Buying an insolvent company’s business – sales process

There will be instances where the due diligence material furnished by the insolvency practitioner to prospective buyers will be limited in scope. The former may not have sufficient knowledge about the business or assets and might not have enough time to compile a comprehensive appraisal. However, hiring a corporate finance adviser would certainly yield a more informative outcome. In any event, it is imperative that buyers conduct separate enquiries and form their own opinions about the business.

It is possible for the sales process to comprise multiple stages. At every stage, the insolvency practitioner will gradually shorten the list of prospective buyers in order to keep alive the competitive tension and may also impart more information pertaining to the business. Conversely, the insolvency practitioner may employ other methods, namely, tender offers or sealed bids, a stalking horse bid or a straight auction. Whatever the modus operandi, the insolvency practitioner will want to induce the most favourable terms for the sale of the business.

A prospective buyer will have an edge over the competition if they act swiftly by making sure that funds are readily available and by carrying out a reduced form of due diligence. Demonstrating an in-depth appreciation regarding insolvency sales will also be advantageous to the buyer. The insolvency practitioner will not want to prolong the completion as the value of the business could worsen if it remains under their control.Â

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