Case Study #4

Company Profile

Company has raised $38 million from venture capitalists through three rounds of financing.
The most recent financing occurred 9 months prior to Sherwood’s involvement.
Company provides data management solutions for information integration.

Company has $6 million in cash.
Company has entered into a $10 million Loan and Security Agreement with a lender who possesses a lien on the Intellectual Property of the Company. The secured creditor does not have a lien against the Company’s cash. Company has utilized the proceeds of the Loan to purchase hardware, software, hire additional staff to open satellite offices throughout the United States and in Europe, and to fund leasehold improvements at its headquarters.
Company owes $5 million NPV on the future payment stream to the secured creditor.
Company and the Secured Creditor dispute the security interest of the creditor in the assets of the Company.
The Company has no other significant debts.
Excluding its monthly payment to the Secured Creditor, the company is close to break-even.
Investors informed the Company that they would not invest more funds unless the Company was able to terminate it obligations to the secured creditor. Any future round would be at a significantly reduced valuation.

Sherwood was hired to negotiate a termination of the Company’s obligation to the lender.
Sherwood initiated a review of all of the Company’s monthly expenditures to identify other potential areas of savings.

Sherwood terminated the Company’s obligation to the lender through a combination of an affordable termination payment (substantial short-pay of future payment stream) plus a return of a portion of the equipment.
Sherwood analyzed expenditures versus industry norms and reduced spending in marketing and advertising efforts.
Sherwood terminated unnecessary service contracts.
Company achieved a cash break-even position and was able to raise funds at a higher than anticipated valuation.