Hostile merger and acquisition activity around the globe has reached a seven-year high, to levels not seen since before the global financial crash of 2008, according to a new study.
Current year-to-date hostile activity stands at $273.4 billion, according to figures from research firm Dealogic published Wednesday. Last year’s figure for the same year-to-date period stood at just $70.6 billion. This year’s performance so far looks to be the highest since 2007’s figure of $377.4 billion, Dealogic added.
Hostile takeovers are where an acquiring company can’t come to an agreement with the target company’s management, instead going directly to the company’s shareholders or replacing management to push through the deal.
Whilst volume may be high the amount of deals are relatively low. Dealogic explained that only 23 deals on the table so far this year, adding that the Pfizer takeover of AstraZeneca is driving total volume – a surprising addition as the U.S. pharma giant has said it has no intention of making its approach for the British company hostile.
Anglo-Swedish drugs company AstraZeneca rejected a revised $116 billion bid from U.S. pharma giant Pfizer on Monday, saying the U.S. company’s “final” offer is inadequate and would present significant risks for shareholders.
Some of these shareholders have expressed disapproval of the deal rejection. AstraZeneca Chairman Leif Johansson has remained resolute telling CNBC Monday that shareholders had the right to vote him away if they were unhappy.
Regardless of whether Pfizer actually forces though a hostile takeover, Dealogic said that it is currently the third largest hostile deal on record and makes Europe the most targeted region for global hostile M&A transactions. Meanwhile, hostile transactions in North America have reached their highest year-to-date activity on record with a figure of $121.2 billion.
Evan Lucas, a market strategist at brokerage firm IG said that the rise of hostile activity could be partly due by the high amount of general M&A currently in the market. However, he added that there is an element of opportunism as well.
“My personal take is there are a lot of companies with cheap valuations that have seen sustained pressure leading heavy discounted share prices,” he told CNBC via email.
“A hostile bid can push boards and shareholders to accept what can be low-ball price – there is no doubt there are some cashed up creditors looking to cash in now for the expected upticks over the coming three years.”