Liquidation, also known as ‘winding up’, is the process of a company ending its life. Liquidators are called in to assist the company in disposing their assets and distributing any proceeds to creditors, staff, and shareholders. As such the assets have to be "realised" by selling them.
When a company is liquidated there are two ways for assets to be sold:
- Liquidators market the assets and sell them through pre-arranged sales
- A Liquidation Auction is carried out and the assets are sold to the highest bidder
What is a liquidation auction?
A Liquidation auction is when a liquidator puts into auction any company assets – these being anything the company owns (unsold inventory, furniture, computer equipment).
Selling at an auction is generally a quick process whereby assets tend to be sold within a month of the company entering liquidation. Typically, the larger the auction audience, the higher the price achieved as buyers compete against each other for the goods.
In general, an auction is seen as the best way to get the best possible price at the time. This way the liquidator cannot be criticised for selling assets cheaply.
The auction process is very transparent, and anyone connected or not to the company can bid. In most cases the liquidator will pass on the assets to an auction house or a firm of chartered surveyors who do it on their behalf.
How to buy stock cheaply?
At liquidation auctions, stock tends to be quite cheap, as there is an onus on a quick sale. However, there are number of things to remember:
- This stock belonged to a company that went bust. So do people want it?
- There is a cost of storing, transporting and checking the quality of the goods
- If stock is part sold then then it may be mismatched i.e too much of one type and not enough of another.
In order to get hold of stock and assets it is a good idea to register with the many auction houses around the country.