Asset Liquidation and Tips for Directors: Maximize Value When Selling Company Assets

Asset liquidation is the process of selling a company’s assets, typically during times of financial difficulty, business closure, or strategic restructuring. To ensure selling company assets bring back the most value, directors need to do everything they can to understand different types of assets, how they are evaluated and the most suitable method to liquidate.

What is Asset Liquidation?

Asset liquidation means “converting a company’s assets into cash”. These assets include physical items like machinery, real estate, and inventory, as well as intangible assets like intellectual property and brand value. The purpose is often to repay debts, close a business, or raise capital for other business purposes.

Why and When is Asset Liquidation Necessary?

Asset liquidation typically becomes necessary for different reasons and circumstances:

Closing a business: When a business shuts down permanently, selling off assets helps recover as much value as possible.
Dealing with financial difficulties: Companies struggling with debt or financial problems may liquidate assets to cover liabilities
Making changes in business operation: In some cases, companies choose to liquidate assets for restructuring, mergers, or to shift focus to other profitable ventures.

What are Different Types of Assets and How to Liquidate Them?

Assets are categorized into tangible, intangible, financial, and personal property. Here’s what we recommend to liquidate each of them.

1. Tangible Assets

Real Estate: Sell through a real estate agent or property auction to get competitive bids. For fast sales, consider a direct buyer or property investor. Auctions are faster but may result in lower offers
Machinery & Equipment: Use specialized auctions for industrial equipment or private sales to targeted buyers. Reselling to companies in the same industry is often effective.
Inventory: You can liquidate inventory by offering sales, discounts, or partnering with liquidation companies. Bulk sales and discount pricing help move items quickly.

2. Intangible Assets

Intellectual Property (IP): Sell IP (patents, trademarks, copyrights) through specialized brokers or licensing deals. In some cases, bundling IP rights with business assets can increase their value.
Brand Value: Licensing or selling the brand name and associated goodwill can be done through brokers who specialize in brand valuation. Larger companies may purchase the brand to expand their portfolio.

3. Financial Assets

4. Personal Property

Selling company assets isn't the same for every business as they have different assets. For instance, some companies, especially those that work remotely or rely heavily on technology, may not have any physical assets at all. In these cases, valuing intellectual property, like trademarks or patents, becomes important, but it can be tricky to determine its worth. On the other hand, assets like stock and work-in-progress items can still be considered valuable and factored into the overall valuation.

How to maximize asset value through liquidation?

Conduct a Thorough Asset Inventory

Start by listing all assets to ensure nothing valuable is overlooked during liquidation.

Conduct an Asset Inventory: Catalog all assets for better tracking.
Use Multiple Channels: Diversify sales platforms to attract buyers.
Target the Right Buyers: Work with brokers or agents familiar with specific asset types.
Enhance Presentation: Clean assets and ensure accurate documentation.
Time Sales Strategically: Capitalize on high-demand market periods.
Bundle Assets: Group similar items for package deals.
Leverage Online Marketplaces: Expand visibility through platforms like eBay.

Methods of Asset Valuation

Market Value: The price for an asset in a competitive and open market. Factors such as demand, current market trends, and the condition of the asset affect market value.

Book Value: The value of an asset as recorded in the company’s financial books, usually calculated as the purchase price minus depreciation.

Liquidation Value: The amount the asset is likely to bring if sold quickly, often at a discount

Market value vs. liquidation value: Market value tends to be higher since it reflects a standard sale, while liquidation value accounts for the urgency of the sale.

It’s important to get a realistic valuation of the asset during liquidation. This valuation should be done independently to ensure accuracy, often with the help of experts. For example, if a business is selling land or property, real estate agents are needed to provide a precise valuation. The same process applies to selling stocks, shares, and machinery. Accurate valuations help in determining the company’s overall worth during the sale.

Who is responsible for selling assets in liquidation?

Aliquidator is responsible for selling a company’s assets during liquidation and distributing the proceeds to creditors. It’s important to choose a qualified liquidator who understands your business and its industry. Since insolvency and restructuring can be stressful, you need someone who can recommend and manage the best solution for you. Not all insolvency practitioners are the same, so make sure you know who you’re dealing with before handing over control of your business or personal financial matters.

This information is for guidance only, is indicative and should not be taken to be advice or relied upon for action for legal process.
In call cases, should you have any queries or wish to discuss your own circumstances, find your trusted insolvency practitioners with Insolvency Australia's directory. For expert guidance on choosing the right liquidator for your business, visit Insolvency Australia’s guide to selecting a practitioner.