Buying a business in administration: what you get and how to have funding ready
Buying a business in administration means buying assets fast, with few warranties. What you get, what happens to staff, and how to have funding ready.
Reading time6 min read
CategoryBusiness guides
Written byThe bizbritain team
Buying a business in administration usually means buying its assets, not the company itself. The administrator sells quickly, gives few or no warranties, and staff usually move across with their jobs. The buyers who win are often the ones who can show the money is ready before they bid.
Here is a recent example. According to a stock market announcement on 7 October, a flooring distributor bought assets of its collapsed rival Headlam from the administrators for £14.9m in cash. Headlam had entered administration on 8 September. The buyer took a freehold warehouse, two trading brands and their stock, and 110 staff are expected to transfer.
Most administration sales are far smaller than that one. The process is much the same. This guide is for anyone thinking of buying a business, or part of one, from an administrator.
Section 01
What do you actually buy from an administrator?
In most cases you buy the business and its assets, not the company. You choose what to take, such as equipment, stock, premises, the brand name and customer lists. The company itself, and most of its debts, stay behind with the administrator.
Administrators usually sell "as seen". They know the business less well than its owner did, so they give few or no warranties about what you are buying. You rely on your own checks, and the price should reflect the risk.
Some things do not pass across simply because you have paid:
Premises: a lease usually needs the landlord's consent before it can be assigned to you.
Contracts: key customer and supplier contracts may need the other side to agree to the change.
Stock and equipment: some of it may belong to someone else, such as a finance company or a supplier who has not been paid.
Section 02
How does buying a business in administration work?
Every administration is different, but most sales follow a similar path.
Find the opportunity
Administrators often advertise businesses for sale. Insolvency news sites and trade press list new administrations each week.
Register your interest
You will usually sign a confidentiality agreement before you see the sale pack. Read it closely, because it may be all the information you get.
Make an offer by the deadline
Administrators often set a short deadline for offers. They want a buyer who can complete quickly and with little risk of the deal falling through.
Show you can pay
Expect to be asked for proof that your money is in place. An offer with funding agreed is stronger than a higher offer without it.
Some sales are agreed before the administration even starts. This is called a pre-pack. Extra rules apply when the buyer is connected to the company, such as one of its directors. The rules cover the first eight weeks of an administration. In that time, selling all or most of the business to a connected buyer needs creditor approval or a report from an independent evaluator.
Section 03
What happens to the staff?
If the business is being rescued and transferred, TUPE rules will normally apply. That means staff usually move to you on their existing terms, with their length of service kept.
This matters for your costs. The government's National Insurance Fund pays some of what an insolvent employer owes its staff. Under a TUPE transfer, the new employer must pay any amount left over. Our guide to buying a business with staff explains how this affects the price and your loan.
Section 04
Getting your funding ready before you bid
A business in administration has a broken trading record. That changes how a lender looks at the deal.
A lender is less likely to rely on the old business's profits. It will look harder at what it can lend against, and at you.
Assets: property, equipment and stock can support asset-backed lending. A valuation helps, so get one early if you can.
Your existing business: if you already trade, its accounts and cash flow can support the loan.
Your own money: a cash contribution shows you share the risk.
Restart costs: plan for wages, stock and supplier deposits in the first weeks, not just the purchase price.
None of these routes is guaranteed. Each lender applies its own checks, and deals in administration need fast answers.
That is why the time to talk to lenders is before you see the right business, not after. An acquisition finance broker can take your plans to a range of lenders at once. You then know what you can borrow before the deadline arrives. If timing is the bigger question for you, our guide to when to buy a distressed business covers it.
This guide is general information, not financial advice. Applications are subject to status, affordability and lender criteria.
Got a question the guide didn’t answer? Talk to an advisor.
We’ve helped buyers fund deals from £25k to £10m across 100+ lenders. If you’ve read the guide and you’ve got a business in your sights, our advisors are on the phone now.