How to take control of companies with no capital.
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 specialise 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 hace 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 saviour
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
directlt or indirectly led to the company
appraoching 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
indervidually. 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 instalments 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 perhapes 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 neww
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 crucual to the day to day
running of the business; sell anything which is
not essential: machinary, copyrights, property,
vehicles etc. You want the best price in the
shorest 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
concerntrate 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.
Unlesss 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".
