Steve Katz, CEO of Nationwide Cellular, a Valley Stream, N.Y., telecommunications company, has found an unusual -- and low-cost -- way to generate rapid growth: he buys bankrupt competitors. Consider Katz's most recently concluded deal, the acquisition of Cellcom, a bankrupt New Jersey-based company. Katz learned about the company through industry contacts -- Cellcom's 53,000 cellular subscribers in the New York City and Los Angeles markets made it appealing -- and approached its bankruptcy-court judge through a lawyer who specializes in Chapter 11 matters. "You'll never find a better deal than in bankruptcy court," Katz stresses, "because you've got the ultimate motivated seller." Here are some of his tips:

* Hire a bankruptcy lawyer. During the Cellcom negotiations, says Katz, he "had thousands of creditors and other interested parties to deal with." The negotiations with all those creditors required a specialist's legal finesse. Ultimately, some creditors agreed to large discounts in return for immediate payments, while others agreed to longer payment schedules in return for larger payments.

* Move quickly. The worst thing that can happen, Katz warns, is that you'll authorize your lawyer to submit a written bid to the court, pay a 5% or so deposit, and then sit and wait. Since all the creditor groups will have to approve the final settlement, Katz says, "you and your lawyer need to meet them quickly to size up their needs and financial flexibility. Then you'll have to convince the judge that your offer is a fair distribution if you want to close a deal quickly."

Katz should know. Nationwide Cellular made its bid for Cellcom on April 15, 1992; by May 23 the judge had proclaimed it a done deal. -- Jill Andresky Fraser