What does the sensible buyer need to know about purchasing companies in financial difficulty?
According to Keith Steven, of the business turnaround company KSA, the primary factor to bear in mind is that companies are in trouble for a reason, and a good plan is needed in order to turn the company around. "You need to consider whether the business separate from the company is viable."
Additionally, if the company has gone into administrative receivership or administration, you will need to consider your legal obligations to the employees of the company, as well as obtaining permission from the courts to use the company's trade name(s).
It is very important to carry out due diligence when considering a company in financial difficulty. Any creditors guarantees made by the previous owner are likely to be worthless. A house, for example, staked as collateral against the business, may have additional preferential claims against it. And of course, the goodwill element of a business in difficulty is likely to be negligible, which on the one hand places the buyer in a position to drive down the price of the business, but on the other hand, could make future trading difficult, when creditors have been left unpaid or part-paid by the receiver, or previous owner. As well as not being able to pay its creditors, a company in trouble will often find itself short-changed by its debtors. Companies who owe you money will assume you don't have the resources to chase them through the courts and may not pay what they owe.
This is a unique opportunity to acquire a well-established company in a niche sector with a strong commercial client base and consistent revenue streams, supported by a solid second-tier management team.
A longstanding and successful DIY store which has established itself as one of the region’s preferred providers. Available on a freehold basis, the company operates from an impressive 25,000 sqft retail property and holds an impressive reputation acr...
Presenting to the market a longstanding and profitable independent company that specialises in the supply and distribution of printing, art and office equipment. Operating for over 50 years, the business has played a vital part of its business commun...
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