Pre-bid stakes – A double edged sword?

In contrast to previous years, in 2015 having a pre-bid stake did not correlate with a higher prospect of success. In fact, based on statistics alone, bidders were far less likely to succeed without a pre-bid stake, than if they entered a deal with an interest in the target. The benefits of, and how to best leverage, a pre-bid stake always need to be carefully considered in the context of each transaction. We expect bidders in 2016 will carefully consider whether the potential advantages of a pre-bid stake outweigh the risks – particularly where the deal proceeds by way of a scheme.

Pre-bid stakes generally offer a valuable tactical "head start" for bidders in control transactions, and in previous years the majority of bidders have commenced deals with a pre-bid stake of some form. However, this strategy was not as popular with bidders in 2015, with only 47% of the deals in our sample commencing with the bidder holding a pre-bid stake – dropping from 55%, 65% and 75%