“You won’t get a fair price when you have no other option but to sell.”
Sports personalities can be a source of a lot of wisdom. Eric Cantona gave us the classic line “When the seagulls follow the trawler, it is because they think sardines will be thrown into the sea.” Bret Hart, a Canadian writer, actor and retired professional wrestler currently signed with WWE, under a Legends contract, came up with my title line above.
Believe it or not, I got thinking about all this when I heard about the plight of Adventis, a UK based marketing and advertising agency, that seems to have got itself into a bit of a liquidity pickle. It recently attempted a £3M equity fund raising round that didn’t come off. This leaves it with a bit of a problem as it owes Lloyds Bank £1.5m and the bank seems to want it back
Without new equity Adventis has decided to sell off its two technology businesses in order to raise some funds. If successful, the group will be left with a property marketing business and no debt. The bank seems to be putting the pressure on saying that they are willing to launch insolvency proceedings, or force the group into administration, if the sale doesn’t generate enough funds.
Well, that brings me to my main thrust of this blog. Everyone now knows that Adventis have to sell, so how likely is it that it is going to raise enough funds now that it has something of a fire sale on its hands? Nick Winks, Chairman, thinks that the sale of the two businesses will generate sufficient funds to cover the debt, although the company did acknowledge that there was “no certainty” that the funds would cover the outstanding debt.
Watch out for trawlers following this one over the next few weeks and let’s hope that Bret is right and that Adventis can pluck a songbird off a nearby tree and it all works out fine as they predict. I’d say that is not the most likely outcome though, as it is never a good idea to have to sell anything when you have the sad combination of: time pressure; few options; and everyone knowing about your plight. Others will probably try and take advantage of your misfortune.
Of course, you can view this as just a salutary lesson and make sure you don’t get into this sort of position. I can’t tell you how many people leave it much too late before they start preparing to sell their businesses, let alone how many overstretch themselves financially. So, don’t take on too much risk and always plan far enough ahead, particularly when you want to sell your business, so that you and not the seagulls are in control. There are many more squawking gulls, hungry for an easy meal, than there are songbirds in the corporate jungle.