Advisory Board

  • Cai Hongbin
  • Peking University Guanghua School of Management
  • Peter Clarke
  • Barry Diller
  • IAC/InterActiveCorp
  • Fu Chengyu
  • China National Petrochemical Corporation (Sinopec Group)
  • Richard J. Gnodde
  • Goldman Sachs International
  • Lodewijk Hijmans van den Bergh
  • De Brauw Blackstone Westbroek N.V.
  • Jiang Jianqing
  • Industrial and Commercial Bank of China, Ltd. (ICBC)
  • Handel Lee
  • King & Wood Mallesons
  • Richard Li
  • PCCW Limited
  • Pacific Century Group
  • Liew Mun Leong
  • Changi Airport Group
  • Martin Lipton
  • New York University
  • Wachtell, Lipton, Rosen & Katz
  • Liu Mingkang
  • China Banking Regulatory Commission (CBRC)
  • Dinesh C. Paliwal
  • Harman International Industries
  • Leon Pasternak
  • BCC Partners
  • Tim Payne
  • Brunswick Group
  • Joseph R. Perella
  • Perella Weinberg Partners
  • Baron David de Rothschild
  • N M Rothschild & Sons Limited
  • Dilhan Pillay Sandrasegara
  • Temasek International Pte. Ltd.
  • Shao Ning
  • State-owned Assets Supervision and Administration Commission of the State Council of China (SASAC)
  • John W. Snow
  • Cerberus Capital Management, L.P.
  • Former U.S. Secretary of Treasury
  • Bharat Vasani
  • Tata Group
  • Wang Junfeng
  • King & Wood Mallesons
  • Wang Kejin
  • China Banking Regulatory Commission (CBRC)
  • Wei Jiafu
  • Kazakhstan Potash Corporation Limited
  • Yang Chao
  • China Life Insurance Co. Ltd.
  • Zhu Min
  • International Monetary Fund

Legal Roundtable

  • Dimitry Afanasiev
  • Egorov Puginsky Afanasiev and Partners (Moscow)
  • William T. Allen
  • NYU Stern School of Business
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Johan Aalto
  • Hannes Snellman Attorneys Ltd (Finland)
  • Nigel P. G. Boardman
  • Slaughter and May (London)
  • Willem J.L. Calkoen
  • NautaDutilh N.V. (Rotterdam)
  • Peter Callens
  • Loyens & Loeff (Brussels)
  • Bertrand Cardi
  • Darrois Villey Maillot & Brochier (Paris)
  • Santiago Carregal
  • Marval, O’Farrell & Mairal (Buenos Aires)
  • Martín Carrizosa
  • Philippi Prietocarrizosa & Uría (Bogotá)
  • Carlos G. Cordero G.
  • Aleman, Cordero, Galindo & Lee (Panama)
  • Ewen Crouch
  • Allens (Sydney)
  • Adam O. Emmerich
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Rachel Eng
  • WongPartnership (Singapore)
  • Sergio Erede
  • BonelliErede (Milan)
  • Kenichi Fujinawa
  • Nagashima Ohno & Tsunematsu (Tokyo)
  • Manuel Galicia Romero
  • Galicia Abogados (Mexico City)
  • Danny Gilbert
  • Gilbert + Tobin (Sydney)
  • Vladimíra Glatzová
  • Glatzová & Co. (Prague)
  • Juan Miguel Goenechea
  • Uría Menéndez (Madrid)
  • Andrey A. Goltsblat
  • Goltsblat BLP (Moscow)
  • Juan Francisco Gutiérrez I.
  • Philippi Prietocarrizosa & Uría (Santiago)
  • Fang He
  • Jun He Law Offices (Beijing)
  • Christian Herbst
  • Schönherr (Vienna)
  • Lodewijk Hijmans van den Bergh
  • De Brauw Blackstone Westbroek N.V. (Amsterdam)
  • Hein Hooghoudt
  • NautaDutilh N.V. (Amsterdam)
  • Sameer Huda
  • Hadef & Partners (Dubai)
  • Masakazu Iwakura
  • TMI Associates (Tokyo)
  • Christof Jäckle
  • Hengeler Mueller (Frankfurt)
  • Michael Mervyn Katz
  • Edward Nathan Sonnenbergs (Johannesburg)
  • Handel Lee
  • King & Wood Mallesons (Beijing)
  • Martin Lipton
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Alain Maillot
  • Darrois Villey Maillot Brochier (Paris)
  • Antônio Corrêa Meyer
  • Machado, Meyer, Sendacz e Opice (São Paulo)
  • Sergio Michelsen Jaramillo
  • Brigard & Urrutia (Bogotá)
  • Zia Mody
  • AZB & Partners (Mumbai)
  • Christopher Murray
  • Osler (Toronto)
  • Francisco Antunes Maciel Müssnich
  • Barbosa, Müssnich & Aragão (Rio de Janeiro)
  • I. Berl Nadler
  • Davies Ward Phillips & Vineberg LLP (Toronto)
  • Umberto Nicodano
  • BonelliErede (Milan)
  • Brian O'Gorman
  • Arthur Cox (Dublin)
  • Robin Panovka
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Sang-Yeol Park
  • Park & Partners (Seoul)
  • José Antonio Payet Puccio
  • Payet Rey Cauvi (Lima)
  • Kees Peijster
  • COFRA Holding AG (Zug)
  • Juan Martín Perrotto
  • Uría & Menéndez (Madrid/Beijing)
  • Philip Podzebenko
  • Herbert Smith Freehills (Sydney)
  • Geert Potjewijd
  • De Brauw Blackstone Westbroek (Amsterdam/Beijing)
  • Qi Adam Li
  • Jun He Law Offices (Shanghai)
  • Biörn Riese
  • Jurie Advokat AB (Sweden)
  • Mark Rigotti
  • Herbert Smith Freehills (Sydney)
  • Rafael Robles Miaja
  • Robles Miaja (Mexico City)
  • Alberto Saravalle
  • BonelliErede (Milan)
  • Maximilian Schiessl
  • Hengeler Mueller (Düsseldorf)
  • Cyril S. Shroff
  • Cyril Amarchand Mangaldas (Mumbai)
  • Shardul S. Shroff
  • Shardul Amarchand Mangaldas & Co.(New Delhi)
  • Klaus Søgaard
  • Gorrissen Federspiel (Denmark)
  • Ezekiel Solomon
  • Allens (Sydney)
  • Emanuel P. Strehle
  • Hengeler Mueller (Munich)
  • David E. Tadmor
  • Tadmor & Co. (Tel Aviv)
  • Kevin J. Thomson
  • Barrick Gold Corporation (Toronto)
  • Yu Wakae
  • Nagashima Ohno & Tsunematsu (Tokyo)
  • Wang Junfeng
  • King & Wood Mallesons (Beijing)
  • Tomasz Wardynski
  • Wardynski & Partners (Warsaw)
  • Xiao Wei
  • Jun He Law Offices (Beijing)
  • Xu Ping
  • King & Wood Mallesons (Beijing)
  • Shuji Yanase
  • OK Corporation (Tokyo)
  • Alvin Yeo
  • WongPartnership LLP (Singapore)

Founding Directors

  • William T. Allen
  • NYU Stern School of Business
  • Wachtell, Lipton, Rosen & Katz
  • Nigel P.G. Boardman
  • Slaughter and May
  • Cai Hongbin
  • Peking University Guanghua School of Management
  • Adam O. Emmerich
  • Wachtell, Lipton, Rosen & Katz
  • Robin Panovka
  • Wachtell, Lipton, Rosen & Katz
  • Peter Williamson
  • Cambridge Judge Business School
  • Franny Yao
  • Ernst & Young

AUSTRALIAN UPDATE – Deal Landscape, Origin of Bidders and Deal Structures

Editors’ Note: This report was contributed by Philip Podzebenko, a member of XBMA’s legal roundtable. Mr Podzebenko is a partner at Herbert Smith Freehills in the Corporate Group. This paper was based on research conducted by other Herbert Smith Freehills staff, Paul Branston, Partner and Michael Denny, Solicitor.

Highlights

  • The Australian public M&A market has seen relatively steady activity levels, with a modest increase in number of deals, but lower total deal value, in the 12 months to 30 June 2017 (FY17).
  • Success rates were down on FY16, with 66% of deals announced in FY17 being completed.
  • The level of contested bid activity was also subdued in FY17 with only 3 targets attracting multiple bidders.
  • The consumer and industrials sectors featured more strongly in FY17, with deals in those sectors comprising 38% and 41% of total deal value respectively.
  • Deal activity in the information technology and software services sectors increased notably.
  • Inbound public M&A remained steady, with bid activity originating from Asia dominating deals by value.

Deal landscape

Levels of public M&A activity in FY17 remained relatively steady, with 59 deals announced (up from 50 announced in FY16), but with total deal value decreasing to $23 billion in FY17 from $33 billion committed in the previous 12 months. Consistently with the decline in total deal value, with only 4 deals exceeding $1 billion and deals in this category and deals in this category accounting for 67% of all deal activity by value (down from 6 deals exceeding $1 billion , representing 80% of total deal value in FY16).

Success rates also declined moderately in FY17 to 66% relative to 73% in FY16.

Overall, the proportion of bids launched in FY17 without support from the target board from the outset (34%) was lower than in previous years (FY16, 44%). Of the unsolicited bids, 45% were ultimately successful (as compared with a 79% success rate for friendly deals). All of the unsolicited bids which were successful only 63% were recommended by the target board either in the board’s initial response, or following negotiations (down from 100% in FY16).

The number of contested bids in FY17 was subdued, with only 3 targets the subject of multiple bidders (none involving targets with a value exceeding $1 billion), down from 7 targets attracting competing bids in FY16. A number of targets received non-binding competing proposals, but they did not proceed to a stage where they could be considered by shareholders. In all 3 contested scenarios, the underbidder was unsuccessful. Encouraging competing bids remains an effective means for target boards to defend against undervalued or opportunistic bids.

Success rates in hostile and friendly deals

 

Merger and acquisition activity in the consumer and industrials sectors featured strongly in FY17, representing 38% and 41% of overall deal value respectively. While there was significant private M&A activity in the energy and resources sectors, public M&A activity volumes in that sector were subdued with most deals involving small-cap targets (average deal size of $27.6 million) and total deal volume of only $606 million (FY16, $1.1 billion).

Private equity participation in public M&A in FY17 was subdued, with only 6 private equity backed deals announced (and only one of them exceeding $1 billion). Of the 6 private equity backed deals, 3 involved targets in the resources sector.

Origin of bidders

Foreign bidders accounted for a majority (53%) of all deals in FY17, by value. Foreign bidders were active across all sectors.

Asia-based bidders were more dominant in FY17, with 11 of the 26 foreign bidders being Asia-based and $9.6 billion committed by bidders based in Asia (representing 41% of deals by value). North American bidders also featured strongly representing 9 of the 26 foreign bidders but only 6% of deal value.

Percentage of deals by origin of bidder

 

Deal structure

The preference for schemes of arrangement increased moderately in FY17, with 49% of all deals involving schemes, compared with 44% in FY15. The use of schemes continued to dominate transactions exceeding $1 billion, with 75% of deals in this category implemented by scheme.

Cash consideration remained he dominant form of consideration in FY17, and was the sole form of consideration in 64% of transactions (up from 62% in FY15). There was a strong preference for cash consideration in unsolicited deals, with 85% of all unsolicited bids being cash-only or having an all-cash alternative. The form of consideration did not have a marked impact on success rates for deals, other than in relation to hostile bids, where all-cash deals were more likely to succeed than all-scrip deals.

Success rates by consideration offered in hostile deals

 FY17 saw an overall decline in premiums offered by bidders, with an average initial premium offered in FY17 of 22% relative to 36% in FY16. The percentage of deals with an initial premium below 20% markedly increased relative to FY16 for both hostile and friendly deals.

Success rates in FY17 continued FY16’s and FY15’s trend, showing a positive correlation between size of premium and bid success, with bids involving an initial premium in the 20-40% range having a 71% success rate, and those with an initial premium exceeding 40% having a 92% success rate.

The use of conditions in takeover bids requiring a minimum percentage of acceptances to be received by the bidder decreased substantially in FY17 with under 50% of acquisitions conducted by way of takeover bid having a minimum acceptance condition (compared with 80% in FY16).

Consistently with previous practice, material adverse change conditions continued to be included in the majority of public M&A deals. However the continued increase in the use of carve outs from the material adverse change conditions for external factors such as changes in law or accounting policy, general economic conditions, industry conditions and stock markets reflect that bidders continue to be willing to accept commercial risk when making a bid.

Deal protection mechanisms continued to feature in negotiated transactions, with use of deal protection mechanisms in FY17 relatively consistent with previous years. The use of toe-holds (where the bidder has a stake in the target before announcement) and reverse break fees increased moderately relative to previous years. ‘Truth in takeovers’ statements (being public statements of intent to accept or otherwise support a bid by target shareholders) remained the preferred form of lock-up, with 68% of lock-ups taking the form of truth in takeovers statements only.

Consistent with previous years, notification and matching rights remained popular with notification and matching rights being found in 90% and 77% respectively of negotiated deals. Use of break fees decreased moderately with 77% of negotiated deals including a break fee (down from 86% in FY16). The use of reverse break fees increased significantly with 49% of negotiated transactions including a reverse break fee (FY16, 32%).

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

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