company designed and
manufactured monitoring equipment for agricultural applications.
In spite of revenue growth the company was losing money. It
had exceeded its lines of credit and was close to default on bank loans.
In addition the owners had infused considerable personal funds,
including a second mortgage on their home and other personal lines of
credit. The longer they operated, the worse the problem grew.
revealed that internal problems of management, coordination, inventory
control, manufacturing process, planning and overall discipline, coupled
with overly ambitious and ill considered moves to grow the technology
resulted in a decline in margin over a period of five years.
shipments were 20% under break even and critical suppliers had placed the
company on credit hold. Cost
of goods was at 75% and creeping up. The
company had considered these options:
consultants had been hired, none of them had succeeded.
the company as it was. No
outside buyer could be found who would also assume the debt.
A major competitor was in the wings waiting for the company to
file bankruptcy so its inventory and equipment could be picked up cheaply.
Find new investors. No one
our recommendation after consulting with the company counsel
the owner decided to assign the company’s assets in a General
Assignment for the Benefit of Creditors..
We recommended that in order to maximize the recovery of assets and
provide the greatest distribution for creditors, it was crucial that the
company be kept in operation on an interim basis.
This would allow us to
the best buyer
Turn raw materials inventory into finished goods
- Turn WIP into shipments
Maintain the company’s position in its market
- Meet contractual obligations to customers
the business as a going concern
acceptance of the assignment we put
our own interim manager in place to run the company
and operate it on a positive cash flow basis
. We then vigorously marketed the company.
two weeks we had found two interested buyers and conducted a closed bid
result was that all of the secured creditors were paid in full and
unsecured creditors received a recovery of over 20%.