How do investment banks conduct auctions of companies?

What are the processes involved in controlled auctions conducted by large investment banks. What are the risks involved from both the buy side and the sell side.

Obviously from the sell side. Most thing are bought on Credit or with loans. If the company defaults on the payment then the Bank is allowed to foreclose. Correct? When they do so they are taking a loss... say a piece of machinery costs $100,000. The Company never makes a single payment on there loan other than the 10 percent they had to put down to get the loan... that means that the equipment is still $90,000 unpaid, or 90% unpaid. When they sell it, via an auction the buyer usually pays even less than that for the machinery.. usually around 50-60%. Depending on the need for the machinery... Cause the only thing a bank can do is sell the machinery... they don't need to make shirts or whatever. In dong so the bank is out of the money... 10% paid plus 50% received from buyer is only $60,000 for an object that was worth 100,000.

As far as the risk in buying... usually the buyer is less informed. By that I mean, It is the risk of the buyer to assume that the machinery is not broken or screwed up in anyway.

I assume you are talking about how an investment banker helps one company to be acquired by another company. They do not go on auctions like foreclosures at the court steps. Unless the company being acquired openly wants to let everyone know the company is looking for a suitor, it is done in highly confidential manner.


The investment banker would quietly look for companies that may have a good fit. Confidential agreement are signed before any kind of information is exchanged. Once a suitor is found, they would agree on a price and the buyer will be given certain period of time of due diligence (to verify the info).

The risk for the seller is that if the information is leaked out before it is done, you can lose customers and suppliers. You banker may not like you any more and your key employees start looking for other jobs and your competitor use that against you. For the buyer, you may pay too much or if the merger does not go well, like Time Werner and AOL, heads will roll.