Becoming A Stalking Horse In Distressed Energy M&A Transactions

What is a Stalking Horse?

In the distressed M&A context, a stalking horse refers to a potential purchaser participating in a stalking horse auction who agrees to acquire the assets or business of an insolvent debtor as a going concern. In a stalking horse auction of an insolvent business, a preliminary bid by the stalking horse bidder is disclosed to the market and becomes the minimum bid, or floor price, that other parties can then outbid. 

Extensively used in the United States, the stalking horse auction is different than the sealed competitive bidding process that is predominantly used in Canada. That said, stalking horse auction processes have been used in Canada in a number of cases.  Most recently, in February of this year, the Superior Court of Justice of Ontario approved a stalking horse auction process in the case of In the Matter of the Receivership of Crate Marine Sales Limited et al., despite the objections of certain creditors. That Court applied the