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Company acquisition in the crisis before and from insolvency

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Company acquisition in the crisis before and from insolvency

Hans­jörg Zelger — Part­ner MAZARS Hemmel­rath GmbH, Munich

Volk­mar Berner — Mana­ging Direc­tor MAZARS Hemmel­rath GmbH, Munich

The economic situation is currently determined by the economic and financial crisis, which has also been clearly reflected in the assessments of managers as well as in the population. Economists now expect economic output in the Federal Republic of Germany to fall by 4 to 6 percent in 2009, and the IFO business climate index reached a historic low of 82.1 in February 2009. The market for corporate transactions experienced significant slowdowns in 2008 and 2009; in the first half of 2009, transactions involving German private equity companies slumped by more than 80 percent. In many cases, transactions are taking place in an environment in which acquisition financing is very difficult to obtain - if at all - and the companies up for sale are experiencing a significant decline in sales and earnings.

At the same time, the current crisis provides opportunities for targeted acquisitions, especially for strategic investors. Why choose to buy a company that is in crisis (also called distressed M&A)? In addition to general reasons such as increasing the value of the company, realizing synergies (economies of scale), market growth, technology, a favorable purchase price is a frequently cited argument. However, a distressed M&A transaction also involves specific risks that need to be addressed in a particular way in order to ultimately realize a successful transaction.

Furthermore, the reasons for and the course of a corporate crisis are presented, the schematic course of an insolvency is briefly outlined and the special features of a corporate acquisition before and from insolvency are explained. The measures for restructuring (short and long-term) and the various options for injecting (equity and/or debt) capital are not explained here. This also applies to the general description and explanation of transaction processes and structures.

Companies in crisis - reasons and course

In general, six stages are distinguished in the course of a corporate crisis.

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Company acquisition in the crisis before and from insolvency

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