Ralph O. Williams III

Mediation Tips - Impasse Breakers

Open Dutch Auction

When partners break up and each wants to retain and operate the partnership, they often have difficulty setting the buyout price. The Open Dutch Auction is the adult equivalent of “you cut and I’ll choose”, the time honored method of dividing dessert with a sibling. Here’s how it works.

One partner sets the price at which he is willing to sell his interest or buy his partner’s. The other partner decides if she will buy or sell at the set price. Self interest keeps the pricing partner honest. He will have to buy if he sets the price too high and he will have to sell if he sets the price too low.

Closed Dutch Auction 

When 50-50 partners break up, the Closed Dutch Auction is an effective way to set the buyout price. The partners exchange sealed bids stating the price at which they will sell their 50% share. The highest bidding partner “wins” and buys out the “loser” at the “loser’s” price.

The price set by each partner must be realistic, because if he “loses”, the partner will have to sell at the price he set. Setting too low a price has a double adverse effect, the “losing” partner will be the seller at the lower price.