Business Sale for $15 Million Using an ABC

Business ServicesLitigation SupportTurnarounds & Restructuring

150M

Annual Sales

25M

in Debt

Direct Marketing Services Inc. (DMSI), Chicago Illinois

Challenge

Catalog Distributor doing $150 million of sales. $25 million debt.

  • Company’s Montgomery Ward and Popular Club catalog businesses were primarily with sub-prime customers who required DMSI to provide credit, were slow pay, and whose ability to pay was affected by the recession
  • Company was losing money, and was unable to pay its vendors and bring in merchandise to fulfill orders
  • The secured lender was unwilling to continue to fund losses or fund new sub-prime receivables during a sale process

Solution

  • MorrisAnderson was hired by the Board of Directors as Assignee in an Assignment for the Benefit of Creditors (ABC) as a strategic move to push the sale process forward
  • The secured lender supported the ABC and financed the business during the sale period
  • MorrisAnderson marketed the Company and conducted a public auction which was attended by 5 potential buyers, including strategic and financial buyers

Results

  • At the auction, a strategic buyer purchased all of Company’s assets except for the Popular Club assets
  • The marketing process brought competing bidders to the table, and pushed the price to over $15 million, substantially higher than if the assets would have been sold piecemeal
  • The Popular Club assets were sold at a subsequent auction sale for $700,000
  • The majority of assets were sold in under 45 days, keeping the costs of the liquidation to a minimum compared to a Chapter 11