Factors Impacting Auction or Liquidation

Each auction or liquidation can be significantly distinct from one another despite assets possessing close similarity. Some of the factors causing variation are location, time of year, condition of the assets, current marketplace, hazardous waste issues, landlord cooperation and the amount of time to conduct the sale.

• Type of Property to Be Sold
  Specialized equipment can have large swings in value based on limited customers in the marketplace, as well as, whether or not a buyer needs it now or not. If a buyer needs it now, the sale can garner very good returns. If not, the equipment will typically be sold for approximately 10% to 50% of its value. Other factors that can also affect value are potential maintenance issues, re-calibration or de-contamination requirements, software transferability, equipment that may need to remain running and operational, or equipment that may need to be properly shut down.

• Location of Sale
  The type of auction or liquidation can impact returns as well. A sale being held “onsite” in conjunction with an online webcast can typically achieve higher returns (approximately 10% to 20%, or higher in some cases), compared to only conducting sales online, or off-site. This is because assets show better in place or in use, providing buyers the opportunity to properly inspect, touch and feel, thus removing buyer speculation, which can often times causes conservative bidding.
  
  Auction/liquidation returns can also be challenged if the assets need to be relocated or consolidated from various locations, which often adds additional expenses. This can also have a negative effect on presentation, which can hinder achieving highest possible returns.

• Terms of Sale
  When it comes time to auction or liquidate, to help obtain the proposed estimated returns, one should opt to receive a “Cash Buy Out” or “Guarantee of Expected Returns.” These will help to eliminate any risk in the sale process.

• Qualifications of Auction Company
  To help achieve both the highest and most accurate returns, it is best to utilize a proven and seasoned auction company, with experienced auctioneers and support staff who truly understand the various assets for sale and who conduct sales on a regular basis. Also, they should have a deep understanding of the global marketplace, along with an expansive data base of companies, manufacturers, retailers, distributors, wholesalers, end-users and dealers (not just purchased lists).

Advantages of the Auction / Liquidation Process
Using the auction or liquidation process to sell assets can have many advantages:

• All attention is focused on marketing the seller’s assets to thousands of potential buyers (oftentimes globally).

• The process creates a deadline and sense of urgency, causing qualified buyers to compete amongst one another, knowing that the seller is taking serious action to sell.

• Auctions can exceed the price of a negotiated sale.

• Auctions eliminate long negotiations, numerous showings, potentially high maintenance and carrying costs and various unforeseen risks.

• Assets are typically sold “as is” with no contingencies.

• All assets are sold at the same time, often to individual buyers, providing the seller the benefits of a bulk sale.

• Upon conclusion of the Auction sale, the facility can be near or completely empty and broom swept, if required. (Please note, based on the facilities condition and potential environmental issues, this service can be very costly to perform).

* Mike Kletecka is an Auction Consultant with AAG – American Auctioneers Group, which has a 20 year history of conducting approximately 90 to 100 auctions annually with a 95% success rate in accurately determining estimated returns.