Everything You Didn’t Notice When You Purchased A Distressed Business

OVERVIEW – Information on buying a distressed business in Canada. The acquisition and purchase of a troubled company is a daunting business challenge

Buying A distressed business in Canada. It’s a phone call we’ve received a few times over the years – a clients earnest desire for the acquisition / purchase of a troubled company that… guess what… comes at a great deal and price!

Hindsight will often tell the business owner certain things weren’t noticed in that whole process, creating some tremendous challenges for the new owner/manager. Let’s dig in.

Opportunities in distressed business turnaround and acquisition come out of several areas. One is simply that in some ways we are still not over the economic crisis of 2008 and many businesses, small and larger are still affected in certain ways – bottom line, they are distressed. In other cases companies have in some cases ‘ lost their way ‘.

That presents a tremendous opportunity for a savvy buyer. In some cases it might be a direct purchase; in others it might mean a merger scenario.

The benefits of a successful acquisition of a troubled company are obvious – they often include a solid return on investment and assets, the ability to enter new markets, and also to acquire assets at what some might deem a fire sale price.

In many cases the business purchaser has the ability to remove the debt burden of the original target firm – either through legal or informal means- i.e. negotiation with creditors, suppliers, etc.

So where are some of the areas where things can go really wrong in buying that distressed business? Part of the problem can simply be the purchaser loses focus of the original intent of the acquisition as things get tangled up in negotiations, business cultures, etc.

In all cases it’s important to determine there is no legal ‘ hangovers’ in the target business , issues such as existing liens, contracts that were in place, lender agreements, lawsuits, etc.

When it comes to the assets of the business in question it in fact might be very prudent to allow certain assets, inventories, etc to remain with the current owner. But don’t forget that those supplier /vendor relationships that were in place are critical to the ongoing success of any company.

Don’t forget also that the ability to keep key personnel in the target firm is a valuable consideration, however that presents a big challenge when the business was in fact under duress and may have lost confidence in the business.

In Canada you can of course legally buy a business that’s already in receivership or bankruptcy or CCAA proceedings, however this has sometimes a larger cost and other legal obligations.

The right type of financing is available for all types of distressed business acquisitions. Financing and acquiring a troubled company can be achieved with bank term loans, asset based lending, mezzanine financing, etc.

If you’re looking to eliminate the ‘ bad times’ in the acquisition of a troubled company seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with ‘ noticing’ the areas that will make or break success.

Author: Stan Prokop – founder of 7 Park Avenue Financial

http://www.7parkavenuefinancial.com

Originating business financing for Canadian companies, specializing in working capital, cash flow, and asset based financing. In business 10 years – has completed in excess of 90 Million $$ of financing for Canadian corporations. Core competencies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details:

CONTACT:

Greg LaBella
7 Park Avenue Financial
Off.   905 829 2653

Cell   905 302 4171
greg@7parkavenuefinancial.com