Article | Financial Analysts Journal | November/December 1995

Investing in Distressed Situations: A Market Survey

by S. C. Gilson

Abstract

The risks of investing in distressed companies—a practice popularly known as "vulture" investing—are highly firm specific and idiosyncratic. Investors who are adept at managing these risks, who understand the legal rules that must be followed in corporate bankruptcy, and who are skilled at identifying or creating value in a distressed situation consistently earn the highest returns in this market. Among the key characteristics of those who are successful in this market are: 1. a superior ability to value a firms' assets, 2. a superior negotiating and bargaining skill, 3. an understanding of the risks of investing in distressed situations.

Keywords: Investment; Markets;

Citation:

Gilson, S. C. "Investing in Distressed Situations: A Market Survey." Financial Analysts Journal (November/December 1995): 8–27.