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.
“All we’re doing is restructuring some old debt,” says Bil MacLeslie, founder of ipHouse in Minneapolis, an Internet Service Provider.
Filing for Chapter 11 protection in U.S. Bankruptcy Court, which he did in December 2005, wasn’t his first choice, he says, but he decided it was the best way to renegotiate contracts with large phone and cable companies.
He says large providers want residential Internet business, and try to squeeze out small providers by changing contract terms and charging the smaller providers more money to buy access.
“They’re going to make it so unattractive that we’re going to have to get out of it. It’s becoming very difficult for companies like mine,” MacLeslie says.
MacLeslie made three acquisitions since starting his firm about a year ago. “Our business model allows for acquisition debt to be paid off by renegotiating the contracts” with big carriers. “And then they wouldn’t renegotiate with us, which completely destroys the business plan when your margins are under 5 percent.
“There is a stigma that goes with it,” he says about filing, but the move also seems to be an accepted tactic in his industry. “It’s weird how it works,” MacLeslie says. A big carrier called and said, “Hey, I hear you’re in Chapter 11. Great. Do you want to make new agreements?”
“It’s kind of a way to force negotiations with them,” MacLeslie says.Getting through reorganization, “to us it’s becoming a normal course of business,” he says. They file a reorganization plan, which gets reviewed by a creditor’s committee and the court. They make adjustments to the plan, gain approval and emerge if all goes well, perhaps as long as a year from now.
MacLeslie says his customers don’t feel any of the effects, and other business owners are aware of the business reasons for filing. “At first I was embarrassed, but business owners understand,” he says, adding “there’s no doubt about it” that the company will emerge a stronger business.
“We’ve taken the one major leak and now it’s up to me to patch up the other leaks.”
Bil MacLeslie, ipHouse: 612.337.6337; bi*@*****se.com; www.iphouse.com
