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Freshfields Transactions

| 1 minute read

Distressed M&A: challenges and opportunities

Are you prepared to take advantage if one of your competitors falls into difficult times or enters an insolvency process? Do you know your way around buying from a distressed seller? What are the things you need to know? How can you prepare? What will make your bid most attractive?

Recent high profile collapses such as HMV have highlighted the opportunities that can be found within the distressed space – if you are prepared and know how to act swiftly.

There are many points in time at which a seller may decide to sell a business line, from when it is facing challenging headwinds to the entry into a formal insolvency proceeding. All will come with their own challenges – but also with opportunities which a savvy buyer with proper advice can take advantage of. Examples are:

  • What protections will be included in the SPA? Can you rely on the seller’s covenant strength? What alternatives could be put in place?
  • Can transitional services be offered by the seller? Can the business operate without them?
  • What will really motivate the seller’s directors and who is really the decision maker (is it the directors or is it the lenders)? Understanding where the directors are coming from and who the decision makers are will enable you to frame your offer in a way that addresses the seller directors’ and/or decision maker’s concerns.
  • How will the process play out? How can you maximise your chance of success, and minimise the price you pay?

In a distressed scenario, time is short. The more prepared the buyer, the quicker it can act and secure a deal. We can help buyers understand the risk and reward – and what it takes to be prepared.


corporate, mergers and acquisitions, restructuring and insolvency, hot topics usa