What type of auction is best for sell-side M&A?
If you’re ready to sell your company, the audience you present it to makes all the difference in its valuation and the success of the acquisition. At Symmetrical, we work with clients to sell their businesses using a variety of auction methods, finding the most suitable forum that will yield the best valuation.
There are three main types of auctions for sell-side mergers and acquisitions: targeted solicitation, limited auction, and broad auction. The type of auction we choose depends on a few factors. Depending on your valuation goals, business size, confidentiality requirements, and strategic fit, we determine how big a group of potential buyers to include. While each auction type provides benefits, there is no one-size-fits-all solution.
In a targeted solicitation scenario, the investment banker will try to sell to a limited number of potential strategic buyers. Typically, five or fewer parties will be involved so that confidentiality can be strictly maintained. However, with less competition, the eventual valuation may be lower than if a broader auction approach was taken. Because it only involves a few potential buyers, this auction is the least complicated method to sell your business.
Limited auctions broaden the circle of interested parties, typically opening the sale to 20–50 financial or strategic buyers. At Symmetrical we tend to find this to be the most effective approach. Assuming we can cultivate a list of buyers that would be interested in the opportunity, we are able to deliver attractive valuations while mitigating the issues and risks of a broader auction process.
This approach is typically the way smaller, “Main Street,” businesses transact. With broad auctions, the opportunity is sent to hundreds, if not thousands of buyers. Confidentiality can still be maintained through non-disclosure agreements, but it is harder to guarantee with this type of auction. In addition, going this route tends to generate a lot of questions and requests from potential “buyers” who ultimately end up not being able to execute a transaction.
When it comes to finding the right buyer and the best offer, it really matters that you choose the right forum to position your company in the best way possible. We know it can be overwhelming to figure out how to find a buyer for your company. The team at Symmetrical can guide you through the process. Contact us for a confidential discussion of your specific situation.