Using a CVA to acquire a struggling business
Toby and his wife managed a film production company which, following a project that was financially not as successful as expected, experienced financial difficulties and had to cease trading. Toby was able to win the backing of a multinational film distributor, who was prepared to back Toby's artistic skills and acquire his company for its valuable film library but was concerned about the extent of the liabilities. The acquirer's solicitors asked for our view.
Whilst a purchase of the company's assets from liquidation was the initial suggestion, this was problematic in that many of the productions had external co-producers whose consent was needed for a sale. We therefore suggested applying a CVA to limit the creditors to a ?0.5m fund introduced by the acquirer and selling the company.
This duly happened, enabling Toby to continue his activity with the backing of his new partner and for creditors to have a much faster and higher return than liquidation.
"Buying the company can be simpler than buying the assets, especially when a CVA has capped the liabilities"
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