The Intricacies of Buying a Bankrupt Company

Patrick Dempsey’s purchase of Tully’s Coffee once again made headlines earlier this weekend.  This time, the reports are about his group running into ‘obstacles’ regarding the sale. Quite frankly, we expected this kind of scenario: The company in question filed for bankruptcy and one of the losing bidders is one of the biggest players in the industry.

What we’re witnessing, however, is part of the often intricate process of acquiring a bankrupt company. What Dempsey’s group Global Baristas is facing happens all the time. And if you look closely at the situation instead of simply listening to speculations, you may get an insight or two should you decide to purchase a bankrupt company soon.

Company’s previous dealings resurface

Global Baristas’ main ‘obstacle’ is about the coffee chain’s dealings with Boeing. Tully’s has branches in Boeing facilities and the aerospace company is offering coffee cards privileges through payroll deductions. Although Boeing explains that their deal is a ‘non-issue’ in the negotiation, it certainly makes the process a bit longer.

What you can learn from this scenario is that previous dealings will resurface – sooner, if not later. When you purchase a company, its partners, affiliates, and other key players can affect the speed and smoothness of your negotiations. Whatever happens, you have to deal with them one way or another.

Competitors can strike back

Global Baristas made public about the obstacles it’s currently facing as part of the response to the status conference requested by its two rival bidders. AgriNurture Inc. and Earthright Holdings USA LLC (ANI), together with Starbucks, wants to know how the deal is going and when it will close. The rival bidders also want to know if Tully’s is still interested in the backup bid if the deal falls through.

In most business dealings, competitors refuse to give up the fight. They will always be there in the sidelines, ready to strike when the time is right. In Global Barista’s case, their competitors are using the slow negotiations to strengthen the possibility of getting the deal. So when you win a bid – especially over a global brand – such challenges are inevitable.

Costs can go beyond what you expected

According to reports, Dempsey’s group shelled out an additional $350,000 to keep the coffee chain operating while it negotiates the sale. Tully’s filed for bankruptcy after all and as a prospective new owner, Gobal Baristas has to take responsibility and keep the business running.

If you’re planning to be an investor, you have to be prepared to pay additional costs during the acquisition period. Most of the time, it’s necessary. You have to set a limit, though, or else you may end up paying more and become bankrupt yourself.

In times like these when many companies are up for sale, you will be tempted to invest. The company often increases in value once the economy and the company itself stabilizes. If you plan to invest anytime soon, remember the intricacies we have indicated above. These can help you secure success in your transaction and maximize the return for your investment.


About Signs Now Mill Creek
Hi! My name is Rani Bal and you can learn more about me and connect with me here: Rani Bal Google+ Profile

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