Broadly speaking a proprietary deal is one in which one specific buyer is introduced to a potential seller without the competition of other potential buyers. In an auction process, multiple qualified buyers are introduced to a definite seller. Generally speaking, the proprietary transaction is geared to favor the buyer and give him or her exclusive access to a “potential seller.” The biggest risk for the buyer is that since the seller is not engaged in a full sell-side process, the seller is often more curious than serious and really only interested if the suitor is willing to offer something perceived as significantly beyond market value.
The sell-side auction process, in contrast, is geared to favor the seller as the process generates a pool of qualified and earnestly interested buyers. The auction process is designed to one end, generating competition among multiple buyers for one asset. The roles and odds are reversed in favor of the seller.
So, even though there are exceptions to this rule, in general, we know that an auction process is significantly more likely to result in a successful transaction. And while much of the process is designed primarily to benefit sellers, the most serious buyers also often prefer seller’s in an auction process for the simple reason that they know these sellers are seriously willing to sell if the right match can be made.