Bid Instructions

Last updated: March 22, 2024

What Does Bid Instructions Mean?

Bid Instructions, or Instructions to Bidders, is a document issued by the investment bank running a competitive auction process that contains all the requirements, expectations, procedures and other information deemed necessary to aid bidders in presenting their bids.


Divestopedia Explains Bid Instructions

Bid instructions for a mid-market transaction are usually summarized at the end of the confidential information memorandum and contains, but is not limited to, the following items:

  • Clarification of the investment parameters desired by the sellers and expected in the transaction.

  • A summary of information to be included in a letter of intent. This could be:
    • the estimate of value and the major assumption(s), if any, made in deriving the purchase price;
    • the percentage of equity that the potential purchaser will acquire;
    • any material and/or unusual representation and warranties required;
    • any major conditions to be fulfilled prior to closing; and
    • a comprehensive list of the additional information or requirements that the potential purchaser would need to complete its investigation.

  • The timetable and steps to be followed by the bidder in the auction process. This will include:
    • the selection process of prospective purchasers that will advance to detailed due diligence after the initial bidding process;
    • procedures for due diligence and documentation review;
    • management presentation meetings and discussions with senior management; and
    • the procedure for completion of formal purchase, sale agreements and closing.


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