Liquidation value is the value that sellers of a failed business could expect to receive in exchange for the business' physical assets. Intangible assets such as intellectual property and goodwill are not included in liquidation value.
Liquidation of a business is usually a forced sale that usually occurs quickly, without sufficient time to line up buyers for or properly auction off the failed business' illiquid assets. Accordingly, the sale of illiquid physical assets in a liquidation scenario often occurs at a discount to the fair value of such assets.
Liquidation value is often considered the theoretical valuation floor of a going-concern business. When a public company is trading near or below (rare) its liquidation value, value investors might consider the company's stock a good buy.