Hi, I’m Peter Peter Schaefer from New Direction Partners, and wanted to tell you today about a transaction that we just closed a few weeks ago.  It was an interesting, or unique transaction, in that the company that was purchased was a large $50 million company with a wonderful reputation and a wonderful name, but unfortunately, as has happened with so many other companies recently, the company had not been performing well over the last few years. 

We went out to market and actually had quite a bit of interest in the company and because it was being led by the bank, it needed to be a “cash at closing” type of transaction as opposed to a “purchase of sales” where they were paying a royalty rate over time.  And it was an interesting process because we had three very serious buyers who put in very different types of offers. 

One was more of a contingent purchase price in which they would buy off sales.  That didn’t work with the bank. 

The other was where the buyer would have either the bank do a private foreclosure of the assets, or it would go through a bankruptcy process and if that were to happen, the trade creditors would have received nothing.  And that was option number 2. 

Option number 3, which was the option that my client choose, was for less money than Option number 2, but the trade creditors were paid in full.  And the bank actually viewed that as a better alternative because going through the foreclosure process, there just would have been some questions going forward as to whether or not the trade creditors would have had claim to any of the purchase price, and they didn’t want to go through the bankruptcy process just because of the cost, the high cost, the seven figure cost of doing that. 

So, they went for a deal that offered less money, but more comfort in that the trade creditors were paid in full.  And that was a great deal for the buyer because even though they did have to come up with the money at closing, they paid much less than they would have had they paid a royalty rate over three, four, or five years.  So, it was an attractive deal to the buyer as well as the seller.