How Long Does it Take to Complete a Liquidation of a Manufacturing Plant?
Liquidation is a process of selling non-cash assets and turning them into cash. It can be done for a variety of reasons – insolvency, personal (such as owner retirement), or to divest non-essential business assets. Of course, if your business is considering liquidating its assets, one of the first questions you will likely ask yourself is how long does liquidation take? Every scenario is different and will have its own time constraints which will ultimately dictate the overall strategy, but you may need a basic ballpark at this time so you can plan accordingly.
On average, you can expect liquidation to take about 60 days (two months). However, the liquidation process will look different for just about everyone we work with. In some cases, you might be able to liquidate all of your assets in three weeks or less. In other, more complex situations, the process could take a year or more.
Let’s take a closer look:
What is Liquidation?
As suggested, liquidation is a term used to describe the process of turning non-cash assets into cash.
In most cases, this involves selling the illiquid asset to an interested buyer for cash or cash equivalents. These buyers can include private buyers, auction houses, collectors, and more. The buyer—and medium of exchange—that makes the most sense in a liquidation scenario will depend on the assets you are trying to sell, as well as the general state of the market.
What Steps Are Involved in the Liquidation of a Manufacturing Plant
So, what causes the liquidation process to require an average of two months to complete?
Frankly, if you want to get the most for your liquifying assets, you will need to complete several critical steps.
1. Contract Negotiation
Negotiating an equitable and legally sound contract will be critical for all parties involved in the liquidation. Having access to experienced, supportive, and responsive legal services can ultimately impact whether or not the exchange will be successful.
In the best-case scenario, all parties who are signing the contract will quickly come to turns and the liquidation process will then be able to begin in earnest. However, as you’d probably expect, there are a few things that can delay the contract negotiating stage, including delayed communications and disagreements regarding the terms of the contract.
Valuation is the lifeblood of the broader liquidation process. After all, without having a reasonable estimate of what a given asset is worth, it will be impossible for either party to determine whether they are getting a fair deal.
The amount of time it takes to complete the valuation process can vary. Liquidating businesses that have a larger body of assets will inevitably need more time in order to get fair estimates. And if these assets come from a wide range of classes or are relatively rare (meaning there will be fewer price comparisons to draw from), the process could extend further.
3. Process Completion
Before formal liquidation can actually be complete, it will be crucial for your business to finish any outstanding projects. Liquidation cannot be complete until the machines are no longer in use—otherwise, they might experience further depreciation which could potentially void the original the original valuation.
Additionally, any outstanding manufacturing will need to be completed in order to ensure that the staging process (as we’ll further explain below) can go as well as possible.
4. Marshalling and Staging
The marshalling and staging process is one of the most important components of liquidation—unfortunately, it is also the step in the process that many businesses tend to overlook. In the rush to sell your most valuable assets and liquidate your equity, it can be tempting to simply accept your first offer and move on. However, without effective marshalling and staging, not only will attracting a potential buyer be much more difficult but any offer you might end up receiving will be significantly lower.
This is especially true in the modern era, where a growing portion of industrial buyers begin—and end—their buying process entirely online. In order for a product, whether large or small, to be appealing to a prospective buyer, you will need to provide an accurate description, as well as an array of appealing photos.
And here’s another important detail you’ll want to keep in mind: it’s not just about making the product itself look good, but you’ll also want to make the space the picture is being taken in look good, as well. If you are not a professional stager or photographer, this might be one of the most important components of the process to reach out and get help.
Marketing will also play a pivotal role in the broader liquidation process. Even if you have state-of-the-art equipment, you won’t be able to get your money’s worth for that equipment until your potential buyers actually know it exists.
In highly specialized industries, the pool of potential buyers will often be rather small. In order for your marketing efforts to be effective, you will likely need to utilize multiple different platforms, including both digital platforms and in-person networks. In general, unless you already have an eager buyer, we recommend dedicating at least 3 weeks to your marketing campaign.
6. Asset Removal and Transfer
Before the liquidation process can be fully complete, you’ll need to move all material products from where they are right now to where they need to be. In many cases, this will involve a combination of transferring some assets to your own facilities (such as a new factory), while others will involve transferring all assets to new buyers. If any of your sales were international, the process will likely take at least a few more weeks.
Maximizing Value and Efficiency
Clearly, there are quite a few variables that can extend the liquidation. Anyone who is going through this process will have two competing needs: selling their assets as soon as they can and also getting the most money that they possibly can.
Navigating these competing needs won’t always be easy. But by working with the experienced Integra team, you can make sure you are getting the most equity possible while also working within a reasonable timeline.