Insolvent or nearly insolvent companies can present an attractive opportunity to purchase assets on the cheap, or at least at a significantly reduced cost. Of course, a buyer purchasing assets from a troubled company wants to be as sure as possible that it is buying only the target’s assets – and not also taking on all of the troubled company’s liabilities. This kind of specialized M&A deal raises issues that usually don’t come up when acquiring a solvent company and that aren’t always obvious at first.
Several different strategies exist for balancing these risks with the potentially substantial rewards of a distressed asset acquisition. Here is an overview of these issues. A more extensive discussion focusing in particular on intellectual property assets, written by Cooley Godward intellectual property partner Gary Moore, can be found here.