Ahead of the New Professionals forum event, Olivia Proudley of Proudley Associates discusses how insolvency practitioners and valuers can best work together.
Olivia will be part of a panel at the New Professionals Forum, discussing how the insolvency ecosystem fits together which looks at how strong cross-professional relationships contribute to successful outcomes. Register for the event here.
In distressed situations, value can disappear quickly. Delays, incomplete information and uncertainty over disposal routes can all reduce recoveries. While market conditions will always influence outcomes, the difference between an average realisation and a strong one often comes down to valuers and insolvency practitioners (IPs) working together from the outset.
In any insolvency appointment, maximising returns for creditors remains a central objective and duty. While the valuation, sale and disposal are often viewed as individual stages, the best outcomes are typically achieved when they are approached as an integrated process.
The difference between an average result and a great one is rarely down to market conditions alone. More often, it comes from clear instructions, speed of engagement and the quality of information shared between advisers.
Case example
One example from my experience, shows the benefits of this approach. It involved a small chain of gift shops whose director decided to cease trading and place the company into liquidation. Following a detailed review of the business, including an assessment of the existing stock levels, product mix, and the trading potential of each individual site, we concluded that an immediate bulk sale of the inventory would not maximise returns for creditors.
Instead, a structured programme of closing down sales across the stores was recommended, using a phased approach with progressively increasing discounts as the stock levels reduced. This strategy encouraged continued customer footfall while maintaining stronger margins during the early stages of the sales process.
By carefully managing the discounting and timing of the sales, we were able to maximise the value realised from the remaining inventory. As a result, the overall realisations were significantly higher than what would have been achieved through a bulk stock disposal in a closedown scenario.
Starting with the end in mind
When looking at the overall picture it’s worth bearing in mind that every appointment has its own dynamics. A solvent restructuring, administration, liquidation or fixed charge receivership will each present different objectives, constraints and stakeholder expectations.
Before a valuation exercise begins, it is important for the IP and valuer to establish several key points:
- What is the intended purpose of the valuation?
- Is the likely route a going concern sale, a break-up realisation or an orderly wind-down?
- Are there funding or time pressures that will influence strategy?
- Are secured creditors expecting an early indication of likely recoveries?
- Is there a realistic opportunity to preserve goodwill or trading value?
Understanding the intended outcome informs the valuation methodology and ultimately shapes the disposal strategy.
How to brief a valuer
The quality of the initial conversation directly affects both the speed and accuracy of the valuer’s advice. An effective instruction should ideally include:
- Details of the appointment and anticipated timescales
- Asset schedules, fixed asset registers and inventory listings – if the Company has them
- Management accounts and recent financial information where available
- Information regarding leases, ownership positions and finance agreements
- Details of any specialist machinery, intellectual property or sector-specific assets
- Existing expressions of interest from purchasers or management teams
- Access arrangements and key site contacts.
No appointment ever arrives with a complete picture and as valuers we are accustomed to working with imperfect information. However, early access to available records allows priorities to be identified quickly and reduces the risk of value erosion caused by delays.
The valuation process
Depending on the circumstances and whether the business continues to trade or not, IPs may require advice on elements such as market, forced sale going concern and break up values.
Providing a range of scenarios allows practitioners to make informed decisions and demonstrate a robust rationale to creditors, lenders and other stakeholders.
The valuation process is about more than establishing what an asset might achieve in a sale. It can help shape the wider strategy for the appointment and identify opportunities to preserve or enhance value.
For example, assets may command very different prices depending on how they are marketed and sold. Machinery assessed as part of a trading business may achieve a stronger outcome than the same equipment sold individually at auction. Similarly, intellectual property, customer relationships or specialist equipment may attract interest from buyers outside a company’s immediate sector.
Site inspections also provide an opportunity to identify assets that may have greater value than accounting records suggest, or conversely, assets whose condition or obsolescence significantly affects recoverability.
The earlier these issues are identified, the more options remain available.
Moving from valuation to sale
One of the most common causes of lost value is the gap between valuation and disposal. The disposal strategy should be considered during the valuation process rather than after it has concluded.
Questions that should be addressed early on include:
- Is there a viable going concern sale opportunity?
- Would a private treaty sale maximise value?
- Is an online auction process appropriate?
- Are there overseas buyers or specialist markets to target?
- Can assets remain powered, operational and demonstrated to buyers?
- Does the business possess intellectual property or customer relationships that require separate marketing?
Different assets require different approaches. A fleet of vehicles, a food manufacturing line and a software business will all attract different buyers and require different marketing strategies.
A disposal strategy should therefore be tailored to the case rather than standardised.
How IPs and valuers work best together
The most successful engagements share several common characteristics including:
Early engagement
Bringing valuers into discussions before formal appointment can often preserve options and protect value. Even a short period of continued trading or controlled marketing can materially improve outcomes.
Open information sharing
The faster information flows between teams, the faster decisions can be made. Regular updates regarding buyer interest, operational developments and creditor positions allow strategies to evolve as circumstances change.
A single commercial objective
While advisers may have different professional responsibilities, the objective is usually aligned: maximise recoveries while maintaining transparency and defensibility throughout the process.
When valuers understand the commercial priorities of the IP, and IPs understand the realities of the asset market, decisions become quicker and outcomes improve.
Disposal and completion
Once buyers have been identified and terms agreed, there are various practicalities to be dealt with.
This stage often includes elements such as asset collection and logistics, site clearances, health and safety considerations, export documentation, management of retention of title claims, coordination with landlords and site owners and reporting realisations against expected value.
Efficient management of all these elements protects value and ensures appointments can progress without unnecessary delay or cost.
Delivering the best outcome
Valuation, sale and disposal should be viewed as parts of the same process. The most successful insolvency engagements are those where valuers are brought in early, expectations are clearly defined and information is shared openly throughout the assignment.
For IPs, the question is not simply “What is this asset worth?” but: “How do we work together to maximise potential value?”
When that conversation starts early, the results for creditors, lenders and stakeholders are almost always stronger.
