Bid Battles: Global Merger Waves, Hostile Takeovers and M&A Strategy
Oxford, England
23 February 2005
Hosted By: The Saïd Business School, Oxford University
What are the rationales for takeovers and mergers?
What causes global merger waves?
How, if at all, do mergers create value?
What is the role of hostile takeovers?
How do companies defend against them?
What bidding strategies should raiders adopt?
What role is played by the competition regulators in jurisdictions across the world and how do they influence the bid process?
How do corporate M&A strategies respond to international regulators and the differences among them?
In a lecture to the Saïd Business School at Oxford University, NERA Director Dr. Mark Williams examined these and other questions, drawing on case studies of some of the biggest merger battles of the last twenty years.
The late 1980s saw a wave of hostile takeovers, which were in many cases financed by high leverage junk bonds. Most famously these included KKR/RJR Nabisco LBO ("Barbarians at the Gate") and the Bendix/Martin Marietta "Pac Man" case. In the UK, hostile bids by foreign companies created controversy, notably the Nestlé/Suchard/Rowntree "Battle for the Kit Kat," and the leveraged Elders IXL bid for Allied Lyons. Then, at the close of the 1980s, before the fall of the Berlin Wall and the introduction of the "one stop shop" of the European Merger Control Regulation, the GEC-Siemens hostile bid for Plessey revived an earlier failed bid by GEC, leading to the threat of a Pac Man defense and multiple competition hearings in the UK, U.S., Germany and several other jurisdictions.
A decade later Rupert Murdoch made a bid, through BSkyB, for Manchester United -- a deal that reached the front pages of the Financial Times, the sports pages of the tabloids, the Houses of Parliament and the Monopolies and Mergers Commission. In the end, a narrow economic analysis by the Monopolies and Mergers Commission blocked the deal. In a similar controversy, in 2000 the then biggest merger in history united new media AOL and old media Time Warner, with a proposed merger of Warner Music and EMI music as a sideshow. In a world before the Napster judgement, and at the height of dotcom mania, the deal -- fiercely opposed by media rivals -- reached the regulators in Europe and Washington and concluded with the withdrawal of the music transaction and the clearance of the supposed deal of the century. Smaller in size, but no less surprising, was the 2001 hostile bid for Abbey National by Lloyds TSB. Unlike Plessey, Abbey successfully shrugged off its unwanted suitor with a competition defense, thus blocking banking consolidation within the UK and encouraging cross-border consolidation. This was followed in 2002, when a year of cruise warfare pitched Carnival against "Love Boat's" P&O Princess and Royal Caribbean on the stock exchanges of the world, and at the regulatory pitches of the Competition Commission, the European Commission and the U.S. Federal Trade Commission.
Drawing on these and other case studies, Dr. Williams reviewed the increasing role of competition authorities in determining what deals are attempted; the set of bidders who elect to take part in each takeover auction, with implications for the price generated in the auction; and the eventual allocation of corporate control.
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