A Win-Win Solution

Sale of Business Leads to Successful Wind-down and Liquidation

  Even though his business had been losing money for many years, the owner of an Industrial Equipment Manufacturer and Distributor always believed that his next big order was right around the corner. Therefore, when he decided to sell his business, he believed that there was going-concern value in excess of the liquidation value of his assets.

  Saeks New Growth Advisors (SNGA) was called upon to aid the business in finding potential buyers for the company. SNGA quickly realized that with a diminishing backlog of orders, a decimated sales force and customer relationships that wouldn't result in substantial future sales, that the business's going concern value was significantly impaired and the business would have to be liquidated.

  SNGA prepared a liquidation analysis for the owner's review and comment. The owner agreed that recovery of his business' asset value was his best course. SNGA presented these findings to the senior secured lender explaining that there was some $300,000 in liquidation value to support the $500,000 in secured debt of the company. The lender expected to recover the remaining $200,000 from the owner of the business under his unlimited personal guarantee.

  SNGA undertook an orderly wind-down and liquidation of the business. This included directing the wind-down of the operations, completion of orders, sale of equipment and inventory, collection of receivables and communication with secured, as well as unsecured creditors.

  SNGA was able to lead the collection of the majority of accounts receivable, sale of equipment valued by the equipment auctioneer at $5,000 for $80,000 and sale of the substantial, seemingly obsolete scrap inventory for over three times the value that was to be realized previously. The senior secured lenders $500,000 loan was paid in full and the next secured creditor, which was the owner of the business who had invested capital and taken secured notes back from the company, was able to receive approximately $150,000.

SNGA increased the recovery from the expected $300,000 to over $650,000, a $350,000 value swing in liquidating the business, resulted in a win for the senior secured lender and the owner of the business.

A Win-Win Result all around.