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October 15, 2015 Article 1 min read

1. Full scale auction

The seller approaches a broad group of potential buyers and conducts all discussions in parallel. This is a highly competitive process with strict timing and procedures.

Pros:

  • Price and returns are normally maximized
  • Buyer is limited in assessing the seller's negotiating position
  • Seller is able to maintain control of the process, including timing and procedures

Cons:

  • Potential for lower values in a soft market
  • Higher risk of confidentiality breach

2. Limited auction

The seller identifies a short list of potential buyers (typically less than 50). Initial discussions occur in parallel and buyers are encouraged to take a pre-emptive posture.

Pros:

  • Seller is able to quickly determine key buyer’s level of interest
  • Lower risk of confidentiality breach

Cons:

  •  Interested buyers may be excluded due to the narrow pool

3. Proprietary sale

The seller negotiates with a select group of preferred parties. Initial discussions and courting can take place over a period of months before there is any forward movement.

Pros:

  • Lower risk of confidentiality breach

Cons:

  • Seller has limited control over transaction timing
  • Selecting the best-fit buyer is integral to maximizing value

4. Negotiated sale

 The seller negotiates exclusively with a single preferred buyer. If the negotiation is unsuccessful, the seller moves on to other interested buyers in sequence.

Pros:

  • Seller is typically dealing with known parties
  • Transaction is often quick
  • Greatest ability to maintain confidentiality

Cons:

  • Seller may not maximize value
  • Seller may have less control of the process due to no competition