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Distressed Sale Valuations
When a business is placed in administration the receiver may require valuations of the components of the business including the goodwill, plant and equipment and even the freehold premises in which the business operates. The receiver is charged with the task of securing the best possible prices to protect the creditors and the shareholders. However without proper valuations there is a danger that bargain hunters may buy the assets at a discount to true value.
A similar situation can arise in the sale of a commercial property or a family home.
The general rule is that the sale of a distressed asset will realise a lower price than a sale of the asset in an orderly sale process. In the case of the sale of infrastructure such as plant and equipment the sale occurring for insitu plant which is to remain operational in the same location post sale will certainly realise a higher value than a distressed sale.
Plant and equipment which is sold in an orderly disposal process is also likely to fetch a higher value than the distressed sale situation.
The lesson here is clear:
First: knowledge is power.... and the person charged with selling off distressed sale assets should have accurate knowledge of the value of the asset in a normal unrushed sale situation. He gets that knowledge from appointing a business valuer network specialist to report on the fair market value. With this knowledge he can then negotiate the sale of the distressed asset from a position of knowledge and without being at a disadvantage.
