The Bottom Line:
Upon appointment as receiver of a leading specialty e-commerce retailer, Stapleton Group quickly maximized its secured lender’s recovery, in less than two months, by:
- Designing and implementing a strategy to 1) maximize cash flow and 2) preserve the company’s brand value.
- Clearly communicating the strategy so that the borrower agreed to stipulate to all sales, thereby avoiding the time-consuming and expensive process of seeking court approval.
- Staging a successful close-out sale to liquidate inventory, including odd-lots (i.e. incomplete size-runs, leftover colors, etc.), via the company’s email campaign system, resulting in sales at approximately 90% of cost vs. previous offers at 20-30% of cost.
- Running a competitive M&A process to sell the business as a going-concern, including its e-commerce site, customer lists, intellectual property (domain names, trademarks, etc.) and other intangible assets.
- Generating additional proceeds through the sale of fixed assets.
The Business Issue:
The company’s working capital declined when management failed to reduce operating expenses in line with an industry-wide downturn in sales. A long-standing legal battle with its lender depleted cash flow further, resulting in a bankruptcy filing that ultimately was dismissed. The company’s inventory became depleted due to lack of capital and credit, and it became delinquent on its mortgage.
Genesis of Stapleton’s Engagement:
After a long legal battle between the company and its bank, including a bankruptcy filing and litigation against the lender, the bank sought the appointment of a receiver. The borrower ultimately stipulated to the receiver’s appointment.
Obstacles and Stapleton’s Solutions:
- The company had a lot of odd-lot inventory, the value of which had deteriorated significantly in the 60-90 days preceding Stapleton’s appointment as receiver. Prospective purchasers’ offers were only 20-30% of cost.
- Stapleton worked with management and existing staff to quickly stage a close-out sale through time-automated e-blasts to the company’s subscriber list, generating substantial sales at approximately 90% of cost.
- The increased sales volume enabled Stapleton to continue staff’s employment, with benefits.
- Third parties were making piecemeal offers for inventory, customer lists, soft assets, etc.
- Stapleton conducted a competitive sell side M&A process, targeting prospective buyers, organizing due diligence materials and widely-marketing the asset sale to 25+ parties.
- Stapleton managed due diligence and negotiated with all interested buyers to encourage comprehensive offers for all of the company’s remaining inventory and soft assets.
- Stapleton ultimately qualified 3 bidders, collected deposits from each, and staged a live auction resulting in bids 3x their original offers.
- Certain former employees who had been laid off were going to lose their health insurance.
- Stapleton created a plan and worked with the HR manager and health insurance company to retain health coverage for current employees and COBRA eligibility for former employees for two additional months.
- Miscellaneous furniture, fixtures & equipment and other assets remained at the business site, cluttering the building which might be added to the receivership to be sold by Stapleton.
- Stapleton sold the items, recovering additional cash for the lender while preparing the building to be shown to prospective buyers in the future.