What is a Pre-Pack Sale?

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A pre-pack sale is where a company enters administration and its business and assets are sold immediately by its administrator under a sale which was negotiated before, or shortly after, the administrator’s appointment. It’s a relatively common procedure in the UK and is often a much better option for creditors than liquidation.

The directors of a failing company recognise that they have no reasonable prospect of avoiding an insolvent administration or liquidation and seek advice from an insolvency practitioner about the potential benefits of a pre-pack sale. An IP will then carry out an assessment of the company’s assets, liabilities and cash flow and conclude that a pre-pack is a viable option for the company and its creditors.

Insight into the Pre-Pack Sale Process: A Comprehensive Guide

During the pre-pack, an IP will prepare a strategy for selling the company’s business and assets to a new buyer. A key consideration is ensuring that the sale is a ‘fair price’. If a company’s financial difficulties become public knowledge, competition may unfairly advantage competitors and result in the sale price being significantly below market value.

To avoid this, IPs will typically test the market by advertising the company’s business and assets for sale. They will also commission a valuation of the business and assets and consider any offers received. Finally, they will prepare a report (an “evaluator’s report”) on the proposed purchaser in order to provide a statement of satisfaction that the sale is a fair price.

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