M&A Auctions

An M&A auction is the process of presenting a company that is for sale to potential buyers. There are two different types of auctions, broad auctions and targeted auctions. There are several advantages and disadvantages to each approach.

Just as the name implies, a broad auction is designed to reach out to as many potential buyers as possible. Your M&A advisors, if he or she is well-experienced, should contact hundreds or even thousands of prospective buyers worldwide. This list should include both strategic and financial sponsors. The goal of this strategy is to maximize the competitive dynamics of the sales process to increase the odds of finding the best possible offer. It helps to ensure that all possible bidders have been reached and it limits potential buyers negotiating leverage. One of the concerns with this approach is maintaining the confidentiality of the transaction. Of course, an experienced M&A advisor will know how to conduct this type of auction without breaches of confidentiality and if done properly, this approach will insure the sale of the company for the best value and terms.

A targeted auction is when your M&A advisor focuses on a few clearly defined buyers that are identified as having a strong strategic fit. These buyers should also be vetted to make sure that they have the financial resources to acquire the company. With a targeted auction is it much easier to maintain confidentiality and minimize any possible business disruption from the process. However, there is a much higher chance that the best possible value and terms will not be achieved due to the limited auction. The only way to insure the best possible transaction is to make sure that all possible buyers, via a broad auction, are included in the process.

Your M&A advisor should be able to explain the pros and cons of each method and help the seller to make an informed decision.