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Bidding Process – Procedures for the Sale of certain Assets and Intellectual Property of Portaero, Inc. – “Date Certain M&A” – Gerbsman Partners

Posted in Date Certain M&A, Distressed Intellectual Property, Gerbsman Partners, Portaero, Uncategorized, tagged , , on June 19, 2013| Leave a Comment »

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Bidding Process – Procedures for the Sale of certain Assets and Intellectual Property of Portaero, Inc.

Further to Gerbsman Partners e-mail of June 11, 2013 regarding the sale of certain assets of Portaero, Inc., I attach the draft legal documents that we will be requesting of bidders for certain Assets and Intellectual Property of Portaero, Inc.  All parties bidding on the assets are encouraged, to the greatest extent possible, to conform the terms of their bids to the terms and form of the attached agreement.  Any and all of the assets of Portaero, Inc. will be sold on an “as is, where is” basis and will be subject to “The Bidding Process for Interested Buyers”, outlined below.

I would also encourage all interested parties to have their counsel speak with David Garcia, Esq. and/or Holly Olson, Esq., counsel to Portaero, Inc.

For additional information please contact David Garcia, Esq, 775 327 3021  dgarcia@hollandhart.com and/or Holly Olson, Esq, hbolson@hollandhart.com

Please review in detail, the “Bidding Process for Interested Buyers” below.

The key dates and terms include:

The Bidding Process for Interested Buyers
Interested and qualified parties will be expected to sign a Confidential Disclosure Agreement (attached hereto as Appendix A) to have access to key members of management and intellectual capital teams and the due diligence “war room” documentation (“Due Diligence Access”). Each interested party, as a consequence of the Due Diligence Access granted to it, shall be deemed to acknowledge and represent (i) that it is bound by the bidding procedures described herein; (ii) that it has had an opportunity to inspect and examine the Portaero, Inc. assets and to review all pertinent documents and information with respect thereto; (iii) that it is not relying upon any written or oral statements, representations, or warranties of Gerbsman Partners, or their respective staff, agents, or attorneys; and (iv) all such documents and reports have been provided solely for the convenience of the interested party, and Gerbsman Partners (and their respective staff, agents, or attorneys) do not make any representations as to the accuracy or completeness of the same.

Following an initial round of due diligence, interested parties will be invited to participate with a sealed bid, for the acquisition of the Portaero, Inc. assets. Each sealed bid must be submitted so that it is received by Gerbsman Partners no later than Tuesday, July 16, 2013 at 3:00pm Pacific Daylight Time (the “Bid Deadline”) at Portaero, Inc.’s office, located at 21631 Stevens Creek Blvd., Cupertino, CA 95014.  Please also email steve@gerbsmanpartners.com with any bid.

Any person or other entity making a bid must be prepared to provide independent confirmation that they possess the financial resources to complete the purchase.  All bids must be accompanied by a refundable deposit in the amount of $100,000 (payable to Portaero, Inc.).  The deposit should be wired to Portaero, Inc.’s attorneys (information will be provided).  The winning bidder will be notified within 3 business days of the Bid Deadline. The deposit will be held in trust by Portaero’s counsel.  Unsuccessful bidders will have their deposit returned to them within 3 business days of notification that they are an unsuccessful bidder.

Portaero, Inc. reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all assets from sale.  Interested parties should understand that it is expected that the highest and best bid submitted will be chosen as the winning bidder and bidders may not have the opportunity to improve their bids after submission.

Portaero Inc. will require the successful bidder to close within a 7 day period. Any or all of the assets of Portaero, Inc. will be sold on an “as is, where is” basis, with no representation or warranties whatsoever.

All sales, transfer, and recording taxes, stamp taxes, or similar taxes, if any, relating to the sale of the Portaero, Inc. assets shall be the sole responsibility of the successful bidder and shall be paid to Portaero, Inc. at the closing of each transaction.

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Date Certain M&A of Portaero, Inc., its Intellectual Property and Assets by Gerbsman Partners

Posted in "Date Certain M&A Process", Aberdare Ventures, Distressed Intellectual Property, Distressed IP, Emphysema, Inetellectual Property, Medical Device, Novartis Ventures, Uncategorized, Venture Capital, Versant Ventures, tagged , , , , , , on June 10, 2013| Leave a Comment »

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SALE OF PORTAERO, INC.

Gerbsman Partners (www.gerbsmanpartners.com) has been retained by Portaero, Inc. to solicit interest for the acquisition of all, or substantially all, Portaero, Inc.’s (“Portaero”) assets.

Headquartered in Cupertino, California, Portaero is a leader in developing devices for the treatment of homogeneous emphysema.

IMPORTANT LEGAL NOTICE:

The information in this memorandum does not constitute the whole or any part of an offer or a contract.

The information contained in this memorandum relating to the Portaero’s Assets has been supplied by Portaero. It has not been independently investigated or verified by Gerbsman Partners or their respective agents.

Potential purchasers should not rely on any information contained in this memorandum or provided by Gerbsman Partners (or their respective staff, agents, and attorneys) in connection herewith, whether transmitted orally or in writing as a statement, opinion, or representation of fact. Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit.

Gerbsman Partners, and their respective staff, agents, and attorneys, (i) disclaim any and all implied warranties concerning the truth, accuracy, and completeness of any information provided in connection herewith and (ii) do not accept liability for the information, including that contained in this memorandum, whether that liability arises by reasons of Portaero’s or Gerbsman Partners’ negligence or otherwise.

Any sale of the Portaero Assets will be made on an “as-is,” “where-is,” and “with all faults” basis, without any warranties, representations, or guarantees, either express or implied, of any kind, nature, or type whatsoever from, or on behalf of Portaero and Gerbsman Partners. Without limiting the generality of the foregoing, Portaero and Gerbsman Partners and their respective staff, agents, and attorneys,  hereby expressly disclaim any and all implied warranties concerning the condition of the Portaero Assets and any portions thereof, including, but not limited to, environmental conditions, compliance with any government regulations or requirements, the implied warranties of habitability, merchantability, or fitness for a particular purpose.

This memorandum contains confidential information and is not to be supplied to any person without Gerbsman Partners’ prior consent. This memorandum and the information contained herein are subject to the non-disclosure agreement attached hereto as Exhibit A.

Portaero, Inc. Company Profile

Founded in 2007, Portaero is a private, California-based, clinical stage medical device company. Over the past 6 years, Portaero has raised approximately $20mm in equity and debt from the leading venture capital firms Versant, Aberdare, and Novartis Ventures.

Portaero is a leader in developing innovative, therapeutic devices to treat advanced, homogeneous emphysema. It is the only therapy currently in patients whose primary indication for the FDA pivotal trial will be homogeneous emphysema.

Portaero’s therapy targets patients whose lungs are hyperinflated due to emphysematous destruction and dynamic airway collapse. The Portaero Access Tube System creates a transthoracic pneumostoma which is subsequently managed by the patient with the Portaero Daily Disposable Tube.  When patent, the pneumostoma reduces the amount of trapped gas and the pressure in the diffusely destroyed lung, thus restoring the productivity of the native airways, improving overall lung function, and increasing patient quality of life.  Early experience also suggests pneumostoma patients experience a lower rate of exacerbations.  Exacerbations make these patients among the most expensive in the health care system.

Portaero believes its assets are attractive for a number of reasons:

·     Portaero is the only device in development which has generated data in homogeneous patients that warrants inclusion of those patients in a US PMA trial.

·     6+ years of clinical experience supports the safety and the efficacy of the therapy.

·     Current patients continue to manage their pneumostomas from 1+ years to 6.5 years.

·     Portaero Intellectual Property, comprising 25 issued US patents, 15 pending US patent applications, 10 issued international patents and 10 international pending patent applications, is the earliest and most comprehensive portfolio for    transthoracic bypass. Some of Portaero patents also apply to using the Portaero port for improving drug delivery to the lung.

·     The Portaero Access Tube System is placed by a thoracic surgeon via a mini-thoracotomy.  The 45 minute procedure requires no special skills and has been completed under both local and general anesthesia.

·     The Portaero Daily Disposable Tube has successfully been managed by a wide variety of patients.

·     The Portaero Reopening Device is designed to be used by an Interventional Bronchoscopist or surgeon.  It should be a simple, safe, outpatient procedure that can be quickly done at the end of the bronch list.

·     The Portaero therapy is very accessible to health care capabilities worldwide.

·     The Portaero system fits well with the direction of reimbursement systems that prefer to pay for desired outcomes.  The bulk of the economics is in the disposable which is only used if the patient is receiving benefit.

·     A leading clinician experienced with Portaero and other emphysema therapies believes Portaero patients have a lower exacerbation rate than untreated patients.

·     The Portaero therapy is reversible.  No patient has been worse off for having tried the Portaero treatment.

·     Preliminary BODE data suggest the potential to increase life expectancy with the Portaero therapy.

·     In the long term, the patents allow for development of a percutaneous procedure for interventionalists.

Impact of Technology on the Market

Patients with homogeneous emphysema represent a large, growing market with an unmet clinical need. Accessing Portaero’s intellectual property is critical for any successful endeavor into this very attractive market. Portaero’s therapy is complimentary to other therapies addressing heterogeneous disease (e.g., valves, coils, steam, glue) and could be sold by the same sales force.

Intellectual Property Summary

Portaero has a comprehensive intellectual property portfolio consisting of 35 issued patents: 25 are issued for the US and 10 are issued for International.  Portaero has 25 pending applications: 15 pending for the U.S. and 10 pending for International.  Description of the portfolio can be found in the Appendix B.  The portfolio represents a broad array of strategic variables including:

Methods and devices used by patient to maintain and protect the pneumostoma
Methods and devices for pneumostomy procedures for creating a pneumostoma
Methods and devices for assessment, maintenance, and treatment of a pneumostoma
Portaero’s Assets

Portaero has developed a portfolio of assets critical to the treatment of emphysema via a pneumostoma. These assets fall into a variety of categories, including:

·     Patents and Patent Applications
·     Patient Data Set for Treating Homogeneous Emphysema from 2 different non-randomized clinical studies
·     Design and manufacturing documentation for surgical and patient care products
The assets of Portaero will be sold in whole or in part (collectively, the “Portaero Assets”). The sale of these assets is being conducted with the cooperation of Portaero. Portaero will be available to assist purchasers with due diligence and a prompt, efficient transition to new ownership. Notwithstanding the foregoing, Portaero should not be contacted directly without the prior consent of Gerbsman Partners.

Portaero, Inc. Board of Directors

·       Sami Hamade: Aberdare Ventures – San Francisco, CA

·       Ross Jaffe:  Versant Ventures – Menlo Park, CA

·       Dave Plough: Portaero President & CEO – Cupertino, CA

·       Steve Weinstein: Novartis Ventures – Cambridge, MA

The Bidding Process for Interested Buyers

Interested and qualified parties will be expected to sign a Confidential Disclosure Agreement (attached hereto as Appendix A) to have access to key members of management and intellectual capital teams and the due diligence “war room” documentation (“Due Diligence Access”). Each interested party, as a consequence of the Due Diligence Access granted to it, shall be deemed to acknowledge and represent (i) that it is bound by the bidding procedures described herein; (ii) that it has had an opportunity to inspect and examine the Portaero, Inc. assets and to review all pertinent documents and information with respect thereto; (iii) that it is not relying upon any written or oral statements, representations, or warranties of Gerbsman Partners, or their respective staff, agents, or attorneys; and (iv) all such documents and reports have been provided solely for the convenience of the interested party, and Gerbsman Partners (and their respective staff, agents, or attorneys) do not make any representations as to the accuracy or completeness of the same.

Following an initial round of due diligence, interested parties will be invited to participate with a sealed bid, for the acquisition of the Portaero, Inc. assets. Each sealed bid must be submitted so that it is received by Gerbsman Partners no later than Tuesday, July 16, 2013 at 3:00pm Pacific Daylight Time (the “Bid Deadline”) at Portaero, Inc.’s office, located at 21631 Stevens Creek Blvd., Cupertino, CA 95014.  Please also email steve@gerbsmanpartners.com with any bid.

Any person or other entity making a bid must be prepared to provide independent confirmation that they possess the financial resources to complete the purchase.  All bids must be accompanied by a refundable deposit in the amount of $100,000 (payable to Portaero, Inc.).  The deposit should be wired to Portaero, Inc.’s attorneys (information will be provided).  The winning bidder will be notified within 3 business days of the Bid Deadline. The deposit will be held in trust by Portaero’s counsel.  Unsuccessful bidders will have their deposit returned to them within 3 business days of notification that they are an unsuccessful bidder.

Portaero, Inc. reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all assets from sale.  Interested parties should understand that it is expected that the highest and best bid submitted will be chosen as the winning bidder and bidders may not have the opportunity to improve their bids after submission.

Portaero Inc. will require the successful bidder to close within a 7 day period. Any or all of the assets of Portaero, Inc. will be sold on an “as is, where is” basis, with no representation or warranties whatsoever.

All sales, transfer, and recording taxes, stamp taxes, or similar taxes, if any, relating to the sale of the Portaero, Inc. assets shall be the sole responsibility of the successful bidder and shall be paid to Portaero, Inc. at the closing of each transaction.

For additional information, please see below and/or contact:

Steven R. Gerbsman

Gerbsman Partners

steve@gerbsmanpartners.com

Kenneth Hardesty

Gerbsman Partners

ken@gerbsmanpartners.com

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The Advantages of a “Date-Certain M&A Process” over an “Assignment for the Benefit of Creditors – ABC” by Steven R. Gerbsman, Gerbsman Partners

Posted in "Date Certain M&A Process", Assignment for the Benefit of Creditors, Distressed Intellectual Property, Distressed IP, Gerbsman Partners, Inetellectual Property, tagged , , , , on May 16, 2013| Leave a Comment »

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San Francisco, May, 2013
The Advantages of a “Date-Certain M&A Process” over an “Assignment for the Benefit of Creditors – ABC”
Apart from a formal bankruptcy (Chapter 7 or Chapter 11) there are two basic approaches to maximizing enterprise value for under-performing and/or under-capitalized technology, life science and medical device companies and their Intellectual Property: a “date-certain” M&A process and an assignment for the benefit of creditors (ABC).

Both of these processes have significant advantages over a formal bankruptcy in terms of speed, cost and flexibility. Gerbsman Partners’ experience in utilizing a “date certain” M&A process has resulted in numerous transactions that have maximized value anywhere from 2-4 times what a normal M&A process would have generated for distressed asset(s). With a date-certain M&A process, the company’s board of directors hires a crisis management/ private investment banking firm (“advisor”) to wind down business operations in an orderly fashion and maximize value of the IP and tangible assets.

The advisor works with the board and corporate management to:

1.  Focus on the control, preservation and forecasting of CASH.
2.  Develop a strategy/action plan and presentation to maximize value of the assets. Including drafting sales materials, preparing information Ïdue diligence war-roomÓ, assembling a list of all possible interested buyers for the IP and assets of the company and identifying and retaining key employees on a go-forward basis.
3.  Stabilize and provide leadership, motivation and morale to all employees,
4.  Communicate with the Board of Directors, senior management, senior lender, creditors, vendors and all stakeholders in interest.
The company’s attorney prepares very simple “as is, where is” asset-sale documents. (“as is, where is- no reps or warranties” agreements is very important as the board of directors, officers and investors typically do not want any additional exposure on the deal). The advisor then contacts and follows-up systematically with all potentially interested parties (to include customers, competitors, strategic partners, vendors and a proprietary distribution list of equity investors) and coordinates their interactions with company personnel, including arranging on-site visits.

Typical terms for a date certain M&A asset sale include no representations and warranties, a sales date typically three to four weeks from the point that sale materials are ready for distribution (based on available CASH), a significant cash deposit in the $100,000 range to bid and a strong preference for cash consideration and the ability to close the deal in 7 business days. Date certain M&A terms can be varied to suit needs unique to a given situation or corporation. For example, the board of directors may choose not to accept any bid or to allow parties to re-bid if there are multiple competitive bids and/or to accept an early bid.

The typical workflow timeline, from hiring an advisor to transaction close and receipt of consideration is four to six weeks, although such timing may be extended if circumstances warrant. Once the consideration is received, the restructuring/insolvency attorney then distributes the consideration to creditors and shareholders (if there is sufficient consideration to satisfy creditors) and takes all necessary steps to wind down the remaining corporate shell, typically with the CFO, including issuing W-2 and 1099 forms, filing final tax returns, shutting down a 401K program and dissolving the corporation etc.

The advantages of this approach include the following:

Speed – The entire process for a date certain M&A process can be concluded in 3 to 6 weeks. Creditors and investors receive their money quickly. The negative public relations impact on investors and board members of a drawn-out process is eliminated. If circumstances require, this timeline can be reduced to as little as two weeks, although a highly abbreviated response time will often impact the final value received during the asset auction.

Reduced Cash Requirements – Given the date certain M&A process compressed turnaround time, there is a significantly reduced requirement for investors to provide cash to support the company during such a process.

Value Maximized – A company in wind-down mode is a rapidly depreciating asset, with management, technical team, customer and creditor relations increasingly strained by fear, uncertainty and doubt. A quick process minimizes this strain and preserves enterprise value. In addition, the fact that an auction will occur on a specified date usually brings all truly interested and qualified parties to the table and quickly flushes out the tire-kickers. In our experience, this process tends to maximize the final value received.

Cost – Advisor fees consist of a retainer plus 10% or an agreed percentage of the sale proceeds. Legal fees are also minimized by the extremely simple deal terms. Fees, therefore, do not consume the entire value received for corporate assets.

Control – At all times, the board of directors retains complete control over the process. For example, the board of directors can modify the auction terms or even discontinue the auction at any point, thus preserving all options for as long as possible.

Public Relations – As the sale process is private, there is no public disclosure. Once closed, the transaction can be portrayed as a sale of the company with all sales terms kept confidential. Thus, for investors, the company can be listed in their portfolio as sold, not as having gone out of business.

Clean Exit – As the sale process is private, there is no public disclosure. Once closed, the transaction can be portrayed as a sale of the company with all sales terms kept confidential. Thus, for investors, the company can be listed in their portfolio as sold, not as having gone out of business.

To this end the insolvency counsel then takes the lead on all orderly shutdown items. In an assignment for the benefit of creditors (ABC), the company (assignor) enters into a contract whereby it transfers all rights, titles, interests, custody and control of all assets to an independent third-party trustee (assignee). The Assignee acts as a fiduciary for the creditors by liquidating all assets and then distributing the proceeds to the creditors. We feel that an ABC is most appropriate in a situation with one or more highly contentious creditors, as it tends to insulate a board of directors from the process. Nevertheless, we have found that most creditors are rational and will support a quick process designed to maximize the value that they receive. A good advisor will manage relationships with creditors and can often successfully convince them that a non-ABC process is more to their advantage. Apart from its one advantage of insulating the board of directors from the process, an ABC has a number of significant disadvantages, including:

Longer Time to Cash – Creditors and investors will not receive proceeds for at least 7 months (more quickly than in a bankruptcy but far slower than with a “date-certain” auction).

Higher Cost – Ultimately, ABCs tend to be more expensive than a date-certain© auction. It is not uncommon for the entire value received from the sale of company assets to be consumed by fees and/or a transaction for maximizing value may not be consummated in a timely fashion.

Loss of Control – Once the assets are assigned to the independent third-party trustee, the board of directors has no further control over the process. It cannot modify the process in any way or discontinue the process. Thus, it is not possible to explore multiple options in parallel.

Higher Public Relations Profile – The longer time frame for the ABC process and the more formal (and public) legal nature of an ABC make it more difficult to put a positive spin on the final outcome.

Messy Exit – Most independent third-party trustees do not perform the services of cleanly shutting down the remaining corporate shell. Thus, investors must either pay another party to do this job or leave it undone, resulting in increased liability.

About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in under-performing, under-capitalized and under-valued companies and their Intellectual Property. In the past 84 months, Gerbsman Partners has been involved in maximizing value for 76 technology, medical device, life science and solar 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, 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, Virginia/Washington DC, Boston, Europe and Israel.

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Email: Steve@GerbsmanPartners.com
Web: www.gerbsmanpartners.com
BLOG of Intellectual Capital: http://blog.gerbsmanpartners.com

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The Advantages of a “Date-Certain” Mergers and Acquisition Process Over a “Standard Mergers and Acquisitions Process”

Posted in "Date Certain M&A Process", Distressed Intellectual Property, Distressed IP, Gerbsman Partners, Inetellectual Property, Steven R. Gerbsman, Uncategorized, tagged , , , on April 29, 2013| Leave a Comment »

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San Francisco, April , 2013
The Advantages of a “Date-Certain” Mergers and Acquisition Process Over a “Standard Mergers and Acquisitions Process”
Every venture capital investor hopes that all of his investments will succeed. The reality is that a large percentage of all venture investments must be shut down. In extreme cases, such a shut down will take the form of a formal bankruptcy or an assignment for the benefit of creditors. In most cases, however, the investment falls into the category of “living dead”, i.e. companies that are not complete failures but that are not self-sustaining and whose prospects do not justify continued investment. Almost never do investors shut down such a “living dead” company quickly.

Most hope against hope that things will change. Once reality sets in, most investors hire an investment banker to sell such a company through a standard mergers and acquisition process – seldom with good results. Often, such a process requires some four to six months, burns up all the remaining cash in the company and leads to a formal bankruptcy or assignment for the benefit of creditors. In many instances, there are a complete lack of bidders, despite the existence of real value in the company being sold.

The first reason for this sad result is a fundamental misunderstanding of buyer psychology. In general, buyers act quickly and pay the highest price only when forced to by competitive pressure. The highest probability buyers are those who are already familiar with the company being sold, i.e. competitors, existing investors, customers and vendors. Such buyers either already know of the company’s weakness or quickly understand it as soon as they see the seller¥s financials. Once the sales process starts, the seller is very much a wasting asset both financially and organizationally. Potential buyers quickly divide the company’s burn rate into its existing cash balance to see how much time it has left. Employees, customers and vendors grow nervous and begin to disengage. Unless compelled to act, potential buyers simply draw out the process and either submit a low-ball offer when the company is out of cash or try to pick up key employees and customers at no cost when the company shuts down.

The second reason for this sad result is a misunderstanding of the psychology and methods of investment bankers. Most investment bankers do best at selling “hot” companies, i.e. where the company’s value is perceived by buyers to be increasing quickly over time and where there are multiple bidders. They tend to be most motivated and work hardest in such situations because the transaction sizes (i.e. commissions) tend to be large, because the publicity brings in more assignments and because such situations are more simply more fun. They also tend to be most effective in maximizing value in such situations, as they are good at using time to their advantage, pitting multiple buyers against each other and setting very high expectations. In a situation where “time is not your friend”, the actions of a standard investment banker frequently make a bad situation far worse. First, since transaction sizes tend to be much smaller, an investment banker will assign his “B” team to the deal and will only have such team spend enough time on the deal to see if it can be closed easily. Second, playing out the process works against the seller. Third, trying to pit multiple buyers against each other and setting unrealistically high valuation expectations tends to drive away potential buyers, who often know far more about the real situation of the seller than does the investment banker.

“Date Certain” M&A Process The solution in a situation where “time is not your friend” is a “date-certain” mergers and acquisitions process. With a date-certain M&A process, the company’s board of directors hires a crisis management/ private investment banking firm (“advisor”) to wind down business operations in an orderly fashion and maximize value of the IP and tangible assets. The advisor works with the board and corporate management to:

1.  Focus on the control, preservation and forecasting of CASH.
2.  Develop a strategy/action plan and presentation to maximize value of the assets. Including drafting sales materials, preparing information due diligence war-room, assembling a list of all possible interested buyers for the IP and assets of the company and identifying and retaining key employees on a go-forward basis.
3.  Stabilize and provide leadership, motivation and morale to all employees,
4.  Communicate with the Board of Directors, senior management, senior lender, creditors, vendors and all stakeholders in interest.
5.  The company’s attorney prepares very simple “as is, where is” asset-sale documents. (“as is, where is- no reps or warranties” agreements is very important as the board of directors, officers and investors typically do not want any additional exposure on the deal). The advisor then contacts and follows-up systematically with all potentially interested parties (to include customers, competitors, strategic partners, vendors and a proprietary distribution list of equity investors) and coordinates their interactions with company personnel, including arranging on-site visits. Typical terms for a date certain M&A asset sale include no representations and warranties, a sales date typically two to four weeks from the point that sale materials are ready for distribution (based on available CASH), a significant cash deposit in the $100,000 range to bid and a strong preference for cash consideration and the ability to close the deal in 7 business days.

Date certain M&A terms can be varied to suit needs unique to a given situation or corporation. For example, the board of directors may choose not to accept any bid or to allow parties to re-bid if there are multiple competitive bids and/or to accept an early bid. The typical workflow timeline, from hiring an advisor to transaction close and receipt of consideration is four to six weeks, although such timing may be extended if circumstances warrant. Once the consideration is received, the restructuring/insolvency attorney then distributes the consideration to creditors and shareholders (if there is sufficient consideration to satisfy creditors) and takes all necessary steps to wind down the remaining corporate shell, typically with the CFO, including issuing W-2 and 1099 forms, filing final tax returns, shutting down a 401K program and dissolving the corporation etc.

The advantages of this approach include the following:

Speed – The entire process for a date certain M&A process can be concluded in 3 to 6 weeks. Creditors and investors receive their money quickly. The negative public relations impact on investors and board members of a drawn-out process is eliminated. If circumstances require, this timeline can be reduced to as little as two weeks, although a highly abbreviated response time will often impact the final value received during the asset auction.

Reduced Cash Requirements – Given the date certain M&A process compressed turnaround time, there is a significantly reduced requirement for investors to provide cash to support the company during such a process.

Value Maximized – A company in wind-down mode is a rapidly depreciating asset, with management, technical team, customer and creditor relations increasingly strained by fear, uncertainty and doubt. A quick process minimizes this strain and preserves enterprise value. In addition, the fact that an auction will occur on a specified date usually brings all truly interested and qualified parties to the table and quickly flushes out the tire-kickers. In our experience, this process tends to maximize the final value received.

Cost – Advisor fees consist of a retainer plus an agreed percentage of the sale proceeds. Legal fees are also minimized by the extremely simple deal terms. Fees, therefore, do not consume the entire value received for corporate assets.

Control – At all times, the board of directors retains complete control over the process. For example, the board of directors can modify the auction terms or even discontinue the auction at any point, thus preserving all options for as long as possible.

Public Relations – As the sale process is private, there is no public disclosure. Once closed, the transaction can be portrayed as a sale of the company with all sales terms kept confidential. Thus, for investors, the company can be listed in their portfolio as sold, not as having gone out of business.

Clean Exit – Once the auction is closed and the consideration is received and distributed, the advisor takes all remaining steps to effect an orderly shut-down of the remaining corporate entity. To this end the insolvency counsel then takes the lead on all orderly shutdown items.

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in under-performing, under-capitalized and under-valued companies and their Intellectual Property. Since 2001, Gerbsman Partners has been involved in maximizing value for 76 Technology, Medical Device, Life Science and Solar 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, 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 Boston, New York, Washington, DC, San Francisco, Europe and Israel.

Unknown

Steven R. Gerbsman
Principal
Gerbsman Partners
steve@gerbsmanpartners.com

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BLOG of Intellectual Capital
http://blog.gerbsmanpartners.com
Skype: thegerbs

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Gerbsman Partners -Successful “Date Certain M&A” of Medical Device company, its Assets and Intellectual Property

Posted in "Date Certain M&A Process", Board Of Intellectual Capital, Date Certain M&A, Distressed Intellectual Property, Distressed IP, Gerbsman Partners, Inetellectual Property, Intellectual capital, Investments, Medical Device, Uncategorized, Venture Capital, tagged , , , , on March 13, 2013| Leave a Comment »

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San Francisco, March, 2013
Successful “Date Certain M&A” of Medical Device company, its Assets and Intellectual Property
Steven R. Gerbsman, Principal of Gerbsman Partners, Kenneth Hardesty, Philip Taub and  John Andreadis members of Gerbsman Partners Board of Intellectual Capital, announced today their success in maximizing stakeholder value for a venture capital backed medical device company. This company was in the medical device skincare space.

Gerbsman Partners provided Crisis Management and Investment Banking leadership, facilitated the sale of the business unit’s assets and its associated Intellectual Property. Due to market conditions, the board of directors made the strategic decision to maximize the value of the business unit and Intellectual Property. Gerbsman Partners provided leadership to the company with:

1.  Crisis Management and medical device domain expertise in developing the strategic action plans for maximizing value of the business unit, Intellectual Property and assets;
2.  Proven domain expertise in maximizing the value of the business unit and Intellectual Property through a Gerbsman Partners targeted and proprietary “Date Certain M&A Process”;
3.  The ability to “Manage the Process” among potential Acquirers, Lawyers, Creditors Management and Advisors;
4.  The proven ability to “Drive” toward successful closure for all parties at interest.
About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in under-performing, under-capitalized and under-valued companies and their Intellectual Property. Since 2001, Gerbsman Partners has been involved in maximizing value for 76 Technology, Life Science, Medical Device and Solar 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, Boston, New York, Washington, DC, McLean, VA, Orange County, Europe and Israel.

Steven R. Gerbsman
Principal
Gerbsman Partners
Phone: 415.456.0628
Fax: 415.459.2278
Cell: 415.505.4991
steve@gerbsmanpartners.com
thegerbs@pacbell.net
http://www.gerbsmanpartners.com

BLOG of Intellectual Capital
http://blog.gerbsmanpartners.com
Skype: thegerbs

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