What is an Asset Stripper?

Malcolm Tatum
Malcolm Tatum

Asset strippers are a form of corporate raiders that focus their attention on a target company. The goal is to gain ownership and control of the company over time. Once the company is in the control of an asset stripper, various assets of the company are sold off, often in order to handle the outstanding debt incurred when gaining control of the company. The strategy involves making sure there is a strong chance that once a portion of the company’s assets have been sold, the remaining assets will still be sufficient enough to operate the company at a profit or make the company attractive to potential buyers.

Businesswoman talking on a mobile phone
Businesswoman talking on a mobile phone

An asset stripper has to work in a systematic pattern. Before beginning the process of gaining control of any company, it is important to research the corporation thoroughly. This will entail identifying every asset currently within the control of the corporation, and determining the amount of any indebtedness owed by the company. Once it has been established that the corporation meets the basic criteria for asset stripping, the next step is to determine which of the assets of the company could be sold without endangering the ability of the corporation to make money. Further investigation into the situation will also focus on those particular assets, with an eye to making sure they are not entangled as collateral on a business loan, or in some other fashion.

Once the asset stripper has identified a viable project, he or she will begin the process of purchasing shares or buying the company outright. In some cases, gaining control of a company is a relatively easy process. At other times, acquiring control of a company may take months or years. The asset stripper, when properly prepared, allows for these types of situations. While many target companies may be amiable to acquisition, others may not. As with all corporate raiding situations, there may be some opposition to the acquisition that was not readily apparent at first. From time to time, the asset stripper may choose to abandon a takeover attempt, due to unforeseen circumstances that make the deal less profitable in the long run.

In practice, an asset stripper is simply a buyer and seller of properties, including assets. The difference is that an asset stripper focuses on mining the resources of a particular company, rather than using the approach of acquiring and selling assets from a variety of sources. Ultimately, the goal is to turn a profit from the endeavor, from both selling off assets of the acquired company, and then selling the corporation and its remaining resources to someone who is interested in continuing to operate the company. In some cases, an asset stripper may end up completely dismantling a company, selling off property, equipment and other operational assets. When this happens, the company usually cannot continue to function and the operation ceases. Still, most asset strippers prefer to strike a balance where there is money made off sold assets, and then still more money made off selling a viable operating company to the highest bidder.

Malcolm Tatum
Malcolm Tatum

After many years in the teleconferencing industry, Michael decided to embrace his passion for trivia, research, and writing by becoming a full-time freelance writer. Since then, he has contributed articles to a variety of print and online publications, including wiseGEEK, and his work has also appeared in poetry collections, devotional anthologies, and several newspapers. Malcolm’s other interests include collecting vinyl records, minor league baseball, and cycling.

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The best asset strippers take their cash out and let the creditors struggle in bankruptcy court to get paid.

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