Auction sales—asset purchase
Auction sales—asset purchase

The following Corporate guidance note provides comprehensive and up to date legal information covering:

  • Auction sales—asset purchase
  • Advantages and disadvantages of the auction process for the seller and bidders
  • Stages of the auction process
  • Drafting and practical issues for the seller and bidders
  • Legal issues relating to auctions

Auction processes play an important role in particular industries, for example, in the private equity industry or in government privatisations, or in large value transactions. A sale by way of auction is designed to elicit competitive bidding for the 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, preferably from management’s point of view.

Auctions can be run with many bidders or can be a targeted with a select few bidders. This will depend on the nature of the business and the market in which it is operated. The seller of the business will generally take control of an auction process and will appoint various advisers to act on its behalf, for example, an investment bank, who will market the sale of the business on behalf of the seller.

Advantages and disadvantages of the auction process for the seller and bidders

The seller: advantages and disadvantages of selling a business by auction sale

The advantages of an auction process for the sellers are:

  1. the seller can secure the highest possible price where there are a number of competing bidders

  2. the seller can control the conditions of the sale: for example, in preparing the initial drafts of the transaction