1. Acquisition of a Troubled Company
David Poitras
Attorney
Danning, Gill, Diamond & Kollitz
Bill Brody
Buchalter Nemer Fields & Younger
Buying & Selling a Company in a Tough Economy
UCLA July 17, 2002

2. Primary Methods of Acquisition:
Merger
Purchase of Equity/Stock
Purchase of Assets

3. PURCHASE OF ASSETS OF A TROUBLED COMPANY
Outside of Bankruptcy
Bankruptcy:  Asset Sale
Bankruptcy:  Plan of Reorganization
Assignment for the Benefit of Creditors

4. Outside of Bankruptcy Law: Article 6 “Bulk Sales.” Disadvantages:
Purchaser:
Seller:
Insolvency of seller
Assumption of liabilities of seller
Fraudulent transfer risks
Unknown liens and claims (taxes, environmental)
Successor liability issues
Lower purchase price

5. Bankruptcy: Asset Sale
Law:  Sections 363 and 365 of the Bankruptcy Code
Purchaser:
Seller:
Advantages:
Free and clear of liens
Assignment of unexpired leases and contracts
Competitive bidding
Business judgment
Disadvantages:
Overbidding and marketing
Disclosure to public
Court approval
Costs associated with approval procedure

6. Bankruptcy: Asset Sale
Process
Negotiate terms
Approval of bidding procedures
Approval of sale of assets
Distinctive Terms to Bankruptcy Assets Sales
Break up fee
Matching overbids
Initial and subsequent overbid amounts
Deadlines for bid submission and approval

7. Bankruptcy: Plan of Reorganization
Law:  Section 1129 of the Bankruptcy Code
Purchaser:
Seller:
Advantages:
Free and clear of liens
Assignment of unexpired leases and contracts
Competitive bidding
Business judgment
Disadvantages:
Possible overbidding and marketing
Disclosure to public
Court approval
Possible rejection by creditors of plan
Costs associated with plan confirmation process
Time delay associated with plan confirmation process

8. Bankruptcy: Plan of Reorganization
Negotiate terms
Approval of disclosure statement
Solicitation of acceptances and rejection of plan
Confirmation of plan