MedTech Private Sale versus Auction. What’s best for you?
Many MedTech companies who are considering a sale, evaluate the differences between a private sale and an auction. Learn how to determine the best path for your MedTech company.
Private equity firms sell portfolio companies in an auction format believing that will result in a prompt sale at the highest market price. Often they are selling a company which has professional managers in place, audited financial statements, well-developed growth strategies and thoughtful projections leading to premium pricing of the business in sale. The management team stays in place following sale providing for continuity and continued execution under an articulated strategic plan. In such a scenario, an auction focused on attracting financial buyers is a good plan.
Privately owned businesses exiting after a long period of business ownership may find that a broad auction approach favored by Private Equity may not suit their situation.
Confidentiality is often compromised in a broad auction. Employees, customers and vendors likely become aware that a transaction is planned. Owners can rightly become concerned that awareness may affect their business negatively. A private sale can preserve confidentiality.
Due diligence in the absence of current and historically audited financial statements and lack of well supported financial projections may require an extended time on the part of buyers to fully understand the business and it future potential. An extended vetting period can be accommodated in a private sale.
Working to align sellers’ succession plans or lack thereof can require mutual understanding of the needs of the business for post-sale leadership and management. This requires time and attention not generally available in the auction process.
Some argue that an auction process always results in a sale. We have found that not to be true. There are a significant number of private companies for which a “busted auction” resulted in no sale requiring adjustments in the business only to return to market at some later date often in a private sale.
Is a private sale or an auction a better choice for your company? Call or email. We will be happy to provide a confidential assessment as to the best approach for your business.
About the Author
Robert Kinsella is the president and founder of Kinsella Group.
