Question of the day
2026-08-02
M&A
Why might a seller choose a negotiated (exclusive) sale over running a full auction?
Answer it out loud first — like you would in the room. Then check yourself:
Reveal the model answer
Model answer
Reasons to avoid a broad auction
- Confidentiality — an auction risks leaks that can spook customers, suppliers, employees, and competitors; a one-on-one keeps the process quiet.
- Speed and certainty — a single motivated buyer can close faster with less process risk.
- A natural/strategic buyer already exists who clearly values the asset most (synergies), so competition adds little.
- An existing relationship or unsolicited, pre-emptive offer that's compelling enough to take off the table.
- The seller is small, distressed, or in a thin buyer universe where an auction would signal weakness or fail to attract bidders. The cost is forgone price discovery — without competing bids, the seller has less leverage and may leave value on the table. Bankers often counter this by keeping a credible threat of 'going to market' to maintain negotiating leverage.
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