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Practitioner's Complete Guide to M&As: An All-Inclusive Reference, with Website by David T. Emott

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Topic 12

Auctions

Auctions are a generally successful way for a seller to sell out fairly quickly and often realize a higher value than if the business were sold in a privately negotiated sale with a single buyer. Those auctions that succeed do so due to the fear factor driving potential buyers. Topic 12 discusses the auction process and what to expect, when, and suggests a buyer's approach to bidding in an auction.

The reader is encouraged to take the time to read the text in conjunction with the referenced Appendices to gain the appropriate level of understanding of the subject matter discussed in the narrative. Appendices are either presented at the end of this Topic or are available for review and download on the companion Web site noted at the end of this Topic.

FEAR IS A COMPELLING DRIVER TO AUCTION SUCCESS

  • Auction deals are managed by investment bankers (or others) with the intention of obtaining the highest price possible resulting from the tension derived from a competitive buyer qualification and bidding process designed to drive to a closing in the least amount of time.
  • Fear is a compelling factor in gaining bidder participation in the auction process, particularly in auctions of targets with strategic capabilities applicable to a group of potential strategic buyers:
    • Fear that a needed strategic capability found in the target will not be gained and a synergistic competitive advantage will be lost.
    • Fear that the target's capability will go to someone else who can gain ...

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