We see a lot of chatter about potential deals every week and while most of these deals don’t come to fruition, a surprisingly large number do. We analyzed 200 potential deals in our “deals in the works” (DITW) database in December 2018 and updated our analysis in October 2021 after the number had grown to 477 potential deals. In a post we wrote about a potential deal for the largest operator of medical office buildings, Healthcare Trust of America (HTA), we mentioned the following,
Interestingly, the success rate has improved to 43.4% and potential deals classified as “unsolicited bid” had the highest success rate with more than 51% of them ending up with a definitive merger agreement. Contrary to what I would have expected, “companies seeking strategic alternatives” had the worst track record with just 31% of them ending up with an acquirer.
Going deeper into the rabbit hole and looking at the potential returns for the three categories yielded even more interesting results. Successful deals that we tracked as a result of an unsolicited bid generated 11.38% returns after the news of the potential deal was out. Since these returns occurred in a relatively short period of time, the annualized returns worked out to 183.59%.
Last week we saw not one, but three different companies turn down unsolicited bids, claiming the offers were too low. While I understand why copper and gold mining company Turquoise Hill Resources (TRQ) turned down an offer by Rio Tinto, I was not expecting RV dealer, Lazydays Holdings (LAZY), to turn down the $25 per share offer from B. Riley (RILY). Given a combination of rising gas prices and rising interest rates, one would think that a company that sells or services RVs might be close to a cyclical peak and choose to bow out at the top. Maybe these three companies discussed below are rejecting the offers as a negotiating ploy or it is possible that they see better days ahead.
Merger activity increased last week with four new deals announced and two deals completed. We also saw a significant rise in new potential deals in the works last week.