What is meant by surplus assets?
Surplus assets are considered to be those assets which a business owns but does not utilise in the course of current operations. For example, a company may own land which is not needed for current business purposes.
Why is an understanding of surplus assets important in a transaction context?
An asset which is surplus to current business purposes will not be captured by a valuation of a going concern business (as this would be calculated based on turnover or earnings and the surplus asset is not contributing to the company’s financial performance). However owners sometimes forget about their unused assets and transfer these along with the operating business as part of a transaction, thus forgoing on the additional value held in the surplus assets.
By understanding all the assets held by your business, you will be able to take a view on whether there are any which are surplus to current business requirements and therefore whether these could be transferred out of the business or whether they could form an additional element of the negotiation.