Bottom Line
The teams are analyzing the financial viability of merging two companies (Avon and SuperCo) into a new entity (NewCo). The current model shows the combined business would have no equity value and could quickly turn cash flow negative without significant cost reductions or capital restructuring.
Key Takeaways
Viability Concerns:: The current merger model shows NewCo would have no equity value and could turn cash flow negative with minor changes to reasonable assumptions like CapEx or revenue growth.
Cost Reduction Levers:: The primary areas identified to improve viability are reducing lease obligations, restructuring debt, and further cutting payroll, with leases and debt being the biggest remaining cost drivers after payroll reductions.
Asset & Business Unit Strategy:: Teams discussed potentially exiting non-core or unprofitable business lines (like bathrooms) and right-sizing the combined fleet of ~500 assets, but must avoid creating direct competitors in the process.
Model Refinement Needed:: There's a discrepancy in how CapEx is accounted for between the companies, requiring alignment to build a defensible operating model with a realistic "margin of safety."
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