A practical guide to buy-side and sell-side private M&A auction strategy
No two private M&A auctions are the same. The target company, sellers, bidders, market conditions and sale process all shape the parties’ strategy. But the fundamentals remain consistent: successful buyers combine a competitive bid price with credibility and deal certainty, while successful sellers use preparation and M&A auction process design to create competitive tension in pursuit of better transaction value and deal terms.
Buy-side strategy: how private equity buyers can win a private M&A auction
For a private equity bidder, purchase price is only part of a winning bid. Sellers also assess whether a buyer is credible, prepared and capable of closing the transaction on the proposed terms and timetable. Our guide explains how bidders can use the letter of intent (LOI), the mark-up of the seller’s form of share purchase agreement (SPA) and thoughtful communication to strengthen their position. It also considers the distinct signalling required when acquiring a founder-owned business.
- Balance purchase price and deal certainty. Sellers want the best overall transaction, not necessarily the highest headline price. A bidder’s credibility, financing, diligence plan and ability to close quickly can materially affect bid value.
- Use the LOI to build seller confidence. A strong LOI answers foreseeable questions, explains key assumptions and presents a clear path from bid acceptance to signing and closing.
- Keep the SPA mark-up focused and executable. Prioritize material issues, work from the seller’s draft and avoid changes that create unnecessary uncertainty. Where representation and warranty insurance (RWI) is contemplated, align the mark-up with an RWI-backed transaction.
- Address founder priorities. In a founder sale, explain how the buyer will support the company’s next stage of growth, work with management and create the conditions for a larger future exit.
Sell-side strategy: how sellers can run an effective private M&A auction
A well-designed private M&A auction can create competitive tension, improve transaction terms and increase closing certainty. It also gives business owners and other sellers greater control over timing, information flow and negotiations. Our sell-side primer identifies the decisions and preparation steps that can help sellers maximize sale value and manage execution risk.
- Designing the sale process: confidentiality arrangements, the process letter and the seller’s draft purchase agreement.
- Comparing bids: evaluating price, terms, financing, conditionality and execution risk before selecting a preferred bidder or granting exclusivity.
- Aligning the seller group: managing multiple sellers, equity rollovers and restrictive covenants.
- Choosing the transaction structure: asset sales, carve-outs, reverse due diligence and one-step versus two-step transactions.
- Allocating post-closing risk: seller representations and warranties, clean-walk structures, indemnities and representation and warranty insurance.
A private M&A auction guide for buyers, sellers and deal teams
This guide provides a practical, high-level overview of buy-side and sell-side strategy in private company M&A auctions. It is intended for private equity sponsors, business owners, management teams and other deal participants preparing to buy or sell a private company through a competitive process.
To discuss buy-side or sell-side private M&A auction strategy, contact one of the guide’s authors or another member of Fasken’s Mergers & Acquisitions group.
