Retaining Partners During a High Profile 363 Sale

Monitor

Situation Overview

Founded in 1983, The Monitor Group was a leading global strategic consulting firm with 700 professionals located in 27 offices across 18 different countries. Monitor specialized in consulting to senior management of corporations and non-profit organizations on business strategy, organization and leadership, innovation, economic development, market pricing and social action. The Company was founded by entrepreneurs tied to the Harvard Business School, including Michael Porter, one of the most cited scholars in economics and business strategy.

Following the financial crisis of 2008, Monitor experienced a dramatic lag in consulting work as companies cut back significantly on pure strategy consulting. Monitor’s business was also hurt from significant reputational damage deriving from a consulting project promoting the country of Libya, and its then leader, and a $12.5M settlement paid to Hallmark for the alleged improper use of proprietary information.

The drop in business resulted in a layoff of nearly 20 percent of Monitor’s employees and prompted the partners to advance $4.5 million to the Company, leading to the deferral of three years bonuses. These factors on top of the cash costs to pay off the founders when Monitor became a fully partner-owned firm, caused a liquidity crunch that the Company ultimately could not recover from – despite borrowing ≈$50M million in mezzanine debt financing. Beginning in September 2012 the Company was unable to pay rent at the Cambridge headquarters and defaulted on interest payments to the mezzanine debt lender. This forced Monitor to evaluate strategic options, including the sale of the Company which ultimately had to be executed through a Chapter 11 Section 363 sale.

 Due to its deep expertise dealing with bankruptcies in the professional services industry, Carl Marks Advisors was hired by Monitor to serve as both Chief Restructuring Advisor and Investment Banker to work and advise on all aspects of the Chapter 11 filing and the Section 363 sale process. In the sale process, Deloitte, who sought to increase their position in strategic consulting on a worldwide basis, was selected as the stalking horse bidder.

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