Receivership of E-Commerce Company

Sellside M&A, Asset Disposition

Obstacle Course

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.

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