Chad Rucker, managing director in VRC’s New York office and a leader in the Fairness and Solvency Opinions practice group, was quoted in Agenda, a Financial Times Service publication, on the various issues board directors face when considering merger offers from a competitor. Rucker advises VRC clients on highly leveraged transactions, including mergers.
“One automotive industry client of mine agreed to sell a problem subsidiary to a strategic buyer to basically get out from under the controlling group’s pension liability. If a subsidiary hasn’t completely funded its pension and goes bankrupt, there’s a potential that a company in the controlled group could be responsible for that liability. I remember the board [said] a strategic buyer might be less likely to default. Had it been sold to a private equity firm they likely would have put a lot of debt on the subsidiary, and that could have failed the company. Then that liability could have come back to the seller.”
“A strategic buyer also may be seen as better able to operate within the industry and succeed. Ultimately, the client sold to a strategic buyer.”