What is an auction process?

During an auction, prospective buyers bid competitively for an asset or service, with the sale going to the best bid. The process varies depending on the type of auction used, though in general, sellers pay a fee to be listed and then invite buyers to bid, evaluate their offers and then choose the best deal.

Where have you heard about the auction process?

Auctions have existed in some form throughout human history. Although perhaps once associated with famous and exclusive auction houses like Sotheby's and Christies, the rise of the internet and electronic payment has popularised the auction process, with online marketplaces like eBay connecting sellers and buyers across the globe.

What you need to know about the auction process.

Auctions are a good way for sellers to determine the best possible selling price for their product. They are often used by investment bankers when buying and selling mid-market companies to generate competition and drive the purchase price up. In this case, bids are not only evaluated for the best price, but also for other factors like the buyer's plans for the business.

The open ascending price auction process, where participants bid openly against one another and each bid must be higher than the one before, is probably the most common. However, there are different types of auction – for example, absolute auctions, call auctions, Dutch auctions and lender confirmation auctions and the auction process varies depending on the type used.