For some buyers (but not most), buying a distressed or troubled business can be the right move.
Buying distressed businesses are risky acquisitions – but with potentially great rewards.
Recently a client of mine bought a business which was so distressed/ troubled that it had been shut down altogether, or “mothballed.”
My client knew of the business because he had performed services for it, and he knew the former manager.
He believed that the business was sound, but had simply been steered into “rough waters.” He supposed the business was salvageable with a new name/ brand, a new facility, new capital and new leadership.
My client stepped in, assessed the business (or what was left of it), developed a business plan and acquired what assets of the shuttered business he could. And as far as I know, he has been successfully breathing new life into the organization since.
Assuming my client pulls this off, and can successfully grow the once moribund business, he will have acquired it for a fraction of what he would have paid for the business during better times. In the process he will likely also have added very substantial value.
I compare this type of business acquisition to trying to catch a falling knife. It is very risky and hence certainly not for everyone. But for those who can pull it off successfully, the rewards can be very substantial!
Over the years we have assisted many clients in connection with acquiring distressed or troubled businesses. Without doing a formal survey, I believe all of these buyers were able to successfully turn the businesses around and make a go of it.
Why? How? I believe that all of these buyers had enough industry experience that they were able to accurately assess and value the troubled business, buy it right, and then step in and make the operational changes necessary for the business to succeed. They also had sufficient resources to fund the businesses while they stabilized them and then turned them around.
Buying a distressed or troubled business can certainly be the right move, but this type of high risk project is certainly not for the inexperienced or the faint of heart!
Quote of the Week
One of the most difficult things everyone has to learn is that for your entire life you must keep fighting and adjusting if you hope to survive.
No matter who you are or what your position is you must keep fighting for whatever it is you desire to achieve.
~ George Allen, Sr., NFL Coach