Hyding Out

3 Lessons Learned from Transaction Involving King Organization and Century Direct

Download King Organization Becomes Part of Century Direct FINAL 2-18-11

Here are 3 non-confidential "Lessons Learned" from the recently announced strategic transaction involving King Organization and Century Direct:

1. In considering options among potential suitors, the owners of King placed significant importance on becoming part of a leading company that ALREADY HAD IN PLACE strong capabilities that would enhance customer relationships (as opposed to joining a company that would have to "build" those capabilities or rely on outside suppliers);
2. Once again the personal chemistry and ethical alignment among principals made a huge difference in both sides being able to navigate the M&A process fairly and efficiently;
3. In an industry such as printing and mailing that is dominated by family-owned businesses, we note that King's passing as an independent company can be traced to family shareholder problems that affected critical decision-making and capitalization long before the decision was made to become part of Century.

Equipment Disposition Done Right Yields Favorable Results

Equipment disposition in the context of Orderly Liquidation of Business is, by definition, a once in a lifetime event that owners don't get to learn from because there is rarely a second time. Lacking experience, and confronted with unfamiliar terms such as "buyer's premium" and choices as to "auction" or "private sale", it's amazing that many owners continue to "do it on their own" rather than engage specialized advisors such as my NAPL colleagues who handle these matters regularly.

A recent case right on my desk illustrates the benefit of seeking outside consultants to guide the owner on HOW to maximize value of equipment in the orderly liquidation scenario.

The owners of a $3.0 million annual sales commercial printer reached the point of decision as to "fix it" or "sell it", and, in the negotiations with a buyer for intangible assets, the discussion turned to the subject of equipment. The buyer had a friend who wanted to make an offer. The number came in at $170,000, far less than a recent equiment appraisal.

The owners started to panic, thinking that at least 170K is better than nothing and fearing the worst.

Thankfully, they calmed down and eventually did not accept this offer. They then retained Bruce Perlstein of NAPL who promptly brought in a resource that will guarantee our client over $50,000 more than the 170K offer. Our client would have left at least 33% on the table if they grabbed the first offer!

In the words of one client, "you'd be nuts to do this yourself".