Taking over a healthy company provides certainty: you will know that there are profits to be made. But taking over an (almost) bankrupt company can also have advantages. It reduces the price, for example. What should you consider as a buyer? And do you opt for a relaunch or an acquisition? 

Bankruptcy: what is the cause?

A business can fall on hard times for many reasons. Sometimes it is a matter of poor management or declining demand, but often enough external factors come into play. Consider, for example, the effects of the corona crisis in the hospitality industry and all kinds of contact professions.

Thus, a relatively healthy company may still be in trouble. For those who want to start a new business, such a company can be a godsend. At a lower price, you can then take over a company that has been running well for a long time. This still provides some degree of security.

Then you have a choice: will you go for a relaunch or an acquisition? We have listed all the pros and cons for you.

Benefits of a relaunch

When you opt for a relaunch after bankruptcy, you are going to meet with a trustee. This has advantages and disadvantages. 

• No liabilities - In a relaunch, it is common to take over only assets and liabilities, not debts and all other obligations, such as staff and long-term contracts. 
• Lower price - The value of the business is greatly reduced, after all, it is bankrupt. In addition, you can choose what to take over and what not to take over, so you have a big impact on the acquisition cost. 
• Cherrypicking - In a relaunch, you choose what to take over and what not to take over. The debts stay in the company; you take over only the healthy parts. So you know exactly what you are buying.

Benefits of an acquisition

Even though the price is lower when you choose to relaunch with a company that has been declared bankrupt, there are also arguments for choosing a takeover anyway.  

• Direction - You are negotiating directly with the seller. You therefore have more control over the process than in a relaunch. This gives you room to negotiate a good price.
• Continuity - In an acquisition, the business can usually continue to operate during negotiations. So there is still revenue being generated that will benefit you as the buyer later. 
• Image - Bankruptcy does considerable damage to a company's image. A business takeover can be done in complete anonymity - no one needs to know how the business was doing.
• Sole party - Whereas in a relaunch there are often several privateers on the coast, in a takeover you are the sole negotiating party. This takes the pressure off and provides a good negotiating position.

Relaunch versus acquisition

So whether it is better to take over a business or have it relaunched depends on a variety of factors. In any case, weigh the following aspects against each other.

1. Healthy company or not?

The state of the company may be leading. The healthier the company, the more advantageous an acquisition. After all, in a business transition, you have the advantages as well as the burdens. If the company is relatively healthy, then continuity is of great importance, so that the business can continue to run as usual.

Was the bankruptcy due to internal factors, is there turmoil in the company or a lot of debt? Then you may be better off choosing to sit down with the trustee for a relaunch. Keep in mind that the company's image takes a big dent in bankruptcy. 

2. Price

An acquisition of only assets and liabilities is obviously cheaper. Plus, you can choose what you do and don't take over, so you know exactly what kind of meat you have in the tub.

3. Check

Still, it doesn't always have to be the case that you pay top dollar in an acquisition. You are the only one at the negotiating table, which means more control over the process. You are in control.

A process with a receiver sometimes takes a long time and is often difficult. Also, there are often several parties involved with the same goal: forcing a relaunch. 

Are you considering taking over an (almost) bankrupt company? A successful relaunch or takeover can only succeed if you are well prepared. Our advisors have years of experience with all types of takeovers. Please feel free to contact us.