Private sale: Overview, definition, and example
What is a private sale?
A private sale refers to the sale of assets, securities, or property directly between parties without being publicly advertised or offered on an open market. Private sales are often used in real estate, business acquisitions, and private equity transactions, where buyers and sellers negotiate terms confidentially.
For example, a business owner might sell shares of their company to a private investor rather than listing them on a public stock exchange.
Why is a private sale important?
Private sales provide greater confidentiality, flexibility, and control over the transaction process. They allow sellers to choose buyers based on specific criteria, negotiate customized terms, and avoid the costs and regulations associated with public sales.
For businesses and investors, private sales can be a strategic way to transfer assets, raise capital, or acquire ownership without public scrutiny or competitive bidding. However, they may lack liquidity, meaning assets can take longer to sell compared to public markets.
Understanding a private sale through an example
Imagine a real estate developer owns a commercial property and wants to sell it discreetly without listing it publicly. The developer negotiates directly with an investment firm, agreeing on a sale price and terms privately. This allows both parties to structure the deal without outside competition or public disclosures.
In another scenario, a tech startup raises funding by selling shares to a venture capital firm through a private sale. Unlike a public offering, this transaction is conducted privately, with only the involved parties knowing the deal’s financial details.
An example of a private sale clause
Here’s how a private sale clause might appear in a contract:
“The Seller agrees to transfer ownership of [Asset] to the Buyer through a private sale. The terms of this transaction, including price, payment structure, and conditions of transfer, shall remain confidential and shall not be disclosed to third parties without prior written consent.”
Conclusion
A private sale is a direct transaction between parties without public market involvement. It provides confidentiality, flexibility, and control over the sale process, making it a preferred option for businesses, real estate owners, and investors.
By clearly outlining the terms of a private sale in a contract, parties can ensure transparency, protect confidentiality, and structure deals in a way that benefits both buyer and seller.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.