The current virus outbreak is creating unprecedented challenges for all businesses.
Even though the Government has announced financial measures, many property businesses will be looking for opportunities to prevent rapidly declining cash flow this year and into 2021.
One key way that property businesses can build a resilient balance sheet for next year is by reviewing their assets now.
Disposing of non-core assets can free up cash and reduce the complexity of a business. It allows senior management to spend their time improving their core business without distraction.
What are non-core assets?
A non-core asset can be any kind of asset that’s not essential to generating revenue and the core business operations of a company. This might be a property or a factory that is no longer being used or not in line with your core and more profitable strategy.
How should we deal with an underperforming non-core asset?
Spotting a non-core asset early will help realise maximum value rather than when it has been underperforming for a long period. Do not let emotions get in the way, divestment should be a strategic tool to focus on the key areas of value in the business. Planning for a sale should typically start at least 6 months before you realise the investment in order to give yourself a good timeframe to achieve the value/result you want.
So how do you find an ideal buyer of a non-core asset?
If the non-core asset is not a property, does the asset have the potential to stand alone, be used as a platform for a buy and build or have any synergetic potential with any other trade/businesses?
Finding the ideal buyer of a non-core asset can vary depending on where such assets would most likely succeed. Non-core assets can be sold to PE funds, trade and can be acquired by local management by way of a management buyout.
Article written by Sandip Khroud, Corporate Partner at Gateley Legal in Leeds. Sandip advises on all aspects of corporate finance work.