Business valuation for insolvency and administration
Insolvency valuations turn on the premise: going concern, orderly liquidation or forced sale. The same assets produce materially different numbers under each, and stating the premise clearly is the whole discipline of the exercise.
Administrators, liquidators and secured creditors need numbers quickly and need them defensible, because the decisions that follow — trade on, sell as a going concern, or realise the assets — are made on them and reviewed afterwards.
The brief
Who reads it, and what it has to satisfy
The purpose sets the standard of value, the level of documentation and the person the report has to convince. Getting that wrong is the most common reason a valuation is rejected.
The administrator, liquidator or receiver, the secured creditor, and creditors generally through the statutory reporting.
Stated explicitly by premise — going concern value, orderly liquidation value or forced sale value.
The appointment date, or the date the decision being supported is made.
What the report must contain for this purpose
- The premise of value, stated at the front and applied consistently
- A separate figure for each premise where the decision requires a comparison
- Assets inspected and valued rather than taken from the register
- Security interests, PPSR registrations and retention of title identified
- Employee entitlements and priority claims quantified
- The realisation timeframe assumed, and its effect on the numbers
Sequence
How an insolvency valuation runs
Speed matters, but the premise matters more. The first conversation establishes which question is being asked.
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01
Establish the premise and purpose
Trade-on assessment, going concern sale, DOCA comparison or asset realisation. Each needs a different premise and sometimes several.
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02
Inspect and schedule the assets
Plant, equipment, vehicles, stock and property inspected and valued at market, with encumbrances and third-party interests identified.
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03
Assess the business as a going concern
Where a sale of the business is possible, what a purchaser would pay for it operating — usually materially more than the sum of the assets.
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04
Report the comparison
The realisation outcome under each premise, with the assumptions and timeframes stated, so the decision and the reporting to creditors rest on something.
Where it goes wrong
Where distressed valuations go wrong
These are the issues that later attract questions from creditors, courts or a subsequent liquidator.
Why the premise decides everything
A workshop of plant might realise $2.4m as part of a going concern sale, $1.7m in an orderly liquidation over three months, and $900,000 at auction in a fortnight. All three can be correct. A report that does not say which one it is answering is not usable.
- An unstated premise A single number with no stated premise is meaningless in an insolvency context. The same fleet can differ by 30 per cent or more between orderly and forced sale.
- Assets valued from the register Written-down book values are irrelevant in a realisation. Only inspected market values, with a realistic sale channel, are useful.
- Third-party interests missed Retention of title stock, PPSR-registered equipment, leased plant and supplier-owned assets are routinely on site and not available to the estate.
- Unrealistic timeframes An orderly liquidation value assumes a reasonable marketing period. If the landlord requires vacant possession in three weeks, that is a forced sale and should be valued as one.
- Going concern value ignored Where a business can be sold operating, that value usually exceeds asset realisation substantially. Not testing it is a decision creditors are entitled to question.
What we need
Documents for this engagement
Insolvency engagements frequently start with incomplete records. We work with what exists and document formally what was not available.
Open the standard checklist →- Appointment documents And the scope of what is being assessed
- Most recent financial records Whatever exists, however incomplete
- Asset register and site list Locations, access arrangements and site contacts
- PPSR search results Registered security interests over the assets
- Finance, lease and supply agreements Chattel mortgages, hire purchase, retention of title terms
- Employee entitlement schedule Accrued entitlements and priority position
Orderly liquidation assumes assets are sold individually over a reasonable marketing period to the best available buyers. Forced sale assumes a compressed timeframe — an auction within weeks, often with site access constraints. The difference between the two is routinely 30 per cent or more, which is why the report states the assumed timeframe rather than just the number.
We hold urgent capability for appointments and can usually attend within days. Tell us the constraint — a landlord requiring possession, an auction date, a statutory reporting deadline — and we will schedule backwards from it.
Yes, and in most administrations both are needed. A going concern sale usually realises materially more than asset realisation, and the comparison between the two is exactly what creditors and the courts expect an administrator to have tested.
We identify what we find on inspection and against the PPSR searches provided — retention of title stock, leased plant, supplier-owned equipment and financed assets. Determining the legal effect of those interests is the practitioner’s and their lawyer’s work; identifying and quantifying them is ours.
It is written on that assumption. Premise stated, methodology set out, inspection documented, assumptions and limitations disclosed, and a signed valuer declaration. Insolvency reports are read by people looking for a reason to disagree, and they are prepared accordingly.
Reviewed by a Certified Practising Valuer
Reviewed by Jarrad Khoury, Director and Head of Valuations — Registered Valuer (QLD, Not Limited), Licensed Valuer (WA, Not Limited), CPV and CBV. Published by Business Valuations Brisbane, the business valuation division of Asset Valuations Group.
Last reviewed
Get the premise right, then the number.
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