April 16, 2010
Speed-dating and the Return of Irrational Deals?
It’s been a good April for deal junkies. There are predictions of a pickup in deal-making (although some question whether these predictions are just that). If the last few months spate of both friendly and hostile deals are a good indication, then predictions that “The next two quarters will probably be defined as a very aggressive period of speed-dating, where companies will try out different combinations to see if they make strategic sense and are actionable,” (by Paul G. Parker, head of global mergers and acquisitions for Barclays Capital) may likely come to fruition. Obviously there are a lot of pluses to more deals being done (especially for those of us who study deals and deal-making). As I asked in my post earlier this week, one of the big questions will be whether deal technology like reverse termination fees (RTFs) will persist in 2010 and if so in what form. This was hot topic at the M&A panel held this week at the Tulane University’s Corporate Law Institute. I for one hope and expect to see the continuing complexity of RTFs where buyers and sellers actually take into account deal risk, such as financing risk, rather than a return to the problematic option-style RTF structure of the private equity deals of 2004-2007. But then again, you never know…
Chancellor Strine joked at Tulane that “We need to get past point at which boards prudently take into account risk. We need to get them to do irrational deals” since "Those are the deals that make this conference fun.”
I guess you could say that those are the deals that make my job fun as well ;-)
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I agree about a more wider and holistic approach needed for RTFs, especially with the going concern going forward and the financial risk of any deals that are due to be made. Irrational deals may be fun, but irrational deals also have a lot to answer for.
Posted by: Speed-Dating | Sep 17, 2011 3:59:35 AM