Safeguards for a buyer that enters into an agreement to purchase assets of the debtor in a 363 sale.
In almost all 363 sales the debtor will negotiate a purchase agreement with provisions in the agreement allowing other potential purchasers to submit higher or better bids. The purchaser that negotiates the purchase agreement, often referred to as the “stalking horse,” invests its time and money in developing and negotiating the agreement as well as for due diligence. As a means of protecting its interests and covering the expenses it incurs for due diligence and in negotiating the purchase agreement, the stalking horse will typically demand that other offers for the debtor’s assets meet certain requirements. For example, the stalking horse will typically insist on a break-up fee and that offers from other prospective purchasers include terms substantially similar to the terms stated in the purchase agreement between the stalking horse and the debtor.