Hostile takeovers rise to 14-year high in M&A as confidence grows
Hostile takeover offers are making up the greatest proportion of global deal activity in 14 years as resurgent economic confidence leads companies to resist friendly overtures from would-be acquirers and demand greater premiums.
The return of blockbuster takeover attempts by some of the world’s biggest corporations including Pfizer, the US drugmaker, is contributing to the overall value of hostile mergers and acquisitions activity even as the quantity of bids is tracking below previous years.
So far this year, 25 unsolicited attempts with a combined value of $290bn have been made. That amounts to about 19 per cent of the value of all M&A activity in 2014, according to data from Dealogic, the most in any year since at least 2000.
The pickup comes as companies become more optimistic about their futures and are increasingly looking at deals as a way to bolster their business instead of more conservative moves such as share buybacks or dividend payouts.
Hernan Cristerna, co-head of global M&A at JPMorgan, said: “The fact that there are more companies looking to make acquisitions is a function of a strong M&A market where companies feel more confident.”
Bill Anderson, head of Goldman Sachs’ defence practice, says that bursts of hostile deals typically come at the beginning and end of any sustained period of M&A activity, as companies move faster to execute takeovers.
“The factors for a wave like this have been there for a while – cheap debt, high corporate cash balances and an improving economy – but now shareholders are also pushing for sensible deals and rewarding those companies that do them.”
However, many unsolicited offers this year have so far failed to lead to deals as targets are also finding the confidence to remain independent and push for higher premiums from would-be acquirers.
What would have been the biggest deal this year ended with Pfizer being told that it would need to increase its £55-a-share offer to buy UK rival AstraZeneca by at least 10 per cent if it wanted to engage in formal negotiations.
Meanwhile, Charter Communications pursuit of rival cable group Time Warner Cable fell apart when the target agreed a friendly deal to be acquired by Comcast for $42.5bn.
Vikas Seth, co-head of Europe, Middle East and Africa and Global Markets M&A at Credit Suisse, said: “The ability to get an unsolicited deal done still remains as much of an art as a science.”
The biotechnology company Valeant is engaged in the largest active hostile takeover attempt as it has teamed up with activist investor Bill Ackman to pursue a $62bn deal with Allergan, the maker of Botox and other cosmetic drugs, which has thus far resisted a succession of takeover overtures.