If a loss in court interrupts your plans to sell your company, how do you still make the sale?
If you're Indianapolis businessman Alan G. Symons, you put the company into bankruptcy.
Symons' company, Fast Tek Group LLC, lost a court fight with Fishers-based competitor Product Action International LLC
in February. So Symons pushed Fast Tek into Chapter 11 bankruptcy protection in June--a move that clears the way for a suitor
to buy the assets without being saddled with the liabilities, including the legal fees Product Action racked up in the court
Symons figures that after Fast Tek's assets are sold in the bankruptcy proceeding, there will be little or nothing left to pay the roughly half-million dollars Product Action says it's owed for legal fees. And that's assuming, he said, Product Action's court victory survives an appeal now pending before the Indiana Court of Appeals.
"If they win, they lose," Symons said of Product Action.
But Product Action feels as if it already has won, said one of its attorneys, Alan S. Brown. Product Action sued Fast Tek claiming that two former employees had stolen trade secrets from Product Action and used them in their new jobs at Fast Tek.
"The real purpose was to stop the use of our confidential information," Brown said, noting that Fast Tek now is forbidden from using Product Action's customer lists and other information.
Symons likened Fast Tek's dispute with Product Action to "two boys in a sandbox" and said the court's conclusion that there was theft of trade secrets was wrong.
The Canadian native, 60, has maintained a high profile since moving to Indianapolis in 1995. He built up a namesake insurance company, Symons International Group, but had to resign in 2002 as CEO of its parent company after the insurance business sustained a string of losses.
Symons has been a director and president of The Columbia Club on Monument Circle. He owns a home in the tony area of North Meridian Street. And his venture capital firm, AGS Capital LLC, is the city's eighth-largest, with $21 million under management.
Fast Tek is one of 15 companies controlled by Symons through AGS. It has employed as many as 100 temporary workers to sort and perform quality checks on parts for auto-parts makers. Fast Tek has full-time staff of 12.
AGS acquired Fast Tek in 2003 and now controls 80 percent of it. Symons' business partner, Scott Weaver, holds a stake in Fast Tek as well as in AGS. Other Fast Tek shareholders include Indianapolis dentist Greg Velligan and Don Brown, president of H.J. Spier Co. insurance agency in Indianapolis.
AGS has been trying to sell Fast Tek for a year, Symons said. With domestic automakers struggling, Fast Tek's sales were just $4.6 million in 2006, down 38 percent from a year earlier.
Fast Tek's bankruptcy filing lists $1.46 million in assets but $4.27 million in liabilities.
So far, three suitors have expressed interest, with one making a firm offer and one still pondering a bid, Symons said. He expects a sale agreement within weeks, which would then need approval by U.S. Bankruptcy Court Judge James K. Coachys.
In its lawsuit filed in May 2006, Product Action had charged that two of its former employees took trade secrets with them to Fast Tek and that Symons and Weaver didn't stop them.
After a five-day hearing, Marion Superior Court Judge Thomas J. Carroll declared Product Action the winner. He ordered Fast Tek to pay Product Action's litigation costs and told Symons, Weaver and the two employees to have nothing to do with Fast Tek for a year.
Symons' use of bankruptcy as a shield is common, said Henry Efroymson, a bankruptcy attorney for Ice Miller who is not involved in the case.
"It's very common for buyers to even request bankruptcy as part of the sales process," Efroymson said. That way, he said, the buyer can have clear ownership of the company's assets.
To recover any money, Product Action can only make an unsecured claim in bankruptcy--that is, one that is not backed up by one of Fast Tek's tangible assets.
Unsecured claims are paid only after all secured claims have been satisfied.
Fast Tek's biggest unsecured creditor is AGS. According to bankruptcy records, Fast Tek owes AGS nearly $1.5 million in unsecured claims.
Symons and AGS also have nearly $1.1 million in secured claims against Fast Tek, bankruptcy records show. Fast Tek also owes money to other companies owned by AGS. For example, bankruptcy records say Fast Tek owes $82,500 to Superior Metal Technologies for unpaid rent and utilities.
One of Fast Tek's largest secured creditors is the Indiana Community Business Credit Corp., which financed AGS' acquisition of Fast Tek in 2003. The community business credit corporation is managed by Indianapolis-based Cambridge Capital Management Corp.
Jean Wojtowicz, president of Cambridge Capital, said the credit corporation would collect on its $371,428 loan, but at a discount.
"This one will come out as good as it could have, given the circumstances," Wojtowicz said. She added, "The automotive industry has seen some tough times. This company hasn't been immune from that."
Fast Tek downsized its sales to let go of less profitable contracts, Symons said. When asked if the sales decline moved AGS to sell Fast Tek, he said no.
"We were looking for a buyer even before" the dispute with Product Action, Symons said. "Things are fine over here."