David Wimer, SVP of Murphy McCormack Capital Advisors, discusses why every M&A professional must understand the Article 9 transaction in order to create seller and purchaser opportunities where they would otherwise be impossible.
In just 46-60 days, the Article 9 transaction can extract business value from a distressed situation and preserve it in a new, debt-free enterprise. With the due diligence already complete, previously untransactable businesses can go to market and sell in a matter of weeks. ”It’s good for the seller, it’s good for the buyer, it’s good for the intermediary.. why wouldn’t you capitalize on that?”
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I would encourage all my colleagues to Investigate and and learn more about Article 9 and be able to apply it Because of the valuable benefits that You know we as a firm are enjoying right Now many times as an MLA of uh sir You’re looking at things at a business And you’re evaluating whether or not There’s a sell side engagement there and Frankly in many cases there isn’t so the Normal reaction would have been oh There’s a distress situation all that Means is delays and trying to slug it Out and turnaround or bankruptcy and When do I ever get a chance to profit From helping that company because time Is money for us as an advisor well Before article 9 we would just walk away From those that that looked in distress The article nine that that makes that Distress situation a golden opportunity We can rejuvenate that that business Have it as a cleaned up sellable asset And actually take it to market and Maintain jobs maintain value and have an Exit option for that owner what we Really liked about the article nine Process is is the timing you know in Forty-five to sixty days being able to Have a you know cleaned up company that Has improved cash flow because of the Debt restructuring and the Reorganization that occurs I mean it’s a Fantastic opportunity to keep that value
Preserved for us to bring it to a Purchaser or a set of investors that can See the value of the business at asset Value at a reduced asset value and Invest in that mitigate their risk as Well as being able to operate that Company with cash flow that’s necessary To grow the value in that business and To me That’s on a short timeframe if you talk About 45 to 60 days to clean a company Up and then potentially May only take you 60 days to market it And sell it because the due diligence Has already been done at Murphy McCormick we’re you know we’re seeing These distressed situations and frankly You know our art competitors you know Would be walking away from them we see Value in those distress situations and By bringing second wind into the as a Resource into the situation you know We’re able to capitalize on that value As the companies are cleaned up why Would you walk away why would you ignore A distress situation because it’s good For the purchaser it’s good for the Seller it’s good for the sellers Employees and it’s good for you as an Intermediary so taking a company that Has just been cleaned up and has had the Due diligence done and is is actually Ready to go hits our sweet spot I would encourage our M&A advisors in
Our community to form an alliance a Strategic alliance with second wind Because of our collaborative Relationship this is something that is a True resource and a tool I think that This is where M&A advisors have to you Know take a look at it now and say look Here’s real opportunity and it’s in an Area where they don’t have to do the Work they just have to do the work once It’s cleaned up there’s no better time Than now to learn more about article 9 And to be aware that this is available Has a real option a real resource why Not capitalize on that it just makes a Lot of sense as an M&A adviser You [Music]
