss Bros was sold via Pre Pack Administration to Brigadier Acquisition Company and, while the deal saves some jobs, the company has since announced the closure of several stores, which has led to the loss of around 250 jobs

Are you considering Pre Pack Administration as an option for your business?

If you are considering Pre Pack Administration as an option for your business, then it is always best to contact the experts first. At Bridge Newland our team of experienced Insolvency Practitioners can support, advise and guide you through your options, to ensure you choose the right path for you and your organisation.

While our head office is based in the Midlands, our team works remotely, allowing us to support clients across the UK.

For more advice on Pre Pack Administration or any of the services we offer, call our team via freephone on 0800 612 6197.

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