Important Tools in Distressed M&A Transactions

March 2009
John M. Reiss, Matthew J. Kautz, Thomas E Lauria, Gerard Uzzi

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More and more distressed companies are seeking to sell assets as part of their plans to improve their financial condition or undergo other corporate debt restructurings. Buying distressed assets and companies inside or outside of bankruptcy court poses risks and challenges that do not present themselves in the non-distressed M&A market, but also offers significant upside opportunities for buyers.

Buyers need to focus on identifying distressed sellers and conducting the acquisition process in a way that minimizes the risks while maximizing the opportunities. That involves knowing the various distressed asset acquisition methods—acquiring assets pursuant to a "363 Sale," acquiring a business pursuant to a confirmed Chapter 11 Plan or by taking a position in the capital structure to facilitate an acquisition—and taking the right strategic steps to make the best of a distressed M&A transaction.