A stalking horse offer, agreement, or bid is a bid for a bankrupt firm or its assets that is arranged in advance of an auction to act, in effect, as a reserve bid.[1][2] The intent is to maximize the value of its assets or avoid low bids, as part of (or before) a court auction.[3]
To secure a stalking horse offer, the debtor can offer bidding protections such as breakup fees to its best bidder before the auction. These incentives enhance the value of the offering for the bidder, which might lead to a better price offer before the auction begins. This higher offer is now the starting offer for the auction and may result in benefiting the debtor and its estate.