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.