Some assets allow neither physical division nor comfortable adjudication to a single party: a unitary collection, a vehicle, a high-value musical instrument, a second home. When several parties want them and none accepts compensating the others, auction is the orderly way out. Properly designed, it ensures the asset is converted into distributable monetary value without sacrificing market price.
When to resort to auction
- The asset is physically indivisible and all interested parties want it.
- Compensation negotiations between the parties have failed or the cost would be disproportionate.
- The asset's market value is high and volatile, making it convenient for the price to be set by the market and not by an internal valuation.
- There is no testamentary or legal disposition adjudicating the asset to a specific party.
Internal auction between parties
Before going to the open market, it is worth offering a closed auction among the parties themselves. Each interested party submits a maximum bid in a sealed envelope; the asset is awarded to the highest at a price set at the level of the second-best offer (Vickrey mechanism) to incentivise honesty. The winner pays into the common pool; the money is distributed like any other liquid asset.
Open auction to the market
If the internal auction does not resolve, or if the parties prefer to maximise the sale price, one goes to the market: judicial auction portal, specialised auction house for art and collections, or professional intermediaries for assets with active markets. The choice of channel substantially affects the final price and associated cost.
Procedural guarantees
- Prior valuation setting the minimum acceptable price (reserve price).
- Adequate publicity of the asset to ensure real concurrence.
- Reasonable deadlines between announcement and closure to allow bidders to inform themselves.
- Documented and verifiable adjudication mechanism, with a record signable on closure.
Distribution of the proceeds
The amount obtained, net of auction costs, is incorporated into the divisible estate and distributed as a liquid asset. It is wise to document precisely the costs, the non-winning bids (to evidence concurrence) and the traceability of the collection and subsequent distribution. All that information is annexed to the case file.