Jessica Scouten, Director of Forensic Services and Senior Manager of Healthcare Consulting, coauthored Part 2 of a series on distressed healthcare transactions in the American Health Law Association (AHLA) Business Law and Governance Practice Group Briefing. The article, “Why You Should Learn the Playbook: Know the Game Plan for Distressed Acquisitions and Divestitures, Part 2—Sampling of Market Terms and Timelines in Court-Approved Sales,” compares court-approved bankruptcy and receivership sales and gives examples of frequently used market terms in distressed healthcare transactions.
Scouten and her coauthors sampled 32 healthcare bankruptcy cases and 20 receivership cases to understand the application of the market terms between these public sale proceedings. The authors examine bankruptcy and receivership sales of assisted living facilities, home health agencies, hospitals, rehabilitation centers, skilled nursing homes, and urgent care facilities to survey and report on the application of the terms:
- Earnest money or good faith deposit
- Minimum initial overbid amount
- Break-up fee
- Bidding procedures order
- Sales order
For each term, they compare its application in bankruptcy versus receivership proceedings. The survey exposes the highly negotiated nature of sales and shows the more predictable performance of earnest money deposits and break-up fees.
Regarding timeline, the authors state,
“Timeframes for conducting court-approved sales are highly variable and often impacted by external factors; however, bankruptcy and receivership courts do quickly consider Sale Motions and enter orders where exigent circumstances require an expedited process.”
The AHLA Briefing article was published on Nov. 21 and is available to AHLA members. Part 3 of the series will discuss seller and purchaser considerations in negotiating sale terms for a court-approved auction process.
AHLA is the nation’s largest non-profit educational organization devoted to health law. PYA is proud to be a long-time supporter of the AHLA mission.
Learn more:
Read Part 1 of the AHLA series coauthored by Jessica Scouten.
PYA provides financial advisory, transaction due diligence, and litigation support services for financially distressed healthcare organizations. If your organization is experiencing liquidity issues, our executives can provide strategic direction and operational insights to help you navigate and understand the options.
