Purchasing a Business in Bankruptcy

On Behalf of | Nov 7, 2019 | Firm News |

Purchasing a business out of bankruptcy can be risky. However, investing in a bankrupt business, when done correctly, can reap substantial rewards.

Buyers of bankrupt businesses have the advantage of buying a business that is cheaper than starting from scratch, or one that is doing well. The business assets are sold free and clear of liens. Another advantage may be the assignment of contracts and leases to the buyer. Furthermore, even though the business is insolvent, its personal property is also sold with it.

The buyer in a bankruptcy sale can acquire all the assets that are necessary to run the business in one single purchase, such as the personal property, as well as contracts and leases. However, since the business once failed, it is important that the new owner avoid the same mistakes.

Buying a business in bankruptcy requires capital to fund the costs of hiring accountants and lawyers to purchase the business, as well as cash to pay for the acquisition. Once the business has been acquired, it is essential to employ a strategy to stay in business and prevent another bankruptcy.  Certain strategies that may help include:

Acquiring Expertise. Buy a business in which one already has expertise or acquire the expertise necessary. Expertise can provide deep knowledge of the market so that one knows the risks and guarantees of the business to manage it better.

Timing. Once the decision is made to buy a bankrupt business, act quickly to acquire it before it deteriorates further due to the resignation of key employees, and sell off shares by investors or liquidation.

Make Appropriate Investments. Bankrupt businesses may require additional investments of money, time, resources, and patience. The new owner may need to invest additional monies for a considerable time before the business is able to turn a profit.

Draft a Business Plan. Create a business plan after conducting research on the company. The plan should design ways to tackle the issues the company faced to avoid failing again. Also, the plan should address the changes to be implemented in the company. Figure out what worked in the business and include it in the plan, along with changes to be implemented.

When considering acquiring a business in bankruptcy sale, consult with a Philadelphia business lawyer to guide you through the process.

Philadelphia Business Lawyers at the Harty Law Group Help Clients in All Types of Business Matters

The Philadelphia business lawyers at the Harty Law Group have considerable experience in business acquisitions and handle all types of acquisitions for their clients. The process of acquiring a business in a bankruptcy can be challenging; it is crucial to employ the advice of dependable and thorough lawyers. Contact us online or call us at 267-383-3899 today for an initial consultation. Located in Philadelphia and Haddonfield, New Jersey, we serve clients throughout Pennsylvania and New Jersey.