FINANCIAL SERVICES | Staff Reporter, Hong Kong

Hong Kong's M&A deal leaks dropped to 10%

This is the lowest level since 2012.

Hong Kong has seen a declining trend in its rate of mergers and acquisition (M&A) deal leaks in 2016, according to new research from Intralinks, a business of Synchronoss Technologies, Inc., and Cass Business School, City, University of London.

Hong Kong, which recorded the second highest average percentage of deal leaks from 2009 to 2016, dropped to fourth place in 2016 with its lowest level of deal leaks (10%) since 2012.

Here's more from Intralinks:

In its annual report for 2015-2016, Hong Kong’s Securities and Futures Commission (SFC) detailed 107 criminal charges against 15 individuals and five corporations. Total investigations rose by 12% and the number of investigations for insider trading grew by 20% from the previous year.

Globally, leaking information on M&A deals before any public announcement of the transaction added an extra US$21m to the average value of deals announced in 2016 that leaked. In 2014, worldwide deal leaks had been on a declining trend for the previous six years, but this trend reversed in 2015 and 2016 – despite the efforts of financial regulators globally in recent years to bring in new regulations to curb deal leaks, and increase enforcement actions and fines for market abuse and insider trading.

The Asia Pacific (APAC) region had the highest rate of deal leaks in 2016, at 9.7%. Of the 10 countries with the most M&A activity, the top three countries for deal leaks in 2016 were from APAC – India (16.7% of deals leaked), South Korea (16.1%) and Japan (12%). South Korea and Japan recorded an increased rate of deal leaks in 2016 compared to 2015.

Philip Whitchelo, Vice President of Strategy and Product Marketing at Intralinks, a business of Synchronoss Technologies, comments on the findings: “The rate of deal leaks in markets where leaking was rampant a decade ago, such as the UK, has reduced considerably: a reflection of new regulations against market abuse and much stricter regulatory enforcement. Countries such as India and Hong Kong, which have comparatively high levels of deal leaks, are also making more efforts to tackle market abuse and insider trading. Overall, against the perceived benefits, those leaking deals must also weigh the risks, and those benefits appear to have reduced in 2016.”

Professor Scott Moeller, Director of the M&A Research Centre at Cass Business School also comments: “There will always be reasons why a target company may see a benefit to leaking a deal, and it is therefore unlikely that the level of deal leakage will ever be at - or near - zero. However, it is encouraging to see that the percentage of deals that leak is remaining largely flat, and at levels below where it was a decade ago.”

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