Merger and Acquisition

By April 29, 2010 October 24th, 2018 Commercial Transactions, Jorge Hurtado

SALE OF COUNTERTOP MANUFACTURER HELPS BUSINESS AVOID BANKRUPTCY

Highlights

  • Cummins & White, LLP successfully represented a commercial manufacturing client in the sale and/or lease of its assets to a competitor despite the fact that all company assets were encumbered by secured liens totaling nearly $3.5 million.
  • Based on its expertise in business acquisitions and business insolvency, the firm negotiated with creditors and the purchaser and developed a cash flow plan that allowed assets to be sold free and clear of any liens and addressed financial payments.
  • Cummins & White also conducted due diligence and drafted sales-related legal documents, including the letter of intent and purchase agreement.

Attorneys

Case Study

In 2009, Cummins & White, LLP helped a manufacturer and installer of residential and commercial countertops in the sale of its business to a competitor in order to avoid bankruptcy. The sale was complicated by the fact that all of the manufacturing company’s assets were encumbered by liens. Cummins & White quickly devised a sales plan that cleared the liens and the acquisition closed without delay.

Background

The manufacturing company, with locations in Southern California and Las Vegas, was a family-owned business that specialized in kitchen and bath countertop manufacturing and installation. In March 2009, the company was on the brink of filing bankruptcy when it decided to sell to a competitor.

The sale was complicated by the fact that all of the assets that were being sold or leased to the buyer, including raw materials and manufacturing equipment, were encumbered by recorded liens amounting to nearly $3.5 million.

Legal Strategy

Cummins & White worked closely with the manufacturing company on all aspects of the acquisition in order to keep the sale on track. These efforts included creative solutions to manage cash flow problems and developing a plan to ensure that secured creditors would either be paid off prior to closing (direct payments from the buyers to the creditors as part of the purchase) or continue to be paid once the sale was complete (payments made as part of a three-year lease of equipment would go directly to the creditors).

Counsel for Cummins & White also:

  • Drafted and finalized the letter of intent, which covered all of the details of the acquisition for both the buyer and the seller
  • Conducted due diligence (researched and evaluated the buyer’s status as well as financial viability)
  • Prepared and finalized the purchase agreement and all related documents

Result/Implication

In only three weeks, Cummins & White attorneys actively participated in business negotiations on behalf of the manufacturing company, developed a cash payment plan that addressed financial obligations both before and after closing, and finalized all of the sales-related legal documents executed by both parties.

A key objective was the release of all liens on or prior to the closing date. As a result of skillful negotiations by Cummins & White, the three secured creditors agreed to the release of or modification of their liens, and the deal was consummated as expected without delay. Importantly, as a result of the sale, the manufacturing company avoided bankruptcy.

According to counsel from Cummins & White, the swift completion of the complex, multi-party transaction was a success for the manufacturing company, which was facing imminent insolvency. “We were able to provide both legal expertise and significant business knowledge to our client during a very difficult time,” Mr. Whitaker said. “We have worked with the manufacturing company for many years and were pleased that we were able to quickly and effectively guide the company through the sales process and avoid bankruptcy.”