When long-term sustainability is not considered to be achievable, our exit option specialists can assist in the development of an exit strategy that optimizes the recovery of economic value for the benefit of all stakeholders.
This may include the operation of the business through an orderly wind-down period, an all asset sale, or hard stop if called for. Operating the enterprise through an orderly wind-down provides the best opportunity for recovery of otherwise unrecoverable inventory value, maximizes recovery of receivables, minimizes disruption to customers dependent upon steady supply, and provides the best possibility for recovery of going concern value.
When long-term viability is unlikely, it is usually beneficial to most stakeholders to operate the company in a limited or scaled-down mode for a short period of time as a means to extract significant off-balance sheet value. This may entail fulfilling orders already in process, or taking additional orders from customers in order to maximize inventory utilization, and gives those customers time to resource to other suppliers. Effective communication with trade creditors and customers is critical for success in this area; we take an active role in this process. Additional benefits include enhanced receivables collection, continued employment for key individuals, and time to sell off intangibles such as customer lists and intellectual property that may only have value while operating.
Sometimes additional lending may be required for a short period. All risks are carefully evaluated to determine exactly how this additional working capital would be deployed, and the time frame in which it would be recovered along with the incremental value achieved through this process. The principal lender as well as other significant stakeholders are included in making this risk vs reward decision. Throughout the process, the Level Ten team provides oversight or hands-on management as well as regular communication of actual compared to projected results.
When a determination is made that cash and or collateral assets are quickly eroding and would not recover under an orderly wind-down, the controlling parties may conclude that a hard stop or immediate shut down of the company is necessary. The Level Ten team can work cooperatively with existing management or independently to facilitate this process, with a focus on minimizing losses and realizing maximum value for assets. Communications with all stakeholders including creditors, customers, employees, owners, and other third parties is foundational to value maximization.
Our experience and networking with end purchasers of assets or intermediaries offers the best opportunity for maximum recovery, while our understanding of the potential pitfalls and risks helps minimize losses that may occur in connection with this strategy.