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What Has More Leaks Than The White House? M&A Deals

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What Has More Leaks Than The White House? M&A Deals

If the White House is looking for advice on how to avoid leaks, then it shouldn't turn toward Wall Street.

Prior to M&A announcements, details of the deal are more often than not leaked, Gadfly's Gillian Tan commented. Although to Wall Street bankers' credit, sometimes the leak does come from the would-be acquirer, an activist shareholder or other parties who have an incentive to leak the information to a reporter. On the other hand, a leak could occur by pure chance, Tan added. There is at least one instance where details of a transaction were merely overheard in the public subway.

But do investors really care about leaks? Probably not. Deals that are leaked first tend to finalize at a richer premium compared to deals where there are no leaks, Tan emphasized. In fact, with the permission of the company, M&A advisers and bankers may even let some of the details slip out early.

The degree of leaking does vary by sector, Tan also noted. For instance, 15.5 percent of all deals in the consumer sector in 2016 was leaked, which is the highest rate. The lowest rate of leaks in 2016 occurred in the healthcare sector at 5.0 percent.

Finally, one of more notable potential deal that could occur andwas leaked is Unilever plc (ADR) (NYSE: UL)'s potential acquisition of Estee Lauder companies Inc (NYSE: EL). But if this transaction doesn't result in a sale of the beauty company, then it could result in another leaked M&A deal attempting to come back to life ‐ Kraft Heinz Co (NASDAQ: KHC) acquiring the England-based company.

But this time around, "you can bet that involved parties will try their darnedest to plug leaks," Tan concluded.

Related Links:

Wall Street's M&A Chatter From August 28: Gilead-Kite Pharma, Enzymotec-Frutarom, MaxPoint-Valassis

Gadfly's Tan: TripAdvisor Is Finally 'Laying The Groundwork' To Be Acquired

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