Auction process letter meaning

Auction disposals frequently feature in sizeable private equity deals. Sometimes labelled ‘institutional buyouts’, owner-led auctions are set up to trigger competition among several prospective purchasers. This Practice Note concentrates on the mechanics of the auction in a management buyout setting; for broader guidance on auction disposals generally, see Practice Notes: Auction sales—share purchase and Auction sales—asset purchase, and also: Auction sale (private M&A) transactions—checklist. It outlines the principal features of the process in a management buyout context. The process The seller directs and manages the timetable, supported by a financial adviser (e.g. an investment bank). In transactions of this scale, incumbent managers typically hold only a modest equity interest in the target and so wield limited sway over the sale arrangements and within the sale process overall. See Precedent: Auction sale process letter—private M&A. Alongside private equity houses, trade acquirers may equally target the business. The seller (often a private equity fund seeking an exit) collaborates with the financial adviser to map the full universe of potential bidders....

Auction sale process letter—private M&A Letterhead of corporate finance advisors [ Insert name of recipient ][ Insert address of recipient ][ insert date ] Dear [ insert name ] Sale of [ Insert name of company or business ] (target) We attach copy number [ insert number ] of a confidential information memorandum ( Information Memorandum ) relating to the Target for your review and consideration. The Information Memorandum is furnished to you in commercial confidence and pursuant to the confidentiality [ letter OR agreement ] you executed on [ insert date ], a duplicate of which is enclosed as well. The Information Memorandum has been, or will be, distributed to a limited selection of other parties, each of whom will be subject to equivalent confidentiality obligations. The intention of the Information Memorandum is to enable you, and those other parties, to determine whether to commence negotiations to purchase [ the whole of the issued share capital of the Target [ or part thereof ]...

Auction sale timetable—private M&A Sale of [ insert name of company or business ]: Timetable Seller preparations (IM – [ insert number ] days): appoint corporate finance and professional advisers; carry out vendor due diligence; identify and contact potential bidders; prepare the information memorandum and marketing presentation; verify disclosures if required; procure signed confidentiality agreements (Seller/Seller solicitors/Seller corporate finance advisers/Potential bidders/Potential bidders’ solicitors). First round (IM and IM + [ insert number ] days): issue the first round process letter with the IM; receive indicative offers outlining price, structure, funding, conditions and regulatory matters (Seller/Seller corporate finance advisers/Potential bidders/Potential bidders’ solicitors). Second round (IM + [ insert number ] days): shortlist bidders; circulate second round letter, draft sale and purchase agreement and vendor due diligence; open the data room; buyers conduct diligence; arrange management meetings and site visits; submit revised offers with SPA mark-up by deadline (Seller/Seller solicitors/Second round bidders/Second round bidders’ solicitors/Target management). Third round (preferred bidder stage) (IM + [ insert number...