Brandlin & Associates
Brandlin & Associates NewsMay 2011 

Everyone likes a bargain.  With the economy continuing to seesaw, bargains can be found in Bankruptcy Court.  However, let the buyer beware when pursuing a "Stalking Horse" bid under Section 363 of the Bankruptcy Code.  The sheer speed of Section 363 sales, combined with the near guarantee that the Stalking Horse will earn a break-up fee if outbid, can cause a bidder to toss common sense out the window.  To the contrary, Stalking Horse bidders need to employ the same discipline in their assessment of the true value of a distressed company as they would in a non-distressed situation.  

Bargain Shopping


A trifecta of years of declining revenues,increasing costs and the recessionary economy recently landed a regional restaurant chain in Bankruptcy Court.  Having filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code, the company opted for a 363 sale.  Our client, a junior lender, was interested in the business's assets and pursued the tactic of becoming the Stalking Horse bidder to buy the assets quickly and unencumbered by any debts.   


Given the many risks associated with Stalking Horse bids, our client retained advisers to conduct due diligence.  With respect to the financials, we quickly completed a quality of earnings analysis to assist our client in determining a competitive bid for the assets. With this knowledge, our client made a successful Stalking Horse bid and an Asset Purchase Agreement ("APA") was filed with the bankruptcy court.


Our client was confident that the advantages of being the Stalking Horse, including a favorable breakup fee, outweighed the fact that its bid would be widely-published and that the debtor would actively seek higher bidders.  Our client was in a powerful negotiating position because we completed our due diligence quickly, while the debtor was challenged by debtor-in-possession ("DIP") borrowing restrictions.


In the end, our client prevailed.  After extensive competitive bidding, it successfully won the auction of the assets at its targeted purchase price of approximately 1.5 times earnings.   


About Brandlin & Associates
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Brandlin & Associates is an exclusive provider of accounting due diligence, financial consulting and strategic consulting services. We pride ourselves on offering superior technical expertise, years of practical experience and unparalleled service to decipher financial and operational performance metrics. As a result, our clients are able to make informed decisions in a timely manner.
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Bargain Shopping
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June 8, 2011

President's Panel

Sheraton Universal

Los Angeles 

We are pleased to be a Platinum Sponsor of the Commercial Finance Conference of California, the trade group for commercial finance companies, factors, banks and other financing agencies engaged in the asset-based financial services industry
of California.

ACG Arizona 

April 13-14, 2011 

 Southwest M&A Conference 

Scottsdale, AZ 

For the 3rd year, we were the tote bag sponsor for ACG Arizona's Southwest M&A Conference, featuring a Capital Connection, 2 keynote speakers and Deal of the Year Award.


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