Everyday
sees opportunities for people and firms
to
take over companies that are in financial
difficulty,
and if that company is near bankrupt,
it
is not unusual for an outsider to take over
and
return the company to a profitable state.
You
will find such businesses looking in the
local
and national newspapers, from business
brokers
and property agents who specialize in
business
sales. Once you have located such a
company,
get all the information you possibly can
on
how much it owes, its asset value, and why it
is
having problems. Is it due to marketing, could
its
products be produced cheaper, and when was
the
last time the company showed a profit?
Once
you have all this information, work out on
paper
how much it is worth. This worth is what
the
company would fetch if it were sold. Put
another
way, the value of assets minus its
liabilities.
Once
the company worth has been established, try
an
offer of between 25% to 50 % of this amount.
The
idea here is not to offer cash, but
promissory
notes, with, say, an option to pay
over
a ten year period.
If
the owner of the company refuses, try again;
this
time offer a 5 year paying off period for
promissory
notes, and try offering a profit
sharing
plan as well. Further to this, you could
offer
the owner(s) part ownership by issuing them
with
stock or shares.
Remind
the owner(s) that due to the parlous state
of the company you will have
to withhold payment
on promissory notes and dividends to shares for
at least a year, in order to give you time to
make the company either profitable again or else
sell off the assets to raise cash.
Use the advise of a solicitor and have him or her
draw up terms, closing the deal as soon as
possible, and
projecting yourself as the savior
of the company. Above all, always project a
professional image. Quite often takeovers are by
people who do not know how to run the business
they are taking over. As it is your concern to
make the
business profitable again, employ
business and marketing professionals to help you
in your task.
Those already in the company may resent an
outsider making changes - be
ruthless - remind
them that thus far their own contributions have
directly or indirectly led to the company
approaching bankruptcy. The same goes for owners
and shareholders: keep on the present track and
go under or grasp the
alternative salvation you
are offering; a hard decision?
After takeover, arrange to meet creditors
individually. Remember, the creditors are
concerned that if the business
goes under they
stand little chance of seeing the smallest
percentage of the debt owed being returned to
them. Offer to pay from one third to one half of
what is owed, and then with nothing for the first
year, and over installments of up to 10 years. You
might think creditors would not put up with this
type of offer, but when the alternative is being
paid perhaps nothing at all as unsecured
creditors, if the company goes bankrupt.
Having come to agreement with your creditors,
have
them sign a letter confirming this new
agreement.
You have now reduced the company's
debts
by at least 50% or more; given the company
a
breathing space of at least a year regarding
repayments,
and has cost you nothing - just
negotiation.
Your
next trick will be to look at assets owned
which
may not be crucial to the day to day
running
of the business; sell anything which is
not
essential: machinery, copyrights, property,
vehicles
etc. You want the best price in the
shortest
possible time.
Use
your marketing and management professional to
plot
a way to recovery. If the sale of assets has
not
produced enough cash, you could always form a
partnership
of professional business people who
have
available funds, but your business plan must
show
them exactly how you intend to return the
company
back into profitability.
You
may need to discontinue certain products and
concentrate on what the company does best - back
to
basics.If part of the operation has been
running
at a loss with no immediate hope of a
turnaround,
wave it goodbye. Ruthless? Yes.
Unless you strip your costs to the bone, the
business
will likely fail.
There
are many books available on how companies
have
been saved from collapse and are invaluable
sources
for someone looking to turn a company
around.
John Harvey Jones, the famous
trouble-shooter
has written several books, such
as
"Back from the brink" and "Managing to
survive".
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