The Mirror's investigative columnist Andrew Penman on the ongoing problem of agents who demand huge fees even when they fail to sell a small business
Hit by the recession or maybe just retiring or moving on, there are countless owners of small businesses who’d like to sell up.
Business transfer agents are supposedly there to help them find a buyer.
But today I lift the lid on a string of them who demand huge fees even when they fail to get a sale, and then sue clients who refuse to pay up.
Verdicts on business transfer agents don’t often come much more damning than this.
The case involves one of the most notorious firms in this field, RTA Business Consultants.
It failed to find a buyer for a family-run car parts firm but still demanded payment.
When the owner, 70-year-old Andrew Rothery, refused to cough up, RTA sued.
And lost spectacularly.
Its rep Jen Leary bragged she could value a business “to the penny” but got the price of Mr Rothery’s firm wrong by £700,000, Halifax County Court was told.
She lied that she could sell West Yorks firm Holmfield Auto Spares for £1.3m and persuaded Mr Rothery to sign a contract to pay £5,000 plus VAT for marketing, followed by commission on sale.
Suspicious of the high price put on his firm, Mr Rothery had two reputable business sales agents value it and they came up with a figure of £600,000.
So he refused to pay RTA, which sued him for £10,000 in supposed unpaid fees and lost commission.
Deputy District Judge Keith Nightingale threw out the case and was scathing about RTA’s terms.
He said: “The contract, it seems to the court, has clauses which are wholly one-sided and quite frankly it is a document that does not seem fair or balanced whatsoever.”
Mr Rothery and his son Gavin were delighted.
“It was the ignorant bad-mannered attitude of the people at RTA which made me determined not to give them money when they had not earned it,” he told me after the case.
“I’ve been in business for 42 years and have dealt with lots of people who want to take money for doing very little.
“RTA is one of them.”
And Mr Rothery is not the only one to think so.
An extraordinary insight to RTA came at an employment tribunal this month.
Former senior salesman Howard Rowlands told the hearing that the boss, Paul O’Reilly, threatened to “punch him in the f***ing face” in a row over the firm’s ethics.
Mr Rowlands said Mr O’Reilly was “ranting and raving”.
He said: “I spun around and left the office as quickly as possible, I just wanted to get out of there. I felt threatened, seriously threatened.”
Mr Rowlands also told the tribunal in Manchester that sales director Paul Mitchell explained how they would make money from a typical business seller, revealing: “We want to stitch him up with the withdrawal fee.”
Mr Rowlands said: “I didn’t do fraudulent contracts, that’s what caused the animosity. I questioned the ethos and morality.”
He explained that clients were unwittingly committing themselves to paying £1,500 even if no sale of their business was achieved.
He said: “The withdrawal fee is on that contract for life, with instructions from Paul Mitchell and Paul O’Reilly not to inform people it’s there for life.
“I raised it at sales meetings, that it was abhorrent. The withdrawal fee is like an anchor. If owners sell it themselves, RTA wants £1,500. If they take it off the market, RTA wants £1,500.”
RTA disputed the account of its former sales star, saying it was made up because Mr Rowlands was facing disciplinary action over alleged racist language.
Mr O’Reilly also claimed that the Mirror had been ordered by the Press Complaints Commission to print a retraction for one of my previous stories about his company.
He was asked to produce this retraction, forcing him to admit: “I don’t have a copy of it.”
That’s because it doesn’t exist.
The tribunal ruling was postponed.
If Turner Butler failed to sell his building business, Constructive Care, Steve Archer assumed he wouldn’t owe a penny.
After all, he’d been given a “Full No Sale No Fee Guarantee”. He said: “This was included with every letter they sent out to me initially.”
His firm folded after no buyer was found and Turner Butler are now suing him in Hertford county court for £50,000.
Even if they had sold his business at his suggested price of £288,000, Turner Butler’s 7% commission would come to barely £24,000.
But there was no sale and Turner Butler, said Mr Archer, expects this huge sum for “simply advertising my now liquidated company on free insertion websites, for something I could have done myself”.
Rupert Cattell, of Turner Butler, said: “We asked Mr Archer for an explanation of what happened to all of Constructive Care’s assets while under contract to Turner Butler and he has declined to respond, or to provide evidence as to what happened to those assets.”
Hoping to sell her gift shop in Bristol, Carol Budd put it on the market with one business transfer agent, and then a second. It was sold to a buyer who was introduced by the first company, she says.
Which has not stopped the second one, Phoenix Business Agents, threatening to bankrupt her if she doesn’t pay them £8,600.
“Their director Zulf Hamid gave me a big song and dance about how valuable my business was, and wanted to value it at £75,000 but I said that it wouldn’t sell for that so he reduced it to £50,000,” she said.
“Eventually it sold for £28,000 to a buyer who had been introduced by the other company.
“If Phoenix had found a buyer for me I would have paid them but I’m not going to pay them for a customer that was procured by another company.
“These people are targeting hard-working, honest folk.”
A spokesman for Phoenix did not dispute Mrs Budd’s account of its initial enormous over-valuation of her shop or explain why it expects a fee that’s almost a third of the sale price, but it insists that the buyer was registered with them.
“Phoenix is a reputable business transfer agency,” said a spokesman, saying the company hoped to resolve the matter through “open and frank dialogue”.
Last week I told how Preferred Commercial demanded £5,000 from one poor client whose pub it had failed to sell, sending no prospective buyers “apart from one time-waster”.
Preferred Commercial is in liquidation with debts of almost £400,000 that it cannot pay. Which does not mean the end of the people behind this company.
If you click on www.preferredcommercial.co.uk you’re re-directed to an almost identical website for a firm called Vendor Direct.
This even uses the same old Preferred Commercial phone number.
That’s because its assets, including any unpaid bills allegedly owed by ex-clients, have been sold to Vendor Direct, whose director is Barrie Hooton.
He’s an ex-director of Preferred Commercial and partner – both in the business and civil ceremony sense – of another Preferred Commercial director, Martin Marshall.
No sale, no fee. That was the crucial phrase in the sales pitch that persuaded Carl Bowman to put his hardware store in Leeds on the market with Ernest Wilson & Co Ltd.
Now he says ruefully: “With hindsight I was possibly a little naive to accept the word of their sales rep and not query the terms of business further.”
His store didn’t sell and now Ernest Wilson is suing him for £4,765.
It was marketed at £205,000 without success, even though Mr Bowman says that he had been told before signing the contract that “potential buyers were very keen”.
He heard little until Ernest Wilson told him to cut the price to £160,000 and accept liability for their marketing fees.
When he refused, Ernest Wilson took it off the market and issued its court claim.
The firm insists that its terms and conditions are sent to every client and include the clause: “Advertising and marketing costs are payable upon withdrawal.”
Director Stuart Moorhouse said: “We were left with no option but to issue court proceedings.”
He pointed out that Mr Bowman’s complaint to The Property Ombudsman had been rejected.
Mr Bowman responded by reminding Ernest Wilson that they were fined in 2012 by The National Federation of Property Professionals.
Its tribunal ruling began: “We are disappointed that we have heard three further cases connected with Ernest Wilson, especially as there have been two previous cases, one in 2007 and another in 2011.”
The latest case, which resulted in three £750 fines, concerned “the giving to a seller client a copy of the agency agreement document for the sale of their business that is not identical to the version the client has signed”.
Tales like the ones here prompted the establishment of the Campaign for Ethics in Business Transfer Agents , a free support website.
Its spokeswoman said some small firms risk going bust if they pay agents who fail to find them buyers but still demand huge fees.
“There are no laws to stop the business marketing agents from producing unfair contracts and then suing in the small claims courts,” she said.
“We encourage people who have successfully beaten them to help by providing witness statements, copy judgments and transcripts for the next person due in court.”
You can find it at www.cebta.org.uk