Will the bear hug replace the hostile takeover? Public M&As with target recommendations more popular than hostile takeovers

Key Points:

It appears that the bear hug approach is replacing the hostile takeover bid, and regulators will no doubt take notice.

2011 saw a continuation of a recent trend for public M&A deals to be announced with an initial target recommendation and 2012 is likely to follow this same path. Seventy-five percent of all public M&A deals (including 59% of off-market takeovers) in 2011 were recommended by the target when announced.¹

What is responsible for this trend? A target recommendation has always been highly sought after: they provide greater deal certainty, a headstart over any potential competitors, facilitate access to due diligence and are very persuasive to retail shareholders. A target recommendation also has a significant impact on the likelihood of success of a deal: in 2011, 86% of recommended deals completed successfully, whereas only 50% of deals which did not receive a recommendation completed successfully.