Seven Success Factors for Winning Section 363 Acquisitions

In the high-stakes world of bankruptcy asset acquisitions, Bankruptcy Code Section 363 provides a powerful mechanism for purchasing assets “free and clear” of most claims, liens, and encumbrances. Success in these transactions demands more than deep pockets — it requires a sophisticated understanding of the process, strategic positioning, and flawless execution. 

To help potential buyers navigate these complex transactions, we identified seven factors that often separate successful purchasers from the pack in Section 363 acquisitions.

1. Establish First-Mover Advantage to Define Deal Terms

First movers can shape the entire transaction structure by establishing the initial framework for what assets are included and what liabilities are excluded. This “stalking horse” position allows buyers to set baseline terms that subsequent bidders must overcome. Critical steps include defining purchased assets with precision, carving out excluded liabilities strategically, and securing customary bid protections that recognize and compensate for the time and resources invested in setting up the initial deal.

2. Build Strategic Alliances Across Stakeholders

Success in Section 363 purchases often hinges on momentum built through careful stakeholder management. Winning bidders cultivate alliances with key constituencies — including lenders, contract counterparties, and creditors’ committees — while securing regulatory approvals and maintaining crucial relationships with employees, vendors, and customers. They also demonstrate their ability to provide essential financing or services during the pre-closing period, establishing themselves as the most credible potential owner of the assets.

3. Structure Price to Satisfy the Fulcrum Security

Successful buyers understand the fulcrum security — the class of claims that sits at the breaking point between being in and out of the money. By structuring bids that satisfy the fulcrum security while maintaining strategic flexibility, buyers can present compelling value propositions that address both economic and practical considerations.

4. Master the Rules to Ensure Flawless Execution

The rules governing Section 363 sales are complex and unforgiving. Winners in this space demonstrate mastery of these rules while maintaining the agility to adapt to changing circumstances. They invest in understanding local bankruptcy court practices, anticipate potential objections, and move decisively when opportunities arise. Success requires both technical expertise and tactical flexibility.

5. Focus Diligence on Critical Risk Factors

Perfect information is impossible in distressed situations. Successful buyers excel at defining acceptable levels of information imperfection, identifying material priorities, and eliminating diligence contingencies that could impede deal execution. They focus on what matters most while maintaining speed and momentum in the process and quickly removing diligence contingencies.

6. Move Faster Than the Competition

Delay does not play in Section 363 sales — speed is often a differentiating factor. Successful purchasers define their first and last bids at the outset, eliminate third-party hurdles such as consent requirements and regulatory approvals early, and maintain the pace needed to outrun competing bidders. They understand that time is not their friend and act accordingly.

7. Secure Financing Before Making Your Move

Nothing derails a Section 363 purchase faster than financing uncertainty. Winners in this space secure all necessary funding at the outset and eliminate financing contingencies that could threaten deal completion. 

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Success in Section 363 purchases requires mastery of these seven critical elements. By focusing on strategic positioning, flawless execution, and elimination of potential deal-killers, buyers can maximize their chances of emerging victorious in these complex transactions. Success demands not only understanding these factors but also executing them with precision and purpose in the intense environment of bankruptcy sales.

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee similar outcomes.