A more recent version of these Auction Sale V Private Sale notes – written by Cambridge And Oxilp And College Of Law students – is available here.
The following is a more accessble plain text extract of the PDF sample above, taken from our Private Acquisitions Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:
M&A Work Shop 2
Auction Sale v Private Sale Auction Sale p.33 DEFINITION
ADVANTAGE S FOR THE SELLER
A controlled auction is the sale of a company or business where the seller seeks competing bids for the target. The issues that arise on this type of transaction are very similar to those that arise on most private sales. The timing and order of the steps in the auction process differ from transaction to transaction, but they almost invariably include the following:
1. Advertisement of Sale:
- By S.755(1) CA 2006 Private Co.'s cannot offer shares for sale to general public. BUT,
- By s.756(3) and advertisement issued to specifically identified B's is the exception, BUT
- Note FSMA 2000
2. The distribution of an information memorandum and letter detailing the auction process to prospective bidders.
- does not create a binding contract,
- inviting B's to submit indicative offers,
- Co. is sold without finance
- Co is sold by "debt free/cash free " price p.23
- Outlines Co.s information (eg. General assets, tax position, potential liabilities, strengths, weaknesses)
-Buyer will see warranties from S
3. A first round of "indicative" bidding.
4. A DD investigation and review of draft sale documents by bidders.
5. A second round of bidding from a limited number of bidders, accompanied by their responses to the seller's draft documents.
6. Negotiations with one or more bidders, leading to the conclusion of a sale. The seller seeks a number of benefits from the auction process:
? The Seller drafts the SPA
? The seller can usually reach more potential buyers through an auction.
? The competitive tendering process is intended to maximise the price by encouraging potential buyers to bid against each other. In some cases, the seller will run a dual-track process with a view to eliciting a preemptive offer from a bidder before the second round of bidding has
Private Sale p.32 A buyer for assets or shares may be sought either directly by the seller or by an intermediary such as a financial adviser, bank or accountant. B and S already know each other; they have agreed the main commercial terms of the proposed acquisition and possibly an agreed period of exclusive negotiations. The usual procedure for negotiating the contract documents on a private sale is as follows:
1. The buyer's lawyer prepares the draft sale and purchase agreement. He submits this to his client and, with his client's agreement, forwards it to the seller's lawyer.
2. The seller's lawyer considers the draft sale and purchase agreement with his client and amends it, returning the amended draft to the buyer's lawyer.
3. The seller's lawyer prepares a draft disclosure letter based on information provided by the seller which, after the seller has approved it, will be sent to the buyer's lawyer.
4. The buyer's lawyer considers the draft disclosure letter with his client, and amends it appropriately, returning it to the seller's lawyer.
5. Both parties' lawyers agree final versions of the sale and purchase agreement and the disclosure letter (there may have been many drafts before getting to this stage).??The Buyer drafts the SPA Continuity of trade Confidentiality may be an advantage as documents are disclosed to a very limited number (usually 1 or 2) of potential buyers. It is not as disruptive as auction sale in relation to employees. Do not go through the potential
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