Monday, December 18, 2006

Hostility on the Rise in M&A

Takeovers are increasingly turning hostile — again, says BusinessWeek. In 2006, corporate and private equity buyers worldwide lobbed 110 uninvited bids worth $351 billion at acquisition targets — the highest number since 2000, when 129 offers worth $117 billion were launched. Some companies are enlisting the assistance of hedge funds and unions to pour on the pressure, while private equity groups are busting in on each others’ deals, and occasionally making hostile offers themselves.
And with companies and financial buyers awash in cash anxiously looking for ways to put their money to work while interest rates remain low and financing is plentiful and cheap, bankers do not expect the wave of hostility to crest any time soon.
Many executives are making unsolicited bids for companies, BusinessWeek says, because they believe they must buy their rivals or risk being bought out as their industries consolidate.
The magazine cites AirTran Airways’ recent unsolicited $288 million bid for Midwest Airlines as an example. AirTran decided to go hostile after Midwest refused to engage in private merger talks. “You can debate the merits of consolidation, but if it happens, no one wants to be left out” AirTran President Robert L. Fornaro told BusinessWeek.
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