Danfurn Case Study

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The goal of the sale process (also called distressed sale) in order to obtain the most compelling bids is to obtain interest from the highest number of potential buyers. Indeed, there is a proven tendency of acquirer to take full advantage of their inherent leverage when singularly engaged in M&A negotiations.

Marketing process

The first step in creating competition is to conduct an exhaustive market analysis in order to determine the most promising potential buyers. They key of the process, however, is identifying a strong group of potential buyers prior to marketing the business. Than based our marketing on the characteristic of Danfurn LLC that these firms would identify as attractive components. LIER AVEC DANFURN LCC. Than, as in any auction process, you should prepare a comprehensive marketing documents highlighting your strengths and offers a clear value proposition to the firms and individuals that you established as the most promising buyer. You need to determine which auction strategies to pick. We would recommend the most usual one, limited auction where a select number or promising buyers are contacted and given access to the marketing documents you created. Following this step, the marketing process would be mostly done since the bidding part of the sales process would begin. You may need to provide marketing effort in the rest of the steps, but they are more likely to be highly specific to one potential buyer to convince them to up their bidding by explaining them how you would add value to their enterprise for example.

Retain investment Banker

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/vebitda.html

Entreprise value = ebitda * home furninshing industry EV/EBITDA ratio = 6 632 000*

Investment banker can be extremely helpful in a distressed sales. Indeed, their role is to help you get the highest price possible for your firm, which, as mentioned earlier, is most likely to happen when there are bid from various interested parties. They will help by handling all the steps mentioned earlier by themselves. You need to evaluate how likely are you to being able to find a buyer by yourself, indeed if you are already aware of potential buyers. You may not need to hired an investment bankers and you can save on their fees, which typically ranger on 6 to% of the final value of the firm. It is important to mention that hiring experience investment banker or M&A advisor usually lead to the acceptance of a higher final bid compared to when the firm management handled the whole process.

Company operating burn rate

(p.51)

operating burn rate consist the number of days a firm can cover ongoing and operating expense with their current amount of cash on hand.Since you had 6,017,000$ as cash and cash equivalents at the end of 2012,your annual operating expense are (90 866-90 200)=666 000$ and cogs for 2012 are 241 977. Operating burn rate = cash/(cogs+operating expense)/365= Your monthly operating burn rate= 666 000/12= 55 000

6 017 000/666 000= around 9. You currently have enough cash to cover for 9 days of operating expense.

Need to fund process

Obtaining committed financing in connection with the submission of a proposal in an auction requires significant resources up front. The Canadian marketplace for acquisition financing is generally more limited than its U.S. counterpart. With Canada's recent abolition of withholding tax on interest payments to foreign lenders, most private equity or other financial buyers rely on their U.S.-based relationship banks for committed financing (often without paying commitment fees) in early stages of auction processes where success is uncertain.

Out of Court Restructure

- Debt refinancing and bankruptcy procedures are costly. Debt refinancing can be difficult to obtain during the recession.