M&A Tip #16 Remove Old Inventory - O'Keeffe and O'Malley

M&A Tip #16 Remove Old Inventory

Nov 10, 2016

Keeping old inventory on your books hurts you when you sell your business. Buyers normally make offers based on the average amount of inventory over the last 12 months or the amount stated on your year-end balance sheet. And buyers typically purchase inventory that is saleable and less than one year old, priced at the lower of its cost or fair market value. If you keep old inventory on the books, a buyer's offer may reflect a higher level of inventory that you have to guarantee to be current at closing. If it's not current, the purchase price may be reduced. Old inventory should be sold, not just expensed, as expensing could reduce earnings and value.