A cola maker has been in the news for ages now. First it was believed that a global leader was in talks to buy it out. Now it’s the turn of an ‘interested’ Indian behemoth.
A chain of salons was also in the news for being in advanced talks to be acquired. That was a few months ago. There is no update yet.
Be it much-anticipated deals or the hush-hush ones, news around acquisitions tend to create buzz. It is common knowledge that such news is planted by the potential acquirer or to-be-acquired entity as a negotiation tool – or even by a third party in order to break the deal.
We asked a few industry experts: Do speculative stories on acquisitions have any impact on the deals? Do they aid or mar deals when planted?
“Speculative stories – as in the case of all speculative stories – tend to create distrust between the parties involved unless there is pre-existing comfort and mutual trust. These stories rarely – if at all — aid deals. Parties involved in an acquisition transaction would prefer to close the deal away from public glare, if the process is concrete and both sides are committed to the transaction. In most instances, speculative stories create disruption as a large number of stakeholders are involved in any transaction and those who are not at the negotiation table tend to feel they have been kept away from developments,” says, Supriyo Gupta, CEO, Torque Communications.
He adds, “However, most companies who are already intensely in the process, tend to ride over the hump and get on with the transaction – albeit with higher levels of secrecy. The only deals that get impacted, therefore, are those where both parties are simply courting and haven’t progressed beyond expressions of interest.”
Anand Mahesh Talari, Co-Founder & MD, Mavcomm Group, reflects, “Speculative stories related to potential acquisitions are frequently disseminated by media outlets. However, the actual impact of such stories on the deal outcomes largely depends on the strength of the relationship between the parties, the nature of the deal, and the levels of negotiation involved. When the media receives information in advance and reports on a potential deal, the ultimate effect of the speculation can be positive or negative depending on the underlying motivation behind the dissemination of such information. Based on my professional experience, I have observed that a greater number of deals tend to come to fruition rather than fall apart as a result of speculative stories. If a deal does fall apart due to the impact of such stories, it could be indicative of a lack of proper fitment between the parties.”
Saleela Kappan, Founder, RED Communications, observes, “It can go both ways. Although planting stories to catalyse a deal is not the most ethical approach, we have witnessed it succeed and fail. This pressure tactic is likely to create friction and leave a negative impression, regardless of whether the deal happens or not.”
“A lot depends on the type of acquisition or merger and angle of the story which could help or deter. In most of the cases and in a larger sense it does help the company valuation to go up if the story about the company is positive and covers guidance for future, however many times it also diminishes the value of the company if the news is negative and has too many persistent issues linked to it. Now the caveat is who gets the story initiated or is it done by media independently with due research, or how the information has been shared and if the story has any specific intent,” notes Abhinav K Srivastava, CEO, Madison PR.
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