In praise of the hostile bid

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Could it be hostile bids are the only things keeping M&A bankers in Abercrombie & Fitch? Maybe. According to a recent article in the Financial Times, more bids have gone hostile this year than at any time since 1999. And hostile bids are hard work.

"Anything is welcome right now," says a senior associate at one US house. "If you're a sell-side advisor in particular, a hostile bid is a big job. It comes out of the blue and you have to get hugely geared up in a short amount of time."

Recent hostilities towards European targets include German ball-bearing maker Schaeffler's $18bn attempt to buy car parts firm Continental, and WPP's 1.8bn bid for Taylor Nelson Sofres.

European companies have also been involved in some not inconsiderable unsolicited bids of their own - most notably BHP Billiton's €113bn bid for Rio Tinto and InBev's €30bn approach for Anheuser-Busch.

Working for the buyer in an unsolicited bid is fairly manageable, says Stephen Lockley, a partner at Wyvern Corporate Finance. He says what's really time-consuming is working for a company that's the target of multiple hostile bids: "You need to do a considerable amount of research into each bidder's case to try and find the weaknesses in their strategy."

One of the latest examples of this in the UK happened back in February, when both Hydrogen and OPD aspired to acquire recruitment firm Imprint.

With global M&A volumes down 30% in the first half of 2008, it's questionable whether hostile bids can really save the skin of M&A bankers, though. The associate we spoke to says banks have started fizzing first-year analysts: "It's unprecedented - they're kiliing their young."

And one headhunter says most big banks are still closed for hiring: "We've had a few conversations with RBS, and Lehman recently hired a VP from Rothschild, but that's about it."