Many buyers soon learned that while online auctions were great at creating price competition, they couldn’t deliver meaningful competition on service and quality. Take a closer look at what happened with e-auctions. In reality, however, auctions don’t always produce the most satisfying results. E-auctions, the managers believed, would allow them to quickly connect with a whole universe of potential vendors and reel in much more attractive offers.

Back in the early 1990s, many procurement managers began to see reverse online auctions, in which suppliers competed for customers’ business, as the way of the future. Executives routinely auction off divisions or subsidiaries of their companies after all, who can fault them for the prices they get if those prices are the outcome of a competitive bidding process?Īuctions have gained popularity with buyers, too, especially since the advent of the internet. Auctions aren’t just for ordinary folks trying to dispose of antique teddy bears or 1970s wallpaper, either. The success of the online giant eBay is a monument to that belief, and a lot of academic research supports it as well. When you have something to sell, the best way to get a good price for it is to hold an auction, conventional wisdom tells us. When discretion is critical, a negotiation will work better, but when you need a transparent, speedy process, an auction is the more sensible choice. If that will add value to your deal, or if a relationship is important, pursue a negotiation.įinally, examine your priorities. But specification can discourage creative collaboration between buyer and seller.

CWA’s assets were uniquely strategic to the winner, but because it had to beat the second-highest bidder by only a little bit, the company got them at a price far below the value the deal actually generated.Ĭan you write exact specifications for an asset? Then you probably won’t go wrong with an auction. In that case, an auction could leave a lot of money on the table-as it did in the sale of Cable & Wireless America. If you can get enough of the right buyers to participate, an auction generally makes sense-unless you expect a wide range of valuations. Before you decide on a process, carefully consider the nature of the buyers, the characteristics of the asset in question, and your own priorities. In many situations, negotiations lead to better results. The wrinkle is, auctions often set up win-lose relationships between buyers and sellers, says Subramanian, a professor at Harvard’s schools of business and law. What’s the best way to buy or sell an asset? Should you hold an auction and accept the most attractive offer? Or should you identify the most likely prospects and negotiate with them privately?Īuctions became increasingly popular after the internet opened wide the universe of potential bidders.

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