HIDDEN MARKETPLACES AND THEIR “TARGETS”

In the current economic environment, troubled, distressed, insolvent and Chapter 11 bankruptcy businesses are presenting strategic and financial investors with attractive opportunities. Distressed transactions may provide the acquirer with a pathway to: gain access to a new client base or geographic territory; acquire assets at extremely discounted prices; effectively eliminate a competitor; or new technology, product lines or services that are complimentary to that of the purchaser.

These unique “targets” present a different range of transaction options as well as significant challenges. After thorough and exhaustive due diligence the structure of a distressed transaction will center on a number of important factors about the “target,” including: issues of value (assets and/or stock), debt and capital structure, the immediacy and extent of cash needs, cost and timing of the transaction and the essential consent of third parties (the bank). The assessment of these concerns will dictate the structure of the transaction.

Identifying these opportunities may be through current vendors, competitors, local bankers and attorneys, and those familiar with troubled companies. Investors in troubled companies should consult with a qualified advisor having expertise in M&A and insolvency at the earliest possible stage of investment.