Schemes may become preferred public M&A structure, says firm

by Sol Dolor03 Mar 2017

A top law firm is predicting that schemes of arrangement may become the preferred structure for public mergers and acquisitions as regulation of the space and support and oversight of the Takeovers Panel increase.

“The execution risk with a scheme is often perceived to be lower, requiring the support of only 75% of voting shareholders in each interest group plus 50% of all votes available – less than 90% of all shares under a takeover,” said to Andrew Matthews, Simpson Grierson partner.

He said that schemes may be shedding their “sneaky loophole” moniker. He said that the trend kicked off with the Nuplex/Allnex scheme in 2016. Now, any conversation on a public markets deal involves a scheme, and it has become the starting point when a deal is recommended.

Matthews also said activity in secondary capital raisings will be strong as corporates fund acquisitions. The trend will be driven by faster and easier raising of equity-based acquisition finance due to securities law changes.

He said that as is the trend in Australia, the ability to quickly and reliably raise acquisition funding is “critical in a buoyant M&A market.”

Chapman Trip recently predicted that capital markets activity may be flat in 2017, with the NZX Main Board possibly seeing only three listings. However, MinterEllisonRuddWatts also predicts the M&A sector will be robust this year.

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Chapman Tripp expects fewer NSX listings in 2017
MinterEllisonRuddWatts predicts sustained regulation in robust M&A sector this year