Comprehensive Liquidation Strategy Prepared in Advance Increases Results
Imagine, for a moment, a crisis your company has ongoing right now. Do you have one in mind? Now, imagine it is six months ago. What would you have done differently with half a year to proactively prepare for this crisis? That is exactly where we come in. With our help, companies are able to substitute hindsight with foresight, and foresight almost always improves your options.
The deepest recession in decades has radically changed the corporate landscape forever. Historically, companies that have experienced long-term success are struggling to stay in business or are filing for bankruptcy and reorganization. Well-known brands are changing hands or being discontinued. In some cases, struggling companies are choosing or left with no other option than to liquidate groups of assets or the entire business. The time to plan for dismantling a business is not as the doors are closing for the last time. The planning should start months sooner.
Even when time and resources are focused on executing a successful turnaround of the company’s financial performance, it is still vital to plan for disaster because, by doing so, the value received from the sale of the company’s assets can be vastly improved, oftentimes by multiples of what will be realized in a liquidation and/or public auction.
Recognizing that no two companies are identical, there are several factors that should be carefully considered by any company at the first sign of financial difficulty.
Key personnel
During liquidation, key personnel can be instrumental in the successful sale of the business, operating divisions, plants, product lines and/or other intellectual property and the build-out of work-in-process inventory to maximize value. If manufacturing operations are going to be closed, specific employees will be critical to the shutdown of machinery and plant systems. Sales and marketing professionals can be instrumental in helping to complete major transactions, and personnel intimately familiar with the company’s information technology are vital to managing inventory systems and securing accurate financial information. Certain inventory management and warehouse personnel may be essential to efficiently manage the shipping of the company’s products. The objective is to know exactly who the key employees are before it is too late and before they leave due to an impending crisis. This way, many of the key personnel can be retained with the appropriate financial incentives and the associated costs can be budgeted for in advance.
Intellectual property
Great care should be taken in assembling, cataloging and securing the detailed information regarding all of a company’s intellectual property (IP). You will want it available so that, in the event of liquidation, qualified buyers will have the knowledge necessary to enter into a competitive bidding environment. Understanding the value of your IP can make a big difference to the bottom line. Recently, AccuVal’s sister company, LiquiTec Industries, was engaged to conduct a multi-faceted sale where its knowledge, recognition and preparation of the company’s IP resulted in nearly tripling the outcome expected had a conventional public auction been conducted. In this case, the success of the sale was driven largely by all of the steps taken to maximize the value of the IP.
Production information
Historical production reports, maintenance records, product samples, photographs and streaming video are easy to obtain when plants are in operation. This information affords buyers important perspective after operations have been shuttered; it’s the next best thing to seeing the plant operating. Properly leveraged, this information is very compelling. It helps in the sale of plants and/or the sale of the underlying production equipment. Very detailed information regarding all of the company’s assets should be created and retained so that everything necessary to provide knowledgeable buyers with the facts needed to make an informed purchase decision is readily available. By doing so, the information can be leveraged immediately in negotiated sales as well as in online and on-site auctions. Then, if the business fails despite a best attempt to save it, no time is wasted in moving to the next steps, thereby reducing costs and improving the outcome of a disposition.
Inventory monitoring
Monitoring the mix and balance of inventory can help provide companies with an early warning signal that trouble lies ahead. Often, in the normal course of business, companies routinely review reports that help them manage their inventory on a go forward basis. However, customized reports can be developed to help highlight changes in the quantities of key inventory components to help improve inventory management when cash is tight. It also affords company management the opportunity to be proactive about dispositions of slow moving, obsolete and/or non-strategic inventory to create the working capital needed to maintain critical operations. AccuVal’s sister company, LiquiTec, empowers companies to creatively manage the controlled disposition of inventory during the normal course of business with a private label, online auction platform that provides an innovative solution to disposing of surplus inventory without raising any concerns among existing customers or in the marketplace in general.
Bundling strategies
Advanced preparation gives everyone the time to consider sale scenarios better than simply moving straight to public auction following business failure. With thoughtful consideration and execution, assets no longer strategic to a company, such as product lines, specialized machinery, dedicated inventory, customized real estate, customer lists, accounts receivables and more, can be bundled together and offered to buyers for whom these assets are strategic. The effect of preparation of this type can often mean the difference between realizing huge premiums versus huge losses.