In early December, 2004, German newspapers reported the acquisition of bankrupt
automotive supplier Peguform GmbH, based in Bötzingen, by U.S. private equity
investor Cerberus Capital Management1. The transaction was announced 30 months
after Peguform, a company with more than 5,000 employees that recorded EUR 1.4
billion in revenues in 20032, had filed for bankruptcy. As it involved a large firm with
substantial importance for Germany’s core automotive industry, this transaction
shone a spotlight on a sector of the private equity business that has not yet been
widely recognized in Germany: investments in bankrupt firms. While traditional
private equity buyouts of financially stable firms have become more and more
commonplace in Germany in recent years3, little attention has been devoted to the
niche of transactions at the corporate cycle’s very end. In the United States, in
contrast, private equity funds investing in bankrupt firms constitute a well-established
part of the financial markets.
In this thesis, I aim at providing an overview of the most important aspects
concerning private equity acquisitions of bankrupt firms, both in the United States
and Germany. This comprises an analysis of the institutional framework for such
acquisitions, an investigation of the transaction process and the management of
acquired businesses, a closer look at the actual market for these transactions and its
development in recent years, and two case studies for practical insight and validation
of the findings.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- The framework for private equity acquisitions of bankrupt firms
- Acquisition options in the U.S. bankruptcy system
- Introduction to U.S. bankruptcy legislation
- Acquisition pursuant to a plan of reorganization
- Acquisition pursuant to section 363 BC
- Acquisition through purchase of claims
- Discussion of the acquisition options in the U.S. bankruptcy system
- General tendencies in U.S. bankruptcy procedures
- Speed
- Acquisition free and clear of liabilities
- Competitiveness of transaction process / Price of acquired assets
- Management approval
- Acquisition options in the German bankruptcy system
- Introduction to German bankruptcy legislation
- Acquisition pursuant to a transferring reorganization (Übertragende Sanierung)
- Acquisition pursuant to an insolvency plan
- Discussion of the acquisition options in the German bankruptcy system
- Speed
- Acquisition free and clear of liabilities
- Asset appreciation
- Other relevant factors
- Influence of creditors
- Debtor-/creditor-oriented bankruptcy systems
- Situation in the U.S.
- Situation in Germany
- Influence of labor laws
- Influence of a firm's stakeholders' attitude towards its bankruptcy
- The process and management of private equity acquisitions of bankrupt firms
- Particularities of the acquisition process in a bankruptcy environment
- Creation of a competitive bidding environment
- Time constraints
- Due Diligence
- Valuation
- Companies and situations of interest for distressed private equity investors
- Distressed private equity investors as providers of “smart money”
- Personal involvement
- Operational expertise
- Turnaround strategies of distressed private equity investors
- Overview of generic turnaround strategies
- Restructuring of leadership and organization / culture
- Cost reduction
- Repositioning strategies
- Capital structure management
- Competition between distressed private equity investors and strategic investors
- Theoretical background
- Influence of distressed private equity investors' activity on bankruptcy costs
- Anecdotal and empirical evidence on the efficiency of markets for bankrupt assets
- The market for private equity acquisitions of bankrupt firms
- Demand for distressed private equity
- Bankruptcies in the U.S.
- Bankruptcies in Germany
- Supply of distressed private equity
- Development of distressed private equity funds in recent years
- Characteristics of distressed private equity investments
- Number and size of investments
- Returns for investors
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This work aims to analyze the process and framework surrounding private equity acquisitions of bankrupt firms in the United States and Germany. It compares and contrasts the legal and practical aspects of these acquisitions in both countries. * Comparison of bankruptcy systems in the U.S. and Germany. * Acquisition strategies employed by private equity firms in distressed situations. * The role of distressed private equity investors as providers of "smart money." * Analysis of the market dynamics influencing these acquisitions. * Impact of legal and economic factors on acquisition success.Zusammenfassung der Kapitel (Chapter Summaries)
The introduction sets the stage for the comparative analysis of private equity acquisitions of bankrupt firms in the US and Germany. Chapter 2 details the legal frameworks governing such acquisitions in both countries, outlining available options and their respective strengths and weaknesses. It focuses on the speed of processes, liability considerations, and the resulting price of acquired assets. Chapter 3 delves into the management process, highlighting the creation of competitive bidding, time constraints, due diligence, valuation, and the strategies employed by distressed private equity investors. Chapter 4 examines the market dynamics, analyzing the demand and supply of distressed private equity in both the US and Germany. It also includes data on bankruptcies and the characteristics of distressed private equity investments.Schlüsselwörter (Keywords)
Private equity, distressed debt, bankruptcy, acquisitions, restructuring, turnaround, Germany, United States, legal framework, market dynamics, due diligence, valuation, competitive bidding, insolvency.- Quote paper
- Elmar Gans (Author), 2005, Private Equity Acquisitions of Bankrupt Firms in the United States and Germany, Munich, GRIN Verlag, https://www.grin.com/document/122842
