Buying distressed businesses
Owners typically look to sell their business following a period of profitable growth since it is presents itself as an attractive, low risk opportunity to investors. Such opportunities may result in a higher price being achieved.
It is for this reason that many investors in under-performing businesses leave the sale of a business too late in the hope that its fortunes will turnaround and therefore become more attractive to potential purchasers. Such a delay may result in the business going past the point at which a sale, that benefits the shareholders, is achievable.
In many cases a sale of an under-performing business may be sought in a final attempt to obtain value from the ownership before failure. In such circumstances parties that may be interested in the business may be presented with two alternatives:
Buy from the current owners with all of its liabilities; or
Wait to see if the business becomes insolvent and purchase the business and assets from an Administrator, Receiver or Liquidator.
If it appears that, without a sale, it is unlikely that the business will be able to survive then many purchasers prefer to wait for the inevitable insolvency due to the potential advantages (see next section).
However waiting for this may result in losing the opportunity to buy the business if someone else does not wish to wait for this potential eventuality or the business does not ultimately fail.
This section of the site provides some guidance on acquiring a business from an Insolvency Practitioner.
