What is a stalking horse bidder?

A stalking horse bidder is a third party that makes an initial bid on a distressed company or its assets in a bankruptcy auction. The purpose of the stalking horse bid is to set a minimum price for the sale and to attract other potential bidders to participate in the auction.

The stalking horse bidder is often chosen by the distressed company or its creditors because they are seen as a serious and credible bidder who is willing to pay a fair price for the assets. The stalking horse bidder may also be granted certain protections in the bidding process, such as a break-up fee or expense reimbursement if they are not ultimately successful in acquiring the assets.

By having a stalking horse bidder in place, the distressed company or its creditors can maximize the value of the assets being sold and ensure a competitive auction process that results in the best deal for all parties involved.