Valuations & Acquisitions: Dealing With an October Surprise

To work today, deals must be more strategic than ever. Buyers need cash in hand to buy because banks are leery about doing deals financed with debt, which typically happens when private equity is involved. So for buyers, cash is king.

In fact, lenders are pulling out of providing debtor in possession (DIP) financing to bankrupt companies. DIP financing — which usually has priority over existing debt, equity and other claims — is arranged by a company while under Chapter 11 bankruptcy protection. To be considered for a cash flow loan, Helman says, there needs to be at least $20 million of cash flow, “and it needs to be relatively certain,” otherwise no deal.