While this is a point of contention in any deal, the big changes going on in the macro environment – rising interest rates, geopolitical tensions, climate challenges – and the recent pressure on equity and debt markets have created a wider gulf between buyers, who believe valuations have permanently reset, and targets, who are still clinging to the hope yesterday’s prices will return.
Five of the eight deals announced recently have involved a bid price below the target’s 52-week share price high.
Another tactic being used by boards to extract a higher price while keeping the acquirer on the hook is to offer a sort of pre-due diligence, typically in the formBut the offer of a management presentation often comes with the condition the acquirer signs a standstill agreement that prevents them from buying shares in the target – and potentially launching a hostile takeover – for 12 months.
“A number of super funds have paused for breath given acquisitions they’ve done recently, but they’ll be back. They need to keep acquiring things,” he says.
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