When an insolvency practitioner is unable to sell the assets and goodwill/intellectual property rights of a business as a package for an acceptable price, they normally enlist the assistance of an agent to realise the assets. There are a number of issues to consider
Method of realisation
Some assets are better sold by private treaty and/or by tender, in particular if there is potentially a limited number of buyers. In most cases, a sale by auction will maximise the realisation and also be seen to be a transparent process.
Live v online v webcast auctions
Auctions have been used for hundreds of years as a method of realising assets. Until recent times, a live auction was the only method available. However, with the advent of modern technology, online auctions and live webcast auctions are readily available alternatives.
It is interesting to note that some agents, who virtually never held live auctions historically, are now recommending and conducting online auctions. It is also interesting to note that many agents only use online auctions exclusively.
Online auctions have the advantage of making the auction more readily accessible to a wider audience including long distance/foreign buyers, but are not the best method of maximising a realisation in all situations.
At Robson Kay, we hold three types of auction:
a) traditional live auctions;
b) online “timed” auctions;
c) traditional live auctions combined with online webcast bidding.
The method we recommend depends on a multiplicity of factors, including the nature of the assets, the quantum/value, their source and much more – we may recommend different types of auction for similar assets (in different cases) dependent upon the facts and circumstances.
Agents who do not utilise all three types of auction are more limited in their options and this will affect their recommendations.
Onsite auction v offsite auction
Irrespective of whether we are conducting a live auction and/or an online auction and/
or a webcast auction, there is a decision to be made as to whether the assets should be left in situ or moved.
Onsite auctions have the advantage of avoiding carriage costs and the added benefit that in some cases, buyers prefer to see the assets “in situ”.
The disadvantages include:
i) landlord issues;
ii) premises costs, including rental, insurance and other costs;
iii) onsite security;
iv) certain assets may not be capable of being stored internally e.g. vehicles, heavy construction plant etc;
v) security issues.
Furthermore, the volume/ value/critical mass in smaller cases may make the sale unattractive and/or incur disproportionate marketing costs and other overheads.
In some cases, we maximise the realisation by uplifting the assets and moving them to our own auction centre/storage facility. While this incurs carriage costs, it has the advantage that:
1) it avoids the IP incurring rental and other premises costs;
2) it avoids action by the landlord;
3) insurance (at our secure site) minimises insurance costs;
4) in addition to storing plant and machinery, equipment and tradestocks within our storage facility, we have large attached secure compounds for vehicle fleets, construction plant and similar, thus securing all the assets on one site;
5) in smaller cases, the assets can be combined with assets from several insolvencies, thus increasing the attraction of the auction to bidders and furthermore, advertising, marketing and other costs being amortised over several cases.
Agent v principal
Some auctioneers who act as agent also act as principal (ie dealers) – potential buyers who understand the “auction world” are never certain when dealer auctioneers are acting as agent or principal and can consequently be discouraged from bidding at auctions held by known dealer-auctioneers.
At Robson Kay, we are independent valuers, auctioneers and agents, specialising in insolvency and corporate recovery work – almost all our instructions emanate from insolvency practitioners, banks or asset-based lenders. We only operate as agent (never as principal) and regularly conduct live auctions, online and webcast auctions dependent upon which will maximise the realisation.
We maintain our own large auction centre/storage facility with secure plant and vehicle compounds, enabling us to consider all options in order to maximise the realisation and where appropriate, can uplift and move assets to our centre for safekeeping.
For further information:
Please contact Jonathan B Kay on 0161 998 8111, email Jonathan@robsonkay.co.uk or visit: www.robsonkay.co.uk