RSM’s 2021 Control Premium Study - a study of 605 successful transactions and schemes of arrangement in Australia and 131 in New Zealand, completed between 1 July 2005 and 31 December 2020.
In 2010 we released our inaugural study in which we analysed the implied control premiums observed in successful takeovers and schemes of arrangement completed in Australia, with expanded dataset studies issued in 2013 and 2017.
This study covers the 15.5 year period to 31 December 2020 and provides a comprehensive insight into change of control transactions involving ASX listed, and for the first time, NZSX listed companies. More specifically, the implied premiums that acquirers are willing to pay over and above the target’s share price.
This study analyses the relationship between control premiums and several critical market factors. These factors include industry sector, consideration type, transaction type, timing, toehold and market capitalisation, among others. Our results indicate that control premiums are influenced by each of these factors to varying degrees and at different times in the economic cycle. This study also contains analysis on the impact of COVID-19 on the M&A market.
Median Control Premium by Industry Sector
Industry sector significantly influences the control premium required to complete a successful transaction.
Our analysis shows sectors that are traditionally priced and valued on upside potential revealed significantly higher control premiums (such as metals and mining, energy, healthcare, and telecommunications, IT and software) than those where valuations are more typically limited to asset base (e.g. real estate and financial institutions).
Median & Average Control Premium by FY & CY
The Australian market has experienced a number of economic cycles over the 15.5 years analysed, including the mining boom, global financial crisis and more recently the COVID-19 pandemic..
The graph shows the impact of these on observed control premiums, with variability in the S&P/ASX 200 Index and periods of global uncertainty impacting buyer behaviour in the Australian market.
Control premiums have risen during COVID-19 to record levels of around 50% driven by strategically opportunistic deals in healthcare, metals and mining, and diversified financials.
We acknowledge the input and support we have received from Curtin University’s Dr Lien Duong, Dr Baban Eulaiwi and Professor Grantley Taylor, and Victoria University of Wellington’s Associate Professor Thu Phuong Truong in the completion of this study.