M&A Confidentiality: How Often Do Leaks Happen?
In the EMEA area, the leak rate is over 10% according to Intralinks. In the Americas, it’s roughly 6%. And the countries with the highest rate of leaks are India, South Korea and Japan.
Intralinks has been tracking the rate at which news of a deal is leaked prior to the news being announced publicly. Firms do, of course, go to great lengths to maintain confidentiality of deals. However, despite the best VDR technologies and management caution, the sheer number of people involved in negotiating larger deals increases the likelihood of a single slip up.
And one slip-up is all it takes.
The Intralinks 2017 report is available here. It’s free, but registration may be required.
The report claims that leaks, when viewed from a global perspective, were declining right up to 2014, but saw an uptick over the last two years making a global average of 8.6% in 2016. They provide this table:
|Target Listing Location||2016 (Rank)||2015 (Rank)||2009-2016 (Rank)|
|India||16.7% (1)||20.0% (1)||15.8% (1)|
|South Korea||16.1% (2)||5.3% (6)||10.2% (4)|
|Japan||12.0% (3)||3.1% (7)||5.1% (9)|
|United Kingdom||7.0% (8)||6.7% (5)||12.5% (3)|
|France||4.3% (9)||0.0% (9)||5.4% (8)|
|Canada||4.3% (10)||12.5% (4)||5.9% (7)|
Deal leakage is obviously sometimes driven by monetary considerations – the ability to profit from knowledge of the takeover /merger / other deal. Whether a typical insider trading profit opportunity – acquiring a stake in anticipation of a share price increase on the news becoming public – or an opportunity to attract other potential bidders to the table.
From 2009-2016, the median target takeover premium for leaked deals was 47 percent vs. 27 percent for non-leaked deals. In 2016, an average of an extra US$21 million accrued to the shareholders of the targets in deals that leaked.
Given regulatory and legal issues related to leaking of news to derive a financial benefit, there is always a risk attached when the leak is intentional.
Caveats with the research above: The only companies considered were publicly traded companies where the M&A deal involved a majority of the shares. Deals involving privately held companies, which account for the large majority of deals that happen every year, were excluded from the study as data on the deals, far less the leaks themselves, is not available to the public. For a full list of the caveats and methodology, please use the link above to download the report.
In the days leading up to a merger and acquisition (M&A) bid announcement, significant trading in the shares of the target company can indicate that information about the deal has leaked. While not providing absolute confirmation of a leak in an individual deal, significant pre-announcement trading
across a large sample of deals can be used to examine patterns and trends in leaking across time periods and geographies.
The Intralinks Annual M&A Leaks Report analyzes and reports on deal leaks globally. This report looks at deal leaks for the period 2009-2016, while placing emphasis on the 2016 findings compared to previous
years. The analysis of data for this report was conducted together with the M&A Research Centre at Cass Business School, City, University of London. More >>