2016 Saw Highest Proportion of Abandoned Acquisitions since Start of The Financial Crisis

SYDNEY, AUSTRALIA--(Marketwired - Nov 29, 2017) -

• Worldwide, more than 7% of announced M&A deals failed to complete last year, the highest since 2008
• Asia-Pacific region has the highest rate of failed deals globally, at more than 13% last year
• China, Australia and Singapore among the countries with the highest rates of failed deals over past 25 years
• Long-term study by Intralinks and Cass Business School reveals significant predictors of deal failure

New research published by Intralinks and Cass Business School has found that, following an increase over each of the previous three years, the proportion of worldwide failed acquisitions reached an eight-year high in 2016. When compared globally, the Asia-Pacific region recorded the highest average deal failure rate in 2016, at 13.2%. Over the past 25 years, China, Australia and Singapore are among the countries with the highest proportion of failed deals. Japan, India and South Korea are among the countries with the lowest rates of deal failure.

Worldwide, 7.2% of M&A deals announced last year failed to complete, the highest rate of worldwide deal failures since the start of the global financial crisis in 2008, itself the highest since 1995, and significantly higher than the overall long-term average deal failure rate of 5.7%. The Materials, Real Estate and Energy & Power sectors have the highest rates of deal failure, whereas the Consumer, Industrials and Healthcare sectors have the lowest.

These are some of the findings of "Abandoned Acquisitions," a study carried out by the M&A Research Centre at City, University of London's Cass Business School and Intralinks, the leading global provider of M&A deal management and secure content collaboration solutions.

Based on an analysis of 78,565 M&A transactions announced between 1992 and 2016, the study investigates 30 deal-specific, company-specific and macro-level financial and non-financial factors to determine which, if any, are statistically significant predictors of deal failure. The study then considers whether these predictors have changed over time.

Key findings

• The failure rate for deals involving public company targets is significantly higher than for private targets. Since 1992, the long-term public target average failure rate was 11.1% compared to the long-term private target average failure rate of just 3.7%, and an overall average deal failure rate of 5.7%.
• The probability of failed deal completions for public targets is influenced by five significant predictors: target termination fees (break fees), target and acquirer size, the target's initial reaction to the deal announcement, the number of financial and legal advisers retained by the acquirer for the deal and the type of consideration offered by the acquirer to the target company's shareholders.
• The probability of failed deal completions for private targets is influenced by four significant predictors: the relative size of the target compared to the acquirer, the liquidity of the acquirer, the type of consideration offered by the acquirer to the target company and acquirer termination fees (reverse break fees).
• External financial shock such as liquidity, financing and banking crises appear to temporarily significantly increase the rate of failed deal completions, whereas external political shocks appear to have no impact.

The impact of catastrophic or unexpected events on deal failure