Distressed M&A Investing: Exercising Acquisition Opportunities in and Out of Chapter 11 Bankruptcy

Description

Distressed companies can represent attractive acquisition targets. Their stock and their debt often trade at prices reflecting the difficulties they face and they may be under pressure to sell assets or securities to raise capital or pay down debt. When markets show increased signs of volatility and the number of distressed assets rises, traditional and strategic investors should consider how to put their capital to use in the distressed space and work with counsel to assess and solve for the associated risks.

Out-of-court transactions tend to be less costly and time-consuming than in-court transactions, but they often require shareholder approval or creditor consensus. By contrast, a transaction executed under the U.S. Bankruptcy Code can bind non-consenting parties. Therefore, firms experiencing acute distress may need court solutions.

Hybrid approaches such as "prepackaged" and "pre-negotiated" bankruptcy reorganization plans may be appropriate for troubled companies with sufficient lead time to engage in out-of-court negotiations before acute distress. Section 363 of the Bankruptcy Code authorizes asset sales in bankruptcy on an expedited basis. Another option is for creditors or outside investors to acquire a bankrupt company, or its assets, through implementation of a plan of reorganization.

Listen as our authoritative panel discusses the options available to private equity and other opportunistic investors looking to acquire distressed companies, assets, and debt--both before and after a bankruptcy filing.