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On this long weekend of summer, cookouts, swimming pools, and sales, I invite you with me to take the time to slow down and to intentionally feel the sacrifice of soldiers who fight for your freedom…

Please listen to this song while imaging this little girl wondering why a parent died in a remote land- Lee Greenwood – God Bless the USA

https://youtu.be/bQIWhqjWhpo

 

 

May God Bless and Protect our Troops.

Please always remember “Freedom is NOT Free”

Please see below Gene Simmons Military Tribute

 

 

Advantages of ‘Date-Certain M&A Process over Standard M&A’ – Gerbsman Partners

Every venture capital investor hopes that all his investment will succeed. The reality is, however, that a large percentage of venture investments eventually are shut down.

In the extreme they end in bankruptcy or assignment to creditors. The majority falls into the category of the “living dead.” Such companies are not complete failures, but their prospects do not justify continued investment, yet they are rarely shut down quickly.

Once reality has been recognized, most investors engage investment bankers to sell their investment off through prevailing M&A processes. Unfortunately, seldom with good results.

REASON #1

The main reason for that sad result is a fundamental misunderstanding of buyer psychology. In general, buyers act quickly and pay the highest price only by force of competitive pressure.

Potential buyers of the highest probability are those already familiar with the company for sale, such as competitors, existing investors customers and vendors. Once a sales process starts the seller is very much a diminishing asset. Both financially and organizationally.  Unless compelled to act, potential buyers simply start to draw out the process, submit a low-ball offer when the seller runs out of cash, or try to pick up key employees and customers at no cost.

REASON #2

The second reason is usually a misunderstanding of the psychology and methods of investment bankers.

Most investment bankers do best at selling “hot” companies. Companies whose value is perceived by buyers to be increasing quickly over time, and where there are multiple bidders.

They tend to be more motivated and work harder on such cases because transaction sizes –and resulting commissions– are larger and surrounding publicity can bring in new assignments, among others. They also tend to be more effective in maximizing value in such situations by using time to their advantage, pitting buyers against each other and setting very high expectations.

In a situation where time is not your friend, the actions of standard investment banking practices often make a bad situation much worse. Such actions include assigning less experience B-Teams to smaller transaction size cases, “playing out the process” which works against the seller, and pitting multiple players against each other which can drive away potential buyers who often know far more about the seller than does the banker.

 

THE GERBSMAN PARTNERS Proprietary ‘DATE-CERTAIN’ M&A PROCESS

The most effective solution in situations where time is not on your side is a Date-Certain Merger and Acquisition Process.

Under this proprietary 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 to maximize the value of their intellectual properties and tangible assets. The Advisor works closely with board and corporate management to:

  • Focus on Control, Preservation and Forecasting of CASH
  • Develop a Strategy/Action Plan and Presentation to Maximize Value of Assets.
  • Plans to include Sales Materials, Due Diligence access. a list of all possible Interested Buyers for Intellectual Properties and Assets and Identify and Retain Key Employees on a go-forward basis.
  • Stabilize and provide Leadership, Motivation and Moral to all Employees.
  • Communicate with the Board of Directors, Senior Management, Senior Lender, Creditors, Vendors and all other Stakeholders in Interest.

THE PROCESS:

The company attorney prepares a simple “As-Is/Where –Is” asset sale documents. This document is very important and includes a “No-Reps or Warrantee” Agreement, as the board, officers and invertors typically do not want any additional exposure on a deal.

The advisor then follows up systematically with ALL potentially interested parties and coordinates their interactions with company personnel, including on-site visits.

Typical terms for a Date-Certain M&A asset sale exclude representations and warranties and include a sales date –typically four to six weeks – from the point of readying sales materials for distribution, a refundable CASH deposit in the range of $200,000, a strong preference for cash consideration and with the ability to close a deal in seven business days.

Date-Certain M&A terms can be varied to suit needs unique to given situations. For instance, the board may choose not to accept any bids, or to allow re-bids if there are multiple competitive bids, and/or allow early bids.

The typical workflow timeline from advisor hiring to transaction close and receipt of consideration is four to six weeks. Such timelines may be extended as circumstances warrant. Upon receipt of considerations, the restructuring/insolvency attorney then distributes funds to creditors and shareholders (if there is sufficient consideration to satisfy creditors), and takes all needed steps to wind down the remaining corporate shell. Typically in coordination with the CFO.

PROCESS ADVANTAGES:

Speed:   – The entire Date-Certain M&A Process can typically be concluded in 4 to 6 Weeks. Creditors and investors receive their money quickly. A negative PR impact on investors and board members related to a drawn out process is eliminated. Where required, such timelines can be reduced to as little as two to three weeks, however severely compressing the process often impacts the final value received during asset auction.

Reduced Cash Requirements:  – Owing to the Date-Certain M&A process’ compressed turn-around time, there is a significantly reduced need for any additional investor cash to support the company during the process.

Maximized Value:  – A quick and effective process during wind-down mode minimizes strain and rapid asset depreciation and thereby preserves enterprise value. The fact that an auction will occur on a certain date typically brings truly interested and qualified parties to the table. In our considerable experience, this process strongly aids in maximizing the final value received.

Cost:  – Advisory fees consist of a retainer and a performance fee, which is a percentage of the sales proceeds.

Control:  – At all time during the process, the board of directors retains complete control. For instance, it can modify the auction terms, or discontinue the auction at any point, thereby preserving all options for as long as possible.

Public Relations:  – As the entire sales process is private, there is no public disclosure. Once closed, the transaction can be portrayed as a sale of the company with all terms kept confidential. Accordingly investors can list the company in their portfolios as sold vs. having gone out of business.

A Clean Exit:  – Upon closing of the auction, considerations received are distributed and the advisor, under the leadership of the insolvency counsel, then takes all remaining steps to effect an orderly shut-down of the remaining corporate entity.

About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in underperforming, undercapitalized and undervalued companies and their intellectual properties. Since 2001, Gerbsman Partners has successfully maximized the values of 107 companies in a wide and diverse spectrum of industries, ranging from technology, life science, medical device, digital marketing, consumer to cyber security, to name only a few.

Since inception in 1980, Gerbsman Partners has successfully restructured/terminated over $810 million of real estate executory contracts and equipment lease/sub-debt obligations, and has been involved in over $2.3 billion of financings, restructuring and M&A transactions.

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

 

IMG
Silicon Valley Venture Capital Survey – First Quarter 2019
First Look
By Cynthia Clarfield Hess, Mark A. Leahy and Khang Tran

View the full report.

Background
We analyzed the terms of 185 venture financings closed in the first quarter of 2019 by companies headquartered in Silicon Valley. We found that valuation results continued to be strong, with the average price increase in Q1 slightly lower than in the prior quarter, though still substantially higher than the historical average. The internet/digital media software industry recorded the strongest valuation results.

Key Findings

  • Valuation Results Remain Strong, but Declined from Three-Year Highs of Prior Quarter
  • Valuation Results Declined for Each Financing Series
  • Internet Industry Showed Strongest Valuations
Full Report
Check out our new Startup Resource Center, featuring articles, videos, checklists, presentations and other tools to help entrepreneurs navigate every stage of company growth.

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

Apart from a formal bankruptcy (Chapter 7 or 11), there are two basic approaches to maximizing enterprise value for underperforming and/or under-capitalized technology, life science, medical device, digital marketing, information & cyber security and solar companies and their Intellectual property:  “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 two to nine times what a normal M&A process or “ABC” would have generated for distressed assets. 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.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 (customers, competitors, strategic partners, vendors and a proprietary distribution list of equity investors, investment bankers and lawyers in Europe, Israel, China, Australia, India and the US). It also includes the coordination of their interactions with company personnel and the arrangement of 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 $200,000 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.
  5.  The typical workflow timeline, from hiring an advisor to transaction close and receipt of consideration is five to six weeks. 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, D&O insurance 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 five to six 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, it 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/assets 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 by which 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 M&A Process”. 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. Since 2001, Gerbsman Partners has been involved in maximizing value for 107 technology, medical device, life science, digital marketing, information & cyber security 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.

Successful ‘Date-Certain M&A’ of TrueFact, Inc., its assets and intellectual property

Gerbsman Partners is pleased to announce the successful completion of maximizing the value of assets and associated intellectual properties of TrueFact, Inc.

TrueFacet, Inc. is the trusted certified pre-owned marketplace for jewelry and watches online.

Due to market conditions and trends, the board of directors of TrueFacet, Inc. made the strategic decision to maximize the value of the business unit and its intellectual properties.

Gerbsman Partners – led by Steven R. Gerbsman, Principal, Kenneth Hardesty and Dennis Sholl,  members of GP’s Board of Intellectual Capital – provided TrueFacet with financial advisory leadership through its proprietary, ‘Date-Certain M&A Process,’ facilitated the sale of TrueFacet’s business assets and its associated Intellectual Property, and facilitated the closing of the sale.

Specifically, Gerbsman Partners provided leadership to TrueFacet with:

  1. Business consulting and investment banking domain expertise in developing strategic action plans.
  1. Implementing its proprietary ‘Date-Certain M&A Process’ in order to maximize value of assets and intellectual properties.
  1. “Managing and guiding the process” among potential acquirers, lawyers, creditors, advisors, senior lenders, vendors, creditors, Bambeco’s board and management, as well as all stakeholders of interest.

 

About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in underperforming, undercapitalized and undervalued companies and their intellectual properties. Since 2001, Gerbsman Partners has successfully maximized the values of 107 companies in a wide and diverse spectrum of industries, ranging from technology to medical device/life science to cyber security, to name only a few.*

In the process, GP has successfully restructured/terminated over $810 million of real estate executory contracts and equipment lease/sub-debt obligations, and has assisted in over $2.3 billion of financings, restructurings and M&A transactions.*

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

 

*For further information on Gerbsman Partners expertise and industry experience, please request our company profile here.

Good afternoon.

Please visit Gerbsman Partners updated website –http://gerbsmanpartners.com

At Gerbsman Partners we seek to continue to “earn the right” to assist venture and private equity investors and senior lenders maximize and monetize value of their challenging and under-performing companies.

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 107 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.

As always and if appropriate, the team and I are available to strategize and develop action plans.
Best regards, be healthy and be safe
Steve