What are they and why are they appearing in Spain now?

Since then, thousands of corporate transactions have been announced. 1988the year in which KKR stuns Wall Street with a daring hostile takeover attemptAbout RJR Nabiscoat the time when the purchases were agreed upon with thehandshake after a sumptuous lunch between participating executives.

Bottom maneuver Henry Kravisimmortalized in a book Barbarians at the Gatedisrupted this style of doing business by going directly to shareholders, bypassing the RJR board of directorswith a generous offer financed by a lot of debt.

Despite the 36 years that have passed since then, the launch of hostile takeovers continues to surprise and cause great shocks in the corporate and political status quo of the countries where they are launched, as just happened in Spain with the proposal made BBVA captured Sabadell.

The negative reaction of the Sabadell council and the Spanish government to the banking integration proposed by BBVA is similar to that demonstrated by the administrators of Anglo American and Pretoria Executive in the face of a recent attempt by an Australian mining group bottomhole pressure buy its South African competitor, which operates mineral deposits in various regions of the world and is listed on Johannesburg and London.

These are not the only hostile operations currently underway. Belgian company Century submitted two preliminary proposals (both rejected) for a British insurance company. Straight line. In Spain, Bondalty – from the Portuguese group José de Mello – formulated a takeover proposal Erkroswhich this chemical company describes as “not by request or consent.”

Sign of euphoria

The return of major hostile takeover bids is a clear sign of a more favorable environment for mergers and acquisitions (M&A)after two years, during which rising interest rates and economic uncertainty led to a decrease in the number and value of transactions in general, especially those that were not agreed upon.

Analysts typically associate hostile takeovers with periods of economic crisis. maximum activity or euphoria in the corporate world (the case of the late eighties), since the uncertainty and costs associated with these processes require bidders to have enormous confidence in the future of their business and good financial easy decide to initiate a transaction of this type.

However, current hostile takeovers occur more likely during the period beginning recovery mergers and acquisitions activity, more than in boom. In fact, they play a major role industrial or strategic groups who seek to merge similar businesses, which will allow them to save money, rather than enter new businesses or markets.

Paper review

Moreover, in the case of BBVA-Sabadell and BHP-Anglo American, the proposals involve payment in shares (without a monetary component), which corresponds to modern times due to a number of factors. First, paper payments allow bidders to benefit from current high inventory levels, which makes its names a more attractive currency. In second place, avoid having to borrow money at current high rates. And finally, let me reduce risk this means maintaining the supply for months (or even years) during which a hostile takeover may continue.

Please note that when paying in cash you must delivery guarantee and the price cannot be changed downward even if there is a catastrophe in the market. When exchanging shares, the transaction cost fluctuates depending on quotes from the two participating companies.

Some investment bankers explain that another reason for hostile or inconsistent proposals is that the boards of many listed companies aim for very high prices, without realizing the impact that the current lack of money is having on valuations. This forces bidders to formulate their offer. directly to shareholdersfailing to obtain the blessing of the proposed firm’s administrators.

The reflection that the environment is not one of complete euphoria is rare appearance of investment funds as supporters of hostile takeovers. Increasing financing costs and the need to typically have the support of managers to continue to operate the business force these types of buyers to attempt to negotiate transactions.

What hasn’t changed since 1988 is fierce battle which usually ends in a hostile takeover. “Emotions on the surface and ego in clash; “The twists in the script and the unexpected characters in Nabisco’s definition of war may contribute to the current debate.”

Difference between friendly and hostile takeovers

From a legal and regulatory point of view, the procedures for friendly and hostile takeovers of listed companies are identical. In both cases, once the transaction has been announced and permission has been sought from National Securities Market Commission (CNMV)there is a waiting time during which the offeror must receive relevant permissionswhether from governments, industry regulators or competition.

At this time, the CNMV may approve the takeover prospectus and open admission periodso that shareholders can decide whether to sell their shares to the participating bidder or bidders.

In theory, the only difference between friendly and hostile takeovers is position of the proposed firm’s board of directors. If you don’t like the deal and don’t recommend it to shareholders, it’s a hostile bid.

Although he Official statement Consultations on Spanish law are not necessary until they are open. acceptance periodHowever, the reality is that in hostile takeovers, the battle begins with the first announcement of the offer.

The legislation limits the initiatives that a council opposed to the proposal can take, limiting them searching for alternative takeover offers or white knights. But usually this also drains the battery legal, regulatory and communication actions to interfere with the process.