Chapter 7 of the 2022 Takeovers + Schemes Review (below) explores transaction timing for public mergers and acquisitions in 2021.
Deals were done more quickly, but the differential between takeovers and schemes of arrangement remained constant
The time taken to implement both takeovers and schemes of arrangement has materially shortened over 2021, but takeovers remain on average quicker to implement than schemes.
For 2021, we saw:
- the time taken to implement a takeover fall by 9%, moving from an average of 103 days in 2020 to 94 days in 2021; and
- the time taken to implement a scheme of arrangement fall by 9%, moving from an average of 127 days in 2020 to 115 days in 2021.
Average days to end of takeover offer v scheme implementation date
Traditionally, takeovers take less time on average to implement than a scheme of arrangement. In 2021, takeovers took on average 94 days to complete, compared to an average of 115 days for a scheme.
However, it is worthwhile noting that the average time period for takeovers was significantly skewed by the iCollege takeover of Red Hill Education, which took 232 days thanks to a protracted competing bid duel. Without this deal, takeovers would have taken on average just 70 days (rather than the average of 94 days).
The reduction in overall timing for both takeovers and schemes seen in 2021 was most probably driven by:
- the reduction in the proportion of deals being hostile (and the accompanying increase in the proportion of agreed deals); and
- the increase in success rates for all transactions.
While the timing differential between takeovers and schemes narrowed a little in 2021, being 21 days in 2021 compared to 24 days in 2020, the data shows that takeovers remain potentially materially quicker to implement than schemes of arrangement. This advantage might also be amplified by the fact that under a takeover, board control is often obtained prior to the close of the offer (i.e. when the bidder obtains more than 50%) whilst with a scheme of arrangement, board control is only obtained upon implementation of the scheme.
While the complete data set indicates that the takeover timing advantage remains relatively low compared to previous surveys, stripping out iCollege / Red Hill Education as the outlier transaction reveals a more material average timing differential of 36 days. This is more in line with what was observed in 2017, 2018 and 2019 – the advantage was 46 days in 2017, 30 days in 2018 and 51 days in 2019.
This reflects the continuing self-selection of takeovers when a quick and speedy outcome is expected to be achieved, and schemes being the preferred acquisition method if that is not the case.
Timing in takeovers
As stated above, in 2021 there was a material reduction in the average time taken for a takeover from announcement to close of the offer – from 103 days in 2020 to 94 days in 2021.
This reduction was largely driven by the reduction in the average initial offer period of the takeovers (from 64 days in 2020 to 58 days in 2021). There was a smaller reduction in the average extensions of the offer period under the takeovers (from 39 days in 2020 to 36 days in 2021).
Timing in takeovers
As can be seen below, there was a material reduction in the average time taken for a takeover when the bidder started with a pre-bid stake. While we have seen over the survey period that bidders with a pre-bid stake achieved completion of the takeover in a shorter period of time, that period itself fell materially last year. That is, in 2020 the average time taken for a takeover where the bidder had a pre-bid stake was 99 days, and in 2021 that period fell to 66 days.
The 2021 data made it abundantly clear that a pre-bid stake is an important factor in securing a speedy takeover outcome.
Bidders without a pre-bid stake took much longer to gain control, with the average time to complete a takeover without a pre-bid stake rising from 113 days in 2020 to 137 days in 2021.
Days to close of takeover bid: Impact of pre-bid stake
Timing in schemes of arrangement
As shown below, the time period between announcement of a scheme of arrangement and its implementation date has been relatively stable over the last five years. This is obviously to be expected in the context of such a regulated process.
Timing in schemes
Just under half (16 out of 33) of all successful schemes announced during 2021 took between 100 – 122 days from announcement to the scheme implementation date. This is consistent with the general timing “rule of thumb” of between three to four months to implement a scheme. However, with just over 24% of all schemes completing in less than 100 days, schemes of arrangement may be implemented in close to three months (with clear sailing and calm seas), but rarely less than three months.
It is interesting to also note that the time period from announcement of the transaction to the date of the scheme shareholder meeting has reduced on average by approximately two weeks.