What Is A Stalking Horse Agreement

What Is A Stalking Horse Agreement

In 2019, Houlihan`s Restaurant, Inc. announced a Chapter 11 bankruptcy, which was the subject of an offer of stalking horses by Landry`s, Inc. The sale of bankruptcy allows you to sell part of a business or an entire business. Innovative practices have made these sales more valuable for corporate restructuring, as bankruptcy courts have become much more sensitive to traditional acquisition techniques in recent years. These techniques, including auctions, customary acquisition agreements, the use of financial advisors and the payment of spin-off royalties, have made investments more efficient through the bankruptcy process. In addition, bankruptcy courts can, under the right circumstances, assure buyers that assets can be acquired freely and without any burden and that liability for succession can be minimized, which values assets transferred by the debtor. These sales create important strategic and financial opportunities for investors. Potential buyers may, for many reasons, be reluctant to play the role of harassing horse, but instead wait for another bidder to negotiate the deal and then participate in the auction. As a general rule, the original bidder must devote more resources than other bidders to negotiating the agreement, performing due diligence and defining the «lower limit» for the terms of the transaction. In order to compensate the harassment horse for its time and efforts, certain incentives are generally negotiated, subject to bankruptcy court approval. Without these incentives, the potential buyer would not be able to agree to be the harasser horse.

These incentives may include refunds, separation fees, favourable tendering procedures and exclusivity agreements. The incentives demanded by the harasser`s horse may be at odds with the debtor`s obligation to obtain the highest and best value, and the requirements of the Bankruptcy Act. Negotiations between the debtor horse and the harassing horse must find an acceptable balance, or the bankruptcy court cannot approve the proposed terms of the stalking horse. Since these agreements are intended to maximize a debtor`s wealth, many jurisdictions allow the use of stalking-horse agreements.

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