Do Leaks Imperil M&A Deals?

Provider of independent IntraLinks and Cass study indicates leaked deals cost time and money

• Controlling the flow of information crucial to M&A deal completion
• More than half the deals leaked to the press do not run to completion
• Premium paid could be 13 percent lower if deal is leaked
• Leaked deals take 70 percent longer to complete

New York and London, June 3, 2008
The research study “M&A leaks: Issues of information control” commissioned by IntraLinks, the leading provider of online workspaces, and conducted by Cass Business School, London, has revealed that less than half (49 percent) of all leaked deals complete, compared to 72 percent of non-leaked deals.

In what is thought to be the world’s first research focused on pre-announcement market leaks in M&A, Cass established a universe of over 350,000 M&A deals between 1994 and 2007, and then using rigorous search criteria distilled the number of deals that had been disclosed in the press prematurely.

The exhaustive research project cast light on the sensitivities inherent within M&A activity and the destabilizing effect a press leak could have on the deal process – revealing that while 97 percent of non-leaked deals are classified as friendly* this figure drops to 80 percent where there are instances of identifiable leaks.

The study showed that both the target and bidder might suffer in the process – the results indicate that the premium paid by the winner in a leaked deal is on average 13 percent lower than in non-leaked deals. This runs counter to the belief by some sellers that a premature deal announcement will attract more bidders and drive-up pricing.

Further illustrating the impact a press leak might have, the study also suggests that while the average time taken for a non-leaked deal to complete stands at 62 days, this figure increases by 43 days (or 70 percent) – bringing the average time to complete to 105 days – if the deal is prematurely announced.

Andrew Pearson, Managing Director EMEA at IntraLinks, commented “Many people in many organizations are involved in the M&A process, and since they all now have access to electronic communication channels, it is more important than ever to control and monitor the flow of information about a deal before it has been announced. The time preceding a deal announcement is a particularly sensitive point in the M&A process and our research shows the potential damage caused by press leaks at this stage. Centralizing information flow through a system with a complete audit trail engenders better behavior and trust that confidentiality will be respected.”

Professor Scott Moeller, M&A lecturer and former managing director and senior investment banker at Deutsche Bank and Morgan Stanley, commented on the research that he supervised, “Market leaks and insider trading receive considerable press attention but this is the first study to identify the impact of a pre-announcement leak to the press. Companies would be wise to heed the factors identified in this research so that they are fully aware of the historical impact of such leaks on deal activity.”

Andrew Pearson, Managing Director EMEA at IntraLinks, concluded “As the financial industry looks at better ways to manage and mitigate risk we anticipate virtual datarooms (VDRs) will really showcase their value. Confidentiality and speed are vital to the success of the financial markets – the very ethos lying behind VDRs and their use in the M&A process.”

* “Friendliness” is classified as a deal completed with Board endorsement

About IntraLinks
IntraLinks® On-Demand Workspaces™ connect business communities and accelerate the intelligent flow of information and documents among participants. Through IntraLinks' secure, neutral, online environments, companies are better able to compete globally by accelerating essential business processes, simplifying communication and fostering rapid workflow. IntraLinks is easily accessible anywhere, anytime using a web browser.

Since 1997, more than 700,000 participants representing over 80,000 organisations worldwide have used IntraLinks On-Demand Workspaces™ to communicate and collaborate on thousands of projects and transactions. IntraLinks has been adopted widely in the financial services and pharmaceutical industries, where its clients include AstraZeneca Pharmaceuticals LP, Bank of America, Deutsche Bank, FDIC, TD Securities, Thomas Weisel Partners and WestLB, among hundreds of others. Founded in 1996, IntraLinks is headquartered in New York with offices around the world.

For more information, visit www.intralinks.com.

About Cass Business School
Cass Business School, City University, delivers innovative, relevant and forward-looking education, training, consultancy and research. Located on the doorstep of one of the world's leading financial centres, Cass is perfectly positioned to be the intellectual hub of the City of London. Our dialogue with business shapes the structure and content of all our programmes of study, our executive education programmes and our research. Our MBA, Specialist Masters and Undergraduate Programmes have a reputation for excellence in professional education. Our Executive MBA is ranked 18th in the world by the Financial Times.

The school undertakes research of national and international significance and supports almost 100 PhD students. Cass has the largest Finance Faculty and the largest Actuarial Science & Insurance Faculty in Europe. Our finance research is ranked 2nd in Europe and 4th in the World outside the US by Financial Management Magazine and our insurance and risk research is ranked 2nd in the world by the Journal of Risk and Insurance.

Cass is a place where students, academics, industry experts, business leaders and policy makers can enrich each other's thinking. For further information visit: www.cass.city.ac.uk