The title of today's Brandon's Blog is Stalking Horse Bidder.
Our Simple Yet Great Step-By-Step Guide For Selling Distressed Company Assets.
In today's Brandon's Blog, Brandon goes through a real life case
study, one of our current files as to why we believe using a stalking
horse sales process is the right way to go for this particular group of assets.
My name is Ira Smith, president of
Ira Smith Trustee & Receiver Inc.
Both Brandon Smith and myself are available to answer any questions you may have either about
this Brandon's Blog or anything else at all.
So shoot us a message, give us a phone call.
We would love to speak with you.
I hope you can watch until the end of this video because I know you will get value from it.
First, Brandon goes through
what is a stalking horse bidder?
And in very simple language, a stalking horse bidder is a potential
buyer who is willing to negotiate an agreement of purchase and sale
and then let their bid stand as the minimum floor price for everyone
to see in a court-approved sales process, and then for other potential purchasers
to determine whether or not they wish to bid more than the stalking horse offer.
The real-life example that Brandon goes through is a current file of ours.
Now because we don't have court approval yet for the stalking horse bid or
the sales process, he couldn't reveal any names or specific
details that you would only find out upon doing your due diligence,
but there's enough information to be able to explain the process.
We are currently the court-appointed
receiver of a green tech technology company.
When we took possession of the assets,
we saw there was a lot of deferred maintenance which negatively affected
the revenue generating capacity of this group of green technology assets.
So with being able to borrow certain funds
and the cash that was being generated from the operation of the business,
we were able to do a sufficient amount of maintenance
in order to increase the revenue generation of the group of assets.
We also had someone in the industry
contacting us saying they wanted to look further to consider purchasing the assets.
So we thought that a stalking horse
process would work the best for this group of assets.
So we simply asked them, if you get to see the information and if you wished to put
in an offer, will you be willing to let your offer stand as a stalking horse bid?
Because that's the basis we will let you
get a first look before anyone else at this information.
And they said yes.
So we had them sign a nondisclosure agreement.
They then did their due diligence
and they then submitted a letter of intent to purchase the assets.
We are right now having our lawyer and their lawyer agree on the terms
of an agreement of purchase and sale for their offer,
what other terms and conditions they want.
What other terms and conditions we need.
What their break fee will be if they are not the successful bidder.
And if we have to hold an auction between
them and one or more other bidders whose offers we like,
we have to set the up level.
What each succeeding bid has to go up by
in order for those purchasers to still be in the auction process.
So what are the benefits to us as receiver
and what are the benefits to the stalking horse bidder?
Well, the stalking horse bidder,
as I mentioned, gets first look with no real time constraints and no
competition at the information and to negotiate with us, the receiver,
to set the terms and conditions that we can both live with.
Once we get that and the stalking horse sales process approved by the court,
every other bidder is stuck with that specific agreement of purchase
and sale and its terms and conditions. To the bidder
there's an advantage that if they're not
the successful purchaser, they get a break fee and some expense
reimbursement to cover them for their time and cost in doing the due diligence
and being willing to expose their offer to the marketplace.
As far as the stalking horse benefits for us, the vendor,
we get a good look to understand what the floor price will be
and to negotiate that floor price and get it set so we know that there are
no offers that can come in below that floor price.
What we have to do next is then go
to court, get our sales process and that specific
stalking horse agreement of purchase and sale approved by the court.
We can then sign it with the stalking horse purchaser and then embark on a sales
process knowing that any other price we get for those assets will be more,
and that the court has already given any stakeholder who is a party to the litigation
that created the receivership, a chance to oppose or object to any
of those sale terms or the minimum price. Once it's approved by the court
we can only do better, not worse.
And we know that our terms and conditions
are fair and reasonable because the Court has told us that it is.
So I hope you can read the entire
Brandon's Blog below because I know you will find it informative.
Again, both Brandon Smith and myself are available to answer any questions you may
have either about this Brandon's blog or anything else at all.
All so shoot us a message, give us a phone call.
We would love to speak with you.