A type of liquidation value which pertains to corporate takeover and restructuring activities. The voluntary liquidation value (also, breakup value) reflects the projected price of a firm’s assets sold individually less its liabilities and expenses incurred in disintegrating the firm. Differently put, it is the market value of all individual assets/units of the firm if it were disbanded and the individual parts operated separately. This is usually the case when owners view the firm as more valuable in liquidation than as a going concern. Owners’ holdings would increase in value if parts were divested each by its own. Many takeover bids originate when raiders spot firms with breakup values that are higher than the prices at which their stocks are trading.
As opposed to ordinary liquidation value, which is typically involuntary due to bankruptcy, voluntary liquidation value results from a firm acting on its free will to sell its assets.
Comments