The news that Unitech Industries bought north east dealer Crosbys out of administration prompted an absolute flood of comments on this very website, and it’s easy to see why so many in the industry have been enraged.
There is a heady sense of déjà vu surrounding this situation, as Unitech does seem to be hoovering up big name distributors who have found themselves in trouble, like last year’s Francis Catering Equipment acquisition, and the ScoMac buyout back in 2008.
But also like the Francis deal, which provoked a similar sense of injustice, it is once again the suppliers that lose out. With the original Bob Crosby Agencies entity in administration, the purchase is essentially name and assets only (and even then, ScoMac has taken on the company’s projects arm). The quirks of UK trading law mean that the debts do not get passed across to the new firm, Crosbys Catering Supplies.
While the administration process will seek to recover some of the debts to suppliers, understood by Catering Insight to stretch into tens of thousands or more for some, the likelihood that all monies will be returned is very slim.
So even though the buyout has saved 38 jobs at Crosbys (which is of course welcome), the consequences of the impact on suppliers could be jobs lost at these companies further down the line. I’m sure this latest big sting will leave a lot of manufacturers and suppliers once again reviewing their credit lines and terms.
And another repetition of this and the Francis situation is the considerable anecdotal evidence of buying equipment right up to the last second before the insolvency was announced, without giving any key suppliers a heads up to enable them to reduce their losses. These kind of moves can’t be said to inspire confidence for a mutually positive working relationship in the future.
Both trading until the very moment of insolvency and buying a company’s assets while divesting its debts are not illegal, but there has to be questions asked about the morality of such steps. I guess the UK government cannot legislate for morality in business, and companies just never know if unfortunate trading conditions conspire to knock them for six, but I would say it is how the management of enterprises in trouble respond to the situation which really shows how strong their moral backbone is. Regrettably, it looks like it is incumbent upon individuals to judge who they should work with.
For my part, I sincerely hope this is the last time we have to report on a major distributor going bust or getting into troubled waters. However, sadly with the trading challenges and margin erosion the industry is facing, I fear it is only a matter of time before we are back here again.