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Public M&A trends and highlights

22 May 2014


Overall public M&A activity during 2013 was significantly down compared to 2012, with only 39 firm offers being announced, compared with 56 in 2012. Of these 39 offers, nine were for Main Market companies and 30 were for AIM companies.

As well as activity levels being down, deal values were somewhat lower when compared to the firm offers announced in 2012. Of the 39 firm offers announced in 2013, 13 had a deal value of over £100 million, with only three of those firm offers having a value of over £1 billion.

There were twice as many firm offers for UK Main Market targets with a deal value of over £1 billion announced during 2012.

On the up, however, were mandatory offers. 2013 saw a two fold increase in market purchases in target companies which involved the triggering of an obligation under Rule 9 of the Code.

The scheme of arrangement has traditionally been the more popular deal structure for recommended bids and this has broadly been the case again in 2013, particularly for higher value bids.

Notable deals

May Gurney Integrated Services plc

May Gurney Integrated Services plc was subject to competing firm offers (both structured by way of a scheme) made by Costain Group plc and Kier Group plc.

Whilst Costain's bid was initially recommended by the target board, it subsequently lost its recommendation following the announcement of a higher cash and share offer, valued at £211.5 million, by Kier Group plc on 24 April 2013.

May Gurney was one of only two AIM target companies subject to competing firm offer announcements during 2013 (the other being for MWB Business Exchange plc) and was also one of only two bids for AIM companies where the deal value was over £200 million.

With regards to the bidder's intentions for the target, Rule 24.2(a)(ii) requires the bidder to disclose its strategic plans for the target company and their likely repercussions on employment and the locations of the target company's places of business.

The general impression from last year is that employee disclosures are becoming slightly more focussed and perhaps slightly less generic in nature.

In the competing bids for May Gurney, both Kier Group plc and Costain Group plc made detailed synergy statements and, accordingly, provided approximate numbers for the net reduction in the number of employees in the enlarged group.

Northacre plc

A number of possible competing offers for Northacre plc were announced, resulting in only a single firm offer for the company, on 17 January 2013, with the other potential bidders confirming subsequently that they did not intend to make an offer. Tom Shaw and Paul Arathoon advised Northacre plc during the offer process.

Of the 39 firm offer announcements made in 2013, only four (half that of 2012) were in the take private / private equity backed sphere, all of which were offers for AIM companies. This included Abu Dhabi Capital Management LLC's contested offer for Northacre.


Cash was by far the most popular form of consideration offered by bidders for target companies in 2013.

Non-UK Bidders

62% of the firm offers in 2013 (excluding any that lapsed or did not proceed) were announced by a non-UK bidding entity. The geographical split ranged from familiar offshore jurisdictions, such as the British Virgin Islands, to less usual locations, such as the Republic of Kazakhstan.

The total value of these non-UK offers came to approximately £9.316 billion - 93% of the aggregate deal value of the firm offers announced in 2013.

Extensions to Put Up or Shut Up ("PUSU") Deadlines

In respect of the 33 target companies that were subject to one or more possible offers from potential bidders, the Panel granted one or more extensions to the PUSU deadline on 14 potential bids.

The period of time for the first extension of the PUSU deadline varied considerably across these 14 potential bids (from one day to seven weeks and three days).

On one possible offer with more than one potential bidder, two potential competing bidders had their PUSU deadlines aligned. This gave them the same extension to their initial deadline, such that both extended deadlines were set to expire on the same day (14 February 2014).

Formal Sales Processes

The formal sale process was introduced into the Code on 19 September 2011 as a means for a target company to effectively put itself up for sale without the need for potential bidders participating in the formal sale process to be publicly identified in accordance with Rule 2.4(a) and (b) or to be subject to the automatic 28 day PUSU deadline under Rule 2.6(a).

Since the Code changes came into effect, there have been 24 announcements by potential target companies (nine Main Market companies and 15 AIM companies) stating they were commencing a formal sale process in respect of the company.

However, the process has not been particularly successful, with 17 formal sale processes being terminated without a firm offer having been made for the target.

A significant number of the formal sale processes appear to have been undertaken due to financial difficulties or challenges faced by the target company.

Earlier this year, Quercus Publishing plc, which was listed on ISDX, put itself up for sale after a poor run of results and was taken private at the end of a successful auction process.

Pension Scheme Trustee Opinions

Since 20 May 2013, the trustees of a target company's defined benefit pension scheme(s) have had the right to append to the target board circular a separate opinion on the effects of the offer on the target's pension scheme(s).

If this opinion is received but not in "good time" (which is not a defined term) before publication of the target board circular, the target company will be obliged to publish the trustees' opinion on a website and to announce that it has done so (Rule 25.9), provided that it is received no later than 14 days after the date on which the offer becomes, or is declared, wholly unconditional.

Since this change to the Code was introduced, pension scheme trustees have given their opinion on two firm offers. In both cases, the opinion was appended to the scheme document.

This article was written by Holly Sage.

For further information please contact Holly Sage  on +44 (0)20 7427 6750 or holly.sage@crsblaw.com