Stalking-horse bid

A stalking-horse bid is an already-negotiated purchase offer — typically backed by a letter of intent or preliminary agreement — that the insolvency administrator secures before opening the actual bidding process. It serves as a price anchor: every subsequent bidder must top it, often by a defined minimum increment. This gives the administrator a solid valuation basis and negotiating certainty, instead of opening a process with no known price floor.

In exchange for the risk of investing due-diligence effort and negotiating time into an offer that can ultimately be outbid by a third party, the stalking-horse bidder usually receives a contractually fixed break-up fee — in practice typically a low single-digit percentage of the purchase price — plus often reimbursement of incurred advisory costs. Originating from US Chapter 11 practice, the structure is increasingly used in larger, professionally run German bidding processes, even though German insolvency law does not expressly regulate it.

For buyers, the stalking-horse role opens two paths: as the first bidder, securing a negotiating head start and information access, against the risk of ultimately losing out despite the effort — cushioned by the break-up fee; or as a subsequent bidder, using an already-vetted, structured offer as a reference point, which can shorten one's own due diligence.