Activity levels in the merger and acquisition industry are quite high this year, but so are hostile deals. In fact, the levels of unfriendly M&A’s have reached their highest values in the past seven years. These values have not been observed since the financial crisis.
A recent published report claims that the current level of hostile activities is worth over $270 billion. In the year 2013, this value was around $70 billion during this same period. It was in 2007 when unfriendly M&A’s stood at over $375 billion, higher than the current stats.
So when do we seen hostility in the merger and acquisition industry? When the management of the two companies involved do not agree and instead push the deal through the shareholders or by replacing the management itself.
As of right now, the volume is impressive but the deals itself are low in numbers. So far only 23 deals have been completed. The pharmaceutical merger between Pfizer and AstraZeneca is driving the volume. Pfizer claims they have no intention of being hostile, but it sure does not look like that.
Recently, AstraZeneca refused a bid worth $116 billion from Pfizer and claimed it to be inadequate and risky for the shareholders, all of whom were not in favor of the rejection. Whether Pfizer takes over AstraZeneca by force is yet to be seen, but this deal is still the third biggest hostile deal ever for right now.
A market strategist told the press that an increase in hostile activity could have been caused by the high activity levels in the general market. But he also said that considering the current conditions, companies also had an opportunity to do it and they were utilizing that.
If the current market is observed, there are many companies which are characterized by cheaper valuations. This has resulted in a rise in pressures, which has caused prices to go down. Now if the bid is hostile, the shareholders and the board of directors are compelled to accept an offer that is not so great because they do not have much choice.
The industry experts believe that creditors are going to take advantage of the situation and conduct takeovers that appear to be favorable, and this will likely be the case for the next three years.