Who is buying Peverel?

In the administration of a business as a going concern, a trade sale is always amongst the first options considered by an administrator.  However, as Peverel is the largest managing agent in the country, the likely trade bidders from the property management sector are probably limited to other firms who could more easily absorb the size and scale of the Peverel operation.  Aside from Peverel, the next largest managing agents are Countrywide Property Management, the Residential Management Group (RMG) and Mainstay property management.  These firms would need substantial funding to afford the price tag asked by the administrators, and may prefer to pass on the opportunity the purchase the whole business in the hope of maybe picking up pieces later if the outcome of the administration is unsuccessful.

(2)    Management Buy Out (‘MBO’)

    Although the Peverel holding companies are in administration, the operating companies (which make a profit of around £12m per year) are not.   Run by an experienced management team who have been with the company for some time, the administration presents them with an opportunity for an MBO and a general reorganisation of the business.  As the management team already know how the business runs, there are advantages at an operational level in an MBO.  However, again, the stumbling block may be the cost as to pull and MBO off, the management team would need to find the financing - which also means convincing a backer of the merits of their business plan.

 

(3)    Break-Up and Close Down of the Business

As some of the brands within the Peverel organisation have suffered less reputational damage than others in recent times, the management of these companies may be tempted in particular to buy their firms out of the organisation and make a fresh start outside the Peverel umbrella.  The administrators have made it clear that this is not their preferred option as they intend to sell the whole business as a going concern.  However, the longer the administration continues and the greater uncertainty this creates for staff and customers may force the administrators into considering other options. These may include selling parts of the business to management or third parties, and maybe even closing other elements of the business down altogether. Other managing agents who may have balked at the cost - or risk - of taking over the whole business, may be waiting on the sidelines hoping for some rich pickings to become available.  With managed property geographically spread across the country, the number of firms who would be interested in pieces of Peverel extends far beyond the core group of large managing agents mentioned above.  Also, its constituent parts may be far more affordable to some of the smaller or mid-size players in the market.

(4)    Private Equity Investment

A private equity investor from outside the industry would be looking at the cold, hard business case of rescuing Peverel from the clutches of administration and making a respectable profit from doing so.  A thick-skinned private equity house may be less concerned about the reputational problems Peverel has faced, compared with the business opportunity and merely treat this as one of many risk factors to be weighed up in successfully bidding for the business.

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(5)    Refinancing and Buy-Back

The refinancing of the business will be another option the administrators will look at carefully, as it was the Peverel holding companies massive debt exposure that led it into the administration process.

A buy-back of the business by Vincent Tchenguiz or a consortium led by him should not be ruled out, particularly after he has shown a steely determination to fight his arrest by the Serious Fraud Office on human rights grounds and has also now settled a £1.5 billion civil claim against Kaupthing.  However, whether the return of Tchenguiz, a financing expert, to the Peverel stable would be a popular move, or whether he would even want to regain ownership of the company managing many of his properties is debatable.
 

(6)    A Combination of the Above

The administration process is a complex procedure with many uncertainties and it would not be unrealistic to predict that a combination of the above potential outcomes may ultimately materialise.  For example, following the purchase of the business, parts may be broken-up and sold to competitors or MBO’s agreed with the management of its constituent parts.

Whilst many firms have considered their options with regard to the Peverel administration, with some walking away and some being turned away, the industry awaits to discover the outcome which could still be some time away even if entering its final stages. Whoever is the ultimate buyer, it will be a tough road ahead.