If that will add value to your deal, or if a relationship is important, pursue a negotiation.įinally, examine your priorities. But specification can discourage creative collaboration between buyer and seller. CWA’s assets were uniquely strategic to the winner, but because it had to beat the second-highest bidder by only a little bit, the company got them at a price far below the value the deal actually generated.Ĭan you write exact specifications for an asset? Then you probably won’t go wrong with an auction. In that case, an auction could leave a lot of money on the table-as it did in the sale of Cable & Wireless America. If you can get enough of the right buyers to participate, an auction generally makes sense-unless you expect a wide range of valuations. Before you decide on a process, carefully consider the nature of the buyers, the characteristics of the asset in question, and your own priorities. In many situations, negotiations lead to better results. The wrinkle is, auctions often set up win-lose relationships between buyers and sellers, says Subramanian, a professor at Harvard’s schools of business and law.
What’s the best way to buy or sell an asset? Should you hold an auction and accept the most attractive offer? Or should you identify the most likely prospects and negotiate with them privately?Īuctions became increasingly popular after the internet opened wide the universe of potential bidders.
