Blog of Intellectual Capital

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• THE GREAT RESTRUCTURING OF 2020 revisited in 4^th qtr 2021

• The Wuhan Coronavirus has fundamentally changed the world and United States economies.

• In many cases, those changes will be permanent.

• The unintended and unforeseen consequences of the crisis will ripple through all aspects of the world and United States economies for many years.

• Many new uncertainties have since arisen, including unprecedented and ever-increasing worldwide debt, inflation, supply chain interruptions, and huge political uncertainty, particularly with regard to China.

• The economic relationships between debtors (individuals, companies, governments) and creditors (vendors, lessors, lenders, employees) and owners (equity holders) are now fundamentally unbalanced, just as has occurred in all previous financial crises.

• ‘WHAT WE KNOW SO FAR’

• As in the Dotcom Crash, the 9/11 Crash and the 2008 Crash, those economic relationships will be rebalanced by renegotiation, sale, bankruptcy and liquidation, so that assets are redeployed, asset value is monetized and maximized and economic activity can continue.

• The world has survived far worse and has revived strongly. For example, World War I, followed by the Spanish Flu, followed by the huge economic growth of the 1920’s. Humans are wired to adapt to and to overcome hardship. We still have the land, resources, infrastructure, intellectual property, technology and talent that we had in January 2020. Huge economic dislocation can also spur huge creativity, energy and innovation, such as has happened with the acceleration of remote work and ecommerce.

• There have been major economic losers, but also major economic winners.

• The United States is self-sufficient in food and energy and is the largest market and the greatest economic and political safe haven in the world. We are the best-positioned country in the world to emerge stronger than before.

• The virus appears to be moderating with increased distribution of vaccines. We expect that it will continue to be with us on a permanent basis, like the seasonal flu.

• The world appears to have largely adapted to the virus, although there will be continual flareups and after-shocks.

• ‘WHAT WE DO NOT KNOW’

• The long-term effects of historically unprecedented government economic stimulation and significant increase in the deficit and of the worldwide political instability created by the virus.

• The availability of cash to sustain under-performing companies and businesses.

• How young CEO’s, investors, bankers will react to a situation that they have not seen or lived through before.

• WHAT HAPPENS NEXT!

• We expect that the world health and economic situation will become clearer over the next few months. We expect to see a giant wave of economic restructuring that will last several years.

• Early business crises will be driven by lack of cash. Based on our experience in several previous economic crashes, the speed with which business owners and managers face reality, preserve, protect and forecast cash and take effective action will determine which businesses survive and which die.

• It is critical for companies, investors and lenders to face reality and act quickly. When things are going bad, waiting seldom improves the situation. In over 40 years of crisis management and restructuring experience we have never seen a board of directors act too quickly when faced with a crisis. We have all too frequently seen a board act slowly or not at all.

• Gerbsman Partners believes that companies, investors and lenders should to call for assistance early. The earlier professionals can get involved in the process, the better the potential outcome in maximizing enterprise value.  Again based on experience, boards, investors and lenders request assistance only after a company has little cash or is out of cash. Many more options exist to maximize enterprise value if a company has some running room.

 Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in under-performing, under-capitalized and under-valued companies and their Intellectual Property, as well as maximizing value for Intellectual Property Patents. Since 2001, Gerbsman Partners has been involved in maximizing value for 113 technology, medical device, life science, solar, fuel cell, cyber security, consumer and digital marketing companies and their Intellectual Property and has restructured/terminated over $810 million of real estate executory contracts and equipment lease/sub-debt obligations. Since inception in 1980, Gerbsman Partners has been involved in over $2.3 billion of financings, restructurings and M & A Transactions.

Gerbsman Partners has offices and strategic alliances in San Francisco, New York, McLean, VA/Washington DC, Orange County, Boston, Europe and Israel.

Steven R. Gerbsman
steve@gerbsmanpartners.com

“Do not go where the path may lead, go instead where there is no path and leave a trail.” – R.W. Emerson

“Never, never, never give up.” – Winston Churchill

“The seeds planted today are the flowers that will bloom tomorrow.”