Takeovers that share a combination of two factors – board backing and a price that meets or beats the independent adviser’s valuation range – have almost always been successful, according to a new report from law firm Bell Gully.
The Takeovers Market Practice Report is the first in-depth analysis of New Zealand takeovers data since the introduction of the Takeovers Code in 2001. The data revealed 95 per cent of takeovers recommended by the target board were successful, while 84 per cent of the offers featuring a price within or above the independent adviser’s valuation range were successful. Offers that achieved both of these features had a 97 per cent success rate.
“These two factors were very influential. It shows the power of a board recommendation and the importance of the offer price being within or above the independent adviser’s valuation range,” said partner James Cooney.
Every takeover offer reviewed in which the bidder had secured a lock-up, an advance commitment to accept the offer from one or more major shareholder, ultimately succeeded. In instances where a takeover succeeded despite not being recommended by the target company’s board, the transaction almost always had a strong lock-up or a pre-bid stake in the target.
“This shows that preparation is crucial”, said Mr Cooney. “If a bidder secures an advance commitment from shareholders or holds a strong pre-bid position, there is a substantially stronger likelihood of an offer succeeding.”
Lock-ups may also be playing another significant role: the report found there was a notable lack of contested takeovers in New Zealand. Just five per cent of the takeovers reviewed involved contested offers. “Strong lock-up positions may effectively be discouraging potential rival bidders from making competing offers,” said Mr Cooney.
Click here to view the full report.