From the Desk of Dr. Doom: Will a Botched M&A Lead to Liquidation?

November 27, 2023by Mike Cronin
A Chief Restructuring Officer sits at his desk as he evaluates how he will wind-down a startup and liquidate their assets
Dr. Doom crunches numbers.

In the combustible landscape of Silicon Valley startups, they call me Dr. Doom. Not a nickname I picked, but it’s stuck, and in a twisted way, I’m fond of it. To some, I’m the last phone call when the walls are caving in; to others, I’m the first step towards a fresh start.

It was a particularly biting Tuesday when I got the call. No amount of caffeine in my system could’ve prepared me for the desperation on the other end of the line. “Dr. Doom, it’s Sebastian.” The voice was trying hard to stay buoyant amidst a sea of troubles. Sebastian was the kind of leader who thrived on control, but now he was grappling with a reality that refused to bend to his will.

His company, CodeMason, was supposed to be a breakthrough in DevOps, but fate had other plans. A botched M&A had left him staring down a $5 million abyss, with only two months to make something happen. They don’t teach you how to handle that in business school. When I walked into CodeMason’s offices, Sebastian was there, nervously pacing.  We cut to the chase—time was bleeding out, and pleasantries wouldn’t stitch the wound.

I looked at my notes:

  • Failed M&A due to ???? Founder unsure
  • $5 million in debt
  • Employees working on side projects
  • 2 months of runway

Turnaround or Wind-Down? 

I took apart the financials, and it was clear—the company wouldn’t make it, this is a wind-down. But the carcass was worth something. The key was to act fast and smart. There was the software—innovative, robust, a lifeline if sold to the right buyer. The CRM data was a gold mine of well-kept industry contacts and insights. And then there was the team, a small group of developers whose expertise was invaluable.

I wasn’t sure we could find a buyer, not knowing much about dev ops, but after a long meeting with Sebastian and his VCs, we created a list of suspects. We sent out an email to all their M&A and Biz Ops teams announcing an auction. It worked. The software found a new lease on life with a tech giant. Here’s what we sold:

  1. The Software IP: Sold to a major tech giant
  2. The CRM data: Sold to a data analytics firm
  3. The Development Team: They happily got absorbed by the very conglomerate that bought the software

    A startup liquidates its assets to pay back venture debt.
    A startup sells off its computers and furniture to pay back venture debt.
  4. Office Furniture & Equipment: Computers, monitors, chairs, desks, all sold

When it was all said and done, we’d pared the debt down to $2 million and settled it. Sebastian was no longer at the helm of his own ship, but he wasn’t sunk. He’d retained his honor and the means to rebuild.

They say I perform autopsies on dying companies, but that day, it felt like I’d done something more akin to organ donation. And as for Sebastian, I had a hunch he’d bounce back. Men like him always do.

As he looked at me, something like respect in his eyes, he said, “I thought you were the grim reaper when you walked in.”

I cracked a smile. It was rare for me. “Sometimes,  the reaper is just someone planting seeds for a new beginning. Don’t lose my number.”

In Silicon Valley, every ending is a precursor to another’s beginning. I understand that well. Another company’s chapter closed, but with a twist—less doom, more dawn. And that’s just another day’s work for Dr. Doom.

Have questions about wind-down? Meet with one of our Ravix Group Chief Restructuring Officers today. Receive a free Wind-Down Playbook & get clarity on what type of wind-down is right for your VC-backed start-up. Contact us for a free hour consult:

Mike Cronin

Michael leads the Advisory Services practice of Ravix Group. He has been handling the wind-down and liquidation of Silicon Valley companies for the last 25 years. Prior to joining Ravix Group, Michael spent 17 years with Diablo Management Group, Inc., where as a Senior Consultant, he managed orderly wind-downs, liquidations, and Assignments for the Benefit of Creditors (ABCs). Additionally, Michael has served as Bankruptcy Plan Agent and Finance Manager for distressed companies and deal-related escrow accounts. His industry experience is broad and diverse, from high-tech manufacturers, online service-providers, and software companies to event-planning start-ups and grocery chains. Michael is forthright and works with all deal constituencies, whether investors, shareholders, creditors or ex-employees with a consistently high degree respect and concern. Michael’s ability to address both big-picture issues as well as a deal’s fine details serve him well in addressing the needs of the Silicon Valley’s varied start-ups. Michael graduated from the University of California Davis with a Bachelor of Science Degree in Managerial Economics. He began his professional career with Andersen Consulting (now Accenture), where he spent four years designing and implementing management information systems for a diverse client base of Fortune 500 Companies. Michael remains proud of his early experiences interning with the Oakland A’s and Senator Pete Wilson, as well as his first childhood job selling found golf balls back to the hacks that lost them.
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