The QuietAuction™ Process: Exploring the Mechanics and Benefits of a Controlled Sale Approach in Mergers and Acquisitions

So, you are thinking about selling your business. That is a large step, and I bet you are wondering how you will manage such a task. Here at True North Mergers and Acquisitions (TNMA), we sell companies through an auction process called the QuietAuction™.

It surprises many, but even in multi-billion-dollar deals, investment bankers do not use a price but an auction for selling businesses. Our QuietAuction™ offers strategic advantages over going to market with a price by creating competitive bidding with discretion. By having multiple parties competing through a bidding process for the company, the seller and their deal team are not telling the buyers what not to pay for the company but instead letting the market determine the price.

Although running an auction sounds simple enough, it can be complex. This blog walks you through the stages of our QuietAuction™ and explains why this strategy could be the best way for you to sell your business.

What Is the QuietAuction™?

The QuietAuction™, similar to a controlled auction or limited auction, is a structured sale process that involves a target group of potential buyers. Unlike traditional auctions that may be available to all buyers, the QuietAuction™ involves a target list of carefully selected groups of qualified buyers and a structured timeline with key mileposts of progress. The mergers and acquisitions advisors or investment bankers create buyer competition by managing multiple phases with end dates and enforcing confidentiality throughout the transaction process.

Preparation and Buyer Selection

The process begins with thorough research and collaboration between the TNMA deal team and the selling company. As mentioned above, they develop a prioritized list of target buyers, including strategic and financial (private equity) buyers. This careful selection ensures that only serious, qualified candidates are invited to participate.

Initial Contact and Confidentiality

Once potential buyers are identified, the mergers and acquisition advisor contacts the appropriate contacts at each target company. Before any sensitive information is shared, all interested parties must sign non-disclosure agreements (NDAs). This step is crucial for protecting the seller's confidential information and maintaining the integrity of the process.

Information Sharing

After NDAs are in place, potential buyers receive a Confidential Information Memorandum (CIM) and access to a secure data room. This allows them to conduct initial due diligence and evaluate the opportunity. The mergers and acquisitions advisor manages this process, addressing follow-up questions and ensuring all bidders receive equal access to information.

Bidding Rounds

Depending on the specific circumstances, the QuietAuction™ may involve one or two rounds of bidding:

• One-step process: In a more streamlined process, buyers submit a single Letter of Intent (LOI) with their offer.
• Two-step process: For larger or more complex deals, the process may include:
  • Initial round: Buyers submit indications of interest (IOIs)
  • Final round: Top bidders are invited to submit detailed LOIs

Negotiations, Due Diligence, and Closing

After receiving bids, the seller and their trusted team evaluate the offers and consider factors beyond price, such as if the buyer is a good fit within the company's culture. The seller can decide to negotiate further with one or more top bidders before selecting a preferred buyer to participate in due diligence with. The process concludes with the signing of a definitive agreement and the subsequent closing of the transaction.

Advantages of the QuietAuction™

The QuietAuction™ process might appear to be complex and lengthy, but it offers several key advantages that make it the best approach to use:

1. Confidentiality: By limiting the number of participants, the QuietAuction™ reduces the risk of information leaks that could harm the business or disrupt operations.
2. Efficiency: With a tight, specified timeline, the process can move faster than a broad auction, potentially reducing transaction costs and closing time.
3. Quality of Bidders: The selective nature of the QuietAuction™ results in a higher caliber of potential buyers and helps create a sense of urgency, increasing the likelihood of a successful transaction.
4. Competitive Tension: Despite the limited pool, the QuietAuction™ process creates a highly competitive environment that can drive up valuations and improve the terms of the deal.

True North Mergers and Acquisitions

In conclusion, the QuietAuction™ process represents a sophisticated approach to mergers and acquisitions that combines the benefits of competitive bidding with the discretion many sellers desire. Partnering with experienced advisors at True North Mergers and Acquisitions can significantly impact your experience when selling your business. Our team brings extensive industry knowledge and a strong track record to help you navigate the complexities of selling your business.

If you are interested in learning more about how our QuietAuction™ might work for you, we would be happy to discuss your specific situation and explore your options together. Contact Michael Hubsmith, President of TNMA, for more information.