It is a common situation for a business owner looking to grow to invest in new technology and equipment, only to find they are financially under water from the acquisition. Finding a strategic player who has not yet made that investment is usually the best path to success.
Our client had invested heavily in new equipment and the assets were underperforming. We needed to find a strategic partner or buyer that would be able to utilize the extra capacity of the new equipment for their existing customers and book of business. The liquidation value of the equipment trumped the enterprise value or cash flow of the Company.
Next Point instituted our divestiture process to research players in the industry that would be able to take advantage of our client’s underutilized assets. The ideal buyer would be an industry player that had not made the investment in the new technology but had a book of business that could benefit from the efficiency and capabilities of the modern equipment and result in reducing costs and increased profits.
The Turning Point
Next Point was able to identify and close a transaction with a strategic buyer who was able to take over the payments on the heavily financed equipment and put it to work for their existing operation. Our client was able to sell the Company as an ongoing business, keep his labor force employed and maximize the value realized as opposed to his alternative option of winding down the company and liquidating the equipment.