Administrator's Report: 49 prospective buyers initially tempted by Outsourcery

But list was whittled down to just two when unified communications firm went into administration owing more than £7m to range of creditors

Despite 12 prospective buyers bidding on Outsourcery, the firm's assets were snapped up by GCI Networks shortly after appointing administrator Ernst & Young (EY), according to the official report.

The 80-plus page document states that in total, 49 parties were initially interested in acquiring the company, which went into pre-pack administration on 16 June following continued losses year on year since its inception. Although revenue increased slightly from £7.4m in FY14 to £8m in FY15, the net loss for FY15 was £6.2m.

Major creditors listed in the report included Vodafone (owed £5.3m) and Etive (owed £1m). According to the report at least £2m was owed to other parties.

Bytes was owed £112,937.66, Convergent Network Solutions was owed over £58,962.66, Fast Host Internet was owed £165,244.46 and HP International Bank was owed £424,637.26, the report stated.

A number of other channel firms were listed as creditors in the report, including CCS Media, BT, Ingram Micro, Microsoft and Softcat.

Before it floated on AIM in 2013, Outsourcery had amassed a number of debts including £2m to digital log book firm Etive, £2.5m to shareholders and a £300,000 mortgage to Barclays.

The company raised £17.7m in equity when it floated, part of which was used to pay off shareholders.

By July 2015, Outsourcery needed additional funding but could not get any more from its existing funders. So it turned to its vendor partner Vodafone, which agreed to fund the firm £4m. With the extra funding Outsourcery paid its Barclays mortgage in full.

According to the report, Outsourcery was in the red "due to investments in IT infrastructure". By 2016 the continued losses had "resulted in cashflow pressure."

Vodafone invested another £1m in the company earlier this year, at the same time introducing Outsourcery to EY.

Outsourcery then entered into an accelerated sales process over five weeks, in an attempt to sell either the whole group, some of the companies in the group, or the group's business and assets.

It was here the 49 prospective buyers were pared down, with bids received on 31 May from 12 parties, the largest offer being £5m.

By June there were two firm offers, both interested in the business and assets of the company, excluding its PSN platform, cash, debtors and property.

GCI offered £4m payable on completion, and could transact on or after 14 June. An undisclosed "party B" offered £4.5m, with £2m payable on completion and £2.5m deferred until an unknown date, believed to be between 18 and 24 months from completion. Party B could not complete the transaction until 17 June.

On 13 June party B withdrew from the sales process, but according to the report the Outsourcery board had already decided on the GCI offer, citing numerous reasons including transaction date and price.

The report stated that Outsourcery employee contracts have been switched over to GCI "as if originally entered into by employees and GCI".

EY was then appointed, and the sale completed immediately after.

CRN reported in September 2015 that UKFast boss Lawrence Jones had bought 5,555,556 shares in Outsourcery for a total of £1m of his own money. He said at the time: "They are a business with huge potential and I see long-term synergies and immediate potential partnerships."

CRN understands that it is unlikely Jones or any other shareholders will receive any of their investments back.

A representative from Vodafone told CRN in a statement: "We supported Outsourcery as it reshaped its business, and maintaining continuity of service to our clients was paramount to us. We believe that the agreement between Outsourcery and GCI was the best option to achieve that objective."