Coronavirus: Private equity investing in a distressed environment

Author: Michael Nicklin, Gibson Dunn | Published: 23 Apr 2020

Gibson Dunn partners shed light on the various paths for turning acquisition opportunities into closed deals

The Covid-19 pandemic has resulted in severe economic dislocation in Asia and worldwide. In this article, Gibson Dunn lawyers examine various strategies that investors may employ to assist companies in distress, and at the same time deploy capital smartly to make opportunistic investments in this time of crisis.

For private equity funds, the current Covid-19 pandemic - while providing unprecedented challenges for many portfolio companies - will also present some unique investment opportunities to invest in distressed businesses.

In a distressed context, there are four principal strategies to achieve ownership:

a negotiated distressed sale conducted outside of a formal insolvency process; a negotiated sale through a pre-packaged insolvency procedure, such as a scheme of arrangement; a purchase out of a judicial insolvency process, such as a scheme of arrangement, administration or liquidation; and a loan-to-own strategic...