Excessive takeover bids are simply not enough

2021 represented a record year for the number of new companies that were publicly listed on the Stockholm stock exchange. After a 2022, with a significantly gloomier market outlook, many publicly listed companies are considered undervalued and the risk-averse capital outside the stock market is starting to see good buyout opportunities. But high bids are not enough.

The recent years’ ongoing bull markets have created certain expectations that make sellers reluctant to let go of their shares as the value has collapsed. It simply takes time to get used to a new reality. Therefore, it has been proven that it is not enough to pay significantly more than the current share price to succeed in getting a bid for a listed company through.

The examples from 2022 are many. Phillip Morris bid at a generous premium compared to the market share price in Swedish Match but were still forced to raise the bid to finalize the deal. Nordic Capital and CVC also bid for Cary Group with a good premium but had to sweeten the offer even more to delist the company in the end.

In December 2022, the media group Bonnier offered nearly 60 percent above the current share price for the magazine subscription service Readly. However, the shareholders rejected the offer who wanted even more. Bonnier has now raised its bid and extended the deadline for the sellers to accept the offer, to potentially agree upon a final buyout of Readly.

It is evident that it is not enough to make excessive offers for listed companies that have lost its value. In all of the above mentioned cases, the media image is a contributing, if not decisive, factor behind the success or failure of a bidding process. One must be prepared to play along the rules of the game, or risk losing a process that has been going on for months.

The public’s opinion and the media are key success factors, and in order to ensure strong delivery in these areas, an elaborate plan – taking different scenarios and preparation for rapid tactical changes into account – is required and should be prepared in connection to the communication strategy. In addition, resources and knowledge are also needed to influence via advertising campaigns, social media and direct communication with large and small shareholders.

Perhaps venture capital giant Apollo Global and former Softbank CEO Marcelo Claure have done their homework of massaging the market through media. According to the well renowned Financial Times, Apollo Global are planning a bid with a high premium on mobile operator Millicom. But prior to the bid being publicly announced, financial media, in this case Affärsvärlden, speculates that the bid should be raised significantly based on the rumored level.

What we know for sure is that upcoming bids on publicly listed companies will be surrounded by intense speculation and media coverage, often placing pressure on raising the offer. Anyone who can plan, understand, and master the situation increase their chances of reaching the desired outcome.

If you have any thoughts about the text or these issues, please contact:

Linus Paulsson, Senior Advisor