Chapter I., B. Asset Acquisitions

• Jurisdiction: United States

B. Asset Acquisitions

1. Option Four: Purchase the Assets Prior to a Proceeding

(a) Pros:

• Same as stock-acquisition pros, above.

(b) Cons:

• If the target has secured debt, the only way to obtain the assets is to get consensual lien releases from all lienholders — both senior and junior (if the purchase price is insufficient to pay the secured debt in full);
• If the assets are used in the manufacturing or distribution of a product, there is the possibility of successor liability for product-liability claims; and
• If the target files a proceeding within two to six years (depending on the state), the purchase may be attacked as a fraudulent conveyance if the purchase price is deemed to be too low for the assets.

2. Option Five: Acquire the Target's Secured Debt as an Asset-Acquisition Vehicle in a Proceeding

If the target has sizeable secured debt, and the target's assets are desired, then acquisition of the secured debt can be a vehicle (although not a sure fire winner—see Cons, below) to ultimately acquire the assets serving as collateral for the debt through either the POR process or obtaining stay relief to foreclose on the lien on the collateral.

(a) Pros:

• Gives the potential acquiror substantial leverage in dealing with the target;
• If the debt is publicly held, it can usually be acquired at a steep discount depending on the severity of the financial distress of the

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