A botched acquisition involves selling assets of a recently acquired company to cover costs. Investors may focus on non-core assets to recoup expenses and restructure the company, or sell all assets to distribute profits. This can happen in friendly or hostile takeovers.
A botched acquisition is a situation in which some or all of the assets associated with a recently acquired company are sold in order to cover costs incurred during the acquisition process. In some cases, the failed acquisition will focus on certain key assets of the company in order to pay off debt while maintaining the company’s operations and functionality. In other situations, the goal might be to dismantle the business entirely, eliminate all associated expenses, and split the profits among the investors who initiated the acquisition.
When a leveraged buyout is the means to orchestrate a friendly takeover of a company, investors usually do so with the goal of restructuring the company and continuing operations. If this is the goal, the investor group will often focus their attention on target companies that have a number of businesses that are not central to the company’s core business model. As part of the restructuring, such peripheral assets can be brought to market and sold as a means of quickly recouping the expenses incurred during the acquisition. Thus, the newly restructured company begins a new life with little or no debt to carry, a viable if slightly smaller financial portfolio, and a renewed focus on core business.
In takeovers where the goal is to acquire the company and dismantle it completely, a target company is selected that has many assets that can be consolidated in batches or individually. Often, in this version of a failed takeover, the emphasis is on a quick sale of the assets so that expenses are repaid and the remaining profit can be distributed among investors in the hostile takeover strategy. Sometimes there is no real effort to find buyers who want to continue running the business in any capacity. Instead, the goal is to sell the assets to the highest bidder.
The general concept of a failed takeover can be applied to both friendly takeovers and hostile takeover attempts. It is not uncommon for at least a portion of a company’s assets to be sold by new owners as a means to recoup expenses. However, a failed acquisition usually involves forward planning and intentions to sell specific assets after the acquisition, rather than evaluating the feasibility of selling assets after actually taking control of the company.
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