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Liquidation of Printing Company: Maximizing Value for Stakeholders
Situation:
A $30 million printing company had lost money for four straight years. The company was a major player in the printing segment that produced Sunday newspaper inserts principally for major retailers. The company had been sold to an ESOP 10 years prior. The industry was suffering from over capacity and the company’s principal competitors were much larger, publicly-traded entities. As a result, price pressure continued to mount even as energy costs were causing significant increases to operations and the cost of raw paper. Senior management had been working to achieve cost savings and enhance gross margins but was unable to achieve the desired results.
Task:
The senior team management retained LMG to develop a liquidation plan and to assist in an orderly wind-down of the operations. LMG also assisted in resolving complicated corporate structure issues surrounding the decision to liquidate caused by the ESOP. The company’s founder, although no longer involved in the business, had posted marketable securities with a value of nearly $2 million to support the senior working capital line.
Action:
A liquidation and wind-down plan was developed and communicated to the company's secured creditor and major unsecured creditors. LMG and the senior management team were successful in selling the company's customer list and book of business to a competitor. An auction was held for the physical assets. Inventory was either consumed in operations during the wind-down or sold at near market rates.
Result:
The secured creditor was paid in full and the founder obtained a release of his $2 million in marketable securities.
