FCA expresses concern over media disclosures of multiple corporate takeovers
The UK market is grappling with a significant issue: the high percentage of takeover announcements that are leaked before official disclosure. According to recent reports, approximately 38% of takeover announcements in the UK are leaked, which is notably higher than the global average of 31%.
The Financial Conduct Authority (FCA), the UK's financial regulatory body, has identified several reasons for this high incidence of premature takeover leaks. One of the main factors is strategic leaks by insiders, who may disclose information to the press to influence rival bids or fend off unwanted bidders. This behaviour can manipulate the market or shape takeover dynamics to benefit a particular party.
Another reason is market enthusiasm and analyst/media speculation. Leaks often prompt price movements driven by financial analysts or journalists predicting takeover targets, implying that some leaks may emerge from market speculation coupled with strategic insider disclosures.
The FCA has also opened 33 investigations linked to potential market abuse cases stemming from these leaks since early 2020, indicating ongoing issues with enforcement and compliance in this area.
The implications of high premature takeover leaks are far-reaching. They can violate market abuse rules, especially insider trading regulations, and unfairly advantage some traders, damaging market fairness. Data shows that 38% of UK M&A deals in 2024 experienced positive abnormal price movements ahead of their official announcements, a figure elevated beyond the five-year average of 32%.
These leaks can also harm the "smooth operation and integrity of markets," potentially leading to less confidence among investors and participants in UK markets. Companies associated with leaks, whether deliberate or accidental, risk reputational damage. For example, Shell had to publicly deny takeover speculation linked to premature media reports.
In summary, the UK's comparatively high incidence of premature takeover leaks stems from strategic insider behaviour and media speculation. These leaks have serious regulatory, market, and reputational consequences, prompting the FCA to intensify investigations and warnings to market participants to uphold confidential handling of takeover information. The FCA's warning to market participants in March highlights the potential harm of strategic leaks in M&A transactions and the need for stricter adherence to market regulations.
Insiders strategic leaks and market enthusiasm, including analyst/media speculation, are key factors contributing to the high percentage of premature takeover leaks in the UK's financial industry, impacting the business landscape and potentially violating market abuse rules. The Financial Conduct Authority (FCA) has responded by intensifying investigations to address ongoing issues with enforcement and compliance in this area, warning market participants to handle takeover information responsibly to preserve market fairness and integrity.
