April 8, 2020
Global M&A Survey: Transactions face vocal criticism from investors and other stakeholders
Research conducted by the global partnership of Finsbury, Glover Park Group and Hering Schuppener Consulting has found that cross-border M&A transactions in 2019 have faced a highly challenging external communications environment with rapid changes creating new obstacles to deal success. In this increasingly complex environment, specific deal objectives, such as building support and acceptance among financial and non-financial stakeholders becomes key. The research conducted consisted of a comprehensive analysis of stakeholder statements in both leading editorial media as well as on social media. The partnership believes that some of the identified communications trends will not only persist but could indeed increase in an M&A environment heavily impacted by the unfolding COVID-19 pandemic.
Key survey findings include:
- Investors in bidder companies are the most vocal stakeholder group, contributing more critical public statements than analysts, rating agencies, and external experts combined: 42% of all critical comments are from investors. Within this group, investors in bidding companies are most active in voicing their concerns, accounting for 69% of all critical concerns. 64% of all negative investor quotes derived from activist investors on the bidder’s share register.
- Strategy, deal certainty and price are still the dominant topics in M&A debates: Commentary from financial as well as from non-financial stakeholders remains predominantly focused on three main issues – strategy (24% of all statements), deal certainty (19%), and price (17%). Despite their prominence in broader public debate, sustainability considerations have yet to emerge as a key factor in M&A deal acceptance.
- Social media is more than an amplifier of editorial media – it features a distinct set of topics and commentators: Topics most referenced on Twitter are the financing of the transaction, benefits for business partners and post-merger integration, therefore diverging from the above-mentioned topics of strategy, deal certainty, and price, which are most frequently addressed in editorial media. In contrast to their limited presence in editorial media, unaffiliated third-party commentators contribute most statements (73%), with roughly one in three (34%) tweets displaying a negative tonality. In editorial media, however, only 32% of the comments come from third parties, whereas representatives of the bidder and the target company, with 45% and 23% respectively, stand at least jointly for the much larger share of voice.
- M&A transactions face a high leak risk with roughly one in two deals leaking before their official announcement: 47% of the cross-border transactions featured saw information about the deal break before the formal announcement which highlights the need for preparation of the involved parties.
Whilst the current health and associated, evolving economic crisis is likely to result in a significant downturn of M&A activity in the near-term future, we believe that ongoing and future M&A transactions could face an even higher risk of vocal stakeholder opposition. With balance sheets under increased pressure, stakeholders – including activist shareholders – will monitor how companies invest their funds to manage this crisis even more closely. Furthermore, with “economic nationalism” on the rise, large cross-border projects could come under increased scrutiny from politics and regulators.
Finsbury, Hering Schuppener Consulting and The Glover Park Group (GPG) together form a global strategic partnership. The combination of these three market leaders is one of the few global platforms advising clients across all communication issues leveraging over 500 consultants in 16 offices around the world. The strategic partnership provides combined global practice groups in Capital Markets, Crisis, Corporate Reputation and Public Affairs to give clients greater cross-market access and the best and most relevant strategic counsel. This strategic advice includes all available communication channels including an integrated digital offering. Finsbury, Hering Schuppener and The Glover Park Group are specialized operating companies of WPP, the world’s largest communications services group.