Corporate finance partner Adam Bogdanor talks public takeovers
24 July 2014
How is the UK market currently in public takeovers?
Thirty-four deals were announced in 2013, with a total deal value of around £10.1 billion. Looking at the first three months of this year compared to the last three months of last year, the number of deals fell, but the deal value increased by around 40%. So public M&A appears to be returning. The question is whether this will continue through the summer. It is interesting that several of the recent flotations have been priced towards the bottom of their range.
Where do you see it heading?
If only I had a crystal ball! UK plc has billions of pounds in surplus cash - sooner or late, pressure will grow for companies to invest it or return it to shareholders. This makes some of them attractive takeover targets. At the same time, the new Takeover Code rules on disclosure and the ban on break fees could put off certain bidders from making offers.
My feeling is that the UK economy as a whole is firmly on the road to recovery, but uncertainties remain. For example, how will the US economy react to the gradual tightening of monetary policy as quantitative easing is withdrawn? When will the Eurozone start to grow again? How will geopolitical tensions in Ukraine and the Middle East play out? Politicians on all sides of UK politics want to see a recovery led by exports and investment, not just debt and house prices.
What does this means for lawyers?
The new Takeover Code rules emphasise the importance of bidders making as much advance preparation as possible before they approach targets’ boards (however informally). Similarly, targets will want to make sure that their defence manuals are up to date, because their message will change as their financial performance improves. Early preparation is vital. Similarly, the ban on break fees means that bidders need to consider quite carefully how they can legitimately protect their exposure on aborts. Lawyers can really help in these areas.
What is your assessment of the Pfizer/Astra Zeneca situation?
I think it shows how the pendulum has started to move away from bidders and towards targets. AstraZeneca is now free from the distraction of a takeover battle. Pfizer chose not to go hostile and not to increase its price. Since the AstraZeneca board rejected its final price, Pfizer decided not to make an offer after all.
Are there certain sectors to look out for?
Recently, the strongest sectors for M&A across Europe have been technology, media and telecommunications; industrials; energy; and consumer. For the United Kingdom, I think financial services and real estate will continue to be very active.
And finally, what is your favourite book?
The Hitchhikers’ Guide to the Galaxy or How are we to live by Peter Singer