As we watch the economic headwinds facing us in the 2022-23 financial year, it is only reasonable to expect we are likely to see more hostile activity in the short term.
A is about 10 per cent of transactions exceeding $US100 million . Yet immediately after the attacks of September 11, 2001, the dotcom crash, the financial crisis , the 2011 Eurozone sovereign debt crisis and the 2016 oil price correction, there was a marked increase in hostile deals as a percentage of total deals. In some cases, it was nearly double the long-term average based on metrics compiled by Morgan Stanley in May this year.
The main reason for this is that sharp market downturns tend to create a material expectation gap between what bidders are prepared to pay and target boards’ views on fundamental valuation. Bidders will always seize downturns to be opportunistic about MA, while target boards will believe, rightly or wrongly, that the market downturn is only temporary and that the current market price does not represent fundamental value.
In recent years, we have seen a lot more “agreed” deals . Before then, however, Australia always had a higher number of hostile deals than the global average. Another reason for the increase in hostile deals as a percentage of total deals in and after a downturn is that there is a lower overall number of deals.
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