• Deal Metrics:

    A Quick Look at Topping Bids

    A QUICK LOOK AT TOPPING BIDS | GO-SHOPS AND TOPPING BIDS

    Table 1 shows that between 2005 and 2012, on average, about 11 percent of friendly cash transactions were topped. Our review of the pricing of deals indicates that transactions with a relatively low announced bid premium are the ones that attract attention from other bidders. For instance, the table shows that the median bid premium of a friendly deal that is subject to a topping bid is 26.7 percent. On average, the first topping bid is about 6 percent higher than the initially announced transaction price. And, after the dust settles, the final premium for a target in a friendly transaction that attracts competing bids is slightly over 35 percent, which is about 2 percentage points higher than the median premium for friendly deals that do not have topping bids. Tables 2 and 3 below separate third-party topping bids and self-topping bids (i.e., instances where the initial bidder improves the bid).

    Table 1: Topping Bids (All deals referenced are friendly completed cash deals)

      Pricing of Deals with a Topping Bid  
    Announcement Year Number of Deals (Value > $100m) Number of Deals with a Topping Bid Median Initial Bid Premium Median First Topping Bid Premium Median Final Bid Premium Pricing of Deals without a Topping Bid:
    Median Premium
    2005 110 12 21.1% 8.0% 39.0% 27.0%
    2006 162 25 29.8% 6.3% 35.1% 25.9%
    2007 168 18 14.3% 4.0% 24.2% 29.7%
    2008 64 11 31.1% 10.7% 48.1% 38.4%
    2009 38 4 37.5% 10.7% 50.0% 52.6%
    2010 108 10 27.2% 12.1% 46.4% 43.3%
    2011 87 4 31.1% 4.3% 36.9% 38.7%
    2012 83 9 23.2% 9.6% 37.9% 33.6%
    TOTAL 820 93 26.7% 6.4% 35.1% 32.7%








     

    Table 2: Third-Party Topping Bids (All deals referenced are friendly completed cash deals)

      Pricing of Deals with a Third-Party Topping Bid  
    Announcement Year Number of Deals with a Third-Party Topping Bid Median Initial Bid Premium Median First Topping Bid Premium Median Final Bid Premium Pricing of Deals without a Topping Bid: Median Premium
    2005 6 27.2% 6.0% 53.3% 27.0%
    2006 6 31.7% 8.0% 51.1% 25.9%
    2007 10 12.3% 5.7% 24.8% 29.7%
    2008 4 38.8% 8.9% 53.4% 38.4%
    2009 2 43.5% 9.0% 60.5% 52.6%
    2010 4 42.4% 13.6% 65.0% 43.3% 
    2011 2 43.6% 2.4% 46.8% 38.7%
    2012 4 21.5% 12.9% 42.4% 33.6%
    TOTAL 38 27.2% 7.4% 44.3% 32.7%

     

    Table 3: Self-Topping Bids (All deals referenced are friendly completed cash deals)

      Pricing of Deals without a Third-Party Topping Bid  
    Announcement Year Number of Deals without a
    Third-Party Topping Bid
    Median Initial Bid Premium Median First Topping Bid Premium Median Final Bid Premium Pricing of Deals without a Topping Bid:
    Median Premium
    2005 6 13.2% 11.2% 29.9% 27.0%
    2006 19 29.7% 5.0% 33.4% 25.9%
    2007 8 18.6% 3.2% 22.4% 29.7%
    2008 7 28.1% 10.7% 36.8% 38.4%
    2009 2 16.3% 10.8% 28.0% 52.6%
    2010 6 22.3% 8.9% 46.4% 43.3%
    2011 2 10.3% 4.4% 15.2% 38.7%
    2012 5 24.3% 5.9% 37.9% 33.6%
    TOTAL 55 26.4% 5.9% 33.4% 32.7%

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  • Notes & Sources:

    1. Transactions are selected based on the following criteria:

    • Announcement date is between January 1, 2005, and December 31, 2012
    • Target is a U.S. public company
    • The deal value is greater than $100 million
    • The initial price per share is greater than $5    

    2. If two transactions share the same target company and the time span between the announcement dates of the two transactions is less than one year, 
    the two transactions are combined as one transaction with two different bids.

    3. 27 topping transactions are excluded due to missing data. 186 non-topping transactions are excluded due to missing data.

    4. Premium Calculation:

    • Initial bid premium is the premium of the initial offer over share price of the target company 42 days prior to the announcement date of the initial offer;
    • First topping bid premium is the premium of the initial topping offer over the initial offer;
    • Final bid premium is the premium of the completed offer over share price of the target company 42 days prior to the announcement date of the initial offer.

    5. Third-party topping deals have more than one bidder. Self-topping deals have only one bidder.

    6. Thomson ONE, Bloomberg, SEC EDGAR, Capital IQ.

    Notes & Sources

  • This feature appeared in the July 2013 Corporate Transaction Litigation Alert.