What does it mean to liquidate assets?

What is liquidation?

Liquidation is a formal procedure to close a company and sell its assets. When the company is liquidated, its assets, such as machinery, equipment, vehicles, stock, and even intangible assets like intellectual property, are valued, marketed and sold. The money raised is used to settle the business’s obligations or paid out to the shareholders in a tax-efficient way.

Liquidation can be a voluntary process initiated by the directors and shareholders or forced on a business by its creditors (the parties it owes money). The result is the same regardless of who starts the process, with the company’s assets being sold before it is struck from the official register and ceases to exist.  

What happens to a company’s assets when it’s liquidated?

When a company enters liquidation, an Insolvency Practitioner will be appointed to manage and administer the procedure. That’s the case regardless of whether the company has debts. They will take control of the business’s assets and assess them. That includes everything from buildings, machinery and office furniture to patents and trademarks. The aim is to turn those assets into cash to pay the company’s creditors if it’s in debt or its shareholders if it’s not.

To do that, the liquidator will have the assets professionally valued by an independent expert. Once the assets have a fair value, the liquidator will commonly sell them at auction or through private sales to unrelated third parties. The aim is to achieve the highest possible price for each asset.

In some cases, if a director wants to use an asset for a new business venture or it has sentimental value, they may choose to buy a liquidated asset from the company. That type of sale will usually be allowed to go ahead as long as the director pays the market rate for the asset, which is why having an independent valuation is vital. 

Why are liquidated assets sold at auction?

Liquidated assets can be sold via marketed sales, which can increase the price achieved for high-value or niche assets. There are also tender sales, where buyers submit sealed bids at the same time. 

However, a company’s liquidated assets are most often sold at auction. Known as a liquidation or bankruptcy auction, this sales method represents a quick way to turn assets into cash and gives buyers a rare opportunity to secure commercial assets at a reduced price. The benefits of liquidation auctions include:

• Speed - The auction process is very quick. Assets can be valued, marketed and sold in just a few weeks. That makes it a good fit for liquidation as it is a time-sensitive process.
• Fair and open - Auctions are open to individuals and businesses of every size, allowing a wide range of buyers to participate in a transparent and fair process.
• Serious buyers - Auctions attract committed buyers across a wide range of industries. That leads to a high success rate.
• Specialist sales - Liquidation auctions often specialise in particular industry sectors. That makes it easier to find a buyer for niche assets that could otherwise be difficult to sell.
• A full service - Liquidation auction houses make life easier for the liquidator by valuing and marketing the assets on their behalf. That encourages competition between buyers and generates the best possible selling price.        

What are the benefits of buying liquidated assets?

As well as providing a fast and efficient service for liquidators, liquidation sales represent an opportunity for buyers to acquire commercial assets at a reduced price. There’s also a tremendous variety of assets available. Our current commercial assets for sale include everything from brewery equipment and recycling and processing materials to assembled timber cabins and an indoor football centre.  

Many liquidation sales are also online, so you don’t have to travel or arrange to take time off to attend. The assets you’ll find at liquidation auctions are usually priced for a quick sale, which can create release opportunities.

If you are going to attend a liquidation auction, it’s important to act fast as the focus is on selling everything quickly. You should have the funds ready and be prepared to buy in bulk. You should also inspect the items closely for signs of damage or defects as the assets will be in a condition ranging from new and nearly new to used. If the auction is online, you can usually arrange to inspect the items in person before the sale or contact the auction house for the information you need.

Read more: The benefits of buying assets at a liquidation auction 

Expert assistance when liquidating assets

At Eddisons, we provide a leading business asset sales service across all industries and offer a range of sales types, including online auctions, marketed sales and tender sales. We manage every aspect of the sale, from desk appraisals and detailed valuations to online and offline marketing to target specific buyers and sectors. Find out more about our asset sales service and get in touch to discuss your requirements with our team.