The value of choosing auctions

The value of choosing auctions

Economic challenges, policy changes and soaring inflation has placed tremendous financial pressure on companies.

According to Clive Lazarus of Park Village Auctions (PVA), when companies need to realise locked-up capital, auctions represent a fast and reliable way to convert assets into cash.

“The year 2018 has been a turbulent year with the rand’s performance resembling an ECG (electrocardiogram) report,” says Lazarus. “This had an unfortunate impact on many businesses that were not able to weather the storm on their own.

“As such, our business rescue division was particularly busy throughout the year.”

Before reaching the point of filing for business rescue, however, he suggests businesses can opt to strategically dispose of assets through auction to free up much-needed cash flow.

Lazarus says that auctions are not only an efficient way to generate capital, but are also a superb mechanism for reducing costs, increasing and optimising business performance.

“Identifying and disposing of superfluous or redundant assets via auction allows businesses to curtail holding costs, wear and tear, and shrinkage,” he explains.

“Public and online auctions appeal to sellers and buyers alike, it’s a win-win for all. Sellers can effectively outsource the sale of goods, enabling them to continue focusing on core business. The nature of auctions dispenses with sales negotiations, and facilitate the realisation of assets at market-related prices.

“Lead times are generally shorter than traditional sale methods, and the agreement is final, with upfront payment required to conclude the deal.”

To best illustrate the value of auctions as a means for asset disposal, Lazarus shares the results of what PVA has achieved on client’s behalf throughout the year. All prices exclude value-added tax and buyer’s commission.

  • Residential dwelling (1 209m²) at Umhlanga Rocks in KwaZulu-Natal sold for R5 350 000;
  • Retail vehicle showroom (4 040m²) in Bryanston, Johannesburg, sold for R11 600 000;
  • Specialist shaft sinking concern, equipment and assets, sold for R12 700 000;
  • Boutique hotel and apartments in Milpark, Johannesburg, sold for R12 800 000;
  • The former premises of The New Age media in Midrand sold for R29 500 000;
  • Industrial property (52 000m²) in Germiston, Johannesburg; heavy engineering equipment and assets sold for R30 000 000 and R3 446 000 respectively; and
  • Engineering workshop and specialist laser and plasma cutting machinery (VR Laser Services), sold for R34 500 000.

Notable commercial vehicle auctions achieved include:

  • A 2016 MAN TGS 27-440 truck tractor sold for R565 000;
  • A 2015 Caterpillar 428F backhoe loader sold for R570 000; and
  • A 2016 Scania R500 LA truck tractor sold for R950 000.

Lazarus says: “Gone are the days when auctions were viewed merely as a forced mechanism for recouping bad debt. Today, organisations can freely choose to sell their assets at auction given the inherent benefits associated with this method of selling.”

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