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Restructuring & Turnarounds using formal insolvency procedures
Pixsta Limited
The partners of TMP were introduced to the management team of Pixsta Limited (“Pixsta”) in early November 2009.
Pixsta was an IT company that had researched and developed visual search technology (as opposed to “text” searches). This technology had been implemented in a fashion context – allowing visitors to their website to search a fashion database using images. A patent application was in progress for this technology. Pixsta was historically funded through venture capital, although no new finance could be raised through these avenues.
The directors were aware that at the end of December 2009, their existing funding would run out and from that point on, they could not afford to pay their debts as they fell due.
After the initial consultation with TMP, the directors continued to try and raise further finance but by mid-December had run out of options and came back to TMP to investigate alternative solutions - not least of which was to ensure that they were acting according to their fiduciary duties.
The directors believed that there was a viable business to be rescued. The business relied on the talent of its staff and the intellectual property that it owned. Various insolvency procedures were discussed, but the only procedure that allowed for the preservation of the goodwill in the business was a pre-packaged Administration. Pre-pack administrations allow for a seamless transition from the old business to the new business as the marketing process occurs before the Administration date.
TMP immediately undertook an aggressive and targeted marketing campaign for the business. Over the Christmas period, at least five interested parties from across the globe were identified, which included national and international competitors. TMP embarked on negotiations with the interested parties which eventually resulted in a bidding war and an offer being agreed upon in early January 2010. The offer received was not only the highest cash offer, but also allowed for the preservation of the jobs of the Pixsta staff.
The offer received, together with further realisations from debtors, should result in a significant return to creditors. This is an infinitely better result for creditors as the alternative to place Pixsta in another insolvency procedure and sell the assets would have resulted in a significantly lower return to creditors.