Distribution
Our client owned a company in the janitorial products distribution industry. He competed with national public companies in a price-sensitive industry, and as a result, he borrowed money for working capital that was ultimately used to fund the business’s losses.
Our client owned a company in the janitorial products distribution industry. He competed with national public companies in a price-sensitive industry, and as a result, he borrowed money for working capital that was ultimately used to fund the business’s losses. Our client was burning his personal net worth and digging into his retirement accounts to keep the business going. He found himself having trouble buying from his suppliers because his credit was overextended, which in turn impacted his ability to service his customers. There wasn’t enough working capital to reinvest into any growth initiatives to improve the top line. He began to lose key employees. There came the point where the bank wanted to get out. He hired Next Point to help him frame the current situation and where the break-even points need to be so that he can turn the business around to a cash-neutral position, determine how much capital and time that would take, and execute the action plan.
Next, Point focused on the owner and quickly framed the issues, options, and gaps and what he personally had at risk. It was quickly determined that continuing to invest in the business personally was no longer a viable option. Next Point worked with the owner to develop and evaluate several options, including bankruptcy, winding down the company and liquidating its assets, or finding an outside strategic buyer. Our client determined his best option was to find a buyer, but Next Point needed time to execute that process. While working through the divestiture process on an expedited time frame, Next Point simultaneously liaised with the company’s bank, vendors, customers, and other stakeholders to negotiate acceptable terms for keeping the business running so that it could be sold as a going concern. The company quickly received five letters of intent from strategic consolidators to evaluate. The competitive sale process generated five letters of intent, providing the owners with multiple alternatives. Next Point helped facilitate a transaction structure that allowed different business divisions to be acquired by strategic buyers.
In January 2006, the Company’s paper, packaging, and janitorial divisions were acquired by a unit of Sysco Foods, while its office supplies and furniture divisions were acquired by Service Office Supply Corp. The transaction enabled the owner to exit the business through the sale of its operating divisions to two strategic acquirers.
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