investment bank logoinvestment bank logoinvestment bank logoinvestment bank logo
  • ADVISORY
    • BUY SIDE M&A
    • SELL SIDE M&A
    • CAPITAL RAISE
    • BUSINESS VALUATIONS
  • DEALS
  • ABOUT
  • CONTACT

Three Types of Auctions for Sell-Side Mergers & Acquisitions

Unless a seller opts (foolishly) to negotiate a sale with a single buyer, some form of auction is the most likely scenario. There are generally three distinct buckets that form the basis for the M&A auction process. The seller and the investment banker will work together to determine which of the following auctions will result in the best outcome. Determining the proper auction requires including the seller’s desire, confidentiality concerns, valuation enhancement and strategic fit and a host of other qualitative and quantitative reasons. There is really no optimal process that fits for all sellers. The following should provide a general idea of and outline.

Targeted Solicitation

In a targeted solicitation, the representing investment banker takes the business out to a relatively small group of potential buyers. This group is generally made up of five or fewer buyers. In most cases, the buyers exclude many financial buyers like private equity groups, choosing instead to focus on qualified strategic buyers. In the case where a private equity group is “deep” in a given market segment, such a group may be included. In a targeted solicitation, the sale generally moves much more quickly, confidentiality is more strictly maintained, but the lack of competition among buyers tends toward a lower valuation for the business.

Limited Auction

The limited auction will yield a larger group of prospective and interested buyers. In this case, the group is typically limited to 20 to 40 potential suitors. In this case, there is a bit more exposure to financial buyers, but the net is still cast with a preference toward strategics. It is obviously a bit more difficult to maintain extremely strict confidentiality, but the potential for obtaining a higher price at the time of sale is bolstered by the broader buying audience.

Broad Auction

The public/broad auction is the most likely scenario, particularly for middle-market companies looking to obtain liquidity. When businesses expand above the $100mm valuation threshold, the pool of buyers shrinks, and thus the auctions tend to lean toward more focused solicitations. The “long tail” in the middle market lends itself more toward the broad, public approach toward sell-side M&A. Maintaining confidentiality, while more difficult here, is still possible through “blind outreach” coupled with the right confidentiality agreements in place.

In a broad auction, the intermediary or investment banker will approach thousands of potential strategic and financial buyers. This approach lends itself to publishing in online, direct-investing sites, broad email outreach and many direct phone calls to potential buyers. The built buyer-list is extensive and the negotiations from Indication of Interest (IOI) to Letter of Intent (IOI) through Purchase & Sale and close can be exhausting. The upside: the highest potential valuations are gleaned from the most broad auctions.

Our team has performed both extremely targeted and very broad auctions across a myriad of company sectors. Let’s discuss which option is right for your business.

  • Author
  • Recent Posts
Nate Nead
Nate Nead
Nate Nead is a licensed investment banker and Principal at Deal Capital Partners, LLC, a middle-marketing M&A and capital advisory firm. Nate works with corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. He holds Series 79, 82 & 63 FINRA licenses and has facilitated numerous successful engagements across various verticals. Four Points Capital Partners, LLC a member of FINRA and SIPC. Nate resides in Seattle, Washington. Check the background of this Broker-Dealer and its registered investment professionals on FINRA's BrokerCheck.
Nate Nead
Latest posts by Nate Nead (see all)
  • Covid-19 Impact on US Private Capital Raising Activity in 2020 - May 27, 2021
  • Healthcare 2021: Trends, M&A & Valuations - May 19, 2021
  • 2021 Outlook on Media & Telecom M&A Transactions - May 12, 2021
Nate Nead
Nate Nead
Nate Nead is a licensed investment banker and Principal at Deal Capital Partners, LLC, a middle-marketing M&A and capital advisory firm. Nate works with corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. He holds Series 79, 82 & 63 FINRA licenses and has facilitated numerous successful engagements across various verticals. Four Points Capital Partners, LLC a member of FINRA and SIPC. Nate resides in Seattle, Washington. Check the background of this investment professional on FINRA's BrokerCheck.

Related posts

May 27, 2021

Covid-19 Impact on US Private Capital Raising Activity in 2020


Read more
May 19, 2021

Healthcare 2021: Trends, M&A & Valuations


Read more
May 12, 2021

2021 Outlook on Media & Telecom M&A Transactions


Read more

Get in touch

[]
1
Step 1

keyboard_arrow_leftPrevious
Nextkeyboard_arrow_right


investment banking Logo

Services

  • M&A Advisory
  • Sell-Side M&A
  • Buy-Side M&A
  • Raise Capital

About

  • About Us
  • Our Deals
  • M&A Blog
  • Contact Us

© Copyright Deal Capital Partners, LLC.

Privacy Policy | Terms of Service | Listing Agreement

This does not constitute an offer to sell or a solicitation of an offer to buy any securities and may not be used or relied upon in connection with any offer or sale of securities. An offer or solicitation can be made only through the delivery of a final private placement offering memorandum and subscription agreement, and will be subject to the terms and conditions and risks delivered in such documents.

M&A advisory services offered through MergersandAcquisitions.net. Securities transactions are conducted through Four Points Capital Partners, LLC (4 Points), a member of FINRA and SIPC. Deal Capital Partners, LLC and 4 Points are not affiliated. Check the background of this Broker-Dealer and its registered investment professionals on FINRA's BrokerCheck.

An Invest.net Partner