Jennifer F. Fitchen is a partner at Sidley Austin LLP. This post is based on her Sidley memorandum.
During the course of the most recent bull market, merger and acquisition (M&A) activity generally remained robust. We increasingly saw competitive auctions for desirable companies, some of which also had the ability to pursue an initial public offering instead of a sale. In the years since the 2008 financial crisis, many acquisitive companies have become accustomed to pursuing target companies with solid balance sheets and bright prospects.
With the COVID-19 crisis, we suddenly find ourselves, once again, in an extremely challenging economic environment, one that many companies are unprepared to face. Many will not survive the economic fallout from the pandemic. Many others will persevere, some perhaps even thrive. They will have the opportunity to strengthen and expand their own footprints by salvaging promising companies that now find themselves in distress. Those deals will look dramatically different from the deals to which most strategic acquirers have become accustomed. For a buyer, adjusting to the rules of the road in the world of distressed M&A may be the most challenging part of a transaction with an insolvent company.