The Law of Corporate Finance: General Principles and EU Law: Volume III: Funding, Exit, Takeovers

16.7 Excursion: Auction Sale 489

Table 16.2 Auction Sale. What Will the Seller Do?

First stage:

Fundamental

choices and time-

consuming inspec-

tions

Sales material Sales process Final stage

Preliminary in-

spection of the ob-

ject.

Time schedule.

Choice of what to

sell.

Choice of potential

buyers.

Inspection of the

object, environ-

mental inspec-

tions.

Internal due dili-

gence.

Preparation of data

room.

Preparation of info

memo.

List of tenants (this

is a list of impor-

tant customers).

Inspection of the

accuracy of infor-

mation.

First contacts to po-

tential buyers, first

contacts to poten-

tial sources of fi-

nance.

Preparation of data

room.

Info memo and the

list of tenants sent to

potential buyers.

Preliminary bids.

Choice of 2–3 poten-

tial buyers.

First draft purchase

contract sent to poten-

tial buyers.

Preparation of data

room completed.

Data room / buy-

ers’ due diligence.

Potential buyers

visit the object.

Negotiations,

drafting of the

purchase contract.

Final and binding

bids.

Drafting of last

details + signing

of the purchase

contract.

Table 16.3 Auction Sale. Why Will the Seller Do It?

The seller wants to avoid negative sur-

prises

Potential buyers are

given all information

that may influence the

value of the object

Potential buyers

are given an op-

portunity to verify

the truthfulness of

information

The seller verifies the information that

will be given to potential buyers.

Environmental inspections are time-

consuming.

Data room is a place that contains docu-

ments (or computer files) that help the

buyer to verify the truthfulness of infor-

mation provided by the seller.

Information memo-

randum contains im-

portant information

for bidders about the

object and the auction

process.

Potential buyers

inspect docu-

ments; they do not

inspect the object.

Only serious bid-

ders may perform

due diligence.