“Prep for Sale – Fixed Assets”

August 16, 2011

“What can you possibly do to improve fixed assets in prep-for-sale?”

Manage the portfolio better… maintain the equipment … organize the equipment for most effective use…

Buyers acquire future earning capability.  A well-organized, well-maintained fixed asset portfolio is the basis for future profitability.  Fixed assets include all plant assets – whether owned or leased.  Leased assets are included, since if properly used in the operation, they will contribute to future profitability.  Let’s examine leased and owned assets: 

·      Leased assets:  Factors that affect business valuation would include, serviceability (condition, technical obsolescence, utilization) and length and terms of the lease.  A well-managed leased asset will have a reasonable utilization ratio, and be technologically consistent with the company needs.  Some examples…

If you have a long-term leased production facility that is nearly 100% utilized, this is a potential cost to a buyer.  Relocation and lease termination costs may be expensive, and these costs will be considered in a valuation.  Examine your leased asset portfolio from a potential buyer’s point of view and position your lease portfolio to their best advantage, ideally without excessive cost (e.g. negotiate an option on additional space…).  Match the service requirements to the lease terms …