Marketing in the Time of Covid - A Restructuring Novella
SOURCE - The Hyde Opinion
Times were good before anyone ever heard of Covid-19. Our client, a Harvard-educated CEO, had raised a tidy sum of venture capital from investors in technology companies. Marketing automation technology was all the rage, and the bet was on building a better mousetrap, with a high-multiple business valuation on the short-term horizon.
Covid changed everything. Focused on the entertainment and events industry, the company started racking up losses in the early months of the pandemic. Revenues ground to a fraction of pre-pandemic levels. Despite generous government aid programs, returning to profitability turned out to be elusive.
The CEO’s options shrank as cash reserves dwindled, and the investors’ patience ran low. It became apparent that fixing the company was unlikely and the CEO called a friend who in turn referred him to me and my colleagues at Graphic Arts Advisors.
An initial assessment revealed that while the enterprise was headed for a crash landing if immediate action was not taken, there was nonetheless sufficient gas in the tank to commence a sale of the core book of business. For a strategic sale of assets to take place, we advised that the company reset its focus from mining growth opportunities to retaining key employees and safeguarding customer relationships. Preserving capital became management’s top priority. Facing an unfamiliar journey, the CEO nonetheless quickly grasped arcane legal concepts such as corporate officers’ fiduciary duty to creditors when a company enters the zone of insolvency. Paying ordinary operating expenses now required an understanding of the impact of not only corporate insolvency laws, but also a rigorous and rolling analysis of projected sources of cash and uses of funds.