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).
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1. Transactions are selected based on the following criteria:
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:
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.
This feature appeared in the July 2013 Corporate Transaction Litigation Alert.