Maximizing value at liquidation.
Background
A successful family-run company was acquired by an equity firm. Anticipated cost reductions and synergies weren’t achieved, and the company eventually became insolvent. The senior secured lender exercised its right to liquidate the company’s remaining assets (consisting primarily of accounts receivable, inventory, machinery and equipment and real estate). The senior secured lender retained RSI to perform the liquidation.
Key Issues
- Liquidation proceeds had to be maximized.
- The company’s poor management of inventory and accounts receivable presented a difficult environment in which to liquidate.
- The company had an extensive network of outlying distribution centers that were obsolete, created substantial overhead and had to be scaled back and closed in an orderly manner.
- The market for commercial real estate was declining.
Actions
- RSI formulated and implemented a strategic plan for the entire liquidation process, covering all relevant liquidation issues.
- RSI analyzed and arranged for the sale of all remaining inventory, including (whenever feasible) sales to the existing customer base.
- RSI analyzed and arranged for the sale of all machinery and equipment.
- RSI analyzed all of the company’s accounts receivable, and created collection and legal enforcement processes to maximize proceeds.
- RSI implemented a rational plan to continually reduce the footprint of the company’s distribution network as the liquidation progressed.
- RSI planned and supervised the sale of the company’s real estate.
- RSI retained appropriate experts and professionals where needed to perform specialized tasks, and monitored their performance and compensation.
- As the liquidation progressed, RSI kept the senior secured lender regularly informed as to issues requiring input and decisions, and presented detailed reports to keep the senior secured lender abreast of all progress.
Outcomes
- Inventory and machinery and equipment were liquidated over a three-month period at appropriate market-price levels, resulting in gross collections of more than $17 million.
- Collections of accounts receivable were vigorously pursued and amounted to more than $24 million.
- The network of distribution centers was rationally and systematically closed in stages, as quickly as practicable.
- The company’s real estate was sold for the highest possible proceeds.