The value of any asset equals what someone else will pay for it. Of course, it is much easier to value an asset if there is a market for it. Take real estate for example, which has a well established market. Although some variables come into play which may affect value, such as location, environmental issues, improvements, or entitlements, the market baseline is fairly easy to ascertain. The same, however, cannot be said about businesses. The variables affecting value are extensive but even the most desperate situations usually have some silver lining to be uncovered.
Believe it or not, there is an almost endless supply of cash in today's economy "just sitting on the sidelines." Institutional investors and traditional lenders, such as banks, will want to see a strong business plan and organized records. Let us help you get ready for your business's next step!
Maybe. But there are significant ramifications that should be explored in depth. One alternative to purchasing the equity of a distressed business, is to structure the deal as an asset purchase. This allows the buyer to reduce risks related to both known and unknown liabilities, while taking only the desired assets. One key concern when purchasing the assets of a distressed business is that the seller may then declare bankruptcy and creditors may attempt to avoid the sale as a fraudulent transfer. This can happen within two years of the seller filing bankruptcy if there is fraud or if the sale is for less than the assets are worth when the seller became insolvent or was made insolvent from the sale. Obtaining a third party opinion that demonstrates fair value may help a buyer avoid this pitfall.
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