Stalking-Horse Bids in Australia: 2025 Guide to Business Restructuring

When a business in Australia hits rough waters and faces insolvency or restructuring, the process of selling assets can become a high-stakes chess match. Enter the stalking-horse bid—a strategy that’s gaining momentum in 2025 as a tool to drive competition, preserve value, and ensure fairer outcomes for creditors and employees. But what exactly is a stalking-horse bid, and why is it becoming a staple in the Australian insolvency landscape?

What Is a Stalking-Horse Bid?

A stalking-horse bid is an initial offer on the assets of a distressed company, made by a preferred buyer chosen by the seller or administrator. This bid sets the floor price for the asset sale, encouraging other interested parties to submit higher competing offers. If no better bids emerge, the stalking-horse bidder acquires the assets at the agreed price. If the bid is topped, the stalking-horse bidder often receives a break fee or expense reimbursement for their role in setting the benchmark and exposing the value.

While stalking-horse arrangements have been common in the US for decades, Australia has only recently embraced them as part of insolvency and restructuring best practice. The main goals are to:

• Ensure asset sales are transparent and competitive
• Maximise sale value for creditors and stakeholders
• Offer certainty to both buyers and administrators

Why Are Stalking-Horse Bids Gaining Ground in Australia?

Several factors are driving the rise of stalking-horse bids in Australia, particularly in 2025:

• Policy Updates: The Australian government’s 2024-25 insolvency reform package has clarified the rules around pre-pack sales and administrator duties, encouraging greater use of structured sale processes like stalking-horse bids to protect creditors’ interests.
• Economic Conditions: With sectors like retail, construction, and tech under pressure from interest rates and post-pandemic market shifts, insolvency appointments have spiked. Administrators are seeking tools to avoid fire-sale discounts and preserve value.
• Judicial Endorsement: Recent Federal Court judgments have affirmed the legitimacy of break fees and the transparency of stalking-horse processes, making administrators more comfortable using them.

For example, in early 2025, the collapse of a mid-sized construction firm saw administrators run a stalking-horse process, securing a $40 million floor bid from a private equity consortium. This not only protected asset value but attracted additional bidders, ultimately resulting in a $46 million sale—well above what a rushed or opaque process might have delivered.

How Do Stalking-Horse Bids Work in Practice?

The stalking-horse process typically unfolds in several stages:

1. Selection of a Stalking-Horse Bidder: The administrator confidentially negotiates with a credible buyer willing to commit to a binding offer and public disclosure.
2. Setting Terms: The bid is formalised, often including a break fee (typically 1-3% of the purchase price) to compensate the bidder if outbid, and clear sale terms to give comfort to the market.
3. Market Testing: The administrator advertises the deal, inviting competing bids and running a transparent auction or tender process.
4. Outcome: If higher bids emerge, the stalking-horse can match or walk away with the break fee. If not, they acquire the assets as agreed.

This approach is particularly valuable in situations where assets are specialised or have limited buyer pools—such as regional manufacturing plants or tech intellectual property—since it guarantees a minimum recovery while keeping the door open for upside.

2025 Policy Developments and What to Watch

The Australian Securities and Investments Commission (ASIC) and the Australian Restructuring Insolvency and Turnaround Association (ARITA) have both released new guidance in 2025, encouraging administrators to consider stalking-horse bids as part of their sales toolkit—provided the process is open, fair, and in the best interests of creditors.

• Disclosure Requirements: Administrators must fully disclose the terms of any stalking-horse arrangement, including break fees, to creditors and the court.
• Creditor Approval: For large or complex sales, creditor committees now have a greater say in approving the process and the choice of stalking-horse bidder.
• Break Fee Caps: ASIC has proposed capping break fees at 2.5% for deals over $20 million to prevent excessive costs and ensure fees reflect genuine risk and effort.

These changes are designed to build trust, reduce litigation, and ultimately drive better outcomes when businesses face tough times.

Conclusion: The Future of Stalking-Horse Bids in Australia

With insolvency volumes expected to remain elevated in 2025, stalking-horse bids are set to become a standard feature of Australian business restructuring. They offer a win-win: administrators get certainty and competitive tension, while bidders are rewarded for setting the benchmark. As new policy guardrails take hold, expect to see more headlines featuring stalking-horse processes in high-profile Australian turnarounds—and potentially, better recoveries for creditors and employees alike.