Beyond the usual suspects: our year in review

If one theme has defined the past 12 months, it’s the sheer breadth of businesses encountering financial pressure.

The restructuring and insolvency profession has always adapted to shifting economic conditions. Yet the past year felt unusually diverse.

Looking back across the matters we advised on, five themes stood out.

Distress emerged across a wider range of sectors

Financial pressure was no longer confined to the sectors traditionally associated with restructuring. Alongside instructions in more familiar areas — such as property development, construction and retail — we advised businesses operating in agriculture, healthcare, automotive manufacturing, telecommunications and professional services.

These ranged from the administration of a long-established Kidderminster carpet manufacturer to the pre-pack sale of motorcycle helmet designer Ruroc Limited. We also advised care home operators wrestling with historic liabilities and acted on the acquisition of Wright Hassall LLP, a law firm that had traded for more than 170 years.

Particularly notable was the volume of work arising from agriculture. Farming businesses faced a distinctive combination of rising costs, borrowing pressures, succession issues and uncertainty around future profitability.

The common thread is clear: financial distress has become both more widespread and more nuanced.

Value increasingly lay beyond traditional assets

Historically, insolvency practitioners focused on stock, machinery, property and debtor books. Those assets remained important, but they were often no longer the primary drivers of value.

Increasingly, businesses derived their worth from intellectual property, software, specialist know-how, customer relationships and reputation. The administration of Humanizing Autonomy Limited illustrated this well: the company’s key assets were software and extensive intellectual property relating to driver risk identification. The transaction required our trademarks and IP team to navigate the intricacies of transferring varied rights — many secured by registration — rather than realising physical assets.

Businesses lived with distress for longer

One of the more striking features of the past year was how many businesses appeared capable of operating under financial pressure for prolonged periods before a formal restructuring or insolvency event occurred.

This didn’t necessarily signal improving conditions. Management teams had become adept at navigating difficult trading environments, while stakeholders continued to support businesses for as long as a credible route forward remained available.

The consequence was that, by the time advisers became involved, situations were frequently more complex than they first appeared. Historic liabilities had accumulated, stakeholder positions had hardened and the range of available options had narrowed. We advised a charity operating care homes for children with special educational needs, for example, in defending a winding up petition presented by HMRC, where the liability related to PAYE that had accrued during the pandemic.

The most challenging assignments were often not those involving sudden corporate failure, but those where pressure had been building quietly over several years.

Lender enforcement remained a significant feature of the market

Much has been written about collaborative restructuring and consensual solutions. In many cases, lenders were prepared to work constructively with borrowers facing temporary difficulties. Yet lender enforcement remained a prominent feature of the landscape.

We continued to see lenders exercise enforcement rights where confidence in a project or borrower had been exhausted. This was particularly evident in property development and construction, where LPA receiverships remained a frequently used recovery tool. Instructions included advising Cambridge & Counties Bank on the receivership of a quarry with development opportunities valued at more than £25m and advising Streambank PLC on the appointment of receivers over a significant residential property on the Dorset coast — a matter complicated by a borrower who proved reluctant to cooperate.

In many cases, lenders had provided significant latitude before taking such steps. Where restructuring discussions failed to produce a viable solution, however, formal enforcement remained an important and often necessary option.

Complexity became the norm

Straightforward restructuring assignments appeared increasingly rare. Cross-border considerations, sophisticated funding structures, regulatory stakeholders and interconnected group arrangements became commonplace.

Advising the board of Stuga Machinery Limited, a company designing and manufacturing machinery for the fenestration industry, illustrated this well. The financial difficulties arose from the insolvency of its German parent, which had previously extracted substantial funds from the UK subsidiary. Rescuing the parent depended on the UK company remaining viable, requiring close liaison with the German administrators to secure its future.

Similarly, our work for the administrators of Net Lynk Direct Limited, a broadband and network supplier, involved liaising with overseas creditors, putting a transitional services agreement in place and advising on retention of title issues.

The profession has always dealt with complexity. But the range of issues encountered within a typical restructuring over the past 12 months appeared broader than ever.

Looking ahead

The restructuring market over the past year was not defined by any single sector or trend. It was defined by diversity.

Financial pressure emerged across a broader range of industries than we have seen in recent memory. Value increasingly resided in intangible assets, businesses operated under financial strain for longer periods and lender enforcement continued to play an important role, particularly within development and construction markets.

For restructuring professionals, the challenge was not that the underlying principles had changed — it was that those principles were being applied to an increasingly varied range of situations.