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Targeted Auctions

Definition - What does Targeted Auctions mean?

A targeted auction is a process which focuses on a limited amount of bidders for an acquisition of a company. The number of bidders is limited to roughly no more than ten potential bidders. This process focuses on the percieved best potential buyers for the target. A targeted auction weeds out buyers that are not a fit quickly compared to a broad auction which approaches all potential buyers in the market regardless of fit.

Divestopedia explains Targeted Auctions

A targeted auction is a private bidding processes which is granted to a limited number of bidders. With most targeted auctions averaging ten bidders or less, it makes management of the auction process more efficient and it also limits the risk of confidential information regarding the sale being leaked to unwanted parties. A disadvantage of a targeted auction would be the chance of excluding a buyer that provides the highest offer.

Most auction processes for mid-market companies use the targeted auction approach. M&A advisors will use their network of contact or on-line deal sourcing platforms to prepare a prospective buyer list. From initial discussions and research, the intial list will be shortened to include only the most realistic and interested potential buyers. From there, depending on the attractiveness of the target, the process will move to a one-step or two-step auction process.

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