Zero-Valuation Last-Chance Triage

“Halpern got straight to the point. ‘I don’t want to waste your time or mine,’ he said, ‘so I’ll tell you exactly what I think. You have two assets: your brand and your back end logistics and fulfilment platform. We aren’t really interested in the brand. But we think we can probably do something with the other bits.’ It was strange. I knew exactly what sort of company Texas Pacific was, but this verdict still surprised me. ‘If we’re to invest,’ Halpern continued, ‘a good chunk of our money is going to go on paying off debts. We’re also going to have to do a lot of restructuring to make a profitable business out of this. You have really good people, young creative people, but most of them are going to have to go. You need to think, can you run this business with fifty people? If we come in, we’ll need to do some radical things.’ It was beginning to sound very nasty indeed, but once again Halpern managed to surprise me. ~ ‘So what I’m saying is that we’ll only do this if you’re prepared to accept a zero valuation.’ Jay was open-mouthed. “Zero? You mean nothing? You’re saying this company is worth nothing?’ ‘Tm saying those are the only terms that we’d accept.’ But he pointed out that the present shareholders could potentially get some return on their investment in a couple of years or so once boo started making money. “You and your shareholders need to be prepared emotionally to deal-with this. If you are, then we can keep talking. ‘If not, there’s no point in taking things any further.’”

“- Yet for all the euphoria, there was a realization that implementing it would involve more pain for the company than ever before. What was the absolute minimum required to run the two companies? This was the unpalatable question that provided the starting point for our discussions. If our plan was to be attractive to investors, then both new companies would need to be pared to the bone. boo.com, the international retailer, for example, would sell in eighteen countries but operate from a single London office.”