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— Bankruptcy —
Conversely, buyers are exercising patience while remaining mindful that the going concern value of a target's business may be declining sharply. Yet there is still a faint pulse to the M&A market. Earnouts, seller financing, mezzanine financing and staged investments are some of the tools buyers and sellers use to bridge funding gaps and valuation expectations.
While much of the capital constituting the current private equity overhang remains on the sidelines, those with experience in previous down cycles know that a down market is often the best time to acquire a business, find good deals on strategic assets and restructure and recapitalize businesses for better long-term returns. Strategic buyers are still closing deals for critical add-ons that will complement and generate revenue for their existing businesses. Additionally, proactive private equity firms are staging some investments, working with mezzanine lenders to bridge the funding gap and considering minority positions in good companies requiring capital. Over the next 18 months, there should also be ample opportunities for buyers to acquire businesses or their assets that may not otherwise survive. In addition to the more traditional deal structures, in a down market buyers can also use bankruptcy and other workout tools to acquire good but struggling businesses or their strategic assets. For instance, buyers seeking to acquire a distressed business as a going concern may want to strike a deal with the business to facilitate a prepackaged bankruptcy under Chapter 11 of the Bankruptcy Code. In a prepackaged bankruptcy, the buyer and the major stakeholders seek to reach agreement before a bankruptcy filing to reduce the risk of a significant decline in a company's value. A prepackaged bankruptcy generally takes less than six months for confirmation. For buyers who do not wish to or cannot afford to acquire a company as a going concern, they may instead acquire certain strategic assets of a debtor in possession through a Section 363 sale under the Bankruptcy Code. Section 363 sales provide a good way for a buyer to acquire an insolvent company's assets free and clear of existing claims and often take only 45 to 90 days to complete. That said, Section 363 sales require an auction where better and higher bids may prevail. In most states, buyers can also structure a deal to purchase the assets of a company that has not filed for bankruptcy through an assignment for the benefit of creditors, or ABC. An ABC is often a simpler and cheaper alternative to bankruptcy where a seller conveys its assets to a neutral third party ("assignee") who acts as a fiduciary for the benefit of creditors. The assignee's responsibility is to wind down the debtor's business, liquidate its assets and distribute the proceeds to the creditors who have filed claims with the assignee. An ABC is voluntary, but typically all creditors must accept it in order for it to succeed. Another option for buyers who are creditors of a distressed company is the purchase of assets through a composition. A composition is a contract between the target and two or more creditors where the creditors agree to accept partial payment in full satisfaction of their claims. A composition is more often appropriate for strategic buyers, though there is a risk of incurring potential successor liability where unresolved creditor claims exist. Regardless of their focus, if buyers, sellers and lenders can overcome their current paralysis, opportunities are available to acquire quality businesses or assets in this environment as are a variety of strategic tools that can be used to structure deals. Until the M&A market rebounds, these tools and deal structures can create a "win-win" for buyers and sellers alike and provide significant growth opportunities for buyers to make investments that would be unavailable or too expensive in better economic times. Stephen A. Gould is a partner with Boston law firm Nutter McClennen & Fish LLP, where he specializes in mergers and acquisitions, private equity and venture capital investments, as well as joint ventures. James F. Coffey is a partner concentrating in bankruptcy, mergers and acquisitions, and corporate law. Comments |
Despite recent rumblings, the M&A market continues to languish. The softness in merger activity has been compounded by rationalized market fears, "analysis paralysis," restrictive lending terms and a continued valuation gap between buyers and sellers. If they can, sellers are being advised to hold out until the economy rebounds. 
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Secret Software & Naked Short Selling
We need NSS arrests - not Insider Trading arrests
It is November 5th, 2009 at high noon and the SEC is all over the news about another arrest. They are all on stage giving this big press conference on 14 arrests for Insider Trading connected to the Galleon Group investigation. Is it Insider Trading? The Government wanted the world to believe this caused the financial meltdown on Wall Street. Three weeks earlier the SEC made the first arrest for Insider Trading involving Raj Rajaratnam and 5 other people on Wall Street.
It is my opinion that the Government and the SEC is involved in a cover up to try and make people think that it was insider trading that caused the crisis of 2008. Let the truth be known. The news media, along with Goldman Sachs and many other Wall Street companies and people of power are all involved in the biggest cover up in the history of the United States. It involves greed to the fullest extend. The SEC is responsible, under the leadership of Christopher Cox in July 2007, the Securities Exchange Commission abolished the Up Tick rule. The elimination of the Up Tick rule created a wave of corruption that grew out of control, based on Naked Short Selling and the use of secret software and super fast computers.
Insider trading has played a role in the financial crisis, yet the story not being told by the news media is the arrest of a Goldman Sachs employee who tried to steal Goldman Sachs secret software. This arrest came over the July 4th Holiday week-end and was aired briefly on a Saturday night on TV and then came Monday July 6th, 2009 and the story disapeared. A few weeks later Goldman Sachs reported its FY 2009 2nd QT earnings ( April – May -June ) and Goldman Sachs made over $100 million dollars a day in 46 of the 64 trading days for that quarter. How could this be possible after a 17 month recession. Wall Street changed two major Laws. The first being the use of decimal places (2001 )instead of fraction. Years later and after they lobbied for the removal of the Up Tick rule ( 2007 ) the secret software was designed and in place ready to go into full operation now that Wall Street was allowed to naked short sell millions upon millions of shares that Goldman Sachs and other hedge funds didn’t even own and failed to deliver. Their greed took over, who wouldn’t , when Goldman Sachs was making over $100 million a day in trading. They destroyed companies like Sirius XM radio and overstock.com and many others. Then they began naked shorting the banking industry and attacking each other.
This is the truth that the news media, corporate Amercia, the SEC, the Government, Goldman Sachs, Hank Paulson and the many others that were in power have not told the American people and the world. Now, as I write this letter, they are now trying to con the world into thinking it was insider trading that caused 95% of the middle class workers to lose 20% - 60 % of their investments and 401K’s.
In the end the Entire story will be told and I hope I get my chance to tell it. Check the facts. There was an arrest of that Goldman Sachs employee in July 2009. Why was it covered up? Where are the arrests for Naked Short Selling and Goldman Sachs use of their secret software that stole the wealth off investors all across the country. It will go down as the biggest scandal in history.
Richard Keane
November 7th, 2009