2006 was the best ever in terms of mergers and acquisitions (M&A) which touched a peak in 2000 amid dotcom madness. Low interest rates, pressures of globalization and the advent of ever bigger private equity funds have spurred mega takeovers. The year of 2006 also witnessed institutions and investors turning hostile to pursue their targets.
More M&A are lined up in 2007 with Corus weighing competing bids from Tata steels and CSN and Vodafone along with others chasing the 67% stake in Hutch Essar.
To the Point:
Across the world, low interest rates, pressures of globalization and the advent of ever bigger private equity funds have spurred a huge number of takeovers. Bankers and lawyers are predicting that 2007 will be just as momentous as this year.
The M&A market rises and falls with the economy, but 2006 exposed some fundamental shifts. One is an unprecedented rise in hostility. Never before have so many institutions and investors been prepared to go hostile in pursuit of their targets. Itâ€™s an increasingly nasty world out there for embattled chief executives.
According to figures compiled by Thomson Financial, in 2006 worldwide M&A activity reached a record $3,760billion compared with $3,400 billion in 2000. Of those mergers and acquisitions, just 19 were hostile in the old sense of the world — a full-on bid for a company that does not want to be acquired. But companies also received 110 uninvited bids worth $351 billion, the highest number since 2000, when 129 offers worth $117 billion were launched.
Most venture capitalists and major banks like Goldman Sachs once avoided hostile bids, wanting managementâ€™ approval for any offer they made not any more. With billions raised in takeover funds and their rivals all pursuing the same deals, they can no longer afford to be so scrupulous.
Itâ€™s a strategy that has paid off handsomely for Goldman, which this year earned record profits for its shareholders and record bonuses for its bakers. Just as business is increasingly global, so is the rise in hostility. Hostile bids were once rare in Europe Mainland
In Sweden the truck maker Scania is fighting off a bid by German rival Man. Scaniaâ€™s CEO even went as far as to liken it to Hitlerâ€™s wartime tactics saying the Germans were experts of blitzkrieg but in the long run they usually lost the war. He also said German firms show no respect for small countries like Sweden.
With lawyers across Europe and America a lawyerâ€™s firm of M&A spokesman said the M&A market has changed radically. Some 20 years ago a hostile takeover was a rarity.