How to find and buy distressed assets

Over recent years, insolvency levels and financial distress among UK businesses have soared. In the year to the end of July 2024, UK insolvencies were higher than during the 2008-09 financial crisis, while recent figures showed that approximately 633,000 UK businesses were in significant financial distress.

High inflation and interest rates, lagging consumer confidence, domestic and international geopolitical uncertainty and the persistent impact of COVID-19 and Brexit have all played their role in pushing thousands of UK businesses into insolvency, while leaving many more at serious risk of collapsing.

These headwinds have also meant that, for those companies lucky enough not to be in imminent peril, the prospects for organic growth are slim – even despite recent signs of economic improvement and the easing of political uncertainty following the general election.

For such businesses, M&A can offer the most direct route to growth as they seek to position themselves to capitalise on a potential economic recovery. With so many businesses in significant financial distress, and financing conditions for dealmaking still tight, cut-price distressed acquisitions can provide the perfect solution for owners seeking growth, while offering a precious lifeline for struggling companies.

Of course, many distressed companies will be beyond saving as a going concern. In this instance, their assets will be sold off by the licensed insolvency practitioner (IP) - potentially enabling savvy buyers to pick up valuable assets at a bargain price.

However, unlocking the value of acquisitions of distressed companies and assets is not as straightforward as keeping an eye out for company collapses. Buyers will need to have a clear plan and be well-prepared to move decisively and quickly in order to pounce on the best opportunities.

In our full-length PDF guide, we provide an in-depth look at the process of finding and buying distressed assets. Members can also access the accompanying Quick Guide: Steps to acquire a distressed business.

A key advantage that you can give yourself when targeting distressed M&A is to learn how to spot the early signs of distress. This will provide an invaluable competitive edge over other potential buyers and enable you to seal deals even quicker.

Early indicators of distress include:

- A business experiencing regular cashflow issues, struggling to meet costs and having a negative working capital
ratio

- Lenders taking the view that the business is high-risk and charging higher rates accordingly

- A rise in debtor or creditor days as creditor pressure mounts, as well as potential defaults and County Court Judgements (CCJs) being issued.

- Falling profit margins as the company struggles to pass rising costs onto customers and clients

- Low morale, with stress at higher levels being passed down and potentially leading to employee departures

While these factors do not guarantee that a company will enter insolvency, it is likely to do so if recovery measures are not implemented and may be more amenable to a takeover offer.

Naturally, searching through individual company accounts to produce a useful shortlist would be far too time-consuming. The Business Sale Report Lens enables buyers to quickly and easily search company records for off-market acquisition opportunities that suit their criteria.

Formal insolvency processes
When a company collapses, there are several forms of insolvency and different processes involved. A winding-up petition, in which a company is unable to settle a creditor debt of more than £750 and is issued a winding-up order, is often the first step. When issued with a winding-up order, the company’s assets will be sold to settle its debts and repay creditors.

During an administration process, management of an insolvent company is transferred to an administrators, providing temporary protection from creditor action and giving administrators time to resolve the company’s situation through a restructuring or rescue deal.

If a company is beyond saving as a viable trading concern, liquidation is the final option. There are three types of liquidation, but they all have the same outcome – the company ceases trading, is struck off the companies register and its assets are sold to repay any creditors.

Download our guide to find out more about the different insolvency processes

Buying a distressed business
Distressed acquisitions are one thing – being able to turn such an acquisition into a valuable, profitable transaction is another. Distressed deals naturally come with a strong degree of risk and a high risk of failure and buyers will need to do their research and have a clear plan.

Building a profile of the kind of distressed business you are seeking to acquire is a must-do first step in the process. A profile should encompass the type of business you are seeking to acquire, the sector or sectors you are looking in, the size of business you are considering and the location where you would like it to be based.

This will be vital in ensuring your search has focus, that it isn’t overly broad and doesn’t waste valuable time looking at unsuitable targets or even lead to you making the wrong kind of acquisition.

Another vital element of completing a distressed deal is to move fast. Time is of the essence in distressed sales, with IPs and administrators under intense time pressure to resolve the company’s situation.

As a result, you will need to have proof of financing and other documentation ready to go right away to demonstrate that you have the means to complete the deal. If you don’t, administrators will not hesitate to move onto other suitors.

Due diligence is perhaps the most problematic stage of a distressed acquisition. On the one hand, this is a business that has serious issues and it is vital to establish what they are and whether they can be fixed. On the other hand, time is short and you will need to complete the process quickly.

Obviously, you may not be able to be as rigorous as in a typical acquisition, therefore it is important to be prepared and be able to ask the right questions. Seek to focus on establishing how and why the business collapsed as this will provide an insight into whether a turnaround is possible or if it is beyond your capacity. For distressed assets, a physical inspection will be vital.

The advantages of distressed deals
Given the risks involved and the incredibly high threshold for success, some might question whether it is worth pursuing distressed deals over solvent acquisitions in the first place. Make no mistake, though, the potential upsides are numerous – it's just a question of being able to unlock them.

Fundamentally, distressed deals offer the opportunity to pick up potentially viable businesses and valuable assets at incredibly attractive prices. However, a low price doesn’t always guarantee good value, meaning that due diligence and advice from a trusted professional are required to ensure the deal is worthwhile.

Another clear benefit of distressed deals is the ability to acquire a company shorn of its debts – which will have been wiped out through the administration process. Underlying issues are of course likely to remain, but the removal of debts clears a major hurdle and enables you to start – at the very least – with a clean financial slate.

As mentioned previously, distressed sales also mean that buyers can close acquisitions far quicker than they usually could. This can help reduce costs that are often accrued when a deal drags and give you the opportunity to get straight to work on your turnaround plan.

At Business Sale Report, we often send members “Fast Sale” updates, in which assets are being sold through an accelerated process

Finally, a particularly relevant upside to doing a distressed deal at this time is the opportunity to be implementing your turnaround strategy during a period of economic recovery. Economic headwinds no doubt still remain, but there have been improvements in underlying conditions this year and numerous forecasts expect a recovery in 2025.

Check out the full guide to find out more about maximising the benefits of distressed deals

Buying distressed assets
When acquiring distressed assets, buyers should seek to focus their due diligence efforts on undertaking a physical inspection of the assets and any property they are seeking to acquire. This will be integral to seeing what you are buying and double checking it corresponds with the sales memorandum.

Furthermore, while liabilities are typically all cleared after a business falls into liquidation, it is advisable to look for whether assets hold any hidden liabilities, such as property liability claims or intellectual property disputes.

You should also ensure you are acquiring assets from an IP, surveyor or auction house that has been appointed by the business. Assets should only be acquired from a company director if the business is still solvent and selling them at a low price prior to the appointment of an IP can potentially breach rules and could trigger an investigation.

If you are acquiring assets that involve service contracts, then it is important to note that these will typically end once the company goes into insolvency. Suppliers will need to be contacted to check whether an ongoing contract can be agreed.

Of course, as with distressed company acquisitions, having your financing ready and advisers prepared will be integral to ensuring a deal can be concluded quickly and without any unnecessary waiting.


Distressed opportunities can sometimes look too good to be true and often this is the case. However, if you do your research, are well-prepared and know how to conduct a quick, reliable due diligence process, the right distressed opportunities can be incredibly high-value deals.

To download the guide "How to Buy Distressed Assets and Businesses" and the practical "Steps to acquire a distressed business", please sign up to our newsletter.

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