Andy Charters, restructuring partner and insolvency practitioner at Grant Thornton, explains what platforms need to do before considering a sale…
The peer-to-peer lending market has had to weather a difficult climate in 2020 – with a pandemic, multiple lockdowns, and changing regulations affecting every facet of the business. According to Andy Charters, restructuring partner and insolvency practitioner at Grant Thornton, more and more platforms have been using this time to review their options and consider a sale.
“You might opt for a sale of the business, to run off the loanbook, or a sale of a particular loan portfolio,” he says.
“Each one of those three different options will have different triggers. It depends on the current ownership of the platform, and whether the current owner has an appetite for continued investment in the sector. Or perhaps the platform has grown successfully and the current owners want to monetize their investment.
“So, there are some really positive reasons why you would want to sell a platform.”
Whether mulling a sale, a partial wind-down or a restructuring, two factors stand out for Grant Thornton: access to good data, and decision making. “It’s really hard at the moment to make decisions for any business,” says Charters. “But actually, being decisive is really important in the face of strong external market pressures.
“Acting decisively doesn’t mean acting recklessly or making rash decisions. It is critical to base your decisions on high quality data. That quality of data allows you to make the quick decisions required in the face of unexpected pressures with a greater degree of confidence.”
Having a good cache of data means that when an unexpected event – for example, a pandemic – occurs, platforms can make informed decisions quickly and can ensure stakeholders can buy in to those decisions. An analysis of the data might mean that a loanbook can be sold for a higher price before external factors cause defaults to rise and devalue the entire platform.
“For sales of a business or disposals of loanbooks, data is so important,” adds Charters.
“I wouldn’t underestimate the importance of getting your house in order before you go to market. This might sound like quite basic advice, but we’ve certainly seen across all sectors that the data is not always as good as management think it is. And people who are looking to buy these types of assets will be data hungry.”
Good data will enable timely decision making. “Businesses often find themselves running out of options,” Charters warns.
“Those who don’t grasp the nettle won’t start to engage with problems until they have already developed.” Charters calls this the “corporate decline curve”.
“The more you move down the decline curve, the less options you have,” he says. “Having an external perspective that can provide advice and challenge can be valuable to a board and a management team struggling through this environment.
Speaking to people who have managed through crises before can provide management teams with valuable extra insight.”
As the pandemic continues to squeeze the economy for the foreseeable future, more platform sales are inevitable. But taking early action can result in a positive outcome for platform owners.
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