Distressed M&A Deal Structures: In- and Out-of-Court Restructuring, Receivership, Liquidation, Section 363 Sales
Understanding the Types of Distressed M&A Structures and the Pros and Cons Associated With Each
Course Details
- smart_display Format
On-Demand
- signal_cellular_alt Difficulty Level
Intermediate
- work Practice Area
Commercial Law
- event Date
Wednesday, January 31, 2024
- schedule Time
1:00 p.m. ET./10:00 a.m. PT
- timer Program Length
90 minutes
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This 90-minute webinar is eligible in most states for 1.5 CLE credits.
This CLE webinar will discuss the unique aspects and strategies involved in structuring the purchase/sale of a financially distressed company. The panel will discuss the various types of deal structures including out-of-court restructuring, Chapter 11 restructuring, receivership, assignment for the benefit of creditors, liquidation, and Section 363 sales. The panel will also outline due diligence best practices for buyers and sellers when acquiring a financially distressed company.
Mr. Radtke's practice focuses on mergers and acquisitions, private equity, commercial transactions and general corporate counseling. He also co-leads the firm’s corporate group. Mr. Radtke represents buyers, sellers and institutional investors in strategic and private equity M&A transactions, strategic investments and joint ventures. He also represents owners of privately held companies in selling their businesses. Mr. Radtke also represents many of the leading private equity firms in the Twin Cities metropolitan area, including spearheading the overall transaction process, negotiating the acquisition-related aspects, and structuring and negotiating equity arrangements. In addition, Mr. Radtke represents privately held companies, portfolio companies of private equity firms and other emerging private companies in connection with corporate governance matters, key contracts and other corporate matters. He also acts as outside counsel to privately held companies, helping them analyze and solve day-to-day legal issues.
Ms. Appleby represents clients in all aspects of complex bankruptcy proceedings, out-of-court restructurings and distressed transactions, to maximize their return and protect their interests. Ms. Appleby frequently represents indenture trustees, financial institutions and other creditors in special situations. Every situation is unique, and her experience enables her to guide clients through all aspects of the restructuring and insolvency process with confidence, clarity and control. Ms. Appleby advises clients on sophisticated restructurings, including those in connection with Chapter 11 bankruptcy proceedings, out-of-court restructurings, distressed investment opportunities, Section 363 sales, UCC Article 9 sales, consensual foreclosures, and event-driven acquisitions.
Distressed M&A presents an opportunity to purchase the assets of a seller in financial distress at bargain prices for qualified bidders. It is critical for distressed sellers and buyers to take early and proactive steps to formulate and implement clear strategies designed to maximize optionality, leverage, and control in order to achieve the desired outcome and reduce the likelihood of subsequent attacks on a distressed transaction.
The distressed sale process is completed under a compressed time frame, which often causes there to be less diligence done by the buyer. Therefore, it is critical for purchasers of distressed assets to understand the legal risks associated with out-of-court sales, as well as the protective measures offered during in-court Chapter 11 sales.
For sellers, distressed M&A represents a method to obtain short-term liquidity to remain solvent. For instance, the rationale for the divestiture of a non-core asset could be to use the sale proceeds to meet near-term debt obligations. Alternatively, the seller may want an outright sale of its entire business, which is usually done in an effort to avoid the onerous restructuring process.
When structuring the acquisition of a distressed business, deal parties must evaluate whether to pursue an asset sale or stock sale, both of which have significant legal, valuation, and tax implications. When acquisitions occur through a Chapter 11 bankruptcy proceeding or Section 363 sale, buyers and sellers face additional legal hurdles. Also, in a Section 363 sale there are often pre-petition solicitations that culminate in the selection of a lead bidder or "stalking horse," that establishes a bidding floor and purchase structure. There are additional advantages and disadvantages to stalking horse status that must be considered.
Listen as our experienced panel discusses opportunities and challenges in distressed M&As and offers strategies for deal counsel for structuring the deal both inside and outside of a bankruptcy proceeding, conducting due diligence, and integrating the distressed business post-acquisition.
- Critical considerations in acquiring distressed assets outside of bankruptcy
- What is being acquired: company, particular assets
- Ability to obtain the agreement of existing creditors and shareholders
- Feasibility of pre-packaged bankruptcy
- Distressed M&A structures
- Out-of-court restructuring
- Chapter 11 restructuring
- Receivership
- Assignment for benefit of creditors
- Liquidation (Chapter 7, foreclosure sale, self-liquidation, other)
- Acquisitions post-bankruptcy
- 363 sales
- Acquisition under Chapter 11 reorganization plan
- Stalking horse bidder: pros and cons
- Market outlook and key takeaways
The panel will review these and other key issues:
- What are some of the potential legal pitfalls with distressed M&A deals?
- What unique issues arise when M&A deals occur as a part of a bankruptcy proceeding?
- What are the best practices for deal counsel to tailor transaction terms in distressed transactions?
- When might a 363 sale be an appropriate method for acquiring assets out of bankruptcy? What are the pitfalls for the investor?
- How is an acquisition structured and approved in a Chapter 11 setting?
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