Research conducted with the M&A Research Centre at Cass Business School, London shows leaked deals on the decline due to regulatory enforcement
Intralinks® Holdings Inc. (NYSE: IL), a leading, global SaaS provider of secure enterprise content collaboration solutions, today announces research showing the percentage of leaked M&A deals fell to its lowest level in six years, due to stronger regulatory enforcement, tighter internal governance, and the increased risks to the transaction when leaking a deal. The Intralinks M&A Leaks Report, conducted with the M&A Research Centre at Cass Business School, London, examines more than 4,400 transactions from 2009 through 2014 and tracks and reports on deal leaks globally.
“Overall, we’re seeing a drop in the volume of leaked deals, said Philip Whitchelo, vice president of strategy and product marketing at Intralinks. “It’s clear from our research that regulatory enforcement, internal governance and the risks to the transactions are deterring more dealmakers from leaking deals. As a result, sellers and their advisers are taking the issue of pre-announcement deal confidentiality much more seriously.”
In the last two years, there has been a significant rise in enforcement actions and fines for market abuse. For regulators in major economies, such as the US and Europe, the average size of a fine has increased by 18 times over the past five years.
As regulatory enforcement gathers pace, the Securities and Exchange Commission (SEC) announced enforcement results for the fiscal year 2015 on October 22nd. Chair Mary Jo White is quoted stating, “Vigorous and comprehensive enforcement protects investors and reassures them that our financial markets operate with integrity and transparency, and the Commission continues that enforcement approach by bringing innovative cases holding executives and companies accountable for their wrongdoing sending clear warnings to would-be violators.”
With regulators clamping down on market abuse, the Intralinks M&A Leaks report examined significant pre-announcement trading in the shares of a target company in the days leading up to the bid announcement, which is highly indicative of information leakage. Key findings from the research include:
The number of deal leaks has been falling
Deal leaks have fallen globally to a six-year low in 2014. Six percent of all deals in 2014 involved a leak prior to public announcement, compared to 8.8 percent in 2013, or an average of 7.4 percent over the six-year period.
EMEA leads in leaking deals, despite record declines
Deals in Europe, the Middle East and Africa (EMEA) showed the highest average percentage of leaked deals at 9.2%, whereas North American deals showed the lowest average percentage of leaked deals at 6.3%. In 2014, however, deal leaks in EMEA fell to the lowest percentage for the period, at 3.8%, and EMEA had the lowest percentage of deal leaks of the four global regions.
Top 3 Leakiest locations
A geographical breakdown for deal leaks over the entire six-year period showed the most leaked deals in Hong Kong (18.6 percent), India (15.2 percent) and the UK (14.1). Australia had the lowest percentage of deal leaks over the period, at 3.5%, while the U.S., at 6.6%, had the median percentage of leaked deals.
Leaked deals that close have higher takeover premiums
Over the entire time period, the median takeover premium for targets in completed leaked deals was 51.2% compared to 29.2% for non-leaked deals, a difference of 22 percentage points. This may be due to leaked deals having a higher tendency of attracting rival bids. Over the entire time period, 7.3% of leaked deals attracted a rival bid compared to 6.1% of non-leaked deals.
“Various market abuse scandals have caused reputational damage and resulted in significant corporate fines and even convictions of individuals over the last few years,” said Professor Scott Moeller, director of the M&A Research Centre, Cass Business School. “Combined with an increasing regulatory enforcement environment, the risks associated with leaking a deal now far outweigh the perceived benefits.”
To get a free copy of the Intralinks M&A Leaks Report, click here.
In the days leading up to a bid announcement, significant trading in the shares of the target company can be indicative of information leakage about the deal. While not providing absolute confirmation of a leak in an individual deal, significant pre-announcement trading (SPAT) across a large sample can be used to examine patterns and trends in leaking across time periods and geographies.
M&A transaction data involving announced deals during the period 1 January 2009 to 31 December 2014, share price and index price information were sourced from Thomson Reuters. Only transactions involving a change of control of the target were analyzed. The final sample, comprising 4,475 deals, also excluded bids for targets without sufficient equity trading records (where the return for the target equity was zero for more than half the total period under consideration). All references to the region or country location of the target refers to the target’s primary listing location.
About Cass Business School and the M&A Research Centre
Cass Business School, which is part of City University London, delivers innovative, relevant and forward-looking education, consultancy and research. Located in the heart of one of the world’s leading financial centres, Cass is the business school for the City of London.
MARC is the Mergers and Acquisitions Research Centre at Cass Business School - the first research centre at a major business school to pursue focused leading-edge research into the global mergers and acquisitions industry. MARC blends the expertise of key M&A market participants with the academic excellence of Cass to provide fresh insights into the world of dealmaking.
Intralinks Holdings, Inc. (NYSE: IL) is a leading, global technology provider of secure enterprise content collaboration solutions. Through innovative Software-as-a-Service solutions, Intralinks software is designed to enable the exchange and control of information between organizations securely and compliantly when working through the firewall. More than 3.1 million professionals at 99% of the Fortune 1000 companies have depended on Intralinks' experience. With a track record of enabling high-stakes transactions and business collaborations valued at more than $28.1 trillion, Intralinks is a trusted provider of easy-to-use, enterprise strength, cloud-based collaboration solutions. For more information, visit www.intralinks.com.
Forward Looking Statements
The forward-looking statements contained in this press release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are express or implied statements that are not based on historical information and include, among other things, statements concerning Intralinks’ plans, intentions, expectations, projections, hopes, beliefs, objectives, goals and strategies. These statements are neither promises nor guarantees, but are subject to a variety of risks and uncertainties, many of which are beyond our control and could cause actual results to differ materially from those contemplated in these forward-looking statements. Accordingly, there can be no assurance that the results or commitments expressed, projected or implied by any forward-looking statements will be achieved, and readers are cautioned not to place undue reliance on any forward-looking statements. The forward-looking statements in this press release speak only as of the date hereof. As such, Intralinks undertakes no obligation to update or revise the information contained in this press release, whether as a result of new information, future events or circumstances or otherwise. For a detailed list of the factors and risks that could affect Intralinks’ financial results, please refer to Intralinks Holdings, Inc.’s public filings with the Securities and Exchange Commission from time to time, including its Annual Report on Form 10-K for the year-ended December 31, 2014 and subsequent quarterly reports.
Trademarks and Copyright
“Intralinks” and Intralinks’ stylized logo are the registered trademarks of Intralinks, Inc. This press release may also refer to trade names and trademarks of other organizations without reference to their status as registered trademarks. © 2015 Intralinks, Inc.