The 2017 Intralinks® Annual M&A Leaks Report, which analyses and reports on M&A deal leaks globally for the period 2009-2016, has just been published. In this blog post, I’ll highlight some of the key findings.
M&A deal leaks: stable, or set to increase?
Worldwide, 8.6 percent of all deals announced in both 2015 and 2016 involved a leak of the deal prior to public announcement. So, deal leaks appear stable. However, in 2014 worldwide deal leaks had been on a declining trend and were at their lowest level for six years at 6 percent of all deals. So, one could argue that the downward trend has been broken. Could we see an increase in the rate of worldwide M&A deal leaks in 2017?
M&A deal leaks by region: APAC and EMEA rising, Americas falling
Over the period 2009-2013, Europe, the Middle East and Africa (EMEA) had the highest average rate of leaked deals at 10.4 percent, followed by Asia Pacific (APAC) at 7.6 percent and the Americas at 6.0 percent. However, since 2014, this trend has reversed: in each of the last three years, the rate of deal leaks in the Americas and APAC has been higher than in EMEA. The rate of deal leaks in APAC and EMEA increased in each of the last two years, whereas in the Americas, after rising each year from 2013 to 2015, the rate fell sharply in 2016. The APAC region had the highest rate of deal leaks in 2016, at 9.7 percent.
M&A deal leaks by country: top and bottom three
|Target Listing Location||2016 (Rank)||2015 (Rank)||2009-2016 (Rank)|
|India||16.7% (1)||20.0% (1)||15.8% (1)|
|South Korea||16.1% (2)||5.3% (6)||10.2% (4)|
|Japan||12.0% (3)||3.1% (7)||5.1% (9)|
|United Kingdom||7.0% (8)||6.7% (5)||12.5% (3)|
|France||4.3% (9)||0.0% (9)||5.4% (8)|
|Canada||4.3% (10)||12.5% (4)||5.9% (7)|
For the ten countries with the most M&A activity, the top three countries for deal leaks in 2016 were India, South Korea and Japan (which has never featured higher than 6th place for M&A deal leaks over the previous seven years). The bottom three countries for deal leaks in 2016 were Canada, France and the United Kingdom (UK). The rate of deal leaks in markets where leaking was rampant a decade ago, such as the UK, has reduced considerably – a reflection of new regulations against market abuse (such as the new EU Market Abuse Regulation, which came into effect on July 3rd, 2016) and much stricter regulatory enforcement.
What happens when deals leak: it’s all about the money
There appears to be one clear perceived benefit to leaking deals: higher target takeover premiums resulting in higher valuations, possibly as a result of increased competition among acquirers for targets in leaked deals. From 2009-2016, the median target takeover premium for leaked deals was 47 percent vs. 27 percent for non-leaked deals. In 2016, an average of an extra US$21 million accrued to the shareholders of the targets in deals that leaked.
Risk vs. reward: could the attraction of deal leaks be waning?
Overall, against the perceived benefits, those leaking deals must also weigh the risks. Financial regulators globally are increasing their efforts against both insider trading (a criminal offence in most jurisdictions) and leaking (not always a criminal offence in all jurisdictions, but increasingly a regulatory offence which could result in “naming and shaming”, fines or suspension of licenses to practice).
In 2016 the difference in the target takeover premium percentage for leaked deals compared to non-leaked deals more than halved compared to 2015. The rate of rival bids for targets in leaked deals also dropped in 2016 to around the same level as for non-leaked deals. So, with the perceived benefits of leaking deals diminishing in 2016, and regulatory enforcement against market abuse increasing, could the appeal of deal leaks be waning? Email me with your thoughts or comments: email@example.com
To find out more about M&A deals leaks, you can download the latest Intralinks Annual M&A Leaks report here.