Legal Blog

M & A Nuggets: A Seller In Financial Distress

financial distressMost companies that file bankruptcy end up liquidating, that is, ceasing business. Some bankrupt companies, however, even though they have accumulated substantial debt, have a customer base that will produce cash flow sufficient to fund future operating expenses. Federal bankruptcy law provides a procedure for a purchaser to buy a distressed seller out of bankruptcy. The procedure is known as a motion, or request, to sell assets free and clear of liens. Basically, a seller with an ongoing business in bankruptcy has the right to sell its assets (i.e., its business) to a purchaser. Creditors like banks that hold the assets of the bankrupt seller as collateral are required to either be paid in full or consent to the sale. Contrary to popular belief, the purchase price is not required to be fair market value. Often, the deal put on the table by the purchaser is the creditors’ only and best chance of being paid anything. So the moral of this story is that a seller’s bankruptcy filing does not preclude the purchase of the seller’s business. Indeed, it may provide a substantial long-term benefit to an opportunistic buyer. manuggets subscribe2

ABOUT GLENN D. SOLOMON

Glenn D. Solomon Esq., is a principal at the law firm of Offit Kurman and has provided counsel to businesses and business owners for more than twenty-five years, with extensive experience in the purchase and sale of businesses, structuring ownership agreements, and advising companies in financial distress

ABOUT OFFIT KURMAN

Offit Kurman is one of the fastest-growing, full-service law firms in the Mid-Atlantic region. With over 120 attorneys offering a comprehensive range of services in virtually every legal category, the firm is well positioned to meet the needs of dynamic businesses and the people who own and operate them. Our ten offices in the Mid-Atlantic region serve clients in the entire state of Maryland, the Washington DC metropolitan area, Northern Virginia, Philadelphia, Harrisburg, Delaware, New Jersey, and New York City. At Offit Kurman, we are our clients’ most trusted legal advisors, professionals who help maximize and protect business value and personal wealth. In every interaction, we consistently maintain our clients’ confidence by remaining focused on furthering their objectives and achieving their goals in an efficient manner. Trust, knowledge, confidence—in a partner, that’s perfect.

You can connect with Offit Kurman via ourBlogFacebookTwitterGoogle+YouTube, and LinkedIn pages.  You can also sign up to received Law Matters, Offit Kurman’s monthly newsletter covering a diverse selection of legal and corporate thought leadership content.

MARYLAND | PENNSYLVANIA | VIRGINIA | NEW JERSEY | NEW YORK DELAWARE | WASHINGTON, DC