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How to win a bid without bidding!

How to win a bid without bidding!. Jim Corum Paul Greenland Quentin Hicks Amanda Nelson. How to win a bid without bidding. FMCG Advertising agency is for sale. A bank has been appointed to handle sale. There are two bidders: ASAP – A media conglomerate An MBO team of FMCG’s Directors

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How to win a bid without bidding!

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  1. How to win a bid without bidding! Jim Corum Paul Greenland Quentin Hicks Amanda Nelson

  2. How to win a bid without bidding • FMCG Advertising agency is for sale. A bank has been appointed to handle sale. There are two bidders: • ASAP – A media conglomerate • An MBO team of FMCG’s Directors • As the MBO team we are trying to decide whether to bid or not bid for the company

  3. Background assumptions • Asking price based on ‘net services’ is $100MM • Offers below asking price will be rejected • Expected future value of FMCG is 110MM • MBO team cannot bid above $100MM • ASAP is cash rich and experienced at acquisitions • If bids are tied, price will increase to $105MM • Current owners need to sell quickly (inside information) • If no bids received owners are likely to seek deal with MBO team at reduced price

  4. To bid or not to bid? Payoffs of bidding/not bidding • ASAP’s best move is to always bid as they will always win given their ability to pay $5MM more • Our (weak) best move is not to bid

  5. However… • If we do not win the bid, we have decided to leave and set up our own company (at a set up cost of $10MM), taking with us many valuable employees and clients • Today, we tendered our resignations and are working through our two weeks notice period • When we leave, we calculate that FMCG will drop in value by $50MM • We have made all information public

  6. To bid or not to bid? Payoffs of bidding/not bidding • ASAP’s best move is not to bid • Our best move is not to bid and win!

  7. The winning bid • ASAP has completed many similar acquisitions • They looked ahead and recognized that future actions affect their current bidding strategy • In reality FMCG sold to the MBO team for only $60 MM

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