ANNEX I : ALTERNATIVES TO TURNAROUND
Typically, these alternatives are the sale of the company, or some of
its business units and / or an orderly liquidation, i.e. not at fire
sale prices. Yes, sometimes it is possible to sell at good prices,
business units or other major assets of a troubled company. And
sometimes there exists what is called a "special buyer",
one willing to pay an above-market price for the whole enterprise
because to him it represents a greater economic value than to others.
The special buyer may be a competitor, or some corporation interested in
vertical or horizontal integration.
Generally, in the context of a sale of a troubled or distressed
company, or sale of its business units or other assets, or in case of an
orderly liquidation of such company, buyers will not put a valuation on
the company or its assets that would apply to a profitable enterprise.
Although, there are exceptions to this rule. In any event, I am not
talking here of fire sale prices. I am talking about a graceful exit,
which is sometimes available as an alternative to undertaking the hard
work and the challenges of corporate turnaround. Consider this example :
a company is losing money, owners are near retirement age, the next
generation has little interest in the business, a turnaround is iffy
(possible but problematic, including the fact that the owners have yet
to find an appropriate manager to lead the turnaround), and all the
while an orderly liquidation would generate substantial net proceeds. In
such a situation, realizing these proceeds may well be the smart thing
to do.
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