3 Types Of Equipment Liquidation Valuation Concepts

The Liquidation of a company often has negative connotations, most typically from a seller’s perspective. Though, this is not always the case. Depending on the circumstances surrounding the liquidation, the selling party may receive a favourable monetary return on their equipment/assets.

 

Typically referred to as ‘Liquidation Valuation Concepts’, this defines the monetary return a seller will potentially receive on their assets. This depends on factors such as the condition, location and the timeline for marketing and removal of the equipment. Therefore, it’s vital to define the different types of ‘Liquidation Valuation Concepts’ to better understand the valuation and liquidation process. 

 

Types of Equipment Liquidation Valuation Concepts

 

Fair Market Value (FMV)

This can be defined as the most probable estimated price for the asset based on the current market conditions. Fair Market Value is used when neither the buyer nor the seller are forced to part with an asset. In this case, the seller often gets the best return on their equipment as it is a willing exchange for both the buyer and seller. Both parties are fully aware of all facts regarding the equipment at the time of purchase. Fair Market Value is not typically used in a bankruptcy/insolvency situation.

 

Orderly Liquidation Value (OLV)

This liquidation method is used when a company is forced to sell its assets. In this case, the company has a longer timeline to sell said assets - typically six to twelve months. This allows the seller more time to connect with potential buyers, create more in-depth marketing campaigns, among other things to possibly garner a higher monetary outcome. Orderly Liquidation Value can often bring a higher return than Forced Liquidation Value, but it is not always a viable option.

 

Forced Liquidation Value (FLV)

This is the most common liquidation method when a party is forced to sell their assets in a tight timeline, often thirty to sixty days. This is usually accomplished through an aggressively marketed auction where assets are awarded to the highest bidder. The monetary return in this situation often relies on location, removal options, current market trends, along with overall appearance and condition of the assets. In a Forced Liquidation Value scenario, the buyers are responsible for the removal of their purchased assets at their own expense and all assets are purchased ‘as-is, where-is’.

 

With the knowledge of these three main Liquidation Value Concepts, a company can make an informed decision as to what can bring the best return, considering their current situation and timeline.

 

Infinity Asset Solutions is a global leader in the field of Industrial & Commercial Auctions, they are a full service asset solution provider ready to help you obtain the best value for our assets. Our services include machinery auctions, appraisals, audits, financing and liquidations. Contact us today to obtain the best value for your assets!