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Last year bidders were few and far between in our market, with only 41 deals over $50
million in the public M&A space. Bear hug approaches, which were essentially unsolicited
conditional approaches that are subject to due diligence, were again very popular last
year, however they were not necessarily resulting in agreed transactions after the approach
had been announced, as we saw in Pacific Brands, Billabong and Arrium.
The deals that did successfully complete that had a bear hug approach as a pre-cursor however
had bidders engaged with targets and target shareholders for a protracted period of time.
So bidders need to be ready for protracted processes, long-term engagement and ultimately
quite a lot of time before they're getting to an agreed transaction.
The second lesson we saw for bidders last year was essentially in a circumstance where
the bidder is the first mover. They were having a distinct advantage, particularly given the
lack of appetite from other competing bidders to engage in a process where one bidder had
already started, managed to secure a pre-bid stake, and also managed to secure a board
recommendation and exclusivity arrangements, albeit subject to superior proposals as is
usually the case in those transactions. So the bidders who were the first movers had
a distinct advantage and, provided they had their bear hug plan and their strategy of
engagement right, they were getting to a successfully completed transaction.
And then finally in respect of the all-important engagement with target shareholders there
was no magic premium that one had to offer last year. What we saw last year is premiums
come down from around 50% where they were in 2011 to a more realistic 37% last year,
but nonetheless we saw a very wide range of premiums being offered. The key really to
success in those arrangements was engagement with the larger target shareholders who were
key to the success in getting the deal premium that was right for the transaction.
Jonathan, with global share indices near record highs this year, do you see bidders coming
off the sidelines in 2013? We're certainly seeing that already, not necessarily
in announced transactions, but in the pipeline of transactions that we are working on. So
bidders are resuming their analysis of M&A transactions and are more confident at this
stage. What we need to see I think is more of a sustained uptake in the rally, and if
that happens I believe that we will see increased deal volumes and particularly more scrip-based
transactions as share markets have proved.