Rob Slee Draws Distinctions: Distressed Deals, Healthy Deals, Zombie Deals, and What’s Important to Value Creation —MidasNation

MidasFund Will Not Acquire Distressed Companies; However, it Will Buy Stable Divisions of Bankrupt Companies.  Here’s Why.  

“Last week’s announcement that MidasFund had started acquiring zombie companies caused a flurry of emails,” writes Rob Slee on the MidasMoments blog of the MidasNation site.  “Many of you asked about the differences between acquiring distressed, zombie and healthy companies. Let’s dig into this.”   Here’s an excerpt:

There’s an established industry ready to buy failing companies.  I personally detest the “dark side”.  You must check your humanity at the door to be successful.  But distressed deals are fairly easy to find.  Every bank has a bellyful of deals that have been deposited into their workout groups.  Many of these ultimately declare bankruptcy, which is another popular hangout place for distressed dealmakers.

Valuation for dark side deals is painstakingly discovered by the stakeholders.  Quite often the equity holders have some power in weakness, but the creditors will eventually force the action.  Investors are looking to acquire the assets for less than what is owed, which is generally less than book value.

 

MidasFund will not acquire distressed companies; however, we will buy stable divisions of bankrupt companies.