That’s the buried lede in Dale Kasler’s Sacramento Bee recounting of the final hours of the auction for bankrupt Tower Records.
As first reported in the media, Great American's bid of $134.3 million for Tower's inventory was a mere $500,000 higher than Trans World's -- providing ammunition for the record companies to argue on Trans World's behalf.
But the real gap was about $2.3 million.
That's because Tower's investment banker, Houlihan Lokey Howard & Zukin, was in line for a higher fee if Tower was sold as a going concern, according to court records.
That tipped the balance clearly in Great American's favor, said the Tower source, who insisted on anonymity because he was not authorized to speak for the company. "In the end, it wasn't that close," he said.
We don’t have all the details, but from the way we read this the fee for Houlihan Lokey was structured so that a going concern bidder would have had to beat the next highest bid by almost $2 million. It was hard to imagine anyone buying a bricks-and-motar music store with the intention to run it as a going concern in the age of downloading music. But buying it for more than $2 million more than its liquidation value? Never going to happen. And so Tower Records falls quietly into the ash heap of history.
How Tower's final hours played out [Sacramento Bee]