What is Asset Recovery?

Malcolm Tatum

Sometimes known as resource recovery or investment recovery, asset recovery is a strategy that is designed to allow investors the chance to squeeze a little more return from investments that are nearing the end of their useful lives. The idea is to sell those assets while they still have some amount of use and are likely to attract potential buyers, based on the pricing set by the current owner. Businesses often use this strategy to sell off assets that are no longer required for the general operation, making it possible to recoup part of the original purchase price.

Businessman with a briefcase
Businessman with a briefcase

One way to understand asset recovery is to consider a company that has recently decided to combine two offices into one. The merging of the two locations leaves the business with several pieces of furniture and equipment that are no longer necessary to the operation. In order to generate some benefit from these now surplus pieces, the company will often elect to offer the excess furniture and equipment at a discounted price. The seller has the benefit of realizing some income from assets that are no longer useful, while the buyer obtains assets at bargain prices. As a result, both parties benefit from the transaction.

The idea of disposing of end of life assets in some manner that generates some revenue of benefit for the owner is key to the process of asset recovery. While the strategy often involves selling off assets that are no longer of any real benefit to the business, there is another approach that may be allow the owner to continue receiving some level of benefit. Known as redeployment, this strategy involves finding a new purpose for the asset, by either transferring the asset to another department or a subsidiary of the parent company. For example, furniture that is no longer needed by the parent may be deployed or transferred to a location of a subsidiary that can make good use of the pieces. In this asset recovery scenario, the parent and subsidiary save money by not having to buy new furniture, while also enjoying the benefit of carrying the reduced value of the furniture on the books of the subsidiary rather than the parent.

Companies will use different strategies when liquidating excess inventory. Auctions are one method of disposing of assets that are no longer needed. At other times, direct sales that are arranged through brokers may be an option. Whatever means is used, the goal of asset recovery is to wring a little more benefit from the assets before they are no longer the property of the owner.

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