Azure Capital’s diverse panel compare notes on hostile takeover bid experience


  • 150 executives, directors, industry participants and advisers attended the forum hosted by corporate advisory firm Azure Capital featuring representatives from the Takeovers Panel, Navitas, FTI Consulting, and Herbert Smith Freehills.
  • The past 18 months have seen the highest level of Australian public market M&A activity for years, against a backdrop of a changing regulatory landscape and a rise in the involvement of activist investors in determining takeover outcomes.
  • An overlay to this dynamic is the increasingly significant impact of public commentary, media leaks, bear hugs, and social media on transactions.
  • All of the above means the challenges facing directors in responding to takeover bids are only becoming more complex, making the importance of Boards being well prepared never greater.

On Thursday night over 150 executives, directors, industry participants and advisers gathered at the Westin Perth to listen to a high-calibre panel discuss defending hostile takeovers and some of the recent trends being seen in public market M&A transactions. A diverse group of industry leaders joined the panel, including:

  • David Buckingham, Managing Director of Navitas Limited
  • Shaun Duffy, Senior Managing Director at FTI Consulting
  • Allan Bulman, Director of the Takeovers Panel
  • Rebecca Maslen-Stannage, Merger & Acquisitions Partner at Herbert Smith Freehills (Sydney); and
  • David Flynn, Partner at Azure Capital.

The session was chaired by Azure Capital Joint Managing Partner, Adrian Arundell, who opened the evening by pointing out that the increasingly fickle nature of long-term shareholders, the role of activist investors, and the significant war chest of passive-turned-aggressive private equity players means that the unprepared target is more vulnerable than ever.

To further set the scene, it was noted that the past 18 months have seen the highest level of public market M&A activity in the Australian market for years, with 56 public market transactions for a deal value of $41bn announced in 2018. Over that time, bidders have adopted a range of tactics to coerce target Boards to the negotiating table, and target Boards have stood their ground, with the full extent of takeover defence strategies on display.

On the theme of being ‘defence ready’, David Buckingham is well rehearsed, having been involved in the high profile takeovers of Western Australian companies Navitas and iiNet. He explained: “… leadership groups need to have intimate understanding of the value of their strategic plan, to allow directors to appropriately respond when an approach is received and avoid surprises.”

It was noted that an increasingly significant player in hostile takeovers is the media. Shaun Duffy provided this perspective: “The media plays a really important role in distilling down all the detail, whether it’s a scheme booklet or process deed, into the really important bits. And in doing so, the media often acts as a signal from one side to the other, as to which way this transaction’s going. No matter how sophisticated an institutional shareholder might be or how much analysis they might do, they won’t want to accept a deal that’s being bagged in the media.”

The panel also discussed their experience advising Boards who had received a hostile approach. When asked for the first piece of advice she provides to directors, Rebecca Maslen-Stannage said: “Stay calm and take the time you have... It’s important to buy breathing space, but it’s also so important to the negotiation dynamic. In a hostile situation often someone’s taken you by surprise, they’ve tried to wrong foot you from the start – it’s important where possible to try and even that dynamic up.”

David Flynn added that “A Board really needs to think twice about whether they put out an announcement quickly. It’s sometimes easier to stay in the shadows, work through the issues and then emerge when you’re ready.”

On the topic of the changing regulatory landscape, Ms Maslen-Stannage noted that “Regulators are acting in different ways than they have in the past. They’re a lot more willing to take parties on, and perhaps without the usual fear of losing, because they’ve heard from the Royal Commission that they should be testing their powers.” She also noted that with respect to deal tactics, “When carefully managed, regulators can be effective weapons in a hostile situation.”

Allan Bulman responded to a query on recent changes to the Panel’s application of the Truth in Takeovers policy, commenting “ASIC is very strong on Truth in Takeovers, it expects market participants to be held to the statements they make. The Panel has that as their starting position but has to be satisfied that there are interests to protect and any orders aren’t unfairly prejudicial to any particular parties.”

With his recent experience at Navitas where major existing shareholder Australian Super joined the bid for the company, Mr Buckingham was asked how Boards need to view investors like Australian Super. He commented that “… we, collectively as Boards, CEOs, leaders, advisers of corporate organisations in Australia need to get used to the tactic, it’s coming, and I think it’s more likely to be at the big end of town in the funds management game.” Ms Maslen-Stannage added that “Actions by one or two institutions might look unusual at the moment, but we’ve seen the trend in other areas that soon that becomes sufficiently common that others actually feel pressured to get involved – so it feels to us like a permanent shift in the landscape.”

Mr Duffy noted that “from an investor relations perspective it creates some very interesting conversations on roadshows with the super funds. You’re better off upfront addressing it, to try and get a sense of where they are. If they do genuinely love your business then you probably can draw the conclusion that they may well be there if a consortium appears.”

Ultimately, the Panel agreed that the challenges facing directors in responding to takeover bids are only becoming more complex. When coupled with strong equity market conditions, low interest rates, a low currency and significant liquidity amongst both strategic and financial players all encouraging greater public market takeover activity, the importance for Boards of being well prepared was never greater.


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