When you envision selling your company, you hope it’s healthy and in the most appealing state for buyers in the market. Unfortunately, that’s not always the case. The economic adage “sell high, buy low” is not applicable when one is required to sell a distressed entity.

Generally, a distressed entity needs to rely on non-tangible assets to yield the optimal value. For example – customer list, intellectual property, management team, etc. A few things to consider when trying to sell your distressed entity:

Be candid: do not hide the problems. Once the buyer commences the due diligence, they will find the issues and then some, so be forthright.
Be realistic about the enterprise value: If possible, have a professional valuation performed on the business.
Highlight your strengths: Perhaps you’re not in the most financially stable position, but your executive team may be a critical component of the team that can take your company to the next level.
Work with a proven counsel and financial advisor: More than likely this will not be your current tax preparer of corporate counsel – you need professionals that are aware of all the nuances of these transactions.
If the company is in distressed, do not delay in your decisions: Time is the #1 factor.
Be prepared: Have all the financial statements, corporate information, and operational information available to the potential buyers in a professional format and structure.
Don’t lose hope or focus: Selling a distressed entity requires a lot of time and focus. You can’t drop everything to try and sell your business otherwise it will further decline. Keep morale up and work on improving your business as much as possible during the process.