The assets of a company can take many forms. These include Physical assets like Inventory, and equipment. There may also be Intangible assets like its brand and website of the Company, the business and customer list of the company.
When dealing with an insolvent company, it is important to form an action plan on how best to deal with the assets of the company.
It is important to consider what the value of the assets of the company is. In other words, is the value primarily driven by physical assets or intangible assets. Is it feasible to sell the business of the company as a going concern?
In the case study below, we will talk about two examples of businesses selling alcoholic beverages we have sold recently.
Quality Beer Limited (QBL) was a business which sold craft beer in New Zealand and exported overseas.
The business of QBL was made up of two divisions. The wholesale portion of the business was responsible to selling BBBL branded beer to various customers throughout New Zealand including to major supermarkets, liquor stores and bars. The business sold both canned beverages and kegs.
The second division, Quality Party Room (QPR) operated its own hospitality venue. Operated out of the company’s premises, QPR provided an authentic, industrial environment for patrons to taste and enjoy QBL branded beer while enjoying pizzas and other food.
As QBL used a contract brewer to produce its beer, the company owned minimal assets. Upon appointment, we assessed the assets and business of the Company and formed the following views:
– The brand was a well-known and established brand throughout New Zealand
– The fact that the brand was sold in numerous supermarkets, liquor stores and bars through New Zealand meant the customer list and business of the company was valuable.
– The Brand of BBL was driving sales and attendance for QPR.
We decided to continue to trade the business while running a sale process for the business to preserve the value of the intangible assets of the company and maximise the sale price which could be achieved for the business of the company.
We were ultimately successful in our sale process and sold the business as a going concern, which enabled us to pay a significant distribution to the senior secured creditor, pay a full distribution to the employees of the company, and allow for a well-known brand and business to continue trading under new ownership.
While the inventory of QBL was valuable, a significant driver of value was the intangible assets consisting of the customer list and brand of the company.
Quality Gin Limited (QGL) was a boutique gin company operating out of Central Auckland. QGL sold branded gin to a limited number of retailers and a small number of bars in central Auckland. QGL used a contract distiller to produce its gin and as such the assets of the company consisted of finished inventory and the brand and customer list of the business.
After assessing the company, we commenced a campaign to sell the assets of the company by seeking expressions of interest for the business and/or assets.
After liaising with various interested parties, we eventually sold the inventory of the company, which facilitated the payment of excise tax due on the inventory and the storage costs. In contrast with QBL, the primary driver of value was the physical inventory, not the intangible assets of the business.