Acquiring A Distressed Business

While a failing business may be burdensome to its current owners, acquiring the entity or its assets can be very attractive to onlookers. Such a purchase takes a competitor out of the market, enables substantial instant growth and ensures a negotiated cost that may be much lower than "organic" growth. Offsetting these attractions are the risks of distressed-business acquisition, including lack of recourse, which should be addressed through due diligence, valuation and negotiation.

Buying as a whole or in parts

An essential question is whether to buy the distressed business or purchase its assets. Before buying the company, a purchaser needs to consider:

• Why the business is in trouble and whether the purchaser has the expertise and financial resources to make necessary changes