Just after I started with eWave, we received the letter you just don't want to get.
It was from the liquidators of Toys "R" Us (Australia), and it confirmed the news we had heard on the radio and TV that morning, that TRU had gone into liquidation. At the time, we were in the middle of a substantial systems integration and eCommerce platform build with a total contract value well over $1m.
We had completed a few months' work, and the client had paid us on time each month - so we had no heads-up that there was any problem at all. They owed us the most recent issued invoice, and also the uninvoiced work from the current month - $XXX* - and the business forecast and work activity for a whole raft of staff in both our Europe development hub as well as Sydney office, were in tatters.
Such a big hole in the cashflow would be a death knell for many companies our size, so I got to work immediately:
What contractual rights might the client have to the unfinished work?
What rights might the liquidators have to rescind payments made to us over prior months?
What chance did the liquidators have of selling the partly-completed platform as part of the going concern, to a new shareholder - in which case we might still be able to carry on to completion?
To cut a long story short -
We owned the IP in the work until completion of the project, so we were able to maintain ownership of the partly-completed work;
As we had not had any indication that TRU was in any financial difficulty, we could not be seen to have had any preferential treatment, so our prior payments were OK;
The liquidators advised that they were unable to find a buyer for the business and agreed that we could take what had been completed from the smoldering carcass of the Australian business.
The liquidators also confirmed that the expected payout on debts owed by TRU to unsecured creditors, such as ourselves, was expected to be zero.
The Rescue
By way of salvaging what had been created to date, we searched for - and ultimately found - a new buyer for the platform. TRU Asia was owned by an independent group, using the TRU name and logo under licence. I joined Nick Hull, our gun sales lead, to negotiate with TRU Asia a deal they couldn't refuse.
Because we had already completed rafts of work, but had been unpaid for around $XXX of that work, we offered all of that work performed for the princely sum of $XXX, plus interest.
Benefit for the client:
This got the new project off and running on a fast track, as it saved some 6 months work.
That 6 months work was also then effectively discounted by up to 50% as we only were seeking payment of $XXX.
Benefit for eWave:
We didn't have to just scrap the 6 months work completed - we got to re-use a lot of it.
We recovered all the cash owed to us by the TRU Australia insolvency, stemming a massive hole in our cashflow and making us good.
We were also able to up-sell the whole thing by virtue of the additional geographies involved in the Asia roll-out, including HK, China, Philippines, Thailand, Singapore, Indonesia, etc.
We were also able to quickly restart work for all the team who had been left on the bench for the couple of months since TRU went into insolvency.
Now that's what I call a win-win. And proving that sometimes, you can get manna from heaven.
* = Insert big number!
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