# Merger Viability & Cost Structure Review for NewCo

**March 19, 2026 at 11:29 AM** · 66m 13s · Participants: JD BUSFIELD, James Adcock, Stefanie Bourne, Sean Griffin

### 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."

### Action Items
- [ ] Share a breakdown of 'other fixed expenses' and CapEx history/forecast (2022-2025), separating capitalized overhead from materials/labor, to align accounting methodologies and assess realistic future spend. — @sean & ste `high`
- [ ] Provide a unit-level asset list (trucks, trailers) to explore options for disposition to pay down debt and improve the capital structure. — @jd & J `high`
- [ ] Analyze the leased property footprint to define which properties are essential for NewCo Day 1 versus those that can be negotiated out of or consolidated (e.g., Cahuenga, Atlanta, Stage 5). — @jd & ste `high`
- [ ] Refine the financial model to target a break-even cash flow to equity position using defensible, no-growth assumptions, incorporating the revised cost structure and aligned CapEx treatment. — @jd & ste `medium`
- [ ] Share updated model with detailed revenue drivers (rate, utilization, asset count) and upside scenarios (e.g., live event expansion) to build a more tactical J-curve projection. — @jd `medium`

### Topics
Merger Viability, Financial Modeling, Cost Reduction, Lease Obligations, Debt Restructuring, Asset Management, CapEx Analysis, Business Unit Strategy

**Sentiment:** neutral

---
*Generated by Call Assistant on 2026-04-09 10:11*