Your company is distressed. The secured lenders are expressing concerns regarding their loans being repaid and the board is looking to maximize value for the company’s stakeholders — what now? An “out-of-court” sale of the company’s equity or assets to a potential buyer might work, but all of the potential buyers are expressing concerns about potential liabilities they might assume and risks associated with any transfer of the business or its assets in an out-of-court process. In fact, many of the potential buyers are insisting on an “in-court” or bankruptcy court supervised sale process to ensure that the assets and business they acquire are “free and clear” of unwanted liabilities and risks. The board might consider an in-court process but doesn’t want the company to commence bankruptcy without a deal in hand. So, the board’s strong preference is to find a buyer to serve as the “stalking horse bidder” who has agreed to submit a binding bid that sets a floor as to price, has limited conditions to closing and all but guarantees that the distressed company will have at least one deal to close at a value at an acceptable price. This chapter is written to guide you through the in-court process, focusing on why “stalking horse” bid protections might help the board obtain a deal that actually maximizes value for the company’s stakeholders.

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