Auction sales—share purchase
Auction sales—share purchase

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

  • Auction sales—share 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, in government privatisations, or in large value transactions. A share sale by way of auction is designed to elicit competitive bidding for the target company amongst 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).

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 example, an investment bank, who will market the sale of the target company 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 company by auction sale

The advantages of an auction process for the seller 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