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More schemes of arrangement tipped for takeovers

28 February 2017

Schemes of Arrangement could become the preferred structure for public mergers and acquisitions, Simpson Grierson corporate partner Andrew Matthews says.

He says although banished for a number of years - and branded a "sneaky loophole" for takeovers, increased regulation for Schemes with the associated Takeovers Panel support and oversight have seen schemes return.

"We think they will become the preferred structure for public M&A," he says.

"The execution risk with a Scheme is often perceived to be lower, requiring the support of only 75% of voting shareholders (in each interest group) plus 50% of all votes available – less than 90% of all shares under a takeover."

Mr Matthews says things really kicked off with the Nuplex/Allnex Scheme in 2016 "but any conversation we have on a public markets deal involves a Scheme - and it's usually the starting point where there is a recommended deal".

Looking at market conditions overall, he says they remain conduicive for deal activity "and New Zealand and Australian-based private equity is cashed up and ready to go".

"For good assets, the competition remains strong and we see a shift back to auction processes. However, asset quality is key – buyers are sensitive to protecting returns, looking for growth, and no one is prepared to over pay. Where the quality isn’t present or the buyer/seller expectations are too divergent, we have seen some assets have been in-play for a long time."

Last updated on the 16th September 2019