Buying distressed assets

January 2009

The number of companies in distress or formal insolvency proceedings is likely to increase dramatically in 2009.   As vendor price expectations fall, the credit market improves and a number of forced-sales occur, there will be an increasing number of opportunities to acquire businesses for attractive values.

Buying stressed or distressed companies presents a different set of dynamics in the acquisition process than would be seen in a normal transaction.  In order to take advantage of the opportunities there are a range of issues for potential acquirors to consider such as:

• The accelerated timetable and the consequent need to be able to act quickly
• Lack of warranties/indemnities when buying out of insolvency and the consequences for due diligence work
• Where to look for opportunities to purchase insolvent companies or get involved in a restructuring
• The potential to gain or lose value in a pre-pack transaction

Administrator, David Chubb and Brendan O'Driscoll discuss these matters and find out ways to best approach distressed situations.