The global law firm’s Freehills’ M&A in 2019: Succeeding in a Climate of Disruption report, released this week, considers the potential for disruptive influence in the M&A process of third parties – including politicians, regulators, activist and active shareholders, and interlopers.
It also considers retention issues – the need to retain those individuals who may be central to the importance of the acquisition.
The HSF report warned that dealmakers need to pay more attention than ever to the other possible constituencies in an M&A deal, beyond the buyer and seller.
“In 2018, we saw a number of M&A transactions disrupted by interlopers –- third parties gate-crashing M&A with a competing bid for the target or a supervening bid for the bidder,” HSF London-based partner Mark Bardell said.
“Whilst in some cases the competitive bidding for a target increased the price paid, in others the competing bidders joined forces or the transaction simply failed following the third party’s expression of interest. This is a trend we expect to continue in 2019,” he said.
The report cited numerous examples of this behaviour throughout 2018, which was largely considered to be a bumper year for corporate dealmaking, particularly in Australia.
Blackstone Group's May 2018 push for Australia’s Investa Office Fund was overtaken by a competing bid from Canada’s Oxford Properties Group just two days before Investa’s shareholders were due to vote on the original offer. Blackstone raised its offer three times but Oxford prevailed and sealed the deal to acquire one of Australia's largest office real estate companies for US$2.4 billion.
While political headwinds could challenge domestic M&A activity this year, the HSF report was optimistic about corporate deal making in 2019, even if we see a change in government
“We are confident that the strong deal momentum will continue in 2019, underpinned by strong foreign investment and private equity interest, robust activity in sectors such as financial services, property, healthcare and energy and resources, as well as demergers and divestments for companies looking to return to a core focus,” it said.
The report noted that the financial services royal commission had been a catalyst for some banks to move away from vertical integration and focus on core areas.
“Other key drivers across the board were continued strong interest from foreign bidders, debt being readily available and increasing participation from private equity players with significant capital to deploy.”