Merger Consulting On Point; Appraisals Proven Accurate in Bankruptcy; Lenders Recover 100 Percent of Debt
Client: Fortune 500 Milk Processing Operation
Challenge: Consult on Merger Feasibility, Value Business Assets for $125M Asset-Based Loan
In the early years of the burgeoning leveraged finance industry, AccuVal was asked to assist in a history-making merger involving two of the world's leading milk processing companies. The merger would become the largest in industry history and the financing package among the biggest nationally syndicated transactions of the day. Syndicating asset-based loans was a relatively new concept, and success often hinged on packaging the deal with information supplied by professionals with in-depth industry experience and impeccable reputations.
The proposed size of the transaction was $125 million. Complexity was high because the merger involved companies with radically different cultures that had battled for dominance in the same territories for years. The transaction also commanded chairman-level visibility from several of the world's largest money center banks. AccuVal was engaged, without competitive bid, to consult on the feasibility of the business plan and evaluate the underlying business assets at 26 plants from the Mississippi River west to Hawaii.
AccuVal Approach
Analyzing the feasibility of business plans requires much more than a review of projections and assumptions. Real legwork is needed, including in-depth meetings with people throughout both organizations, operational reviews of all plants, knowledge of the industry and customer base, and intimate familiarity with all classes of business assets. These skills enabled AccuVal to deliver clarity to a very complicated business plan, offer realistic feedback regarding aggressive financial projections and perceived synergies, and provide accurate appraisals of the machinery, real estate and vehicle fleet.
Bottom Line: Business Assumptions, Financial Projections Accurately Reflect Actual Operations; Asset Appraisals Proven in Chapter 7 Bankruptcy; Lenders Recover 100 Percent of Debt
AccuVal expressed specific concerns with many of the underlying assumptions in the business plan. However, the appraisal conclusions were sufficient to support the capital structure needed to complete the transaction, so the deal was funded. Shortly after funding, the cultural and operational issues identified by AccuVal presented themselves one by one. Factors such as clashing business cultures, differing production practices and techniques, failure to eliminate duplicate production capacity quickly enough and varying maintenance practices each contributed to the company declaring bankruptcy just 18 months later. Prior to the formal declaration, AccuVal contacted the lead lender and offered to provide crisis consulting. AccuVal presented a plan to bundle certain plants with the company's intellectual property and made specific recommendations regarding the timing and disposition methodologies for balance of the production facilities. With a few exceptions, the actual sale of the company's assets mirrored AccuVal's recommendations. As a result, secured lenders recovered 100 percent of their indebtedness.
The AccuVal AdVantage™
Over 25 years of successfully guiding lending institutions with accurate valuation and advisory services. Cradle-to-grave understanding of what makes businesses tick. The ability to maximize outcomes under tenuous circumstances. Follow through. Promises delivered. That's The AccuVal AdVantage™ at work.
© 2013 AccuVal Associates, Inc. All Rights Reserved