Buying the assets of a competitor out of a section 363 bankruptcy sale? This site has explained here and here how section 363(f) of the Bankruptcy Code empowers a court to order that assets sold under section 363(b) of the Code are, in the hands of the purchaser, “free and clear” of any “interests” in the property that may have existed while it was in the hands of the debtor (or to have inured at any time prior to the sale). The protection is very broad and therefore helps generate greater sale proceeds for the claimants of the bankruptcy estate. However, as pointed out here (re restrictive covenants), here (re successor tort liabilities ), and here (re unemployment insurance ratings), these protections are not absolute. Another such chink in the armor of 363 protections is antitrust exposure, which can generate additional liabilities for the purchaser that are not evaded by the “free and clear” provision of section 363(f) or the finality provision of section 363(m).
Antitrust is a legal experience less familiar to businesspeople and attorneys than even bankruptcy. In “Evaluating Antitrust Exposure When Purchasing A Competitor’s Assets In Bankruptcy: ‘Caveat Emptor’” (published on mondaq.com), Todd R. Seelman and John Cardinal Parks provide a nutshell on different types of antitrust scrutiny, while also discussing important recent cases that exemplify potential outcomes. Important takeaways: (1) bankruptcy asset sales are subject to the antitrust laws; (2) protections under section 363(f) and (m) do not insulate purchasers at bankruptcy sales from antitrust laws; (3) closing your eyes won’t do – it may be wise to notify the regulatory bodies when in doubt, and also to prepare evidence for court that might obviate further scrutiny.
The editors and editorial board of DailyDAC include preeminent restructuring and insolvency professionals, journalists, and editors. They are devoted to providing reliable and plain English education and deal intelligence about assignments, corporate bankruptcy, receiverships, out-of-court workouts and similar topics.
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