Buying a customer order/enquiry book

[PDRD]

Evening all.

OK so a customer of ours is in deep trouble and is about to file for liquidation. They seem to have a decent order book, but most of the orders are sold at cost or below. Hence the money issues and imminent liquidation. We are owed several thousand ££ so don't imagine we will see it, we have suggested we can settle the payment by 'buying' their order/enquiry book.

I know this has no real value but we want the contacts. We know these customers want to buy the product on offer, so it seems like a good way of getting good leads.

Now my issue is, will these customers think we are associated with the old company? If we contact them and tell them that we have purchased the contacts will they by happy for us to quote for work?

This will be a new line onto our business model but is one we can incorporated and have experience and knowledge in.

Why are things never simple.......

Regards
Phil

 

[Dave Shaw]

Hi Phil

Creditors often wonder why they can't take assets in lieu of their debt. Normally directors in this situation are advised not to since it effectively prefers one creditor over the others.

If you are interested in the order book you will probably have to pay to acquire it from the liquidator. Alternatively to avoid paying you could just approach any of their customers you know to see if there is an opportunity for you.

Whilst it depends on the industry, customers are often less bothered (compared to suppliers) about an acquisition from liquidation provided they don't experience any significant disruption. However if there are to be supply issues then an unconnected party can normally smooth things over by explaining that they are new to the relationship and wish to take the relationship forward on an improved basis. Often customers don't like the hassle of finding a new supplier so if you give the impression you have taken over the business it is easier for them to leave the contracts with you.

If you are buying a business out of an insolvency process take advice to make sure that you don't expose the rest of your business; for example put it into a separate legal entity so that if it doesn't go according to plan you don't adversely affect your current one.

Dave

 

[PDRD]

Thanks Dave.

I know they have yet to file for liquidation so was hoping to do the 'deal' before it happens. It is more of the contacts book we want rather that the order as we aim to contact and requote the work on our terms and prices.

Thanks
Phil

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[Alan R Price]

As Dave says, you will have to be careful that any deal you do will not fall foul of the "preference" provisions of the legislation, so you cannot set off any purchase price against money owed to you - you must pay cash. If there is value in the contacts list, make an offer to the company for it now: even if you have not tied up a deal prior to liquidation you will have a foot in the door to start negotiating with the liquidator as soon as he/she is appointed - this will be very welcome.

Such deals are often structured around a lump-sum payment, based on the volume of business generated with those customers over the previous couple of years; or a percentage of future sales to those customers over the next two years. There is however no hard and fast rule.