What is Asset Recovery and How is it Achieved?  

Asset Recovery is the conversion of business or personal holdings into cash.  There are two major categories of assets, the tangible and the intangible. Tangible assets consist of inventory, real estate, and FF&E (furniture, fixtures, and equipment). Intangible assets include intellectual property, patents, trademarks, contact and customer lists, as well as leases and permits if they can be assigned or transferred. A Seller is wise to consult an attorney before proceeding with as asset recovery project. There must be a clear understanding and adherence to UCC and Bulk Sales Laws, and Creditors must be included in the process if any portions of the assets are held as collateral.  

The following is a brief description of the three major liquidation methods commonly employed in converting a Seller's assets into cash.

  Liquidation by Private Treaty Sale. The Seller or the Seller's agent advertises and markets the assets in an effort to generate sales to individuals and end users.  This method may generate the greatest cash recovery, but it can also be costly and time consuming.  In many cases, unless buyers are found quickly, the costs of advertising, storage, handling, and other expenses, will seriously diminish any increased revenues generated by the private sale.  A Seller with intentions of converting assets to cash by private sale must know the "current market value" of the assets. A qualified appraisal is really the only way to know what the assets are worth. Dealers are generally the easiest buyers to find, and some Sellers elect to quick sale their assets to dealers.  But remember, "buying low and selling high" is how dealers make their money. 

 Classic Liquidation Sale. A properly performed liquidation sale can result in a very nice cash recovery for the Seller. Although liquidation sales may vary somewhat in design, they are essentially all the same. The sale starts with the assets being offered at moderate discounts, and the discounts increase with time. Liquidation sales performed by an agent can range from a few days to a few weeks in duration. Events conducted by the Seller, such as "going out of business" sales, can last much longer. With respect to their duration, liquidation sales can be costly to advertise. Labor, rent, utilities, and other costs will be substantial and must be considered. Remember, an online liquidation does not negate the cost of storage and handling.  Also, liquidation sales come with the important consideration of which party will be responsible for the disposition of assets that may not sell. The grand finale of a well-performed liquidation sale may need to be an absolute auction of the assets that remain. If the liquidation process is allowed to result in the assets being completely cherry-picked, then it will be difficult to attract the buyers required for an auction of what remains. A successful recovery project is dependent on properly managing the discount rates on the most desired assets, watching what is selling and what is not, and knowing at what point to stop the liquidation sale and conduct an absolute auction. In the event, a portion of the Seller's assets have little chance of generating an acceptable cash recovery, then the Seller should consider donating those assets and taking the write-off.

 Liquidation by the Auction Method. In many cases, an auction is simply the best way for a Seller to convert assets into cash.  The auction method of liquidation affords the Seller the simplest, fastest, and most cost efficient way in terms of advertising, labor, rent, utilities, and other expenses to convert assets into cash.  The auction method of liquidation is by far the most time and trial proven method known in the business world.  Tangible and intangible assets can be sold, and the Seller is afforded the luxury of choosing the time and place to convert the assets into cash. The assets are sold, the buyers are responsible for removals, and the premises can be vacated immediately upon the conclusion of the removal process.  In other words, the auction is performed and the deal is done. The auction method allows for a group of motivated buyers to gather in the same place at the same time. This in-turn creates the competitive bidding spirit that drives all auctions. A well-conducted auction can and should generate excellent cash recovery for the Seller.  In some cases, due to the competitive bidding spirit, recovery can exceed the fair market value of the assets. It is true that certain types of assets do not lend themselves well to the auction method of liquidation. For those, choose the private treaty sale or classic liquidation sale methods.  If a Seller's assets are of a type and sufficient quantity to lend them well to the auction method, the Seller would be wise to dispense with other considerations and move to utilize this time and trial proven method of liquidation.
 

What is a Professional Asset Recovery Specialist?

Before choosing an auction or liquidation company, a Seller should be reasonably sure the company has the ability to accurately determine the value of the assets and then bring in the buyers needed to maximize the cash recovery from the assets.  What the Seller is searching for is a professional asset recovery specialist.  A good way to determine the ability of a company to perform is to ask for references. Checking with a company's former clients is always a good first step. If a company's former clients are satisfied with the cash recovery they received from their assets, chances are the Seller can expect the same. 

If a Seller's assets consist mainly of a singular commodity, the Seller may wish to commission a company specializing in that commodity. However, be aware that with certain types of assets, and when dealing with a highly specialized auction or liquidation company, you are also dealing with that company's cultivated group of buyers. This can sometimes result in those buyers having too much control over the selling price. Accordingly, the cash recovery from the assets may be negatively affected.

 Whether the Seller's assets are of a singular or diverse nature, the Seller may wish to commission a company that has performed successfully in liquidating a wide range of assets.  This type of company is the true professional asset recovery specialist.  Such a company's success is likely due in part to its network of professional associates.  The company's ability to draw upon its network resources will allow it to learn about and accurately appraise any assets it has been commissioned to liquidate.  This company's success also stems from efficiency in determining who the buyers are, and how many are needed to conduct a successful sale and maximize the cash recovery from the Seller's assets.  Once the company has utilized its network resources to learn about and appraise the Seller's assets and then identified the buyers, it is proficient in getting the buyers there on sale day.  This type of company will have an excellent record of pleasing the Seller with the dollar recovery generated from the assets it has been commissioned to liquidate.  

ALLIANCE Auctioneering & Equipment  •  Columbia, SC  •  888-468-8125  •  Email: allianceae@aol.com

Copyright © 1999 ALLIANCE Auctioneering & Equipment. All rights reserved. Revised: May 26, 2010
Website designed by Renée A. Gibson. Email at ragibson62@att.net