When rightsizing or winding-down a business’ assets, there can be significant differences in recovery rates based on whether assets are ‘broken out’ or sold as an on-going entity. Breaking the assets down for auction or secondary/foreign markets will sometimes achieve the highest NOLV recovery. But, creditors will often realize the highest recovery by keeping operations going, then selling the business as a complete, turnkey operation. Such a strategy retains customer goodwill, leverages the value of attractive leaseholds, and saves on breakdown and relocation costs.
ASSESSING THE UNDERLYING VALUE OF A BUSINESS
Tiger’s professionals understand that assets hold both an intrinsic and intangible value. How assets are presented for sale can have a significant affect on the price buyers will be willing to pay for those assets. Branded apparel, for instance, will achieve greater margins in a designer store than at an off-price retailer. The same principal applies when selling-through wholesale assets as a result of a wind-down, divestiture, liquidation or relocation. Tiger captures intangible value by first formally assessing the following:
- Viability of customer lists, management and employees, real estate holdings, and brands.
- The overall fiscal health of the company, including cash availability.
- Trends in inventory turnover rates.
- Mix of viable versus underperforming assets.
- Inventory on-hand versus current orders.
- Changes in manufacturing capabilities.
- Contractual re-sale limitations and contracts linked to the goods.
- Efficiency of existing and potential distribution channels.
THE SALE PROCESS
When a turnkey sale is warranted, Tiger will supply short-term working capital to stabilize and keep a good business running, and will conduct an expedited sale process in which the business, and its earning potential, is presented to highly selected, prospective buyers.
Speed makes such transactions possible. We have gone into dark warehouses where, six months earlier, business hummed. We have immediately rehired employees, turned the lights back on, and resumed operations – all for the sake of selling the inventory as part of an ongoing, viable business concern.
The results of Tigers Disposition Advisory Services efforts have been impressive: Over 70% of our projects result in a reorganization or successful turnkey sale of the business, while consistently achieving recovery rates on the inventory that far exceed those of historical, piecemeal sales and formal NOLV appraisals.
Tiger’s expertise in turnkey sales is most notable, but not limited to, consumer goods, after-market auto parts and food processing interests. Companies represented range in revenue size from $10 to $250 million annually and carry a debt of $1 to $50 million.