M&A and Investment Banking Lecture 4.1 – M&A

Transcript:M&A and Investment Banking Lecture 4.1 – M&A:
M&A and Investment Banking Lecture 4.1 – M&A Tactics 1 M&A Tactics Art or Science? Hostile Shareholder Activism 2 M&A Tactics Hostile M&A 3 Hostile M&A Hostile M&A is really only possible in public M&A situations As a bidder in a private sale process, there are opportunities to exert pressure on a seller, but truly hostile bid tactics are the preserve of public M&A Hostile M&A comes in many forms, but at its core involves making an offer to public shareholders (formally or informally) that bypasses the target’s management or board Exerting pressure through publicity has become an increasingly common tactic in recent years 4 Source: Thomson Reuters as at 20 August 2014. ‘01 – ‘14 YTD EMEA Public M&A: % of Hostile Transactions Hostile Pros and Cons Hostile Advantages Can acquire a target against the management’s wishes Seizes PR initiative Greater control over timing of announcements and offer timetable Disadvantages Possible reputational damage to offeror Higher risk / uncertainty target incentivised to seek alternative solutions (i.e. white knights) No due diligence access or co-operation with respect to regulatory issues Greater costs Higher premium likely Unwanted press attention Unlikely to close early in 60 day timetable Institutional shareholders can be averse to hostile bids Cannot implement via a scheme of arrangement Friendly Advantages Friendly and recommended by the board Board support may reduce likelihood of counter bid Greater level of due diligence possible Ongoing co-operation from management Traditionally lower premium Likely to run to shorter bid timetable Board irrevocables Possible to implement via a scheme of arrangement Possible to address any regulatory / anti-trust issues with co-operation of the Offeree Disadvantages Risk of leak ‘Cost’ of board recommendation and support Management control of enlarged group may be compromised 5 Usually initiated by a call to the Chairman (or CEO) Followed by an offer letter Can be helpful to have meeting with the potential bidder (may be through advisers) to get clarity on offer terms Value and assumptions Deal structure Diligence requirements Confidentiality Financing Intentions for the business Financial adviser to assist with evaluation of offer terms and provide advice on recommendation Private Approach Made to Target Board Meet to Clarify Terms Announce Offer Reject Bidder Options Target options Board to Consider Terms Accept Key Terms Due Diligence Walk Away Go Public – Bear Hug Hostile Bid Improve Terms Reject – ‘Just Say No’ Seek White Knight Other Defence Options Seek