Part B2 Regression analysis of traditional administration with a concern sale to assess the procedure’s ability to deliver viable purchasing companies and compare with the analysis of the pre-pack sample. This part of the looks at the failure rates of purchasers from a traditional administration going concern sale and identifies which characteristics change the chances of failure. The dependent variable in the regression analysis is a binary variable measuring whether the purchaser is continuing in operation (0) or has succumbed to a further insolvency procedure or ceased trading (1). The independent variables are: Whether the sale was to a connected Whether there was deferred consideration Size of the company entering administration (turnover and employee numbers) Age of business prior to pre-pack The timing of the dependent variable relative to the data in the dependent variable is lagged at 12 months, 24 months and 36 months. Part C Finally, is a combined regression analysis which considers the impact of whether, all else being equal, failure rates differ between business sales after and trading administration. III Summary of Outputs and Analysis The data points listed (Parts A1 and B1) for, respectively pre-packs and traditional going concern sales, have been provided on respective excel spreadsheets. The most significant findings are summarised and analysed below. These findings are followed by respective regression analyses (Parts A2 and B2) along with an explanation of the model selected which underpins the regression analysis. Finally, there is a combined regression analysis (Part C) which considers the impact of whether a sale takes place in a pre-pack or trading administration on the subsequent failure of the purchaser. Part A Data was collected for 497 companies utilising pre-pack administrations in 2010, with 499 cases being identified to reflect a small incidence of two unique business sales
01 Crop and animal production, hunting and related service activities 3 0.6% 10 Manufacture of food products 10 2.0% 11 Manufacture of beverages 1 0.2% 13 Manufacture of textiles 2 0.4% 14 Manufacture of wearing apparel 1 0.2% 16 Manufacture of wood and of products of wood and cork, except furniture; manufacture of articles of straw and plaiting materials 5 1.0% 17 Manufacture of paper and paper products 3 0.6% 18 Printing and reproduction of recorded media 9 1.8% 20 Manufacture of chemicals and chemical products 1 0.2%
22 Manufacture of rubber and plastic products 2 0.4% 23 Manufacture of other non-metallic mineral products 5 1.0% 25 Manufacture of fabricated metal products, except machinery and equipment 24 4.8% 26 Manufacture of computer, electronic and optical products 2 0.4% 27 Manufacture of electrical equipment 1 0.2% 28 Manufacture of machinery and equipment n.e.c. 1 0.2% 29 Manufacture of motor vehicles, trailers and 2 0.4% 30 Manufacture of other transport equipment 2 0.4% 31 Manufacture of furniture 6 1.2% 32 manufacturing 11 2.2%
35 Electricity, gas, steam and air conditioning supply 1 0.2% 38 Waste collection, treatment and disposal activities; materials recovery 2 0.4% 41 Construction of buildings 15 3.0% 43 Specialised construction activities 32 6.4% 45 Wholesale and retail trade and repair of motor vehicles and motorcycles 6 1.2% 46 Wholesale trade, except of motor vehicles and motorcycles 24 4.8% 47 Retail trade, except of motor vehicles and motorcycles 23 4.6% 49 Land transport and transport via pipelines 11 2.2% 52 Warehousing and support activities for transportation 4 0.8% 55 Accommodation 3 0.6%
56 Food and beverage service activities 25 5.0% 58 Publishing activities 4 0.8% 59 Motion picture, video and television programme production, sound recording and music publishing activities 8 1.6% 61 Telecommunications 5 1.0% 62 Computer programming, consultancy and related activities 11 2.2% 64 Financial service activities, except insurance and pension funding 29 5.8% 68 Real estate activities 4 0.8% 69 Legal and accounting activities 5 1.0% 70 Activities of head offices; management consultancy activities 8 1.6% 71 Architectural and engineering activities; technical testing and analysis 4 0.8%
93 Sports activities and amusement and recreation activities 4 0.8% 94 Activities of membership organisations 2 0.4% 95 Repair of computers and personal and household goods 1 0.2% 96 Other personal service activities 18 3.6% non-trading non-trading 5 1.0% N/K Not 35 7.0% 499 100.0% NB The total of 499 includes two companies that are represented twice as there were two distinct business sales. Appendix 2 Sector of company subject to pre-packaged administration – Categorised SIC 2007 Code Range (2 Digit) Sector Name Prevalence Prevalence Rate 01-09 Agriculture and Mining 3 0.6% 10-33 Manufacturing 88 17.6% 35-39 Utility Supply 3 0.6% 41-43 & 68 Construction / Real Estate 51 10.2%
45-56 Wholesale / Retail / Transport / Storage / Accommodation and Food Services 96 19.2% 58-66 & 69-75 Communication / Finance / Insurance / Professional Services 84 16.8% 77-82 Administrative and Support Services 96 19.2% 84-88 Public Administration / Education / Health and Social Work 7 1.4% 90-93 Arts, entertainment and recreation 10 2.0% 94-96 service activities 21 4.2% Non trading Non trading 5 1.0% N/K Not known 35 7.0% Total 499 100.0% NB The of 499 includes two companies that are represented twice as there were two distinct business sales. Appendix 3 Details of Insolvency Practitioner involved in pre-packs Firm Appointments Sales to Connected Party Use of Deferred Consideration Sales to Connected Party with Deferred Consideration Abbey Taylor 1 1 0 0
Appendix 4 Failure data by categorised oldco sector data – Pre-packs SIC 2007 Categories Prevalence (where full failure data) Prevalence Rate Prevalence of failure Failure Rate (within category) Failure Rate (overall) Agriculture and Mining (01-09) 1 0.2% 0 0.0% 0.0% Manufacturing (10-33) 87 18.3% 27 31.0% 22.3% Utility Supply 3 0.6% 1 33.3% 0.8% Construction / Real Estate (41-43 & 68) 49 10.3% 18 36.7% 14.9% Wholesale / Retail / Transport / Storage / Accommodation and Food Services (45-56) 91 19.2% 23 25.3% 19.0% Communication / Finance / Insurance / Professional 79 16.6% 11 13.9% 9.1%
dataPP$DefConYes 0.8717 0.4495 1.939 0.0525 . --- Signif. 0 ‘***’ 0.001 ‘**’ 0.01 ‘*’ 0.05 ‘.’ 0.1 ‘ ’ 1 (Dispersion parameter for binomial family to be 1) Null deviance: 206.22 on 465 degrees of freedom Residual deviance: 202.03 on 464 degrees of freedom AIC: 206.03 Appendix 7 Sector of company in trading administration – 2 Digit SIC 2007 SIC 2007 Codes (2 Digit) Sector Name Prevalence Prevalence Rate 13 Manufacture of textiles 2 1.8% 18 Printing and reproduction of recorded media 2 1.8% 20 Manufacture of chemicals and chemical products 1 0.9% 24 Manufacture of basic metals 2 1.8% 25 Manufacture of fabricated metal products, except 3 2.7%
machinery and equipment 26 Manufacture of computer, electronic and optical products 1 0.9% 28 Manufacture of machinery and equipment n.e.c. 1 0.9% 31 Manufacture of furniture 1 0.9% 32 Other manufacturing 4 3.6% 35 Electricity, gas, steam and air conditioning supply 1 0.9% 38 Waste collection, treatment and disposal activities; materials recovery 1 0.9% 41 Construction of buildings 6 5.5% 43 Specialised construction activities 1 0.9% 45 Wholesale and retail trade and repair of motor vehicles and motorcycles 2 1.8%
46 Wholesale trade, except of motor vehicles and motorcycles 10 9.1% 47 Retail trade, except of motor vehicles and motorcycles 9 8.2% 49 Land transport and transport via pipelines 3 2.7% 55 Accommodation 11 10.0% 56 Food and beverage service activities 3 2.7% 58 Publishing activities 3 2.7% 64 Financial service activities, except insurance and pension funding 5 4.5% 68 Real estate activities 1 0.9% 71 Architectural and engineering activities; technical testing and analysis 4 3.6% 74 professional, scientific and technical activities 1 0.9% 78 Employment activities 1 0.9% 82 Office administrative, 6 5.5%