House of Commons - Public Accounts

Select Committee on Public Accounts Sixty-First Report

GETTING VALUE FOR MONEY IN PRIVATISATIONS

PART 1: KEY LESSONS

10.Trade Sales
The Management and Marketing of the Business
- What steps can departments take to manage the sale of a business effectively?	- Departments should ensure that all key financial information about the business is obtained and included in the marketing documentation. This should include financial prospects and cash flow profiles.
	- Where the sales take place at some distance from a sponsoring department, the roles of each party should be clearly defined at the outset; and sponsoring departments should monitor the vendors' handling of sales to ensure that agreed procedures are being applied properly in all key respects.
Information for Potential Bidders
- What information should be provided to potential bidderrs?	- The achievement of good value for money is most likely where there has been competition among fully informed bidders. Providing comprehensive information about the business being sold will help stimulate imaginative, competitive bids.
	- For a variety of reasons, including commercial confidentiality, departments may not wish initially to provide comprehensive information to all potential bidders. On the other hand, departments need to provide sufficient information to encourage initial bids and to minimise the risk that short-listed bidders will reduce their bids significantly at a later stage when further information is made available to them.
	- Information should be made available on an equal basis to all potential bidders, or departments will risk undermining bidders' confidence in the integrity of the sale process. To help demonstrate the integrity of this process, vendors and their advisers should keep a careful written record of the information passed, and what is said, to bidders.

Short-listing of Bidders and Completion of the Sale

- What factors should departments consider when short-listing bidders? - While departments will usually need to reduce the number of bidders to a manageable number, they should always aim to maintain a competitive number of bidders throughout the process.

- Where a period of exclusive negotiation with a preferred bidder is unavoidable, the period should be kept as short as possible. Departments should avoid making concessions at a late stage, denying other bidders the opportunity of attaching a value to them in their bids.



© Parliamentary copyright 1998	Prepared 3 September 1998