ELI5- How does asset reconstruction work, and why do these companies buy failed businesses?
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A failed business doesn’t necessarily fail because it’s a bad business. Yes, sometimes someone opens a business in an already oversaturated market, but the more likely reason a business fails is simply due to mismanagement.
So, if it’s an actual viable business, stepping in and taking over and running it correctly can make it an actually profitable business.
Same reason people buy a crappy house and renovate it. There is some value is almost anything tangible. If you can appropriately price and pay for that value you can buy low, invest $ in improvements, sell for profit.