Controlled Auction continued…

This blog is part 2 of Controlled Auctions vs. Negotiated Sale posted 3-14-13.

Real estate and business sales differ in two other important ways. First, rarely are home owners as emotionally attached to their homes as are owners who have spent their entire adult lives building their businesses. Most owners have poured their time, effort, cash and often, egos into their companies. For that reason, emotions can become quite intense in the business transaction.

Second, in a business transaction, the number of possible mistakes and misunderstanding increase exponentially.  There are no arguments re: sq footage.  There are 4 walls, a roof and garage.  Yes, things do come up in an inspection but it is pretty cut and dry and the seller either agrees to take care of any of the issues or the buyer takes care of it.

A business however is a living entity.  Things can change during the sales process.  Inventory and other assets can become the object of conflict as well as working capital staying with the business.

Even though buyers and sellers do not interact directly in a Controlled Auction a seller has more control in an auction then in a negotiated transaction because bids are solicited through a process that seller’s team crates and controls.  The process gives the seller more control over important factors such as timing, the extent of due diligence, the first draft of the definitive agreements and the ability to compare multiple competitive bids and choose an ultimate winner.

The chance of a transaction falling apart is much less likely in an action process.  At the end of the day, a deal that result from an auction process yield a higher price, more seller-friendly agreements, and less risk for seller.

Look for Part 3 next week for a summary on “Seller’s advantages of a Controlled Auction”