One of the things I recommend to business owners who are in the planning stages of selling their companies is to sell off non-producing assets such as unused machinery or excess, slow moving inventory. Business owners who embrace this strategy benefit several ways.
First of all, they can turn idle assets into immediate cash. The cash can be used to pay down debt, be withdrawn by the owner or reinvested in the business. I don't normally advise business owners who are contemplating a sale to go out and invest in new equipment, but they should expect that buyers will require that the equipment they purchase is in good usable and working order and they are not inheriting deferred maintenance problems.
Another reason to sell off idle equipment is that the buyer of the business will recognize unproductive assets as nearly worthless. My experience is that business owners will receive more cash for idle assets if they sell them outright to a company that wants and needs the asset.
Companies that are asset intensive often times don't generate enough income and cash flow to support the enterprise value the owner is seeking. This will seriously affect the marketability of the company and result in fewer offers. An appropriate strategy might be to analyze the asset utilization, sell off idle assets, pay down existing debt and hold off marketing the company until the new cash flow supports the balance sheet.
Most purchase agreements contain extensive protective clauses in the form of representations and warranties that are designed to protect buyers from assuming non-performing assets. Avoid potential post sale problems by selling off idle equipment before you put your company on the market and put cash in your pocket today.
National Equipment Appraisal National Equipment Appraisal (a division of JMR Capital, Inc.)
"When business owners ask me to help them sell their companies, it's my job to make sure they position the company for its highest value and receive top dollar for their years of hard work. Owners look to me to provide solutions to the complicated process of selling their business interests.
Idle, non-producing assets are a problem I encounter in several businesses. In the past, I could only recommend that clients should sell off idle equipment but now I can offer them a practical and easy way to help them do it through the sales division of National Equipment Appraisal. To learn more, contact National Equipment Appraisal."
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