Determining Fair Market Value for Manufacturers & Bankruptcy Auctions
Bankruptcy auctions for manufacturers can be highly varied as each manufacturer is different, which is true even in the same vertical. Machinery and equipment Appraisals bring their own special challenges, which must be dealt with early in the process.
The first order of business is to determine costs via an assessment and appraisal in order to develop real world numbers for inventory and equipment auctions. It may take as little as one day to walk a facility with a qualified appraiser being able to inspect about 20 CNC machines plus support equipment/tooling, warehouse, and office equipment.
These machines as an example would need to be researched with the process completed in a single day for the average manufacturer. This can vary when there are machines that are more complex or specialized, which could add 1 to four additional days. Once completed the appraiser will need approximately one day to write, review and complete the report. These are averages so it could take more or less time depending on the manufacturer and the assets.
Factors that need to be considered for inventory appraisals include (and are not limited to):
- Quantity of SKU’s and groups
- Intricacy of raw, work-in-process and finished goods
- Whether there are multiple locations where inventory needs to be assessed
Once again, as part of the preparation and appraisal process for bankruptcy auctions, inventory assessment time frames generally include:
- One day to speak with management, walk one facility, perform random counts and inspect the inventory.
- One day to review and understand the company’s financial information (sometimes longer, dependent upon the amount of available information).
- Two days to perform research.
- One day to write, review, and complete the report
One might conclude, then, that an appraiser’s quote for an appraisal, based on using an asset list or financial statements provided by the party seeking the appraisal should be fairly straightforward to calculate and somewhat uniform among several appraisers. However, because certain assets are more challenging than others, and multiple locations may need to be viewed, estimates among competing appraisers may vary significantly.
The more experience the firm has in working with manufacturers facing bankruptcy auctions the more accurate the appraisal can be for the inventory and equipment auctioneer the day of the auction. The process of determining fair market value is only the first step in planning successful bankruptcy auctions. A skilled liquidation and business auction firm that has the experience in manufacturing of all types can create a marketing plan and the outreach that draws in the right type of bidders to reach that valuation on the equipment and inventory.
By providing a customized solution for the liquidation process, the right firm can develop a plan that may use several different approaches to successful asset liquidation that go beyond bankruptcy auctions. The key is the ability to bring a varied and deep set of experiences in dealing with manufacturing assets in order to ensure that they are suitable for inventory and equipment auctions, or to develop another liquidation channel to ensure success.
Ideal Trading Corp is a liquidation company in New Jersey that offers services for businesses to convert their assets to cash. With extensive experience in commercial liquidation and auctioning, we provide outstanding results for business owners who are going out of business, facing bankruptcy and more. 973.343.6684 – Contact us today!