"No crisis should go to waste," Chicago's newly elected mayor, Rahm Emanuel, famously said at the height of the recession. "A crisis provides the opportunity to do things that you could not do before."

Challenging economic times provide a strategic opportunity for many businesses to grow. Real estate workouts and other loan restructurings make it possible for strong businesses to acquire the assets of those that have fallen on hard times. When evaluating a troubled company, the method used to acquire assets is important. Using a traditional purchase and sale agreement, for example, can expose the buyer to unintended liabilities. Other obstacles may arise when creditors holding liens refuse to execute releases unless they are paid greater value than the assets are worth.

Fortunately, creditors' rights attorneys have a variety of tools at their disposal to acquire troubled assets on terms that benefit their clients. Sales conducted pursuant to Section 363 of the U.S. Bankruptcy Code provide a means to purchase assets—sometimes at discounted prices—that are free and clear of all liens. Such acquisitions may be limited to equipment or inventory, but may also include intellectual property rights, real estate and intangible assets. Others may involve the acquisition of a going concern. In an extreme example, the government-endorsed Chapter 11 reorganization of General Motors enabled the "New GM" to acquire the operational assets of the "Old GM" without interrupting normal operations.

Alternatively, an assignment for the benefit of creditors (ABC) allows a distressed debtor to assign its assets to an assignee, who in turn liquidates the assets. An ABC is a voluntary insolvency procedure that operates outside the provisions of the Bankruptcy Code, and beyond the supervision of a court if effectuated in Illinois. Creditors and third parties that work closely with the assignee have an opportunity to purchase the insolvent company's assets, often at reduced prices. Since the procedure has no judicial oversight, however, the assets do not have the built-in protections of a Section 363 sale. Although that means it is "buyer beware" when it comes to determining whether the assets are being sold free and clear of all liens, the attorney representing a potential buyer can negotiate with a secured creditor to obtain a release of its liens on terms that are favorable to the buyer.

A third way to acquire distressed business assets is through what is often called a "friendly foreclosure." In this scenario, the buyer steps into the shoes of the senior lienholder, which is usually the working capital lender, and forecloses out junior-lien creditors. This method is typically used to acquire an ongoing business, rather than individual assets. Accordingly, this type of acquisition requires the cooperation of the target company's management and careful lien searches.

Although the economic climate is showing signs of improvement, opportunities to acquire troubled assets at depressed market values are still plentiful. Working with a skilled legal advisor will help ensure that the visionary business operator takes full advantage of the opportunities that are present in good times as well as bad.