Jay Sachetti joined Jeff O’Brien, partner at Husch Blackwell and Dyanne Ross-Hanson, president of Exit Planning Strategies talked about the market for mergers and acquisitions, exit planning opportunities for companies that don’t end up for sale and how companies can maximize their eventual sale price during an early October panel at the first Upsize on Tap event at Summit Brewing Co. in St. Paul.
When the state Legislature passed a law requiring employers to provide paid leave and safe time for employees, Justin Bieganek started hearing differing details from friends, colleagues and peers.
HOW TO TURN AROUND YOUR DISTRESSED COMPANY
05 :: How to decide when it's over.
by Andrew Tellijohn
ONCE YOU'VE STARTED working with a turnaround specialist you?ll create a short-term plan for turning the business around. Whether you?ll succeed in the long-term is a function of time, capital, internal resources and whether you have a business that has a viable value-added service or product in your market.
If you don?t have any of those criteria, your chances of survival are slim. When the realization hits, it?s time to act accordingly. It?s time to come up with an exit strategy that will help you quickly and efficiently find closure for the business without incurring additional losses.
It can be a lot like creating a projection for continuing. Once again, you need to gather your advisory team around you to establish a strategy for who is going handle which responsibilities and in what timeline you hope to complete the process.
First, business owners must consider the alternatives. You might consider breaking your company into pieces and selling part of it or merging with another company. Maybe you can?t make it on your own as a $10 million company, but someone three times that size might be able to work your cost structures into their own. They might be interested in merging all or part of the business.
If a merger or a sale doesn?t present itself, shutting the company down is another option. Remember, it?s important to move swiftly. If you decide to shut down the business, you can work with your attorney to try to do it yourself. Or you can seek the assistance of the U.S. Bankruptcy Code through Chapter 7 liquidation, though it is a more expensive strategy.
Either way, try to collect as much of your outstanding accounts receivable as possible and seek assistance in selling equipment that can generate cash to pay off creditors. The danger of doing it yourself is that any excess money does go to unsecured creditors. You may want to seek the assistance of someone who specializes in liquidating companies. Your advisory group or the Turnaround Management Association can usually help find a reputable person.
You?ll want to move as much inventory and cover as many obligations as possible before word hits the street that you are going out of business. But do remember to communicate with your trusted advisers. Nobody wins when a company goes out of business: not bankers, not attorneys and not you. So handle the situation as a team in order to minimize losses and try to get it done as quickly as possible.
Finally, it?s important for entrepreneurs to remember that it?s not always their fault when a business fails. Situations change. For example, foreign competition and distress among the auto industry are macroeconomic factors that hurt many small manufacturing companies that otherwise had perfectly reasonable business plans.
But facts are facts, and if you?ve done the basics to turn around, including cutting expenses, focusing on sales and examining alternative business strategies and haven?t found a way to make the business profitable, and if you lack any of the fundamental requirements ? time, capital, internal leadership or a viable, value-added business proposition ? there?s not a strong likelihood that the business is going to survive.
CHECKLIST
? Do you have time, capital, internal resources and a viable business strategy?
? Seek advice from lawyers, CPAs and banks.
? Identify a strategy that specifies who will handle what responsibilities and a timeline in which they should be completed.
? Depending on the industry, businesses might want to bring a couple of large vendors into the discussions.
? Liquidations typically should be finished as quickly as possible.
As the name suggests, Owatonna-based Kamp Automation looks for customers with a process they’d like to automate. It could be a small, inconvenient, tiny part that people can’t assemble. It could be a high-volume product so needed that the customer can’t find enough labor to produce it in the necessary quantities. “We’ll work anywhere from medical device companies to the seed industry for corn and soybeans,” says Kent Patterson, co-founder, president and CEO. “We just jump all over wherever there is custom automation.” The company started in his garage. Patterson and his partners built a machine. The company started to grow to the point where now it has 48 employees — and had a bunch of people and stuff in different locations. “We went from a garage to a shop to a shop and just kept moving to new places and signing leases,” he says. “We got to a point where it’s like, OK, this is getting big enough and sustainable — we felt that we wanted to look for our own space.’”
