Curing Zombie Companies via Mergers & Acquisitions

A Zombie Company is over indebted but is kept alive by the banks. The reason for the existence of Zombie Companies are loose lending policies by the banks encouraged by the lowest interest rate environment in the history of mankind. Under normal conditions, such companies would have gone already out of business. Many of those business owners view financial debt as free money and ask for high valuations for personal reasons. This poses a significant challenge for many M&A transactions, which actually could help to cure the Zombie. Sophisticated buyers can bring in new know-how, expertise and apply a more conservative debt/equity financing structure so that the Zombie firm has a chance to become a sustainable business again. In recent years many possible M&A transactions were postponed instead of curing the Zombie.

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