This chapter describes two types of auction used in mergers and acquisitions (M&A). One is effective/informal/negotiated auction and the other one is controlled/formal action. The effective or negotiated auction generally offers the best approach to the sale of Middle Market companies. It leverages the best qualities of an auction and a negotiation, as several—and sometimes many—rounds of offers and counteroffers are involved. A primary objective of sellers of Middle Market businesses and the M&A professionals serving them is to facilitate an effective auction of the business, gathering together as large an audience of prospective buyers as possible and encouraging those buyers to compete against each other at least implicitly. In author's experience, formal auctions in their strictest form are used primarily by public companies divesting smaller Middle Market divisions or businesses. Ironically, public companies at least occasionally employ this approach out of a lack of experience with less formal auctions. The chapter concludes by describing that while it sometimes takes longer to consummate a deal the effective auction is much more likely to maximize transaction value for sellers of Middle Market businesses.


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    Title :

    Two Types of Auctions: The Informal Auction and the Controlled Auction


    Contributors:

    Published in:

    Publication date :

    2012-01-02


    Size :

    9 pages




    Type of media :

    Article/Chapter (Book)


    Type of material :

    Electronic Resource


    Language :

    English




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