The auction process in private equity transactions
The auction process in private equity transactions

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

  • The auction process in private equity transactions
  • The process
  • Information memorandum
  • Second round offers
  • Preferred bidder
  • Final negotiations
  • Exchange

Auction sales are common in larger private equity transactions. Often referred to as 'institutional buyouts', disposals by auction are usually initiated by the owner and are designed to elicit a competitive bidding situation between a number of potential buyers. This Practice Note focuses on how the auction process works in the context of a management buyout but for a more detailed look at auction sales generally see Practice Notes: Auction sales—share purchase and Auction sales—asset purchase and see: Auction sale (private M&A) transactions—checklist.

The process

The seller will take control of the process, with assistance from a financial adviser (eg an investment bank). In these larger transactions, existing management are likely to have just a small stake in the business being sold and therefore less influence in the sale process. See Precedent: Auction sale process letter—private M&A.

As well as private equity funds, trade buyers may also be interested in the business. The seller (which may well be a private equity fund looking for an exit) will work with the financial adviser to identify all potential buyers.

The process in the context of a private equity sale is fundamentally similar to any auction sale and typically involves the following stages:

  1. selection of the seller's corporate finance and other professional advisers. The corporate finance adviser is likely to have auction experience in the context of institutional buyouts in addition

Popular documents