The Revlon Rule resulted from a legal case decided by the Supreme Court of Delaware in 1985. Revlon, Inc. found itself in a hostile takeover, which management and the Board fought hard to defend. Ultimately, a white knight provided a friendly, but lower, bid that the Board accepted. The bid approval was overturned by the Supreme Court of Delaware,...
A controlled auction process is a type of sales process where various potential buyers submit purchase offers for an acquisition target. A regular auction consists of multiple parties bidding for a business simultaneously. Controlled auctions are differentiated in that the process unfolds in a carefully planned sequence designed to build and maintain a strong negotiating position. In a controlled auction, the opportunity is presented to a select group of qualified buyers in a manner that simulates a market.
A controlled auction process is a time-tested method to maximize value when selling a business. The primary objective of a controlled auction is to generate the best possible cash purchase price. However, in addition to price, another important aspect of the controlled auction process is the ability to manage the deal terms with the use of a seller-friendly purchase and sale agreement.
The two most important keys to a successful controlled auction process include:
Fully understanding what the seller's objectives are; and
Having the ability to maintain strict control over the process.
When selecting and investment bank or business broker to sell your business, ask them to provide a detailed description of their auction process. All investment bankers and brokers can approach multiple potential parties in an attempt to create an auction. Be sure that you engage a firm that has the expertise with controlled auctions to maximize your sales price.
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