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Knowledge Center

Hot Opportunities in a Cooling Economy: Buying Struggling Facilities at Distress Sales

May/June 2008: By Bobby Guy: ADVANCE for Long-Term Care Management,  (Vol. 11, No.3)

Successful acquisitions come in many shapes and sizes. For the senior living company looking to expand its portfolio, distress sales can provide a unique opportunity to purchase the diamond-in-the-rough at a very favorable price.  What are the typical ways to acquire a distressed facility? Let’s take the example of a skilled nursing facility (the SNF) that is in default on $10 million of secured bank debt.  A potential purchaser has several ways to try to acquire the facility for less than the full outstanding debt.  The Consensual Sale (aka the “Short Sale”). In this method, the seller and the bank agree to the purchase price with the buyer. The purchase process is almost exactly like the typical asset sale of a facility that is performing well. The differences lie in the fact that that the bank must consent to the lower price and in the risks that can arise in distress sales. Read More

 

Why Up-Market, Down-Market Acquisitions are different

September 15, 2010: (TMA International Headquarters)

Buyers like distress sales because “distress” translates into “value pricing.” Similar to used cars, which sell at significant discounts in part because of the risk of buying a lemon, distressed companies sell at significant discounts in part because of the risk that the buyer inherits unknown liabilities. The key to completing a successful distressed acquisition is handicapping and then limiting the risk of those unanticipated liabilities. Read more