Get access

How to Sell a (Bankrupt) Company


  • We are grateful to an anonymous referee, Renee Adams, Lucian Bebchuk, Patrick Bolton, Dick Brealey, Julian Franks, Denis Gromb, Oliver Hart, Ronen Israel, Pino Lopomo, François Ortalo-Magné, Ben Polak, Oved Yosha, David Webb, Luigi Zingales, Jeff Zwiebel, Bilge Yilmaz and seminar participants at Tel-Aviv University, HEC Paris, Universidade Nova Lisbon, London Business School, London School of Economics, Philadelphia Federal Reserve Bank, USC Law School, Wharton and the AFA meetings for very helpful discussions and comments. Financial support from the Bank of Italy is gratefully acknowledged. We are solely responsible for any remaining errors.

Leonardo Felli

London School of Economics

Houghton Street

London WC2A 2AE



This paper suggests a way to sell a company that maximizes the proceeds from the sale. The key to this proposal is the option left to the seller to retain a fraction of the shares of the company. Indeed, by retaining the minority stake, the seller can transfer the control of the company while reducing to a minimum the rents that the sale of the company leaves in the hands of the buyer. We then focus on two main applications of this idea: bankruptcy procedures and carve-outs.