Tougher regulation is failing to prevent leaks around deals, new research out today shows. And no wonder – being loose-lipped about transactions generally pays off.
The mergers and acquisitions (M&A) research, by Intralinks and Cass Business School, found 8.6 per cent of deals globally were the subject of leaks, either to the media or other interested parties, in 2015. This was up from six per cent in 2014.
The leakiest countries in 2015 were India (where 20 per cent of deals were affected), Hong Kong (12.9 per cent), United States (12.6 per cent), Canada (12.5 per cent) and then the UK (6.7 per cent).
In terms of sector, real estate was top (12.9 per cent), ahead of healthcare (12.5 per cent) and energy and power (9.3 per cent).
In common with a longer-term trend tracked by the researchers, leaked deals achieved “significantly higher takeover premiums than those in non-leaked deals”. In 2015, leaked deals attracted a median takeover premium of 53 per cent, compared with 24 per cent for non-leaked deals.
Leaked deals are also more likely to attract rival bids, with 6.4 per cent doing so, compared with 4.4 per cent of non-leaked deals.
“One interpretation of these findings suggests that even an increased threat of enforcement is still not enough to deter leaks: in short, for some the potential benefits of leaking a deal still appear to outweigh the risks,” said Philip Whitchelo, vice president of strategy and product marketing at Intralinks.
“Despite increasing scrutiny and regulation, this research shows that there are still obvious benefits associated with leaking a deal, including encouraging rival bids and boosting the value of bids.”
However, Scott Moeller, director of M&A research at Cass, predicted a long-term decrease in deal leaks, citing increased regulatory enforcement and new market abuse regulations.
For the research, leaks were tracked by monitoring significant trading in shares of target companies in the days leading up to a deal being announced.