How do you manage wide ranging stakeholders through a fast-tracked sale process?

EY Partners were appointed as Administrators of Sargon and achieved a successful sale of its business and asset via an accelerated sale process.

On 3 February 2020, Stewart McCallum and Adam Nikitins were appointed Joint and Several Voluntary Administrators of eight entities within the Sargon Group (“Sargon”).

Sargon owned and operated businesses in the financial planning, corporate trustee, responsible entity, superannuation and related financial services sectors.

On 4 May 2020, a recapitalisation transaction was completed with the Cloverhill Group. The transaction ensured the continuing employment for all employees, being approximately 100 staff, and provided stability for the AUD 15.5 billion in superannuation funds under management with Sargon for in excess of 230,000 superannuation fund members.  The sale included shares in operating subsidiaries which continued to operate with independent boards and were not under external administration.

Urgent action and strategic thinking

EY moved quickly to stabilise the operations of Sargon, ensuing to preserve regulatory licences, minimise disruption to operations continuing on a business as usual basis and address the entities’ urgent insurance and funding requirements. 

An accelerated sale process was commenced by the EY Administrators, which required prospective bidders to solve urgent insurance and funding requirements of Sargon, and also to be a party capable of satisfying regulatory authorities in respect of the businesses ongoing licencing requirements.  The EY Administrators process ultimately delivered a binding offer from the Cloverhill Group for the purchase of the business and assets of Sargon.

Despite extensive negotiations with various third parties whose consent or participation was required to effect a consensual sale to the Cloverhill Group, the EY Administrators were ultimately required to make an urgent application to the Federal Court of Australia to enable the sale to proceed within the time constraints present.  The application was heard before the Honourable Justice O’Bryan and on 1 May 2020 his Honour granted leave for the sale to proceed.  The Court made orders pursuant to section 442C(2)(c) of the Corporations Act 2001 (Cth) (“Corporations Act”) which enabled the EY Administrators to dispose of assets used by, or in the possession of Sargon, notwithstanding that the assets may have been subject to a security interest and/or other ownership claims by third parties. 

The Court was satisfied with the robust nature of the sale process run by the EY Administrators, the urgent action being proposed to give effect to the sale and the arrangements made for ensuring that the interests of secured creditors and other parties claiming ownership and/or security rights would be adequately protected.  The Court also granted ancillary relief under section 447A of the Corporations Act to ensure that intellectual property rights associated with the business and assets of Sargon could be transferred to the Cloverhill Group unencumbered by security interests.

The total consideration paid by the Cloverhill Group for the business and assets of Sargon was retained by the EY Administrators as required by the Court for the purpose of meeting claims made by several parties in respect of the assets sold.  Several interested parties subsequently made claims to the proceeds of sale and were afforded the opportunity to make submissions to the Court in respect of their entitlement to the sale proceeds.  On 21 April 2021 his Honour handed down a determination of interested parties claims to the sale proceeds and the EY Administrators subsequently facilitated the distribution of proceeds as directed by the Court.

Experience, transparency and trust

By maintaining regular and transparent engagement with stakeholders, the EY Administrators carefully navigated a challenging environment to sell the financial services business.

The sale was complex and challenging in many respects, particularly given the state of the market, the prevailing risks associated with the COVID-19 pandemic and the limited market for this business and assets.  With the support of key stakeholders, EY was able to conduct an accelerated sale process which required extension engagement and negotiations with a large number of stakeholders, including regulators APRA and ASIC, external administrators appointed to other parts of the Sargon Group, the independent boards of the operating subsidiaries, secured creditors, unsecured creditors and parties claiming ownership and/or security rights in respect of the assets the subject to the sale.