The decline in abandoned corporate acquisitions in the UK: regulatory influences

Michael McCann

Journal of Financial Regulation and Compliance, 2013, vol. 21, issue 3, 259-267

Abstract: Purpose - Abandoned acquisitions represent a significant aspect of acquisition activity. Despite this, little analysis of aggregate abandoned acquisition activity has been conducted. This paper aims to address this gap by analysing trends in aggregate abandoned acquisitions. Design/methodology/approach - This paper represents preliminary research on this topic, using descriptive statistics and correlation to identify trends in the data and propose tentative explanations for the changing patterns in abandoned acquisitions observed. Findings - There has been a stepped decline in the number and rate of abandonment between the 1970s/1980s and the 2000s. Analysis of the trends suggests several reasons for this. Firstly, target management resistance has a major influence on abandonment. Changes in the Takeover Code relating to Put‐up or Shut‐up (PUSU) provisions have produced a decline in hostile bids since the 1990s, reducing the rate of abandonment. Secondly, the increasing proportion of cross‐border transactions in total UK activity may also contribute to the falling rate of abandonment. Research limitations/implications - The preliminary methods used to analyse the data are limited. However, the work has identified relationships between regulatory changes which make speculative bidding more costly, the decline in hostile bidding and a decline in the rate of abandonment. These explanations need to be analysed further with more rigorous testing of the proposed relationships. Originality/value - This paper is the first to analyse aggregate abandoned acquisitions in the UK, proposing explanations for the trends in abandoned acquisitions since 1969.

Keywords: Acquisition; Corporate control; Corporate governance; Corporate regulation; Acquisitions and mergers (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfrcpp:v:21:y:2013:i:3:p:259-267

DOI: 10.1108/JFRC-11-2012-0047

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