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auction sales Test with Questions (New Version 2024-25) & Complete Solutions
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auction sales Test with Questions (New Version 2024-25) & Complete Solutions
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auction sales Test with Questions (New Version2024-25) & Complete Solutions
A buyer may be concerned that, in the event of a successful claim for breach of warranty or
indemnity, the seller may not have the funds available to meet
the claim. To address this concern, the buyer may ask for a retention account. - ✔✔This is
where the buyer and the seller agree that a certain amount ofthe consideration monies will be
placed in a joint account (usually operated by both parties' solicitors acting together). Such
monies will be available to the
buyer in the event of a successful warranty/indemnity claim against the seller. The
consideration remaining in the account after a certain period of time has expired (often the
warranty limitation period) is then paid to the seller.
gives buyer comfort that if they have to make claim in future there will be some money!
4 Concerns of seller - ✔✔1)obtain best price for Target
2)Which buyers are committed? Who is just fishing?
3)what about risk of releasing confidential info
4 ) Commercial impact on Target as a result of a failed sale or confidentiality breach
Concerns of buyer - ✔✔1) how much will it cost if deal falls through
2)how committed is the seller if he has to sell at a low price
3) how many bidders is the seller talking to?
4) lack of due diligence- can they accurately value the Target? is it a worthwhile acquisition?
Private Treaty Sale - ✔✔one buyer negotiates with the seller for the Target's shares or with
the Target for its assets
, Auction Sale - ✔✔bids for Target are submitted by more than one potential Buyer
Private Treaty Sale: Heads of Agreement - ✔✔non legally binding, record of the terms which
the 2 parties have agreed
Private Treaty Sale: Confidentiality Agreement
confidentiality agreement will usually be drawn up by the seller's solicitor and should be
drafted to fit the situation, - ✔✔a confidentiality agreement should be signed before the
heads of agreement are discussed
If they are included in the heads of agreement, the document must expressly state that the
confidentiality provisions are legally binding because the heads
of agreement will not themselves be legally binding
Private Treaty Sale: Exclusivity/Lock-out agreements - ✔✔Given that a due diligence
investigation is an expensive and time-consuming exercise, a prospective buyer is likely to want
some form of protection against losing out to a rival bidder. Whether or not the buyer is able to
secure this protection will depend on the strength of the buyer's bargaining position
Private Treaty Sale: 3 agreements - ✔✔Heads of Agreement
Confidentiality Agreement
Exclusivity/Lock-out agreements
Auction Sale: meeting the parties concerns (3) - ✔✔Confidentiality agreements
Process Letters
Indicative Bids
Auction Sale: Confidentiality agreements - ✔✔all the potential bidders in an auction will be
required to sign up to confidentiality agreements before any information about Target is
released to them.
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