Asset Sale – Part 2 – What’s Left in the Corporate Shell

This is the second supporting post, further elaborating on “In Tough Times, your Acquisition Offer Might be an Asset Sale”

2. What will be left in the entity that is left after the sale?  Some clients?  A copy of the tech to serve those clients?  Debt (likely)?  Tech Debt (in many cases)?  Litigation or other liabilities? Employees?

Be very clear, at least to your self, what will be left in the corporate shell.

Is your plan that the original organization will continue forward?  If so, and you’ve sold the brand, how do you rename it while keeping whatever brand equity you have left.  This should be part of the sale negotiations.  As an example, one of the org may keep/get the branding, the other may have temporary use.

Are all clients moving to the acquiror?  If not, what happens to those who are left?  Are they left high and dry?  Is there another vendor or provider you can refer them to? Is there data that they need to be able to retrieve?

Make sure you know what happens to any remaining customers, and have a communication plan to explain it to them.

For an example of “what not to do”, Insteon appeared to shut down abruptly in April of 2022, without any communication to their customers, or originally any message on their website! Amazingly, a dedicated group of Insteon customers apparently bought the company!  However, this is not a very responsible approach, so I can’t recommend it.

What if you have other tech?  Can it be sold?  Can it sustain another or remaining business? Are you keeping enough of the team to maintain it?

Inventory all the debt that will not be assumed by the acquiror. Also be sure to assess which, if any debts are personally guaranteed.  You know that I NEVER recommend this, unless you have been significantly compensated for taking this excess risk.

Then be honest and inventory the tech debt that will remain!  Is there anything else that has value?  Or does it all just need to go into the electronic trash can?

Also you must honestly assess any ongoing or potential litigation

Look at the team that is NOT going with the acquisition – how many people are there?  What is their severance situation?  How much of the acquisition price will go to pay their severance?

In part 3 we will discuss how to plan for the resolution of the remaining shell.

Each part of the series is available at the links below.

Part 1 – Be Clear About What is Being Acquired

Part 2 – What’s Left in the Corporate Shell?

Part 3 – How will you handle the what is left?

Part 4 – Don’t mess up the legal details

Part 5 – How will you take are of yourself and your team?

Part 6 – How to Get Paid

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