Leaked Deals Cost Time and Money

Think leaking terms of a deal will lead to a better offer? Think again.

Less than half of all leaked deals are completed, compared to 72 percent of non-leaked deals, according to a research study, “M&A Leaks: Issues of Information Control” conducted by London’s Cass Business School and commissioned by Intralinks. 

Controlling information during a deal and prior to any formal announcement or press releases is key. More than half of leaked deals fail to be completed, the study found. And of those that were completed, the premium paid is 13 percent less. Moreover, it takes 70 percent longer to close a deal that has been leaked.

The study, which covered 350,000 M&A deals between 1994 and 2007, also revealed that while 97 percent of non-leaked deals were classified with the board’s endorsement, this figure dropped 17 percent in instances where there were identifiable leaks.

Both target and bidder suffered since the premium paid by the winner in a leaked deal is on average 13 percent lower than in non-leaked deals.

The study results suggest the notion that leaked information could attract more bidders and increase pricing.

“Many people in many organizations are involved in the M&A process, and since they all now have access to electronic communication channels, it is more important than ever to control and monitor the flow of information about a deal before it has been announced,” said IntraLinks Andrew Pearson in a statement.

Leaking deal information not only results in lost money but valuable time. The average time for a non-leaked deal to complete increased from 62 days to 43 once a deal was prematurely announced