The arrival of receivers at Memsolve and its subsidiaries heralds the collapsed distributor as a going concern. start of a crucial period in the company's future, as the administrators begin the task of assessing which parts of the business, if any, are viable for sale as a going concern.
To say the collapse of the distributor has been rapid would be a euphemism.
Established in 1995, the distributor had a turnover of #19 million by 1996, which had doubled by 1998. It was in the process of diversifying its interests from its primary business of components distribution into PC and systems building.
In March 1998, Memsolve adopted the Atlantic Systems trading name from defunct distributor Electro-Wide through its Hexagon IT subsidiary. Hexagon had already bought Electro-Wide's mail-order business and was looking to tie in its systems building unit, Eagle Systems, with the Atlantic PC brand.
The icing on the cake for Memsolve came towards the end of last year when it joined forces with Future Solutions to provide PCs for Asda's Christmas sales promotion.
John Atherton, general manager at distributor Enta Technologies, said: 'For a tier-three distributor, Memsolve was going great guns last year and we were doing a lot of advertising with it. I don't know what went wrong.'
However, what is clear is the detrimental effect the HM Customs & Excise raid on Memsolve in November 1998 had on the company's trading position.
Credit insurer Euler Trade Indemnity suspended cover immediately following the swoop. It was later restored but never returned to its original level, thus creating a credit shortage that was to prove crippling.
Shortly before the receivers were called in, Chris Walmsley, marketing manager at Memsolve, told PC Dealer: 'We have had cash flow problems.
We paid #180,000 for monitors but only received #30,000 of product, as it used the rest to pay old invoices, so we instantly lost #150,000 of credit. We can bear that if it happens once - but it happened about 10 times.'
So what does the future hold for Memsolve? Creditors and suppliers will be keen to recover stock under the Retention of Title rule, but the VAT man will be at the top of the pile, and since the HM Customs & Excise investigation is still ongoing, this may take some time. A meeting of creditors is not expected for at least three months.
One distributor complained: 'A large amount of the total debt occurred recently - in fact, just weeks before it went under. It's still a painful process to recover the debt, even if you are insured. The manner in which the company has failed often counts for more than the failure itself.'
Administrative receiver BDO Stoy Hayward is looking to sell Memsolve and its subsidiaries as a going concern and placed an advertisement in the Financial Times on 16 February. But channel sources have expressed their doubts as to whether the group of companies can be sold lock, stock and barrel.
One source said: 'They don't appear to be trading at present, so it would be difficult to sell them as a going concern. But there's no clear view on the right way forward. There may be some cherry picking, but there are so many grey areas - not least of which is the whereabouts of stock.'
Another source added: 'Memsolve has been a very profitable business in the past, so someone will be able to find a use for at least a part of it.'
The next few weeks will be crucial in deciding whether Memsolve is to survive this turbulent period. The industry will be watching with interest and any bid for Memsolve is likely to be viewed as a bold move. But, under the right management, it is conceivable that at least parts of the business could survive.
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