MorrisAnderson Selling a Business when the Industry is Rapidly Declining
150M
Annual Sales
40M
in Debt
Mercury Retail Services, San Antonio Texas
Challenge
$150 million Magazine Distributor to large retailer operating in 10 states with 3 Distribution Centers. $40 million debt.
- Magazine industry declining by 8% annually for multiple years
- Retailers forced pricing down and converted magazines to pay-when-paid consignment inventory
- Distributors had to pay for all magazines but only sold through 1/3 of product and got delayed credit back for 2/3
- Company lost control on inventory accounting and grossly overstated inventory values which made detecting that operations were losing money for years hard to detect
- Company was almost out of cash and on verge of being shutdown by its publisher suppliers
Solution
- MorrisAnderson was appointed CRO
- Negotiated deals with publishers to only pay for expected weekly issuance each week in cash; 1/3 of the total amount
- Reduce costs to service and bridge company to sale
- Marketed Company for sale
Results
- Company was sold in 3 separate transactions
- Remaining estate was wound down without a legal proceeding even though unsecured creditors would receive no distribution on their claims
