Can You Sell a Distressed or Struggling Business?

Yes, a struggling or distressed business can still be sold if a buyer sees value in its assets, customers, contracts, employees, intellectual property, brand or turnaround potential. The sale may involve the whole company, selected assets or a formal insolvency process. If insolvency is a realistic concern, directors should obtain qualified insolvency and legal advice early because creditor interests and directors’ duties become increasingly important.

A company does not have to be highly profitable to attract a buyer. Its customer contracts, employees, intellectual property, stock, equipment, property, brand or market position may still have value. Another owner may also believe they can improve performance by reducing costs, introducing capital or combining the business with an existing operation.

However, a distressed business sale is different from selling a healthy company.

The buyer pool is usually smaller, the price may be lower and the transaction may need to move quickly. Directors must also consider creditors and their legal duties if the company is insolvent or approaching insolvency.

The earlier you seek qualified advice, the more options may remain available.

Can you sell a struggling business?

A struggling business can be sold if a buyer believes that its business, assets or future opportunities are worth more than the cost and risk of acquiring them.

A buyer might be interested in:

• Profitable parts of the company
• Customer relationships
• Contracted revenue
• Employees and specialist skills
• Intellectual property
• Stock and equipment
• Property or licences
• A recognised brand
• Geographic coverage
• Market access
• Turnaround potential
• Synergies with another business

The transaction may involve selling the company’s shares, selling selected assets or completing a sale through a formal insolvency process.

If the company cannot pay its debts when due or has liabilities exceeding its assets, it may be insolvent. Government guidance says insolvency does not automatically mean the company must stop trading, but professional advice should be obtained before deciding what to do next.

Distressed business sale options at a glance

Is the business struggling, distressed or insolvent?

These terms are sometimes used interchangeably, but they describe different levels of financial difficulty.

Struggling business

A struggling business may be experiencing:

• Falling revenue
• Reduced margins
• Loss of a major customer
• Rising costs
• Employee shortages
• Poor cash conversion
• Temporary losses
• Owner fatigue
• Operational disruption

It may still be able to pay its debts and have sufficient assets.

Distressed business

A distressed business faces significant financial or operational pressure and may need funding, restructuring or a sale to avoid a more serious outcome.

Warning signs can include:

• Regularly missing payment dates
• Using new borrowing to meet existing liabilities
• Persistent cash-flow shortages
• Tax arrears
• Supplier pressure
• County court judgments
• Breached loan terms
• Reduced credit limits
• Employees or landlords not being paid on time
• An inability to fund essential stock or wages
  
  

Insolvent business

Government guidance describes a company as insolvent where it cannot pay its debts on time or has more liabilities than assets on its balance sheet.

Once insolvency becomes a realistic concern, directors’ priorities change. They must protect company assets, treat creditors appropriately and avoid worsening creditors’ position. These duties continue whether the company is still trading or has stopped.

What our experts say:

Do not diagnose insolvency from one late payment

A short-term cash shortage does not automatically mean the company has no future.

Equally, continuing to trade because next month “might be better” can increase losses and reduce the options available.

Directors should obtain current information covering:

• Cash available
• Amounts due to be received
• Wages and taxes falling due
• Secured and unsecured debt
• Supplier arrears
• Asset values
• Forecast trading
• Contingent liabilities
• Personal guarantees
• The realistic cost of completing current work

A licensed insolvency practitioner and suitably experienced solicitor can then advise whether the company remains viable and which routes should be considered.

What makes a distressed business sellable?

A business in difficulty is more likely to attract a buyer when it has identifiable value that can survive a change of ownership.

A profitable core operation

The company may be making losses overall while one product, location or division remains profitable.

For example:

• One branch performs well while two are loss-making
• Core customers remain profitable but overheads are too high
• The main operation works but debt repayments are unsustainable
• A growing division is being held back by historic liabilities

A buyer may acquire the viable part rather than the whole company.

Reliable customers or contracts

Customer relationships can be valuable where:

• Revenue is recurring
• Contracts are transferable
• Customers are likely to remain
• Margins are attractive
• The company has a strong market reputation
• Relationships are held by the team rather than one departing owner

The buyer will examine whether contracts can be assigned and whether customers can terminate following a sale or change of control.

Valuable employees and expertise

A trained workforce can be difficult and expensive to recreate.

A buyer may value:

• Technical specialists
• Industry accreditations
• Sales relationships
• Operational knowledge
• Management capability
• Security clearances or regulated expertise

Employment obligations and TUPE may apply in a business or asset transfer, depending on the circumstances.

Intellectual property

A distressed company may still own valuable:

• Software
• Patents
• Trade marks
• Designs
• Databases
• Domain names
• Copyright
• Proprietary processes
• Product documentation

The buyer will want evidence that these rights belong to the company and can be transferred.

Assets with resale or operational value

These may include:

• Property
• Machinery
• Vehicles
• Stock
• Tools
• Specialist equipment
• Customer deposits
• Work in progress
• Licences

Assets should be valued realistically. Book value may differ substantially from market or forced-sale value.

Strategic value to another company

A competitor or adjacent business may be able to:

• Remove duplicated overheads
• Combine locations
• Cross-sell to customers
• Use spare capacity
• Integrate employees
• Improve purchasing terms
• Add new services
• Acquire market share

The distressed business may therefore be worth more to a strategic buyer than to a standalone owner-operator.

Distressed business value drivers

Who buys distressed businesses?

The likely buyer depends on what remains valuable and how urgently the transaction must be completed.

Trade buyers

Competitors, suppliers and related businesses may be interested because they understand the sector and can integrate the operation.

A trade buyer may value:

• Customers
• Employees
• Geographic coverage
• Equipment
• Contracts
• Intellectual property
• Market share

It may also be able to move more quickly than an inexperienced buyer because it already understands the industry.

Turnaround investors

Some investors deliberately acquire underperforming businesses.

They may look for companies with:

• A viable core operation
• Temporary rather than permanent problems
• Opportunities to reduce costs
• Strong assets
• Capable management
• A realistic route back to profitability
• Sufficient working capital

These buyers normally expect the price and deal structure to reflect the risk they are taking.

Private buyers and entrepreneurs

An individual buyer may see an opportunity to improve the business personally.

This is more likely where:

• The company is relatively small
• The operational model is understandable
• Funding requirements are manageable
• The owner can provide a handover
• The causes of distress can be corrected

A private buyer may find funding difficult if the company is loss-making or has limited security.

Existing management

A management team may understand the business and believe it can operate more effectively under new ownership.

An MBO can offer continuity, but funding may be difficult and any proposed transaction must be independently and properly structured where insolvency is a concern.

Customers or suppliers

A customer may want to protect an important supply source. A supplier may acquire the company to preserve demand, move closer to end customers or recover value from a key relationship.

Asset buyers

Some buyers are interested only in individual assets, such as:

• Machinery
• Stock
• Property
• Intellectual property
• Customer contracts
• Websites
• Databases
• Trading names

An asset sale can preserve parts of the business even where the original company cannot continue.

How is a distressed business valued?

A distressed business is not usually valued in the same way as a stable, profitable company.

A healthy company might be valued primarily using maintainable EBITDA and a market multiple. A distressed valuation may give greater weight to:

• Current cash flow
• The cost of stabilising the business
• Asset values
• Existing debt
• Customer losses
• Required investment
• The urgency of the sale
• Available buyer competition
• The value of individual divisions
• Liquidation or break-up value

Healthy versus distressed valuation

Why the price may be lower

A distressed buyer may need to fund:

• Trading losses
• Overdue suppliers
• Employee costs
• New stock
• Repairs
• Systems
• Marketing
• Management recruitment
• Legal and restructuring work

It may also face a higher risk that:

• Customers leave
• Employees resign
• Suppliers withdraw credit
• Forecasts are missed
• Contracts cannot be transferred
• Reputation deteriorates
• Unknown liabilities emerge

The purchase price will normally reflect these risks.

Worked example

Assume a company owns:

• Equipment worth £300,000 in an orderly sale
• Stock with a recoverable value of £180,000
• Customer contracts valued by a buyer at £250,000
• Intellectual property valued at £100,000

This creates a preliminary asset and commercial value of £830,000.

The buyer estimates it must also fund:

• £150,000 of immediate working capital
• £100,000 of restructuring costs
• £80,000 of essential repairs
• £50,000 of customer-retention risk

A buyer may therefore offer considerably less than £830,000, particularly if some assets are already subject to finance or security.

The seller cannot assume that the value of all assets will be added together without allowing for liabilities, funding requirements and buyer risk.

What our experts say:

Compare the sale with the realistic alternative

A distressed sale offer should not be compared only with what the business might have been worth when trading well.

It should also be compared with:

• The proceeds of an orderly asset sale
• The likely outcome in liquidation
• The cost of continuing to trade
• The amount of new funding required
• The risk of further customer or employee losses
• The likely return to creditors
• Whether another buyer can complete in time

A lower offer may still preserve more value, employment and creditor recovery than allowing the position to deteriorate.

That conclusion should be supported by current valuations and professional advice rather than urgency alone.

Can you sell the company’s shares?

A share sale transfers ownership of the limited company.

The buyer acquires the company with its:

• Assets
• Contracts
• Employees
• Debts
• Tax history
• Legal claims
• Regulatory history
• Other liabilities

A buyer may consider a share purchase where:

• The company is distressed but not insolvent
• Important contracts cannot easily be assigned
• Licences sit within the existing company
• Historic liabilities can be understood and priced
• The buyer has a strategic reason to preserve the legal entity
• Creditors agree to a restructuring

However, share sales become more difficult as liabilities and uncertainty increase.

The buyer may request:

• A very low or nominal share price
• Debt restructuring
• Creditor agreements
• Extensive warranties or indemnities
• Specific tax protections
• Seller support
• Working-capital funding
• Conditions before completion

A nominal share price does not necessarily mean the business has no value. The buyer may be accepting substantial debt and future funding obligations.

Can you sell the business or assets instead?

A buyer may prefer to acquire selected assets rather than the company.

These could include:

• Goodwill
• Customer contracts
• Stock
• Equipment
• Intellectual property
• Property
• Employees and operations
• Trading names

This can allow the buyer to avoid some historic liabilities, although liabilities and obligations may still transfer in particular circumstances.

An asset sale can also leave the seller’s company holding:

• Unsold assets
• Debt
• Tax liabilities
• Claims
• Employee obligations
• Lease commitments

The seller therefore needs advice on what happens to the remaining company after completion.

Can directors sell assets before insolvency?

Directors can sell company assets where the transaction is properly considered, documented and completed for an appropriate value.

However, directors should not move valuable assets away from creditors or favour connected parties improperly.

Under section 238 of the Insolvency Act 1986, an administrator or liquidator can apply to court concerning certain transactions at an undervalue entered into before administration or liquidation.

A sale at an undervalue may include:

• Giving assets away
• Transferring them to a director or related company cheaply
• Selling them for significantly less than their value
• Moving intellectual property without proper consideration

Transactions with connected parties are likely to receive particular scrutiny.

Directors should obtain:

• Independent valuations
• Written professional advice
• Evidence of buyer marketing
• Board minutes
• A clear record of alternatives considered
• Evidence explaining why the transaction benefits creditors
  
  

What our experts say:

A quick sale still needs evidence

Urgency does not remove the need for a defensible process.

Where the company is approaching insolvency, document:

1. What was sold
2. How it was valued
3. Which buyers were approached
4. Why the selected offer was accepted
5. What other options were considered
6. How creditors were expected to benefit
7. Whether the purchaser was connected
8. Which professional advisers were involved

This can help demonstrate that directors acted responsibly rather than transferring value away from the company.

Directors’ duties when insolvency is possible

When a company is financially healthy, directors generally act to promote its success for members.

When insolvency becomes likely, the interests of creditors become increasingly important. Insolvency Service guidance states that directors must protect company assets, treat creditors equally and avoid actions that worsen creditors’ position.

Directors should not:

• Continue taking customer deposits where fulfilment is unrealistic
• Sell assets substantially below value
• Repay selected creditors without proper justification
• Remove money for personal benefit
• Conceal records
• Mislead buyers, creditors or advisers
• Allow losses to increase without reviewing viability

Professional advice should be taken early because the correct course depends on the facts and the jurisdiction.

Insolvency procedures and terminology differ in some respects across England and Wales, Scotland and Northern Ireland. This article provides a general UK overview rather than jurisdiction-specific legal advice.

Data insight:

Insolvency pressure is not unusual

The Insolvency Service recorded 2,022 registered company insolvencies in England and Wales during March 2026. Creditors’ voluntary liquidations have consistently represented a substantial proportion of recent formal insolvencies.

These statistics do not predict the outcome for an individual company. They do show that directors facing severe financial pressure are not alone and that formal procedures are established for dealing with companies that cannot continue normally.

Seeking advice early is generally more constructive than waiting for a creditor or cash crisis to determine the next step.

What is administration?

Administration is a formal insolvency procedure overseen by a licensed insolvency practitioner.

Under the Insolvency Act, an administrator must pursue statutory objectives in order. These include rescuing the company as a going concern or achieving a better result for creditors as a whole than an immediate winding up would be likely to produce.

Administration may be considered where:

• The underlying business may be viable
• Legal protection from creditor action is needed
• A sale could preserve more value
• The company requires restructuring
• A better creditor result may be achieved than through immediate liquidation

The administrator takes control of the company from its directors and decides how to pursue the statutory objective.

Administration is not simply a way for the existing owners to continue trading without liabilities.

What is a pre-pack administration sale?

A pre-pack administration usually involves arranging the sale of all or a substantial part of a company’s business before it enters administration. The administrator completes the sale after appointment, often very quickly.

A pre-pack may help preserve:

• Customer relationships
• Employment
• Contracts
• Stock value
• Going-concern value
• Supplier confidence

However, these transactions can attract scrutiny, particularly where the buyer is connected to the former owners or directors.

Rules in England, Scotland and Wales impose requirements on substantial disposals to connected persons during the first eight weeks of administration. The administrator generally needs creditor approval or a qualifying evaluator’s report before completing the transaction.

A pre-pack should only be pursued through licensed insolvency and legal professionals.

What is a creditors’ voluntary liquidation?

A creditors’ voluntary liquidation, or CVL, is a process initiated by directors when an insolvent company cannot continue.

A licensed insolvency practitioner is appointed as liquidator. The liquidator realises the company’s assets and distributes available funds according to the statutory order of priority.

Government guidance describes a CVL as directors taking steps to close an insolvent company.

A CVL does not normally preserve the existing company as a going concern, although the liquidator may sell assets or parts of the operation where this improves realisations.

The result may include:

• Sale of equipment and stock
• Collection of debtors
• Disposal of intellectual property
• Redundancy of employees
• Investigation of directors’ conduct
• Distribution of available funds to creditors
• Dissolution of the company
  

Administration versus liquidation

The earlier you act, the more options may remain

Financial pressure can make it difficult to know where to begin. Start by obtaining current financial information and qualified restructuring advice before advertising or accepting an offer.

Where the company remains suitable for an ordinary sale, Valius can help introduce UK business opportunities to serious buyers through a modern marketplace.

Register with Valius to explore the appropriate next step for your business.

Valius is not an insolvency practitioner and does not replace legal, restructuring or insolvency advice. A company that may be insolvent should consult a licensed insolvency practitioner before marketing or transferring assets.

How quickly can a distressed business be sold?

A distressed sale may need to move faster than a normal transaction because value can decline as:

• Cash runs out
• Suppliers withdraw support
• Employees leave
• Customers become concerned
• Stock becomes unavailable
• Contracts are terminated
• Creditor action increases
• Reputation weakens

An ordinary business sale may take months. A distressed asset transaction could occur much faster, particularly within a formal insolvency process.

Speed creates trade-offs.

A shorter sale period may mean:

• Fewer buyers
• Less competitive tension
• Reduced due diligence
• Lower price
• Greater reliance on asset valuations
• Less flexibility over deal structure

The objective should be a controlled accelerated process rather than an undocumented emergency sale.

How do you find buyers for a distressed business?

Potential routes include:

• Direct approaches to trade buyers
• Specialist turnaround investors
• Business-for-sale marketplaces
• Restructuring and insolvency practitioners
• Corporate finance advisers
• Asset buyers
• Management teams
• Existing customers or suppliers

The sales materials should be honest about the situation.

A buyer will need to understand:

• Why the company is distressed
• How quickly action is required
• What is being sold
• Which liabilities remain
• Current trading performance
• Immediate funding needs
• Customer and employee risks
• Whether the company can continue trading
• What consents are required

Do not describe a distressed company as a normal profitable opportunity if material facts suggest otherwise.

Should you use a business broker?

A business broker may be useful where:

• The company is underperforming but solvent
• A normal sale process remains possible
• Suitable buyers need to be identified
• Confidentiality must be managed
• The owner needs help coordinating enquiries

A conventional broker may be less suitable where:

• Insolvency is imminent
• Creditors are taking enforcement action
• Directors need immediate restructuring advice
• A formal insolvency sale is likely
• Trading losses are increasing rapidly

In those circumstances, a licensed insolvency practitioner or specialist restructuring adviser should usually be approached first.

A broker cannot provide insolvency advice unless appropriately qualified.

How to prepare a distressed business for sale

Time may be limited, but organised information can still support a better process.

Prepare a short-term cash-flow forecast

Include:

• Current bank balance
• Expected customer receipts
• Wages
• PAYE and VAT
• Supplier payments
• Rent
• Loan repayments
• Essential operating costs
• Critical payment dates

Use realistic collection and payment assumptions.

Produce current management information

Prepare:

• Recent profit and loss accounts
• Balance sheet
• Aged debtors
• Aged creditors
• Debt schedule
• Stock report
• Customer revenue
• Divisional performance
• Work in progress
• Forecast cash requirements

Annual accounts may not reflect the company’s current position.

Identify the cause of distress

Potential causes include:

• Loss of a customer
• Excessive debt
• Poor pricing
• High overheads
• Fraud or financial control failures
• Unprofitable contracts
• Expansion costs
• Supply disruption
• Management problems
• One-off litigation
• Seasonal cash flow
• Under-capitalisation

A buyer needs to know whether the cause is temporary and fixable or part of a deeper structural problem.

Separate viable and non-viable operations

Analyse:

• Profit by location
• Profit by product
• Profit by customer
• Direct and central costs
• Staff requirements
• Assets used by each division
• Contracts attached to each activity

This may reveal a saleable core within an otherwise unviable company.

Organise asset ownership

Confirm:

• Which assets belong to the company
• Which are leased or financed
• Whether lenders hold security
• Whether intellectual property is registered correctly
• Whether contracts can be assigned
• Whether landlords or regulators must consent
  
  

Protect records

Directors should preserve:

• Accounting records
• Board minutes
• Contracts
• Bank statements
• Tax records
• Employee information
• Asset registers
• Emails supporting major decisions
• Valuation evidence

Incomplete records can make a sale harder and create additional concerns in a later insolvency process.

Data insight:

Administration is designed around creditor outcomes

Administration is not focused on protecting existing shareholders. Its statutory objectives prioritise rescue where possible and a better result for creditors where rescue is not reasonably achievable.

This distinction matters when considering a distressed offer.

Once the company is insolvent, the relevant question is not only whether the owner likes the price. Directors and any appointed office-holder must consider whether the process and outcome appropriately protect creditors.

What happens to employees?

The impact on employees depends on the transaction.

Possible outcomes include:

• Employees transfer to the buyer
• Selected employees transfer with an acquired business unit
• Some roles are made redundant
• Employees remain with the original company temporarily
• The business closes

TUPE may apply where a business or undertaking transfers, but insolvency-related transfers contain specialist rules and exceptions.

Employee arrears may also be dealt with differently depending on the formal process and the amounts owed.

Employment advice should be obtained before communicating promises to staff or buyers.

Maintaining confidentiality may be necessary during early discussions, but prolonged silence can also increase uncertainty and employee departures. Communication should be planned with legal and insolvency advisers.

What happens to creditors?

Creditors may include:

• Banks
• Asset-finance providers
• HMRC
• Landlords
• Suppliers
• Employees
• Customers holding deposits
• Directors
• Shareholders with loans

The outcome depends on:

• The value achieved
• Security over assets
• The formal process used
• The statutory priority of claims
• Costs of the process
• Asset ownership
• Retention-of-title claims

Shareholders rank behind creditors and may receive nothing where available value is insufficient.

A sale of the business does not automatically transfer all sale proceeds to the owner.

What happens to personal guarantees?

A sale of the business does not necessarily release the owner or directors from personal guarantees.

Guarantees may cover:

• Bank loans
• Overdrafts
• Property leases
• Asset finance
• Supplier accounts
• Invoice finance
• Government-backed lending

Check:

• What has been guaranteed
• The maximum liability
• Whether security has been provided
• Whether the buyer will refinance the debt
• Whether the lender will release the guarantee
• Whether the guarantee survives the sale

Obtain written confirmation of any release. Do not assume that transferring the business automatically ends the obligation.

Common mistakes when selling a struggling business

Waiting until cash has completely run out

A business with no ability to pay wages, buy stock or serve customers is harder to preserve and sell.

Hiding the company’s problems

Buyers and advisers are likely to discover tax arrears, customer losses and creditor pressure.

Selling assets too cheaply

An undervalue transaction can be challenged and may expose directors to serious scrutiny.

Paying selected creditors without advice

Preferential treatment of certain creditors may be investigated in a later insolvency.

Assuming a buyer will take every liability

Asset buyers commonly select what they acquire. Liabilities may remain with the seller’s company.

Using a normal broker when insolvency advice is needed

Buyer marketing and insolvency advice are different services.

Continuing loss-making trading without review

Directors should not allow creditor losses to increase without assessing whether continued trading is justified.

Ignoring secured lenders

A lender may hold fixed or floating security and its consent may be needed for a sale.

Accepting a connected-party sale without independent evidence

Transactions involving directors, owners or related companies need careful valuation, process and documentation.

Taking customer deposits without a realistic delivery plan

This may worsen the position of customers and increase liabilities.

Distressed business sale checklist

If your business is in serious difficulty:

• Prepare an immediate cash-flow forecast
• Identify all overdue liabilities
• Confirm whether wages and taxes can be paid
• Review secured debt and personal guarantees
• Produce current management accounts
• Identify the cause of distress
• Separate profitable and loss-making activities
• List assets and ownership
• Obtain independent asset valuations
• Review customer and supplier contracts
• Confirm intellectual-property ownership
• Identify essential employees
• Preserve company records
• Avoid unusual payments or asset transfers
• Obtain advice from a licensed insolvency practitioner
• Obtain restructuring and legal advice
• Consider ordinary sale, accelerated sale and formal options
• Identify credible trade and turnaround buyers
• Request funding evidence
• Document decisions and alternatives
• Consider employees and creditors before shareholders
• Avoid promising an outcome before professional review

Sell early, transparently and with the right advice

A distressed or struggling business can still be saleable.

The strongest opportunities normally have something a buyer can preserve or improve, such as customers, employees, assets, intellectual property or a viable core operation.

The outcome is likely to depend on:

• How early the problem is addressed
• Whether the business remains operational
• The quality of financial information
• The value of transferable assets
• The availability of credible buyers
• The amount of immediate investment required
• Whether the company is insolvent
• How well directors protect creditors

Where insolvency is possible, consult a licensed insolvency practitioner before transferring assets, taking further deposits or accepting an offer.

Explore the right route for your business

Valius helps connect UK business sellers, serious buyers and advisers through a modern marketplace built to make acquisitions simpler, more transparent and less fragmented.

A marketplace listing may be appropriate where the company remains suitable for a conventional or accelerated sale. It is not a substitute for restructuring or insolvency advice.

List your business on Valius when your professional advisers confirm that marketing the opportunity is an appropriate route.