We often imagine that buy out a struggling business is made with the symbolic euro, but it is quite another. Although it is true that this type of recovery requires less financial financing during the purchase, it still requires solid guarantees in the long term combined with a significant investment.
In addition, very often the buyer is not the only master of his decision. He often has to face the decision of a competent court.
Why choose to buy out a struggling business?
Buy out a struggling business represents an obvious advantage: its low cost of transfer. So if the reasons for these difficulties are identified and if they can be corrected, this operation can be a very good investment.
What do we mean by a company in difficulty?
In reality, there are several types ofcompanies said to be in difficulty with specificities for each case. One finds in a first category, the companies placed under amicable procedures, among which are included the ad-hoc mandate and conciliation. There are also those placed under collective proceedings : safeguard, accelerated safeguard, receivership and compulsory liquidation.
Judicial liquidation is in a way the most unfavorable status. Indeed, the liquidation of a company is done at the end of a long and complex process. The purpose of this statute is to optimize the conditions for the sale of its assets and the settlement of the receivables and debts it has contracted. The company found itself faced with such difficulties that it could not make the payment to its liabilities and declared itself in suspension of payments. Judicial liquidation therefore occurs when the reorganization plan has failed or has been impossible to implement.
Buying a company in difficulty: how to do it?
The first step to buy out a struggling business is to define what will be the scope of your offer: what you want to take back (tools, stock, premises, rental and leasing contracts, employment contracts, customer contracts, etc.). Once this has been done, it will be necessary to compare an economic value, that is to say the price proposed for the repurchase.
Due to the long and complex procedures, it should be noted that the takeover offer by an external buyer is taken into account quite late. Sometimes even more than a year after the opening of the procedure. This is a point to be particularly taken into account, because at this point the difficulties may have worsened, new ones may have appeared and caused the situation to become insurmountable (employee demotivation, lasting loss of customer confidence and / or suppliers, foreclosure of essential markets, etc.).
The trade-in offer must be publicly filed and contains a number of mandatory documents. The constitution of this file should not be left to chance because it determines your commitments (scope of recovery, sale price, terms of payment, etc.). The offer thus constituted, but also the candidate's profile, are examined with great attention by the court. He is in charge of verifying the seriousness of the offer and its feasibility.
In practice, the offer can be discussed by the court so that it is improved, for example on the amount of the purchase price or on the rights of employees born before the takeover (paid leave, hours of recovery …). The court, if it has several recovery files, will have to make a choice and choose the one that it considers the most solid. In short, he will choose the one that will offer a greater guarantee of job maintenance by clearing the liabilities as much as possible.
Balance sheet
We can see this clearly, once all the potentially risky elements are known, analyzed and anticipated, buy out a struggling business including liquidation, is not necessarily a risky bet.
This kind of project therefore requires a good estimate of the situation so as not to rush.
