Bankrupt Business?

[jiffybutler]

Hi there,
I am a young and aspiring entrepreneur looking to acquire a bankrupt business. I have no experience in this field and therefore need some tips on where and how
to acquire one, and if it's a good idea or not.

I appreciate any advice regarding this field.

Thanks.

Ashkan Akbari

[Freelancier]

Could be. It depends.

It depends on if it's a business you want to own.
It depends on whether the bankruptcy court -- if one is involved -- wants to sell it to you.
It depends on whether you have the cash to make it work when the previous owners did not.
It depends on whether the creditors want to negotiate with you for some of their money or just have the court liquidate the business.
It depends on whether the business has assets that make it worth the money.

It depends.

But get a lawyer to help you navigate the waters if you have to work with a bankruptcy court.

[ozetel]

Yes I have had some experience, although in Australia so many of the laws will be different.

Some underlying principles most definitely still the same though (along the lines of what Freelancier has said);

- you really need to know what you are getting into and make a very very well informed decision about the main question in my opinion. If it failed in the past, what do you bring to the table that stops that happening again? Why would it possibly be different?

Be prepared and able to lose money. Be ready to and be able to ask the difficult questions and more importantly be ready to accept the answers to those questions and get out or back away if that is what those answers suggest. If all those obstacles can be climbed over then ok, but this is not a situation you want to go into without absolutes.

My 2 cents from down under anyway!

[nealrm]

My first though was no, my second though is H____ no. Sorry buy a bankrupt business is almost always a very poor idea for a small business. What do you expect to gain from buying this business??? Do you want the the name - A name that will associate you with with a company that went out of business. Do you want the client list - there are cheaper ways of getting a client list. Do you want the fun of dealing with the prior owner's creditors - for $100 a month I'll call and leave you harassing messages.

My guess is that you want the equipment of the business. So don't buy the business, wait for the bankruptcy auction and then buy the equipment outright. No need to worry about the prior creditors or being associated with a bankrupt business.

[Harold Mansfield]

I've heard of buying the assets of a bankrupt company. And I've seen people invest to save a company from bankrupcty. But why would anyone want to purchase a business that has already gone bankrupt?

[nealrm]

Generally you buy a bankrupt business to get intangible assets. For example a brand name. It is why companies like Hostess have a market value even after bankruptcy.

[ArcSine]

Ashkan, taking over distressed / bankruptcy situations can be lucrative, and can be a nightmare. In the deals which come out winners, for the great majority of 'em the value which is created comes from obtaining concessions from the creditors and senior equity holders.

The ability to do so is a unique skill, not unlike being able to set fire to the other guy's house, and then getting him to apologize to you for having made it so flammable. If you've always had such a knack, then bankruptcy / distressed / turnarounds might be your ticket.

You'll also want to have excellent legal counsel on your side, as I'm sure you're already aware. It's very much driven by the complex bankruptcy and creditor laws, and you absolutely must be getting your advice from somebody who knows those laws cold. Ditto for the tax angles: those can be pretty involved and can swing the end result by a hefty margin.

Nealrm has a great point: First identify very carefully the valuable assets. Then map out your best route to those assets. A full-on acquisition of the entire entity might be the most efficient path, but then again there might be better ways to cherry-pick the jewels.



I have no experience in this field... Don't proceed until you've put in some serious homework time...this one's (http://www.hl.com/library/bsttcacs.pdf) just to give a sneak preview of coming attractions. Best of luck!

[huggytree]

do you want to buy ANY business?

or is there an exact type of business you want to buy???

the advice will all depend on what it is your trying to buy