Industry: media, digital
Objective: protect stock price integrity of parent company
A corporate backed SME was struggling to achieve its growth targets. As a cash flow negative entity, the firm was accumulating debt, which reached a significant amount over time. Assigned as an outside expert with the risk assessment, the need to consolidate losses to the balance sheet of the parent company under IFRS was highlighted to the management.
Balance sheet simulations revealed, the consolidation of the losses, would have consumed a significant portion of EBIT of the (listed) parent company. This was happening at Q3 of the respective year and would have compromised the share price, potentially causing double digit million damage. Hence, a quick divest process to protect integrity of the share price was imperative.
Over the scope of 6 weeks, a MBO was scoped and a financial investor was found, to invest in the company, to secure going concern.
Closing the transaction within a narrow timeframe, protected the integrity of the market capitalisation of the parent company. Newly installed terms for future cooperation, maintained synergies for mutual benefits. The former subsidiary company remains operative until the present date.