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Competitive Bid Process

Definition - What does Competitive Bid Process mean?

A competitive bid process is mostly used in the procurement of goods and services. The process entails submitting a sealed envelope detailing the price and terms of an offer. The recipient of the offer then selects the competitive bidder that has delivered the lowest price or best terms. While not practiced regularly, a competitive bid process can be done with a company sale whereby the investment banker would skip the traditional M&A process and immediately solicit letters of intent (LOI) to be delivered confidentially from all potential buyers by a certain date.

Divestopedia explains Competitive Bid Process

Companies undertaking a competitive bid process usually command valuation premiums over their peers. They typically operate in an industry where they have developed a significant competitive advantage and operate as a price leader. Buyers seldom like to get involved in a competitive bid process unless the target company clearly provides post-transaction advantages that can be readily quantified and pose little risk to be realized.

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