Disposition Firms Are Leaving ‘No Stone Unturned’ to Maximize Value

–Amid fierce competition for deals in a flat economy, firms use strategic partnerships to arrange turnkey, going-concern sales and take other unconventional steps to enhance recoveries, Tiger Group exec writes.

BOSTON (7/29/14)—Disposition firms have always been aggressive about the pursuit of deals. But in today’s highly competitive market, they are becoming increasingly resourceful with a view toward maximizing recovery values, writes Bob DeAngelis, Executive Managing Director of Tiger Group, in a new blog post at ABLadvisor.com.

“Asset-disposition firms are working harder than ever to provide competitive advantages and enhanced recoveries by leveraging solutions and approaches that reflect the realities of today’s marketplace,” DeAngelis writes. “More often than not, this involves expanding their operating platforms. Specifically, by aligning with a greater variety of strategic, going-concern partners—from real estate and M&E/industrial partners, to brands and IP partners—firms are able to offer more nimble and holistic approaches, and better overall values.”

In the post (“Disposition firms are maximizing value by leaving no stone unturned”), DeAngelis cites the recent turnkey, going-concern sale of the equipment and inventory formerly owned by bankrupt Quantum Foods to West Liberty Foods, LLC. Coordinated by Tiger Group, City Capital Advisors, LLC and Schneider Industries, the transaction illustrates how strategic partnerships can lead to better returns for the lender, DeAngelis says. By avoiding a piecemeal auction, the deal prevented two food-processing plants and a cold storage distribution center in Illinois from being dismantled, he notes. It thus created 400 to 600 jobs at facilities that were in the process of going dark.

But turnkey sales are complex and often require a team of experts who are capable of handling specific aspects of the business such as inventory, equipment, real estate, IP and other asset classes as efficiently as possible, DeAngelis writes.

He also cites the move by KPS Capital Partners to acquire the entirety of the assets of Furniture Brands International as a going-concern in the course of a Section 363 sale, and auctions by Tiger Group’s Remarketing Services Division in which turnkey buyers stepped up to purchase such diverse assets as a waste-to-energy plant and the IP, production facilities and other assets of a well-known nutraceutical manufacturer. Likewise, in recent retail liquidations, including those of Loehmann’s and Coldwater Creek, the adaptability of the firms involved clearly was a constructive factor in maximizing the process, DeAngelis writes.

Meanwhile, today’s lenders are focused on better understanding the value of non-traditional assets such as IP, brand value and the “relative value” of various businesses. “Lenders are keen on cutting through the hype and asking hard questions,” he writes. “They want to feel assured that the brand is strong enough to attract interested parties and drive premium bids in excess of pure NOLV.” Lenders also insist on having confidence in their plans for accessing the liquid value of asset types that they have never loaned against before.

“Against the backdrop of a stagnant market, our industry continues to see significant growth in demand for wholesale dispositions, remarketing services and private sale expertise, with a greater number of companies seeking to aggressively manage underutilized or unproductive assets,” DeAngelis writes in the conclusion to the piece. “In this changed landscape, banks and disposition firms are right to focus on adaptation.”

Read the full blog post at http://www.abladvisor.com