Equipment Appraisal Blog | Understanding Machinery Appraisals

Understanding Levels of Equipment Values When Selling a Company

Posted by Equipment Appraisal Services on Fri, Sep 04, 2015 @ 11:00 AM


The price you would be willing to accept if you were selling a company is highly related to your motivation for selling your company. If someone came up to you and held a gun to your head, you would probably agree that any price they suggested was reasonable.  If you were a billionaire and decided you were tired of one of the companies you owned, you could take your time and wait until you got the price you wanted.

Before selling a company with assets that include expensive machinery and equipment, it is important to know the machinery and equipment values. A machinery and technical specialties (MTS) appraiser is the person to call because he or she has the specific knowledge and expertise it takes to accurately determine machinery and equipment value. A professional equipment appraiser will do a thorough analysis of the equipment, taking into account its age, condition, replacement cost, and many other factors. In addition to the in-depth analysis of the machinery and equipment, the reason for selling a company will help the appraiser provide you with the most accurate equipment appraisal.

Levels of Machinery and Equipment Values

Levels can be thought of as reasons for selling a business. While there are many nuances to machinery valuation, most sales can be categorized as being sold at fair market value, at an orderly liquidation value, or at a forced liquidation value. Each of these values take into account the uses for the equipment, the compulsion to buy or sell, and the time that you have to sell.

Fair Market Value

Used machinery equipment appraisals are opinions and the value quoted is a starting point for negotiation between the buyer and the seller. It is natural for some tension to exist between the two parties to any negotiation. If a buyer is in desperate need of a seller's equipment, the seller can usually negotiate a higher price. If the seller "needs" to sell equipment, the buyer may get the equipment for a bargain. When a willing seller and a willing buyer are under no compulsion to buy or sell machinery or equipment, a machinery and equipment appraisal can help to establish a fair market value and facilitate a sale. 

Example: A seller could command top dollar for his machinery under the following scenario. A crucial piece of machinery breaks down and halts the production line. For every day the machinery is down, the company loses $10,000. The owner of the manufacturing company finds out that it will take three months to fabricate a new machine. So, he scrambles around and finds another manufacturing company that has the same type of machine. Under normal circumstances, the machine may have a fair market value of $50,000, but because the buyer is in a desperate situation, the seller can ask and get $70,000 for his machine.

Orderly Liquidation

In an orderly liquidation, the seller has a reasonable amount of time to sell the company's machinery and equipment. A machine appraiser would consider the date at which the machinery must be liquidated and the reasonable valuation that would attract a willing buyer within that time period. An example of the need for an orderly asset liquidation might be an owner who wants to retire by a certain date and will need the proceeds of the sale to buy his luxury condo in Miami Beach.

Forced Liquidation

A machine appraisal would probably come in at the lower end of the spectrum when the sale of a machine is mandatory and not a matter of choice. A judge in a bankruptcy case may order the machinery, equipment, and other assets of a company to be liquidated in an attempt to compensate unpaid creditors.

Equipment appraisers are careful to examine all the factors that go into the value of equipment. Sometimes, why you are selling is almost as important as what you are selling.

Tags: equipment values, equipment appraiser, selling a company