Sales process for an insolvent company

The sales process can comprise several stages and at each stage, the insolvency practitioner will narrow down the pool of prospective buyers from the list they have generated. It is important that the former does this in order to prevent a drop in the competitive tension of the process. Furthermore, as we go deeper into the process, the insolvency practitioner is likely to provide more information to the prospective buyers. Of course, they could always employ other methods, namely, a straight auction, a stalking horse bid, a sealed bid or a tender offer. The insolvency practitioner will utilise whatever it thinks will engender the most favourable terms for the sale of the seller’s business at that point in time. Â

There may be instances where the due diligence information furnished by the insolvency practitioner to prospective buyers lacks completeness. This is more likely to occur during the initial stages when the former is not properly cognisant of the business or assets and has not had sufficient time to prepare the pertinent data. Consequently, it is imperative that prospective buyers make their own inquiries prior to forming a definitive opinion about the business.

If a prospective buyer moves quickly, they will have an edge over their competitors. This would entail, among other things, carrying out fewer investigations and ensuring that one’s funds are readily available for the acquisition. Moreover, a prospective buyer can also acquire ‘brownie points’ if they are able to demonstrate an adequate understanding of how insolvency sales work. The insolvency practitioner will obviously want to complete the sale as speedily as possible the longer the business is under their control, the more its value will ostensibly deteriorate.

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