The insolvency bidding process: how it runs, deadlines, mistakes

Legally, the insolvency administrator has no formal duty to run a bidding process. Their duty is broader: to achieve the best possible realisation of the estate in creditors' interest (§ 1 InsO). A documented competition among several offers is simply the safest way to demonstrably meet that duty — and to protect against a later claim that the estate was sold too cheaply.

So once more than one prospect with credible interest appears — typically from the second non-binding offer or the second serious inquiry onward — the situation changes. Instead of individual calls, every prospect receives the same documents at the same time, the same deadlines and the same rules. In larger cases, the administrator also aligns the chosen approach with the creditors' committee.

Teaser + NDA. Prospects first receive an anonymised short profile (industry, revenue range, cause of distress, target deal structure). Only after signing a non-disclosure agreement do they get the company name and access to the next stage.

Data room. A virtual data room with annual accounts, contracts, an asset overview and — depending on case stage — a preliminary estate overview opens up. Quality and completeness vary widely: in insolvency, due diligence is by definition less complete than for a healthy company.

Round one — indicative offer (letter of intent). Bidders submit a non-binding but as concrete as possible offer: price range, deal structure (asset deal or, less often, share deal via an insolvency plan), proof of financing, planned treatment of the workforce, targeted signing date.

Shortlist + deeper due diligence. The administrator selects the most promising bidders for a second, deeper review phase — often including management meetings or a site visit.

Round two — binding offer. Remaining bidders submit a legally binding offer, usually with a draft contract. The administrator then awards the deal — in larger cases after creditors'-committee approval.

Speed is its own competitive factor in a bidding process, alongside price. A fast, internally consistent indicative offer backed by clear proof of financing earns preferential access to round two — a buyer who only reacts once others are already bidding bindingly has little chance left in practice.

Concretely: sign the NDA the same day, work through the data room immediately and thoroughly (not just skim it), and attach a credible financing confirmation to the indicative offer already — a bank or equity commitment often carries more weight at this stage than a somewhat higher purchase price without proof.

Structure beats improvisation: a bidder who has already decided, before round one, whether they're pursuing an asset deal or a share deal (see Asset deal vs share deal in insolvency) and how transferring employment relationships will be handled comes across as far more serious than one who only works these questions out during due diligence.

The most common mistake is a too-vague indicative offer — a price range with no structure, no proof of financing, no timeline. In practice such offers rarely make it to round two, even if the stated number looks attractive.

The second common mistake is reacting late to deadlines. Bidding processes run on fixed dates; a bidder who lets a deadline pass „because some questions are still open” is usually dropped from the process rather than given a special exception.

The third mistake concerns communication outside the process: direct contact with employees, customers or suppliers of the insolvent company during an active bidding process is viewed almost universally negatively by administrators — it undermines the confidentiality every bidder is contractually bound to.

For more on the timing and tone of first outreach, see Contacting the insolvency administrator; the term definition with its legal basis is at Bieterverfahren in the glossary.