Alex Mazer of Big Shoulders Capital demonstrates how investors can acquire the full enterprise value of a going concern at the cost of the assets.
The Article 9 strategic short sale of business assets extracts business value from previously distressed situations, as all subordinate liens and liabilities are removed in the asset sale transaction.
Because the asset purchaser is inheriting both the tangible and intangible assets of the previous business free and clear of all legacy liability, the transaction offers the investor the opportunity to acquire full operational value at asset cost, while enjoying essentially full securitization in the asset base.
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As an investor we love to buy assets out Of an article 9 sale process because we Understand that the process allows for Us as buyer to buy assets free and clear Of all liens and encumbrances and to Effectively acquire an enterprise for What more or less resembles an asset Valuation but they need to keep in mind About an article 9 sale process is that Oftentimes the assets are sold in bulk In one lot to one buyer who intends to Continue operating as the new owner of Those assets it does not contemplate That assets are sold individual Piecemeal at a public auction context as The buyer all that I really need to do Is assure that I’m satisfying that Senior lender who’s initiating the sale If I can satisfy his claim or at least Offer a price that that senior lender is Willing to accept I’m able to Effectively buy those assets free and Clear of all obligations and continue Operating that business the result of The article 9 sale is that a buyer has Acquired the tangible and intangible Personal and occasional real property of The business and they can continue Operating that business similar to how The business was operating before but Free and clear of all the legacy Liabilities as an investor buying Businesses in distress there’s so many Reasons that a company might find itself
In this position it may not be inherent To the business it could be some Idiosyncratic bizarre event that popped Up in the life of that business but by Being able to buy those assets and buy The business out of the article 9 sale It allows us to buy that those assets Inherit that enterprise Free and clear of that one event but to Still sustain and maintain an ongoing Business second wind from our experience Has been critical through the article 9 Sale process compiling all the relevant Information and allowing the process to Happen as efficiently and effectively as It can You [Music]
