Severed Connections

 

Severed Connections

 

The deal was done.  Economically, fair to all the principals involved. 

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This was an asset sale of a near bankrupt electric motor/transformer manufacturer.  What the principals failed to consider was that the employees had felt severely undermined in the transaction.  Vacation pay was not paid, benefits not taken were eliminated; things of this nature were taken personally by the rank and file.

 

The level of employee frustration was made evident when they were tasked with loading the assets onto trucks that would take them to the new owners in MN.

 

25MM worth of motors and transformers were quickly reduced to scrap value by disgruntled employees clipping wires and electrical contacts as equipment was being packaged and loaded for shipment.

 

Any amount of nonfinancial investigation would have uncovered the issues.  Almost certainly some other path could have been found to avoid the total destruction of value that did occur.  Calculating even the highest possible costs of due diligence against the almost total loss of purchase price would show a miniscule investment in risk management.

 

An ounce of prevention.

 

Have something to add? 
Got a different point of view, want to play devil’s advocate, or just think we’re all wet? Post your experiences or examples.                                                                                                                                                                                            Brought to you by;                                         www.packardacquisitions.com
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