Forums: Discussions for entrepreneurs and small business.

I would like to learn more about buying a bankrupt company. I would appreciate any feedback about how to find companies for sale or especially anyone`s experience with actually buying a bankrupt company.

Also, if I missed a topic already covering this topic if you could point me to it I would greatly appreciate it.

Why buy a bankrupt company?

Companies that have gone under for whatever reason can offer a significant opportunity at a very reduced cost. Often creditors just want to get whatever they can out of a bad loan and they are willing to sell Assets through an auction.

When you buy the company you also get employees, supplier relations, and a whole lot of issues that, in my opinion, can be easier to fix then trying to learn by making the mistakes yourself.

Here is an interesting article I read about it yesterday:
http://findarticles.com/p/articles/mi_m0DTI/is_n8_v26/ai_210 31164

Also, I know I want my own business, but I don`t know what type of business to start. Given my background as an analyst and manager I feel that it would be easier for me to find out about companies and research their profit potential then to think up the idea myself.

Okay...that makes sense. :-) I don`t know much about buying companies, but the question came to mind. Thanks.

I would be very cautious on the purchase of a bankrupt company.

the underlying reason could be a lawsuit

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Daniel Stewart Bilsi 4050A Sladeview Cres. Mississauga,Ontario L5L 5Y5 www.bilsi.com

The idea of bankruptcy is that a company is unable to pay its creditors. If a lawsuit is the reason for driving a company under then the court may determine to sale the business to satisfy that lawsuit. The court will also determine who gets money from the proceeds of the sale.

As the buyer you are protected from all creditors, which is what is quite interesting. In essence you get a fresh start financially.

The main risk is that if the practices of the company are what brought on the lawsuit and you don`t change those practices you are destined to repeat the fate of the previous owners.

I don`t know all the ins and outs, which is why I was hoping to find someone with some experience with the topic.

Is there anything, maybe in a Google search, under something like "business brokers?"

I know people list their businesses for sale, often in newpaper classifieds. I think it`s often because they want to retire. I`m wondering if there might be some brokerage houses who specialize in selling bankrupt business as a way to maybe satisfy previous creditors?

HI,

 

You seem to be wearing rose colored glasses.  I’ve worked for several companies that went bankrupt and nobody wanted to buy these companies.   Here are some of the real issues you need to consider.

 

Lawsuits!  Many bankrupt companies are buried in lawsuits.  Either they owe money to somebody or somebody owes them money.  I worked at one company for example, where the owner tried to sell off his interests in his company to a large conglomerate.  The conglomerate did a three month study of our business.  At the end of that period, the conglomerate withdrew its buy offer.  Their on site rep cited the large number of lawsuits the company was entangled in as the main reason for withdrawing. 

 

He also noted that many of our customer accounts were substantially in the arrears, our on hand inventory was out of control ( $50,000.00 of working inventory and $350,000.00 of useless inventory ) and many of our suppliers would never do business with us again.  He further stated that repairing our company’s reputation would be a major undertaking.

 

Also, many of the good employees had left the company.  This left only a few good employees and a bunch of losers.

 

And, contrary to your statement, many of our creditors were not willing to negotiate a lower settlement to resolve our accounts.  That may work in buying a house that has been foreclosed on, but in very few other places.  

 

These are the real issues you face when you buy a bankrupt company. 

 

 

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The older we get, the more excuses we make for not chasing after our dreams. But truth is, goals are attainable at any age.