The document discusses strategies for acquiring and divesting distressed assets, highlighting characteristics of distressed businesses and investor considerations. It outlines various strategic alternatives for investment or acquisition, including asset purchase agreements and Chapter 11 sales. The panel moderated by Mark Greenberg features insights from financial experts on navigating the complexities of distressed asset transactions.

1. December
Lunch

2. Today’s Topic
Discovering Distressed Assets: How to Acquire & Divest
Our Moderator:
Mark Greenberg
Silverstone
Advisors/Blackbird Capital
Group

3. Today’s Panelists
Steve Fields – First Financial
Justin Flood – The Anderson Group
Doug Lutz - Frost Brown Todd

4. Financial Distress
Investopedia’s Definition
A condition where a company cannot meet its
financial obligations to its creditors. The chance
increases when a firm has:
• High fixed costs
• Illiquid assets
• Revenues sensitive to economic downturns
• High business concentration (customer, vendor, sector)

5. Some Characteristics of
Distressed Businesses
 Stagnant or declining revenues
 Shrinking or negative margins
 Lack of Liquidity and Inability to
Forecast Cash Requirements
 Increased Accounts Payable
 Turnover of CFO, Controller
 Asset divestitures to increase cash
 Decreased communication with
creditors
 Increased secured lender oversight
(through special assets or workout
group)
 Failure to pay trust fund taxes

6. Investor Considerations
• How badly in debt is the business? (Secured lender
underwater? Subordinate secured debt? Tax liens?
Amount of unsecured debt? Who are the largest
unsecured creditors & how much owed?)
• What needs to be cleaned up, negotiated, etc.? (Secured
lender only? Other subordinate secured debt?
Landlords? Taxes? Critical trade?)
• How much runway is left (is time of the essence to
preserve value)?

7. Investor Considerations
• How much new investment is necessary?
• A balance sheet fix, a flawed business model
problem, a management problem or all of the
aforementioned?
• Rescuable as a going concern or better liquidated?

8. Investor Considerations

9. Investor Considerations

10. Strategic Alternatives for Investment or Acquisition
Distressed
Middle Market Company
Strategic Alternatives
Strategic Alternatives
“Congenial”
Acquisition by Means of Asset
Purchase Agreement
Acquisition by way of
UCC Article 9 Transaction
Purchase of Business by way of
Chapter 11;
Sec. 363 Sale of Chapter 11
Invest Additional
Capital
Article 9 Sale
or Chapter 11
Restructure/Continue
Going Concern
Pursue a Going
Concern Sale
Refinance with
Current/New
Lenders
Liquidate
Distressed
Company Acquirer

11. Deal Structure Considerations

12. Deal Structure Considerations

13. Deal Structure Considerations

14. Deal Structure Considerations

15. Acquiring Distressed Assets
Outside of Bankruptcy

16. “Friendly Foreclosure”

17. Acquiring Assets from a
Bankruptcy Estate: Options

18. Acquiring Assets from a
Bankruptcy Estate: Benefits

19. Acquiring Assets from a
Bankruptcy Estate: Risks

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21. Our sustaining sponsors

22. Our sustaining sponsors