TMP Case Summary – Marketing Services Company

Our client is a unique combination of brand consultancy and design agency under one roof. The company gives its clients objective brand strategy advice and 360 degree communications – a strategy originally adopted in response to the fragmenting nature of the marketing services industry.

Factors leading to business distress

- Its biggest client cut spend unexpectedly and dramatically due to the first dip in sales of its product for 10 years; this resulted in a significant loss in the previous year.

- Cash drain resulted from another key client’s harsh payment terms.

- Director responsible for new business was involved in a very serious road traffic accident; he was not able to work for at least 6 months and a replacement agency did not deliver results.

- Overdraft facility was used for the first time, then the company moved to invoice financing, which was not entirely appropriate for that business sector.

Issues

- Overheads needed to be reduced in the face of a less visible sales pipeline.

- Company’s current premises, despite being appropriate for its needs, had become too expensive; alternative premises were being considered.

- Both the bank and the invoice financier were secured on the company’s assets, as well as by a personal guarantee from a director.

- The company had identified a potential acquirer/investor, but its historic liabilities prevented a smooth passage to any merger or investment.

Outcome

- TMP advised on the restructuring of the company and the directors decided to propose a Company Voluntary Arrangement (CVA) to its creditors.

- A five year CVA was approved with unsecured creditors expecting a dividend of 52%.

- Negotiations were undertaken with the bank and the bank did not object to the proposed CVA. The company would continue to pay monthly instalments to the bank in the usual way.

- At the time of the CVA being implemented, the company replaced its invoice financier with a new debtor funder that was more appropriate for its needs.

- The company’s headcount was slightly reduced, including two directors who parted on amicable terms.

- Premises costs were reduced by a move to a new building in the same area, thereby minimising any disruption to the business.

- With a new finance controller, the company has more immediate day-to-day clarity and visibility on issues relating to cashflow, debtors and creditors.

- The company continues to have a dialogue with its potential acquirer/investor, a significant player in the creative arena.

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