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Ifacompanyhasconfidenceinitsprocessesforaddressingthe
challenges,therecanbeagreatopportunityinDistressedAssets
Contents
S No
S.No.
Particulars
1.
Introductionondistressed businesses
2
2.
Wh t aredistressedassets
What
di t
d
t
3.
Potentialopportunitiesofbuyingdistressedbusinesses
4.
Potentialchallengesofbuyingdistressedbusinesses
5.
Successfactors
6.
DueDiligence
7.
Rampingupfundsinternalcompetencies
8.
Factorsofthedistressedinvestingequation
9.
Questionstoaskbeforeacquiringdistressedassets
10.
WherearetheIndianopportunitiescomingfrom?
DistressedBusinesses Introduction
A company is under distress at the time of:
Fall in market demand
Funding & liquidity constraints
Financial reporting issues
Lack of formal controls
Bankruptcy
Restructuring
Liquidation
Over supply
Currency fluctuation
Inability to size and scale
DistressedAssets
greater management
capital
Potentialopportunitiesofbuyingdistressedbusinesses
Potentialchallengesofbuyingdistressedbusinesses
Lack of insight on distressed businesses and their domain can cause the
acquirer to overpay
SuccessFactors
Negotiated
q
Acquisition
Price
Speedwith
which assets
whichassets
canbe
integrated
Knowthe
endgame
DueDiligence amust
Financial
Operational
Liquidity
Suppliersrelations
Cashburn
Customer
WorkingCapital
management
Debt covenants
Debtcovenants
Goingconcernissues
Creditagreements
relationship
Executionability
Depth of
Depthof
management
Legal
Shareholders
agreements
Employee
agreements
Associates
agreements
Expertisecheck
Articleofassociation
Reviewing
Reviewing
Memorandumof
association
monitoringcontrols
Marketpotential
Rampingupinternalcompetencies
1. Develop supporting processes and governance
2. Senior management team that understands the goal and objective of
the acquisition
3. Ability to pinpoint appropriate targets
4. Understand the components of value and move forward with a due
diligence process and perfect intelligence
5. Valuation should be based more on expected deployment and not
historical data
6. Thorough knowledge of tax implications, various acquisition and
integration strategies and legal structures that enhances distressed
investing is must
Factorsofthedistressedinvestingequation
Pricevs.Value
Fewexperiencedbidders
Abilitytoleverage,mergeand
attractcapital
Fastactionaidingtocompetitive
advantage
Weightedopportunityvs.Risk
Domainexpertiseinhouse
Deepcommercial&operationalDueDiligence
Knowthestepsfromhereandnowtothenandthere
p
Abilitytoretainkeytalent&attractrequisitetalent
Questionstoaskbeforeacquiringdistressedbusinesses
Howdidthecompanybecomedistressed?
Whatarethereasonsforandagainstthedistressedassetacquisition?
Isthetargetoverleveraged?
Shouldwebuytheentirecompanyorjustitsassets?
Whatshouldourstrategybetoacquire?
Howconfidentareweaboutcompanysduediligenceprocess?
Contd.
Incaseofacross
In
case of a crossborder
borderacquisition,areweawareofallofthehost
acquisition are we aware of all of the host
countrysgovernmentalregulations?
Howshouldthetransactionbestructuredtomaximizetaxefficiency?
Dowehavetheabilitytoredeploytheseassetstogenerateabove
averagereturns?
10
Whatisourcompanysrisktolerance?
11
Doesmycompanyfullyunderstandthecomplicatedtaximplications
ofadistressedassetacquisition?
Contd.
12
Howdoweexpecttoutilizethenewlyacquiredassetcomparedto
howitwasusedpreviously?
13
Haveweconsideredassumptionofliabilities,supplycontractsor
p
, pp y
leasesinourbid?
14
Wouldtheacquisitionconstituteanexpansionofacorecompetence
or a foray into an entirely new business line?
oraforayintoanentirelynewbusinessline?
15
Whatwouldourexitstrategybeiftheacquisitiondoesnotgenerate
thenecessaryReturnonInvestment?
WherearetheIndianopportunitiescomingfrom?
A. Over supply business
Broadcast
Films
T til
Textile
C.
Retail
Hospitality
Hospital & Health
care
Midsized Pharma in APIs
Auto and Autocomponents
Changingbusinessenvironment
IT
Travel
Print Media
Hospitals
Pharma
Midsized IT and BPO
F.
Highlycapitalintensive
g y p
companies
Auto components
Manufacturing units
ContactUs
EndofDocument
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