FROM LIQUIDITY CRUNCH TO SUCCESSFUL SALE
With nearly $70 million of debt, Employment Plus, an Indiana-based staffing company, was on the verge of foreclosure. The owner desperately believe that if the company could just survive this liquidity crunch, brought on by the lack of appropriate accounting and tax processes, the business would stay intact and eventually grow to greater valuable. The owner was adamant he would not sell from a position of weaknesses.
But, as Ravinia Capital outlined in its initial meeting with Employment Plus, there wasn’t much choice. Taking on more debt – as recommended by one investment advisor – was unrealistic given that the owner had already received a forbearance letter from its lender. As time wore on and debt mounted, Ravinia Capital was able to help the owner see the sale of the company as the most viable approach with the best long term outcome for his employees, his customers and for himself.
An Exhaustive Process
Ravinia Capital’s first action was to hire a turn-around executive as COO who could resist the pressure to liquidate and who would be able to negotiate with the lender to keep the company afloat. Next, it began the sales process with an extensive Confidential Information Memorandum (CIM) that revealed the company’s significant business value, a thorough sell-side due diligence report, and a vast data room that contained more than 60,000
W-2’s and a huge amount of tax and accounting documents that spanned several states.
The Heart of the Enterprise
Because Ravinia Capital understood the heart of the Employment Plus enterprise, it learned that all of the noise from the company's balance sheet and bad tax and accounting processes confused the fact that Employment Plus was very good at what it did. Ravinia Capital could see the strength of the company beyond its financial challenges and was able to effectively communicate its value to the capital markets.
Unexpected and Extraordinary Results
While Ravinia Capital was running the competitive bidding process for the sale of the company, it also ensured that the banker remained committed to the company, while keeping the accounting and tax issues on track. The sales process established by Ravinia Capital drew wide interest and competitive bidding, with one buyer – a private equity firm -- as a standout. For the seller the result was unexpected and extraordinary. Not only did he escape seeing his company liquidated, but the sales price compensated him fairly for his hard work over the many years he spent building his business.