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Second Hand Industrial Equipment—Monetization Opportunities via Asset Disposal Channels

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by Ananya Pritam Gogoi , Senior Domain Analyst, Capex and MRO
30 November 2019




Every company faces the need to deal with their excess inventory, surplus assets, end-of-lifecycle equipment, or customer returns. It becomes a challenge for companies to smartly dispose such used-equipment and parts while being able to monetize them effectively. Generally, holding onto surplus assets affects a company by occupying more space, tying up capital, and negatively affecting the company’s bottom line. Hence, managing and disposing such surplus assets becomes a costly and time-consuming affair for companies.

The global market for used industrial equipment is highly volatile with different economic factors shaping the demand for such used machineries across countries. Additionally, increased production and export of new machines are driving the growth of companies who offer equipment lease and rental options. These options are witnessed as more attractive by buyers, who previously used to procure used machines. Most of the demand for used machinery arises from the developing economies of Latin America, Asia-Pacific, Middle East, and Africa.

However, given the availability of machines in a shorter time, there is also a demand for used machines in North America and Europe. In the export of used industrial machinery, the age of the machines usually determines their market. With the presence of multiple channels for used machinery sales, the sellers must also take into account economic developments and react accordingly.

In Europe, governments utilize fiscal revenue to increase productivity and price competitiveness for different industries by boosting investment in capital equipment. For example, Italy offers Italian manufacturers “super-amortization” of capital equipment investments; the Hungarian government provides subsidies for capital equipment investments, and in Norway, machine production over the last year grew 100% more than manufacturing production. Such kind of stimuli creates imbalance in the larger markets. Therefore, it is desirable that industrial companies reduce excess capacity before the used machinery market gets saturated in the near future.

Challenges Faced by Companies in Disposing Surplus/Obsolete Equipment:


Costs Associated with Holding Surplus Assets/Obsolete Equipment:

Companies all over the world are not focused on disposing their surplus assets or used equipment, as it is not their core competency. Hence, at times they assign an in-house team to dispose such assets, which results in a lot of inefficient handling of the entire liquidation process. So, companies suffer from low returns on surplus asset liquidation, high opportunity costs, high disposal costs, etc.

The various costs associated with such equipment or assets are listed below:

Sr. No. Cost Explanation
01 Opportunity Cost Till the time surplus assets/obsolete equipment have been sold and monetized, they hold no value for a company but, they still take up management time and attention.
02 Warehouse Cost Surplus assets take up additional space in plants or warehouses of companies, thus, hindering other revenue generating activities.
03 Asset Tracking Expenses Idle assets lying around have to be tracked until they are disposed. A company could better utilize their resources in other productive avenues.
04 Maintenance Costs Until an equipment is sold, the company must maintain them to keep them in working condition.
05 Insurance Costs Such assets have to be insured for any damage.
06 Taxes Such assets or equipment can increase a company’s property tax base

The costs mentioned above results in lower return on assets, which affects a company’s financial performance. When companies convert surplus assets into cash, significant improvement in liquidity ratios can be witnessed.

Current Trends in the Used-equipment Market:

The market for used industrial equipment/machinery, technology and facilities has become a global business today due to the presence of a wide range of different sourcing channels. Market trends in the used machinery market are often linked very closely to political and economic developments in export markets and thus can change quickly.

As a result, it is generally considered difficult to identify trends as to which countries have a particularly high demand for used machinery or which countries supply a lot of them. Hence, the demand for any used equipment or machinery varies significantly from country to country. It is expected that 2019–2020 will bring a 10% correction in the machinery industry. Thus the demand will recede, new and used machinery prices will fall and excessive capacity production will be corrected.

This crisis in the machinery industry is anticipated to be triggered by a 2-3 percent demand contraction for industrial products.  This may be caused by a combination of global risks such as trade wars, no-deal Brexit, an Italian euro crisis, a migrant crisis and emerging market slumps, (as is happening with the Turkish Lira presently) or higher oil prices due to renewed Iran sanctions.

Used equipment in Europe

Used equipment in industrialized countries

Used equipment in developing countries

  • Used  machinery, for example, equipment returned from expired lease contracts, is employed in many places in the European industry, particularly to supplement existing production facilities or as peak time support.
  • However, machines that are somewhat behind the state of the art and have a lower degree of automation are often sold abroad.
  • In industrialized countries, new machinery is often profitable in multi-shift operations but customers may have to wait a long time before it is ready.
  • Used machinery on the other hand has the advantage of being available immediately, therefore, the demand for such machinery arises even in highly industrialized economies.
  • In developing countries, there is high demand for robust, easy-to-use and inexpensive machinery which works even under the most adverse conditions.  The assembly and maintenance of  the required infrastructure and power supply along with providing fast and efficient basic training in the equipment operation is more important for a buyer than having any sophisticated high-tech machinery.

Surplus Assets Disposal or Liquidation Channels:

Option 1 - In-house Surplus Asset Management Teams

Asset Disposal Networks: Companies form such networks on ad hoc basis. The team involves experienced stakeholders from connected functions such as finance, procurements, equipment engineers etc. The team is dissolved once assets are disposed.

Dedicated Teams: Individuals with experience in asset management process and subsequent disposal were hired to oversee the asset management process internally. They are active like any other function of an organization.

Option 2 - External Parties Involved in Disposal

Direct Seller: For transactions made with a direct seller, much information can be obtained. For example, what the equipment was used for, when it was last used, and where it had been stored etc. Big companies always keep good records on their equipment. So, a potential buyer might even speak with an engineer who knows the equipment. Buying equipment which comes straight from a working facility of a reputed company signifies that the equipment has been maintained well during its use.

Resellers / Used-equipment providers: Resellers or used-equipment providers or brokers have large inventories of equipment that have been purchased from multiple sources. A potential buyer can always look for their required equipment model, brand, specifications etc. Such brokers are able to cater to buyers who have an urgent need of any equipment, in a short time. These equipment providers also have tie-ups with OEMs who can support for parts requirement, maintenance activities etc.

Online Liquidations or Auctions: In auctions or online liquidations due to closure of a specific facility,  information about the equipment is relatively available including how it was used. On the other hand, in auctions or online liquidations run by a dealer or an exchange, equipment often comes from various sources. So, there is less or no information about the equipment, which poses a risk to potential buyers. Such risk and uncertainty is generally kept under wraps by offering attractive pricing.

Appraisal Approaches of Used-Equipment:

Knowing an asset’s basis is critical in determining depreciation deductions and in establishing gain or loss when disposing such equipment; the target sales return usually amounts to ~ 40% against the acquisition cost.

The valuation approaches for used-equipment are done on the following basis:

  1. Cost: The value is derived based on the cost of the substitute with identical utility of the used equipment. The valuation method holds good only for new or specialized equipment. Depreciation estimate is subjective in this approach.

  2. Market: The value of the used equipment is derived based on the transactions of similar items sold in the secondary market place. Comparative parameters include manufacturer, model, effective age, condition, capacity, price, time of sale, type of sale, and location. Additionally, direct and indirect installation costs are taken into account.

  3. Value: The approach derives the asset value’s revenue generating capacity in the business. It is predominantly used while valuating entire production line or an entire plant.

Resale Value of Old Equipment:

In case of any high-end critical equipment resale, sellers can opt for private treaty option where they sell the equipment to direct buyers. Here, the seller obtains good returns on the equipment resale as the buyer bears all the related costs such as, acquisition cost, removal cost, installation cost, and logistics cost for the old equipment.                                                       

For companies looking to sell their old equipment, independent appraisal can help in getting the best value out of old equipment. Equipment sellers can hire a qualified independent appraiser to represent them for setting prices with buyers/auctioneers. Such independent appraisers or representatives of the seller must also monitor the final sales prices to get the best value out of old equipment.

The table below highlights an example of pharmaceutical industry, showing how much resale value can be expected by equipment sellers:

Equipment Condition Original Price Range Approximate Resale Price
Less than 3 years old high-end equipment > $25000 60- 70% of the original price
Less than 3 years old general lab equipment Varies Highly 50 – 70% of the original price
More than 5 years old equipment Varies Highly 20 – 50% of the original price

Surplus Assets Disposal or Liquidation Process:



With the current boost in global economic development, industries such as pharmaceuticals, FMCG/CPG, packaging, paper, chemicals, etc. have witnessed the need and benefits of redeployment or resale of used equipment and parts. So, the numbers of suppliers who cater to such requirement have also risen significantly in North America and Europe. In the developing economies of Asia, Latin America, and MEA; availability of suppliers with the capability to offer end-to-end services for used equipment is yet to grow.

Suppliers with capabilities of offering end-to-end used equipment services provide sellers with a solution that brings liquidity, total transparency, channel control, efficiency, and effective execution to the surplus disposal process. These suppliers also enable management of complex, large-scale inventory liquidation while delivering significant cost savings to sellers.


  1. www.liquidation.com
  2. www.fedequip.com
  3. www.liquidityservices.com
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Ryan Habich

Great article!




Excellent article. Very informative Thank you very much




Excellent Article


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