Distressed Assets

Management teams that are on the prowl for acquisitions may find themselves doing some treasure hunting. That’s because they likely will find a growing amount of opportunity in distressed assets, or the debt or equity of a company that has declared bankruptcy or is restructuring itself. That was one of the points that was made clear during a webcast hosted by Ernst & Young last week, titled, appropriately enough, “Buying Distressed Assets.”

After all, business bankruptcy filings more than doubled between 2006 and 2008, jumping from 19,695 to 43,546, reports the research group, American Bankruptcy Institute. Filings in the third quarter of 2009 (the latest data available), at 15,177, were nearly three times those of the third quarter of 2006.

Similarly, the number of mass layoffs – a rough proxy for corporate restructurings – jumped from 938 for the month of February 2006 to 1,761 in January 2010, according to the U.S. Bureau of Labor Statistics.

So, how can financial executives best take advantage of the opportunities? A couple of pointers from the panelists: (more…)