The stalking-horse auction method allows a struggling company not to obtain small bids when selling its definitive assets. Once the stalking-horse bidder has made its offer, other potential buyers can make competing bids for the company`s assets. Corporate bankruptcy filings are more frequent than we think and can be beneficial for troubled businesses. By making an initial bid as a stalking-horse bidder, it gives the bidder the opportunity to negotiate an interim sale contract with the troubled debtor. Since stalking horse is the opening offer of assets or business, the insolvent company generally grants several incentives to stalking-pferd. Incentives include fee refunds, break fees and term exclusivity. In general, a harassment horse sale can be good news for all participants. If you enter the public sale with an acceptable starting offer, you will at least be sure that the asset will receive more than low-level offers. But there`s room for unfair treatment. Any sales contract that discourages other bidders will likely result in a lower selling price. There are some things you need to pay attention to: the creditors` committee will probably consider the demerger fees versus the proposed price. Since the demerger taxes would normally reduce the amount of proceeds from the sale that the estate would receive, the creditors` committee will want any minimum tax necessary to induce the stalking-horse bidder to bid.
The limitation of the clearance tax limits the amount required for an initial overrun of the supply of stalking horses. There are some drawbacks when the first bidder is. Even if the stalking horse supplier wants to reach the assets at the lowest price, the price must be within the base. In addition, the offer negotiated between the indebted company and the bidder is not always guaranteed if it is not approved by the bankruptcy court or the creditors` committee. Of course, from the point of view of almost all other constituencies, i.e. the creditors` committee, the debtor and the lender (if any), it is likely that everyone will want a unique form of asset acquisition in order to promote other offers and allow a fair comparison of the bids (see below). These constituencies want any deviation from the buyer`s contract to be established prior to the hearing for the approval of the tendering procedures and, if possible, that such differences be quantified. Stalking-pferd-bidders can generally negotiate what specific assets and liabilities they hope to acquire. The costs incurred by the harasser offerer for financial advisors, legal fees and other expenses related to the agreement are generally reimbursed when the business is outbid. It depends, of course, on whether the fees exceed the debtor`s rebate. Costs must be taken into account as administrative costs to qualify. Potential buyers may, for many reasons, be reluctant to play the role of harassing horse, but instead wait for another bidder to negotiate the deal and then participate in the auction.
As a general rule, the original bidder must devote more resources than other bidders to negotiating the agreement, performing due diligence and defining the “lower limit” for the terms of the transaction. In order to compensate the harassment horse for its time and efforts, certain incentives are generally negotiated, subject to bankruptcy court approval. Without these incentives, the potential buyer would not be able to agree to be the harasser horse. These incentives may include refunds, separation fees, favourable tendering procedures and exclusivity agreements. The incentives demanded by the harasser`s horse may be at odds with the debtor`s obligation to obtain the highest and best value, and the requirements of the Bankruptcy Act. Negotiations between the debtor horse and the horse