The Top Five Traps In Distressed M&A Transactions

To read this article in its entirety please click here.

"The Chinese use two brush strokes to write the word 'crisis.' One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger—but recognize the opportunity." John F. Kennedy, speech in Indianapolis, Indiana, April 12, 1959.

As a result of the contraction of the capital markets, it has become increasingly difficult for distressed corporate borrowers to refinance their existing debt facilities, recapitalize their businesses or even obtain the debtor-in-possession financing necessary to reorganize through bankruptcy. As a result, distressed sales—both inside and outside of bankruptcy—have become commonplace. Most distressed M&A transactions are structured as asset sales, rather than corporate mergers. By purchasing the assets of a distressed business, the purchaser is able to extricate and unburden the operating assets from the debts and liabilities of the distressed seller.