BBC Dragon Sara Davies MBE is set to step in and rescue Crafter’s Companion after its directors called in administrators – but can she turn the business around?
Davies, who returns for series 22 of Dragons’ Den this Thursday, hopes to save 100 jobs at the Durham firm she founded as student two decades ago.
“Well… looks like I’m going to be pretty busy!” she wrote on LinkedIn after the news broke. “So excited for the future and to be back at the helm of Crafter’s Companion!”
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Crafter’s Companion, which has physical stores in Newton Aycliffe, Chesterfield and Evesham, supplies crafting tools and supplies across the UK, Europe and United States via its website.
COVID-19 saw eCommerce sales spike as hobbyists sought to take up crafting at home. However a drop in business followed and the company moved into the red.
Growth Partners invested millions last year, installing a new management team as Davies and husband Simon, the co-founder and CEO, stepped back.
The pre-pack insolvency, first reported by The Times, will see the duo – currently minority shareholders – increase their investment, with Sara Davies named CEO.
Davies added: “The problem we’ve had is the debt structure currently in place in the business meant that it was just impossible to continue to invest in the brand.”
BBC Dragon Sara Davies MBE set to rescue Crafter’s Companion
Simon Bonney, former managing director of business advisory Quantuma – who founded boutique restructuring and advisory firm Arafino Advisory in London late last year – said a pre-pack administration “can be a very effective way of rescuing a business when it appears that there is no way of overcoming a debt burden or lack of appetite to inject funds when the shareholder structure is onerous and the company needs cash”.
Writing on LinkedIn, he continued: “However, we also regularly see circumstances in which individuals exit from a going concern company when it is already in financial difficulty, or exit in such a way as to leave the company in financial difficulty.
“I’ve led a successful case recovering funds from the exiting parties after the event and also advised on transactions where there was not expected to be an insolvency, but where the company was in some form of financial distress.
“In those circumstances, you need to be analytical about how the transaction would look if the company subsequently failed.”
Gary Pettit, managing director at Northampton-based PBC Business Recovery and Insolvency Limited, said: “I appreciate this may seem a little like teaching grandma how to suck eggs, but I always advise that extra bit of caution when acquiring a business that is – or is likely to become – insolvent.
“Appreciate the sentimental element here, but there is that old saying of ‘buyer beware’.”
However Peter Coates, managing director at Durham Precision Engineering Ltd since 2009, replied: “[It] looks more like a well-planned pre-pack, like Typhoo Tea did over six months.”
He added: “Good luck rebuilding… a complicated set of affairs on Companies House during 2024. [It] will take some figuring out what really went on with share swaps etc. Need a good IP (insolvency practitioner) to delve through all that for the creditors.”
Davies continued to Chronicle Live: “There’s no secret that the company was struggling post-pandemic, and its owners tried to pursue an expansion strategy at a time of real economic uncertainty, which was unfortunately unsuccessful.
“It’s an unprecedentedly difficult time for many retail and consumer businesses. However, looking to the future, we have a new financial structure in place which means we have managed to save the large majority of jobs in the company – and in particular in the North East of England, and ensure that we continue trade as a going concern.
“This means a lot to me. To be going back into the business alongside the fantastic team at Crafter’s Companion is an opportunity I couldn’t pass up. Consumer interest in crafting has never been stronger, and with customers of every age recognising the well-being and mental health benefits of creating beautiful things, I am looking forward to helping drive the strategy of the company again.”