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

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Presentation on theme: "How to win a bid without bidding! Jim Corum Paul Greenland Quentin Hicks Amanda Nelson."— Presentation transcript:

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? 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 Payoffs of bidding/not bidding

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? ASAP’s best move is not to bid Our best move is not to bid and win! Payoffs of bidding/not bidding

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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