What are Asset Auctions?

Asset auctions are auctions that specifically deal with the sale of assets owned by businesses. In some cases, the auction is held to dispose of company assets as part of a business liquidation. At other times, the auction is held as a means of selling off assets that are no longer important to the core business operation, allowing the company involved to remove the surplus from its inventory. In either situation, the goal is to obtain the best possible price for each asset that is placed on the auction block.

One of the more common applications of asset auctions is the sale of assets that were once of use to a company, but are no longer required for some reason. For example, a business that has determined to combine manufacturing functions that were once managed in two separate facilities into one location will typically wish to dispose of at least some real estate and equipment as a result of the merger. In this scenario, holding an asset liquidation auction makes it possible to quickly and easily dispose of the facility and equipment that is no longer needed by the business. By doing so, the company is able to reduce its tax burden, lower its equipment inventory and divert the proceeds from the auction into some other area of the business operation.

It is not uncommon for asset auctions to be utilized when business owners choose to shut down a business operation or are forced to do so as part of a bankruptcy action. In this scenario, the goal is to sell off the assets of the business to the highest bidder. Depending on the nature of the assets, the auction may involve selling everything as a combination deal, or offering the various assets for sale individually.

Corporate raiders often make use of asset auctions after securing controlling interest in their target companies. This is particularly true when the object is to dismantle the business and earn a profit from the takeover by incrementally selling off the company’s assets. Here, the strategy makes it possible to quickly arrange for the sale of individual assets, and possibly even selling off the shell of the company once it has been stripped of all or most of its assets.

Using asset auctions to manage the quick and orderly disposal of assets has several advantages. Typically, auctioneers can aid in publicizing the auction and qualifying buyers in advance. This means that the participants in the auction are highly likely to be interested and the bidding is likely to be brisk. While the auctioneer will receive a percentage of the sale in return for his or her efforts, many companies find that using an asset auction approach yields greater returns that easily offset the auctioneer's fees while still allowing the business to receive an equitable amount from the sale.