Auction sale

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Auction sales

Auction processes play an important role in particular industries, eg in the private equity industry, in government privatisations, or in large value transactions. An asset sale by way of auction is designed to elicit competitive bidding for the target business among interested parties at the highest price and on the best possible terms. For the seller, there is a high certainty that the sale will be completed to a preferred bidder (which is preferable from management's point of view). It should be noted that share sales are more likely to be conducted by way of auction sale than asset sales.

Auctions can be run with many bidders, or they can be targeted with a select few bidders. This will generally depend on the market in which the target company operates and the nature of its business. A seller will generally take control of an auction process and will appoint various advisers to act on its behalf, for eg an investment bank, which will market the sale of the target business on behalf of the seller.

See Practice Note: Auction sales—asset purchase and Checklist:

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