onday, 8 a.m. You find a note taped to your computer screen: “Sell the Pennsylvania facility ASAP.” It’s a vacant manufacturing site that has been idle for years. Perhaps the message is from the CFO, suddenly (or finally) authorizing you to sell. Or maybe you made the note to yourself, thinking it’s
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time once again to raise cash and cut costs.
No matter who wrote this note, what can you do now to streamline the process once the prodigal buyer is found? These five self-assessment questions can avoid later delay in responding effectively and in pre-screening potential buyers.
Do I know our bottom line? You’d welcome top price, a quick sale, and no risk. But most selling opportunities present trade-offs. Does management want cash now, even at a lower return? Or can you hold out for top dollar? Is your company concerned about a write-off against book value? Is there a reserve already taken and available with respect to the business closure? How do monthly carrying costs affect the price and timing equation?
How important is certainty? Your first buyer may want an extended period for due diligence, feasibility studies or financing. Buyers seeking rezoning or redevelopment may be willing to pay more but require a longer timetable. Can you afford the time, and the possibility of a terminated deal and remarketing risk, to maximize potential value? If the property might be more valuable for redevelopment, does your company have the resources, patience and experience to lead or oversee that effort?
Is there an environmental concern? Whatever the buyer’s view, you should understand the site history, prior uses, any known contamination and past or present remediation or enforcement activity. You can also determine whether your compliance group needs access to the site post-closing to complete any decommissioning work and what legal or financial responsibility your company is willing to accept.
Do I know what I own? You may have been manufacturing here for 40 years. Or the plant may have been obtained in a recent M&A event. Verify what parcels make up legal title to the site and what specific company affiliate holds the public record title. You may own more (or less) than you think, or title may be in a defunct or predecessor entity. It happens. Start fixing it now.
Who can provide answers to buyer due diligence questions? Find someone in the organization (or in your retirement pool if necessary) who has extensive and reliable knowledge about the site and keep that person in reserve. You may want to keep representations and warranties in the contract to a minimum. But you will have questions about the prior operations and current condition of the physical facility to decide how to respond to buyers. Inability to answer those questions may slow the transaction or raise unnecessary suspicions.
James Hagy, the newest member of the Site Selection Editorial Advisory Board, serves as an Adjunct Professor at the Case Western Reserve University School of Law and at the Center for Real Estate of the John Marshall Law School. During his 28-year career with Jones Day, the global law firm, he formed and led the firm’s Corporate Real Estate Services practice worldwide. He has advised a broad range of Fortune 500, FT 500 and private companies in major national and international transactions.