MARKETS & INVESTING | Staff Reporter, Singapore

Hong Kong is the fourth country with the most failed M&A deals

Deal failure rate between 1992 and 2016 hit 8.6%.

Hong Kong is the fourth country with the most failed merger & acquisition (M&A) deals with a deal failure rate of 8.6% in the years within 1992 to 2016, collaboration software Intralinks revealed.

According to research they conducted with the Cass Business School, Hong Kong's failure rate just trailed behind Singapore's 9.2%, Australia's 11.9%, and China's 12.9%.

In deals where Hong Kong was the acquirer, the highest failure rates were in Singapore and the US with both 20%, followed by Australia with 16%, and France with 12.5%.

In deals where Hong Kong was the target, the highest failure rates were in China 15.2% and Switzerland with 14.3%.

The study also identified four significant predictors of failed private target M&A deals.

The first predictor of a deal failure is deal size. The study found out that deals involving larger targets relative to smaller acquirers were less likely to complete.

Intralinks cited a managing director of Hong Kong private company, "Smaller acquirers must be aware of potential risks involved, and the deal should be timetabled appropriately. They need to ensure they can communicate the synergy benefits to both the parties. And, of course, they must have adequate finance available as early as possible."

Liquidity and method of payment offered by an acquirer were also an issue. Deals, where cash was the only form of consideration offered to the target, were less likely to fail.

Moreover, the absence of acquirer termination fees, a fee payable by the acquirer to the target if the deal does not complete, also could determine deal failure.

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