Buying the business and assets of an insolvent company:

Sale at underperformance stage:

• Not yet reached formal distress.
• Seller will often be considering refinancing with lenders or raising capital to improve performance.
• Any sale will likely operate in line with traditional M&A practices, pricing and costs.

Sale at distress/crisis stage:

• Not yet entered into formal insolvency process but creditors likely circling and threatening to place company into a process.
• Timescales will be more pressured due to creditor pressure, cash flow and funding issues.
• Likely that sale will take place involving an insolvency, potentially using a pre-pack administration where insolvency practitioners are lined up, the sale is negotiated in advance, administrators are appointed and sale is completed immediately afterwards.
• Risks for buyers as businesses and/or assets sold as seen and without warranties but maximum discount available.

Sale at failure stage (out of an insolvency process):

• Creditors or board of directors have placed company into insolvency process.
• Administrator sells business and assets of insolvent company during appointment.
• Appointment of administrator and ongoing administration process may erode confidence of suppliers, customers and employees, which may impact on value.
• As with a pre-pack sale at distress/crisis stage, risks for buyers as businesses and/or assets sold as seen and without warranties but maximum discount available.