Partner Article

The Eurostar sell-off; how can the government ensure maximum return for the public purse?

In 2013 the new national infrastructure plan (NIP) doubled the coalition’s target for the disposal of state assets, writes Phil Bird, CEO of Perfect Channel.

The goal is to turn Government stakes in Eurostar and other organisations into £20bn for reinvestment in the UK economic infrastructure over the next six years.

The disposal of the UK’s 40% stake in Eurostar could potentially net the Treasury hundreds of millions of pounds. But it will be increasingly important as the Government divests itself of further assets, that when it comes to the public purse, it is able achieve maximum value at sale, in a transparent and accountable way.

Pricing Government assets for the conventional financial markets has previously been a complex process, involving a drawn-out price discovery process, and even this is no guarantee that the best price will be found. However, I believe there is a way of naturally facilitating an optimum price consistent with the highest valuations in the marketplace.

The Government and indeed any organisation selling off assets, needs to consider the latest advances in auction technology now available.

Auction theory, the application of different types of auction which deliver an optimal price for different types of situation, can be used to secure the best price for any asset. And I’m not the only one who thinks so.

The indomitable Wall Street legend Bill Hambrecht helped persuade Google to use an Internet-based auction for its initial public offering (IPO) back in 2004 and has popularised the “OpenIPO” model, based on the Dutch auction model. When asked his thoughts on a complete conversion to the auction IPO process, Hambrecht replied: “The old way is like using a slide rule instead of a computer. The Facebook IPO will ultimately force regulators to make all information available to everyone. No more whispering.”

Auctions work hand-in-hand with situations where no business has an information advantage, the objective is to force true competition.

Online auctions facilitate an optimum price consistent with the highest valuations in the marketplace and consistently deliver a simple, transparent model which creates an ideal environment for competitive pricing.

Technology has moved far beyond eBay and the traditional ‘English forward’ auction, new technology now exists to develop sophisticated financial auctions. Auction models have been developed that provide the best results in the financial marketplace and unlock the true potential of auctions in this space. Complex mathematical analysis and algorithms aside, the fact is, auctions offer a mechanism which enables true pricing and unbiased execution.

When it comes to Government money and assets, the public needs to be confident that work has been done to ensure the best possible return - it is after all the public purse. The essential component is providing UK taxpayers with a clear and credible demonstration that the maximum possible market price was achieved in a way that is easily understood.

I believe that it is in the interests of the Government and indeed every major financial institution, to take a hard look at the capabilities of an online auction mechanism, to increase utility, ensure transparency, demonstrate compliance and above all, present an even playing field for all interested parties.

This was posted in Bdaily's Members' News section by Perfect Channel .