If You Can’t Bag an M&A Bargain, Go for a Trophy
Bidders will struggle to find targets for cheap takeovers. They may have more luck with quality assets that would otherwise be hard to nab.
Not quite.
Photographer: Mike Kemp
A crisis should be an opportune time for M&A bargain hunters. In reality, buyers probably won’t be getting deals done on the cheap. It’s not just that markets are rallying. Even companies whose fallen shares aren’t recovering may not make easy targets for lowball takeovers. Bidders should think about pricey deals becoming available rather than available deals becoming cheap.
Dealmakers at JPMorgan Chase & Co. recently looked into the dynamics of 17 significant deals done during the crisis of 2008-2009. One conclusion was that the takeover target’s 52-week share-price high was a stubborn benchmark for the acceptable price of a deal. Boards and investors were wary of taking low cash offers that crystallized the value of the company at a sunken level — never mind that there might have been valid reasons for the shares taking a dive.