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| Exit Strategies When it Seems There's No Way Out |
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| Avoid an Exit Under Pressure
CrownWatermark Business Consultants work hard to ensure that all parties involved in a turnaround reach agreements without forcing the recovering client into bankruptcy. Since in a bankruptcy filing most of a company's free cash flow will be absorbed in legal and consulting fees, only about one in ten small businesses survive the court-supervised reorganization process - a high-risk and expensive option. If bankruptcy seems imminent, and if circumstances permit, businesses are usually better off to pursue an alternative exit strategy with a better chance of survival.
An advanced turnaround method is known by turnaround professionals as Dump-Buyback. First, you dump your failing company through a liquidation procedure like Chapter 7 or receivorship (Assignment of Benefit for Creditors). Second, you buy back the assets of the old company at their liquidation value, and you leave all the old debts behind.
You may never shut your doors in the process, and from customers' and employees' perspectives there may be no noticeable change - other than the company's name. This approach only makes sense if you have more debt than the liquidation value of your assets, you cannot get one or more major creditors to settle for a reasonable amount, and you have restructured your business around a profitable core business. You MUST have fixed your business or have a plan to do so before you do a dump-buyback. Unless you have found a surefire way to make a profit, you will have angry creditors and bankers knocking down your door again in a short time.
Exit Strategies
If you decide that your business is not a turnaround candidate or you want to shut down the company for personal reasons:
For solvent companies: Sell your company as a going concern. If you cannot get a reasonable price for the company for an outright sale, then liquidate by selling the assets piecemeal. Ask us about a legal strategy for SELLING YOUR COMPANY TWICE! We work with area business brokers to help you get the most for your business.
For insolvent companies: Use Assignment for the Benefit of Creditors. If your creditors balk at the ABC (which is rare), then file Chapter 11 if you want control during liquidation or choose Chapter 7 and walk away.
Call CrownWatermark at 253-279-4067 for your FREE consultation regarding exit strategy options.
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