April 24, 2023
The Usual Takeover Defenses Were Less Common in 2022 IPOs
In its 2023 M&A Report, WilmerHale recently reported on some pretty unusual trends in adoption rates of common takeover defenses by newly public companies in 2022. Here are some stats, which appear even more unusual in the charts included in the report since they show the consistency in adoption of these takeover defenses in earlier years:
– Classified board – adopted by 83% of IPO companies in 2021 and 46% in 2022
– Supermajority voting for mergers and changes to org documents – adopted by 81% of IPO companies in 2021 and 54% in 2022
– Prohibition on stockholder written consents – adopted by 90% of IPO companies in 2021 and 46% in 2022
– Limitation on stockholder rights to call special meetings – adopted by 95% of IPO companies in 2021 and 76% in 2022
What do they attribute this to? The rough IPO market. Here’s an excerpt:
Despite the decline in takeover defenses among established public companies, most IPO companies continue to implement anti-takeover provisions (understanding that such measures may in the future need to be dismantled). In 2022, however, adoption rates by IPO companies for many takeover defenses declined markedly from historical norms, likely due in part to the unusual characteristics of the IPO market that year—deal flow fell by more than two-thirds compared to the preceding three years; offering sizes were much smaller, and IPO companies had far less annual revenue.
If the depressed IPO market is creating these anomalies, they may continue into 2023. John recently blogged that it’s not looking up for IPOs.
– Meredith Ervine