Ryan K. Cochran, Member of the Firm in the Health Care & Life Sciences practice, in the firm’s Nashville office, co-authored an article in AHLA’s Business Law and Governance Practice Group, titled “Why You Should Learn the Playbook: Know the Game Plan for Distressed Acquisitions and Divestitures—Sale Terms and Market Considerations.” (Read the full version – subscription required.)
This Briefing is part three of a three-part series on distressed health care sales. Part one provided a market snapshot and an overview of distressed sales. Part two reported on a sampling of market terms and timelines in court-approved asset sales. Part three discusses seller and purchaser considerations in negotiating the following sale terms for a court-approved stalking horse auction process: earnest money deposit, break-up fee, the minimum initial overbid amount, bid increments, the scheduling of a closing date, and certain closing conditions. It will also discuss how the court approval process may impact the seller and purchaser’s perception of the reasonableness of these sale terms.
Following is an excerpt (see below to download the full article in PDF format):
Negotiating these terms requires a balance of competing interests. The seller seeks terms that ensure the sale of the purchased assets will be to a contractually and financially committed bidder at a price that the seller believes is fair, while preserving the ability of the seller to potentially obtain higher and better offers at an auction for the benefit of the seller and its creditors. Purchasers often seek terms that give them greater exclusivity or protections (a higher break-up fee and a higher initial overbid amount) and reduce their risk (lower deposits, increased closing conditions, and a most favorable closing date). In court-approved sale processes the court is the final arbitrator of the reasonableness of the balance struck by the seller and purchaser, and other parties in interest in the case are given the opportunity to weigh-in.
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