Methods of Liquidation (GOB, going concern, open market sale, public auction, etc.)

Last Updated: Jun 7, 2019

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Methods of Liquidation:

Method of Liquidation refers to the style of liquidation chosen which is based on the financial position of the company and the time remaining to liquidate the business assets. Methods of liquidation include going concern, public auction, orderly liquidation, and GOB. Going concern sale is the sale of an entire business including tangible and intangible assets and is generally considered the preferred method of liquidating a business. Going concern value is the value of a company under the assumption that it will continue to operate for the foreseeable future. This is in contrast to liquidation value, which assumes the company is going out of business. The difference between going concern value and liquidation value consists of intangible assets and goodwill. If the going concern sale is not possible, the liquidation approach is required.

The liquidation approach is primarily about time. If the business is in default of any of its financial obligations, the bankers pull the trigger on a forced liquidation. In this case, there is very little time, so you have to assume an immediate shutdown of operations and sale of the assets. The forced liquidation value refers to an opinion of the gross amount, expressed in terms of money, that typically could be realized from a properly advertised and conducted public auction, with the seller being compelled to sell with a sense of immediacy on an as-is, where-is basis, as of a specific date. The orderly liquidation value takes place over a longer period of time than an auction sale and allows for additional time to locate buyers for the assets. The orderly liquidation value is an opinion of the gross amount, expressed in terms of money, that typically could be realized from a liquidation sale, given a reasonable period of time to find a purchaser (or purchasers), with the seller being compelled to sell on an as-is, where-is basis, as of a specific date.

A going out of business sale is any offer to sell to the public or a sale to the public of goods, wares, or merchandise on the implied or direct representation that such sale is in anticipation of the termination of a business at its present location or that the sale is being held other than in the ordinary course of business. The GOB terminology is utilized for retail stores.

These definitions were provided by Mike Goldstein, Managing Director, Heritage Global Valuations