• Deal Metrics:

    A Quick Look at Topping Bids

    A QUICK LOOK AT TOPPING BIDS | GO-SHOPS AND TOPPING BIDS

    Table 1 shows that between 2005 and 2016, on average, about 9 percent of friendly cash transactions were topped (107 such deals in 12 years). 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 22 percent. On average, the first topping bid is about 8 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 just under 37 percent, which is about 6 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).

    Table 1: Topping Bids (All deals referenced are friendly completed cash deals)

      Pricing of Deals with a Topping Bid  
    Announcement Year Number of Deals (Value > $100m) Number of Deals with a Topping Bid Median Initial Bid Premium Median First Topping Bid Premium Median Final Bid Premium Pricing of Deals without a Topping Bid:
    Median Premium
    2005 117 12 11.3% 8.0% 32.8% 25.0%
    2006 165 19 20.0% 7.5% 42.6% 26.0%
    2007 179 16 12.9% 4.9% 27.4% 24.3%
    2008 64 8 29.9% 11.4% 43.4% 34.0%
    2009 38 5 18.9% 13.1% 34.4% 36.6%
    2010 113 10 33.9% 12.1% 46.6% 34.6%
    2011 88 5 22.2% 4.4% 35.6% 37.5%
    2012 89 10 21.3% 10.2% 30.9% 33.2%
    2013 83 6 22.3% 10.0% 37.0% 28.4%
    2014 69 3 20.6% 2.6% 34.8% 32.0%
    2015 89 6 32.7% 8.7% 50.1% 30.9%
    2016 92 7 31.1% 7.4% 49.3% 38.7%
    TOTAL 1,186 107 22.1% 7.7% 36.8% 31.2%

     

    Table 2: Third-Party Topping Bids (All deals referenced are friendly completed cash deals)

      Pricing of Deals with a Third-Party Topping Bid  
    Announcement Year Number of Deals with a Third-Party Topping Bid Median Initial Bid Premium Median First Topping Bid Premium Median Final Bid Premium Pricing of Deals without a Topping Bid: Median Premium
    2005 7 22.1% 6.2% 41.3% 25.0%
    2006 4 29.2% 8.0% 43.5% 26.0%
    2007 6 10.0% 6.9% 20.9% 24.3%
    2008 4 34.8% 8.9% 52.5% 34.0%
    2009 1 7.3% 4.8% 18.1% 36.6%
    2010 4 55.9% 13.6% 79.2% 34.6%
    2011 3 22.2% 4.4% 35.6% 37.5%
    2012 4 19.3% 19.3% 30.9% 33.2%
    2013 2 33.2% 10.0% 57.4% 28.4%
    2014 2 18.0% 10.2% 38.3% 32.0%
    2015 5 22.1% 8.5% 49.5% 30.9%
    2016 1 57.5% 5.2% 65.8% 38.7%
    TOTAL 43 22.3% 8.6% 42.1% 31.2%

     

    Table 3: Self-Topping Bids (All deals referenced are friendly completed cash deals)

      Pricing of Deals without a Third-Party Topping Bid  
    Announcement Year Number of Deals without a
    Third-Party Topping Bid    		 Median Initial Bid Premium Median First Topping Bid Premium Median Final Bid Premium Pricing of Deals without a Topping Bid:
    Median Premium
    2005 5 4.6% 12.5% 14.9% 25.0%
    2006 15 17.5% 7.5% 39.1% 26.0%
    2007 10 17.4% 3.2% 34.3% 24.3%
    2008 4 29.9% 11.4% 42.8% 34.0%
    2009 4 24.9% 13.2% 38.2% 36.6%
    2010 6 16.3% 8.9% 39.1% 34.6%
    2011 2 18.1% 4.4% 23.3% 37.5%
    2012 6 21.3% 4.9% 28.7% 33.2%
    2013 4 15.3% 8.5% 28.5% 28.4%
    2014 1 31.4% 2.6% 34.8% 32.0%
    2015 1 64.2% 17.3% 92.5% 30.9%
    2016 6 29.7% 7.6% 43.0% 38.7%
    TOTAL 64 20.3% 7.6% 34.6% 31.2%

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  • Notes & Sources:

    1. Transactions are selected based on the following criteria:
      • Announcement date is between January 1, 2005 and December 31, 2016
      • Target is a US public company
      • The deal value is greater than $100 million
      • Price per share is greater than $5
    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. Premium Calculation:
      • Initial bid premium is the premium of the initial offer over share price of the target company 21 days prior to the announcement date of the initial offer
      • First topping bid premium is the premium of the initial topping offer over the initial offer
      • Final bid premium is the premium of the completed offer over share price of the target company 21 days prior to the announcement date of the initial offer
    4. Thomson ONE, Bloomberg, SEC EDGAR
    Notes & Sources

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