What is the difference between orderly and forced liquidation?

Orderly liquidation assumes 6 to 12 months to sell assets: collect receivables, work down inventory, sell equipment through normal channels. Forced liquidation is an immediate auction: shorter time, lower prices, typically around half the orderly recovery rate for non-cash assets. Both scenarios are shown side by side so you see the realistic range.

Why is this useful for an owner planning to sell?

It is your negotiation floor. If the going-concern sale falls through, you know what you would realistically keep: and therefore where your walk-away point sits. For advisors and counterparties, it is a sanity check: a going-concern offer below the orderly liquidation value means the buyer is offering less than you would recover by winding down.

Does this replace a full insolvency analysis for a bankrupt business?

No. Formal bankruptcy dossiers and judicial reorganisation require a court-appointed trustee who applies the full creditor priority cascade (RSZ/BTW super-priority, employee severance under WCO, preferential claims, unsecured creditors, subordinated shareholder loans). The Upswitch version subtracts liabilities at book value: sufficient for scenario analysis and a negotiation floor, but not for a formal insolvency proceeding.

When is this method automatically recommended?

When the Altman Z-score lands in the distress zone, EBITDA is negative, or leverage relative to the going-concern enterprise value is excessive. In those cases the engine shows the liquidation value alongside going-concern multiples so you can defend both perspectives side by side in the report.

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Valuation method

Liquidation analysis (orderly + forced)

The floor value when the business cannot be sold as a going concern. Two scenarios per Pratt & Niculita (2008): orderly wind-down over 6-12 months or forced auction.

What it is

Liquidation analysis is an asset-based downside lens that computes what an owner could realistically recover when the business is wound down rather than transferred. The engine applies academically grounded per-asset-class recovery rates (cash 100%, receivables 60-85%, inventory 35-65%, equipment 25-50%, real estate 70-90%), subtracts wind-down costs (5% orderly, 10% forced), and places the result alongside book equity. You see three figures in one view: book value, orderly liquidation, forced liquidation. When adjusted assets fall below liabilities the engine flags an insolvency signal, even when the displayed equity is clamped at zero. The report ties into IVS 104 §60-80 for the premise-of-value statement, uses Altman Z'' (2000) for the distress zone, and renders a 12-class realisation schedule in EY/KPMG working-paper format.

When to use it

Four core contexts. Owners use it as a negotiation floor: "if I can't sell, I get X". Advisors extend it to succession planning and family transfers where inheritance tax must rest on a defensible lower bound. In divorce dossiers and shareholder disputes, an independent floor provides a control anchor. And in distressed M&A or turnaround paths, the orderly-vs-forced comparison gives the bank and trustee the numbers they need. Formal bankruptcy dossiers still require a court-appointed trustee: Upswitch subtracts liabilities at book value, not against the full creditor priority cascade.

How Upswitch applies this method

Upswitch computes both scenarios automatically as soon as the balance sheet lands: same input contract as Adjusted NAV. Each scenario carries a per-asset-class breakdown (book value × recovery factor = adjusted value) so the number stays transparent. Academic sources (Pratt & Niculita 2008, Hitchner 2017, EY/KPMG restructuring templates) are in the audit trail. When the business is in a distress scenario (negative EBITDA, weak margins, high leverage), the engine automatically flags liquidation as a relevant reference alongside the going-concern multiples.

Data and benchmarks

Sector multiples and transaction benchmarks are calibrated against the Upswitch Index, our continuously updated European SME reference dataset (per-country filter).

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In your professional report

Each method appears as a dedicated section in your branded PDF, with a full audit trail for every normalisation and adjustment.

In your professional report
Section	Included
Liquidation analysis	Value and method summary
Audit trail	Per adjustment, fully traceable

How it compares

How it compares
Method	Best for	Data needed
Adjusted NAV	Going-concern asset-based valuation	Balance sheet + tax latencies
Upswitch adaptive market approach	Going-concern headline value	Historical financials
Fiscal reference	Belgian fiscal reference (succession, internal transfer)	EBIT + balance sheet

Frequently asked questions

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