When I was at FreeMarkets, we made the prescient -- but poorly executed -- bet that asset auctions and asset recovery would become important extensions of procurement, especially in manufacturing environments (and occasional in retail as well). At the time, we ended up acquiring two companies. The first, a technology platform, iMark, was an absolute disaster for reasons I don't have time to get into in this post (the blame goes multiple ways, and I deserve some it myself). The second, an industrial publication and search engine, Surplus Record, which Ariba still quietly owns (a secret known by about three people in the company), has become a hybrid Thomas Register/Google of the used industrial equipment business. That was one deal in retrospect that I was thrilled to be a part of.
I had lunch with the publisher, who remains a close friend, a couple of weeks back and he continues to lament the decline of manufacturing in the US. Not surprising, his revenues clearly rise and fall with the broader industrial fortunes here (interestingly, he's shared with me over the years that there is not a free market in certain parts of the world for used industrial equipment, as import protections make it all but impossible to sell them in certain regions).
In any event, ever since I was part of the FreeMarkets corporate development team, examining this market over a decade ago, I've enjoyed following it. That being said, a recent article in Food Processing caught my eye. In it, the authors describe the current state of the asset market as well as how sellers go about getting rid of equipment and entire facilities (which happens when companies open new facilities, liquidate assets, etc.). In the case of on-site or online auctions, consider them as "one option a company has at its disposal for buying and selling assets. For sellers, they provide quick finality (and quick cash) for a no longer needed asset. Speed also can be an asset for the buyer, for he's looking at equipment that's already built; and he's probably getting it for pennies on the dollar ... When an auction won't fit the bill, negotiated dealer sales, even rental/leasing companies, can meet the need. These and other used-equipment channels play a role in extending the usefulness of assets and helping food processors operate under ever-tightening margins."
Speed is one of the key aspects I've observed in my own analysis of the used asset market. Whereas it might take months or quarters to order and put a new piece of machinery into a production setting, much of the same activity can be accomplished, often within weeks, by going the used route (at pricing which might not necessarily offer the type of savings you'd think, as dealers can be smart about pricing assets with this immediate need in mind -- and are willing to hold on to equipment for years). However, if companies on the sell-side go the auction route (where both end-users and dealers make up the buyers), they have the choice of taking their chances in an event, the article points out, or selling to a company who will "take possession and warehouse the used equipment, sometimes whole processing lines," in whole. This is known by those in the industry as "buying the deal."
Stay tuned for part two of this post when we look at what the state of used asset market can tell us about the broader economic situation.