Jon Moulton makes u-turn on pre-packs

“Pre-packs are not all bad,” according to Jon Moulton, one of the
administration procedure’s fiercest critics.

Moulton, the former managing partner and founder of private equity firm
Alchemy Partners, has previously been vocal about his concerns that pre-packs
are open to abuse and are not always the right avenue for administrators to

However, Moulton, now chairman of financial consultants
Better Capital,
made a u-turn remark on the controversial insolvency procedure – labelling them
not all bad at a recent forum.

Pre-pack administrations have caused controversy as the insolvency
practitioner arranges the sale of a business before it enters formal insolvency,
with some debts wiped clean when the new owners – often the existing management
– take over.

His comments were made at an
Insolvency Practitioners
forum on pre-packs.

However Moulton is still concerned about the procedure, and questioned
whether IPs always managed to obtain a fair value for the business, selling to
existing management rather than through marketing the business.

He also called on regulators to undertake more work on how pensions are dealt
with in a pre-pack.

Moulton told the
last year: “Pre-packs could be very easily abused. Bad management
can plan for a pre-pack months in advance, line up an administrator – and then
be back running the business immediately.

“It means when retailers fail they are often being kept with the same
directors when it would be much healthier if new management arrived and with
fresh money to invest.

‘It is not a procedure that has any legal basis. It has grown up as a
practice and no one has yet had the enthusiasm to contest it.’ He warned that
creditors, who often lose out from pre-pack deals despite a business being
re-started almost immediately, may suspect fraud, but feel legal action would

Further reading:

forum challenges pre-pack transparency

Stephens sells Reader’s Digest to Jon Moulton business

lukewarm on company rescue consultation

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