Archive for June 3rd, 2008

What happens when an M&A deal leaks?

Posted on Tuesday, 3 June 2008. Filed under: Commentary, Mergers |

In research sponsored and released today by IntraLinks and conducted at Cass Business School, we have analysed what happens to deals when they leak to the public prematurely.  The answer is unsurprising and not good for those who want the deal to complete in a timely fashion.

Our analysis of over 350,000 deals since 1994 showed the following:

  • Deal Completion:  less than half of all leaked deals complete, compared to 72% of all non-leaked deals.
  • Friendliness:  only 80% of leaked deals are friendly, compared to 97% of all non-leaked deals
  • Delays to Closing:  leaked deals take alomost 70% longer to complete than non-leaked deals (105 days on average vs 62 days).
  • Premiums:  in a counter-intuitive finding, the premium paid in leaked deals is slightly less at 24% vs 28% on average for all deals. 

Certainly, market leaks and insider trading receive considerable press attention but this is the first study to identify the impact of a pre-announcement leak to the press. As noted in the IntraLinks press release on this study, companies would be wise to heed the factors identified in this research so that they are fully aware of the historical impact of such leaks on deal activity.

The press release can also be seen here and as a news story it has been covered in the Financial Times Alphaville (you’ll need to scroll down a ways to find the reference in FT Alphaville), Yahoo Finance,  Financial News, and other publications on-line.

As always, I’m interested in your comments on whether you find these findings to be consistent with what you’ve observed, and especially the counter-intuitive finding that leaked deals have lower premiums.

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