We see a lot of chatter about potential deals every week and while most of these deals don't come to fruition, a surprisingly large number do. We analyzed 200 potential deals in our "deals in the works" (DITW) database in December 2018 and updated our analysis in October 2021 after the number had grown to 477 potential deals. In a post we wrote about a potential deal for the largest operator of medical office buildings, Healthcare Trust of America (NYSE:HTA), we mentioned the following,
Interestingly, the success rate has improved to 43.4% and potential deals classified as “unsolicited bid” had the highest success rate with more than 51% of them ending up with a definitive merger agreement. Contrary to what I would have expected, “companies seeking strategic alternatives” had the worst track record with just 31% of them ending up with an acquirer.
Going deeper into the rabbit hole and looking at the potential returns for the three categories yielded even more interesting results. Successful deals that we tracked as a result of an unsolicited bid generated 11.38% returns after the news of the potential deal was out. Since these returns occurred in a relatively short period of time, the annualized returns worked out to 183.59%.
