Bankruptcy Business Acquisitions

<p>When I am asked at cocktail parties about the type of law that I practice, I usually answer "bankruptcy." Inevitably,

the next question is about the type of person that I represent in bankruptcy; over time, I have shortened that response

to "creditors and predators." By "predators" I mean those people and businesses that specialize in acquiring distressed

businesses, or their assets, and reorganizing them. They have no initial involvement in the bankruptcy process, but

intervene out of the purest of capitalistic motives: the opportunity to make a profit.

</p><p>These entities tend to be treated as red-haired stepchildren in the bankruptcy process. To the debtor, they may be

Jack Kervorkian, here to put an end to all that the owner of the debtor has worked for in his business. To the

unsecured trade creditors, they may be Kirk Kerkorian, ready to upset long-standing relationships in order to make a

fast buck. And to the secured creditors, they are often seen as kind of a "High Plains Drifter"—someone who, for a

price, will save the town, but who acts unpredictably and at his own whim.

</p><p>Judges are often wary of these entities that appear, at times, with dubious claims to standing. Once, my client

acquired its "standing" by purchasing the claim of the local lawn mowing service for $41.39. The first question out

of the judge's mouth in that case was, of course, "Mr. Prochaska, have you traveled 600 miles to protect your

client's $41 claim?"

</p><p>These entities are, however, essential to the process. They are the purchasers at §363 sales. They are the

post-petition management and funding sources. And, for better or for worse, they establish the true market value of

the debtor's business or assets. The difficulty that these entities often have in appearing in bankruptcy cases is, in

part, the genesis of <i>Bankruptcy Business Acquisitions.</i> This book is a "how-to" manual for those who would like to

become "predators" themselves.

</p><p>The book is encyclopedic in its coverage of the topic, and is composed of 31 separate chapters, some of which

have their own particular authors and contributors. This aggregation of co-authors and contributors is both a strength

and a weakness of the book. Almost all of the chapters are extensively annotated and footnoted, much like a law

review article; these are the best parts of the book, and the most helpful to an everyday practitioner. Other chapters

are less in depth, and are more tailored to a non-legal reader. To a reader with some experience in the process, these

are less helpful. For example, the termination or limitation of exclusivity (often the defining moment for a "hostile"

outsider in a bankruptcy case) is given little attention, beyond a recitation of the language within the Code.

Fortunately, however, these quibbles are minor, and will, I hope, be rectified with updates.

</p><p>Acquisitions within bankruptcy often raise special issues within the context of more familiar areas, such as

regulatory, labor, securities and taxes. Each of these has its own chapter in the book, and the special issues that

result in change of ownership or control are well-addressed.

</p><p>There is a good appendix of forms that are more prevalent in acquisitions in bankruptcy, such as a letter of intent

to acquire a control over a debtor by negotiating and funding a plan of reorganization, and an agreement on a

break-up fee in connection with a sale under §363.

</p><p>The book was written for "business people, creditors, attorneys and bankers." That is a rather wide audience, each

of whom has different needs and backgrounds. This is a difficult task and, given the very nature of the subject,

perhaps too ambitious. Perhaps the more general chapters were addressed to a "lay audience." However, attempting a

bankruptcy business acquisition is like playing bridge—either you are in the game or you are kibbutzing, and

kibbutzing is not provided for in the Code.

</p><hr>