I run a small manufacturing shop with two product lines. One is profitable, the other is dragging us down. I've got a buyer interested in the equipment and IP for the struggling line, but I want to keep the main business running. Is a partial asset sale realistic? Or do buyers usually want the whole pie? Any gotchas I should watch for?
Asset Sale
Can you do a partial asset sale to keep the main business alive?
Partial asset sales are definitely a thing. I sold off a warehouse and a distribution contract last year and kept the core business. The key is making sure the assets are cleanly separable — no shared liabilities or tangled contracts. Get a good lawyer
Buyers hate buying a piece of a mess. If the struggling line shares equipment, staff, or customers with the profitable one, you'll have a hard time convincing anyone to take just that slice.
lol 'partial asset sale' sounds like selling your car's enginne but keeping the doors. Good luck finding a buyer who wants a car with no engine.
That's my worry. The equipment is mostly separate but the building is shared. We could lease back space, but that adds complexity.
We did a partial sale of a product line including some machines. The buyer insisted on a transition services agreement. Be ready to provide support for 6-12 months, or they'll walk. Also, allocate purchase price carefully for tax purposes.
It's doable but rare. Most buyers want the whole entity to avoid sucCessor liability issues. You'll need to prove the assets are free of liens and that the remaining business isnt dependent on them. If the buyer is strategic, they might see value in just the line. But don't expect a premium.
Make sure you don't accidentally trigger a bulk sales law violation. Some states require notice to creditors when you sell a significant portion of assets outside the ordinary course. That can sink the deal fast.
I've seen this backfire. Seller kept the 'good' business but the buyer of the 'bad' one went bankrupt and stopped paying on the note. Seller ended up with the assets back but no cash. Get a personal guarantee if you're financing.
Personal guarantee — noted. I wasn't plannin to finance, but the buyer hinted at it.
Also, watch out for employee issues. If the sold line has dedicated staff, they might transfer under TUPE or similar rules depending on your location. That can complicate things and create unexpected costs.
Or just sell the whole thing and start a new business that doesn't suck. Less headache.
Ignore GrumpyPants. Partial sales work if you're disciplined. Spend the money on a good M&A attorney and a tax advisor. It's worth it.