In this post-financial crisis environment, the mergers & acquisitions market is extremely competitive as both corporate and private equity investors have capital to invest but fewer quality deals in the marketplace to invest in. A competitive deal environment drives up bids and puts pressure on transaction timelines, increasing the potential for deal bias and conflicting interests.
These risks can be exacerbated when public companies are involved. Buyers may pay significant control premiums over the trading price of the stock but may have limited access to the information necessary to assess the deal strategy, risks, and value. The limitations imposed on receiving non-public information can arise from a variety of factors, including the dynamics of the sale process, regulatory considerations, and commercial sensitivity. Since there are virtually no contractual protections if something goes wrong in public deals, buyers are essentially taking the business “as is.”