December 14, 2023

M&A Deal Leaks: Gender Diverse Target Boards Leak Less

This year, SS&C Intralinks’ annual deal leaks study looked at the impact of gender diversity on leaks. This excerpt from an interview with one of the authors from the University of London’s Bays Business School summarizes one of the more interesting findings:

One of the most striking findings of our analysis is that deals involving targets with greater gender diversity at the board level are associated with lower incidence of abnormal pre-announcement trading. This observation appears to be driven particularly by greater gender diversity at the executive (as opposed to non-executive) board member levels. We find that targets with more than 30 percent female executive board members experience approximately two percentage points lower incidence of leaks (8.6 percent vs. 6.7 percent).

It is important to note that optimal outcomes in terms of lowest incidence of M&A deal leaks are observed when the proportion of both executive and non-executive female board members are higher. We find that the incidence of deal leaks is as low as 3.2 percent for target firms where both female executive and female non-executive directors are above 30 percent.

This finding is very interesting because it relates to a concept that is referred to as critical mass in prior academic studies. This idea suggests that female directors can be more influential if they reach a certain level of ‘critical mass’ such as at least 30 percent female board members. Having one or two female directors who are treated as symbolic figures and elected to be BoD to account for their social category, is unlikely to result in positive outcomes. This is sometimes referred to as the token female director and, unsurprisingly, such low levels of gender diversity are unlikely to make a significant difference to corporate outcomes and this is supported by studies in this area. Women are able to add value once they reach a critical mass of three or more, for example.

The study also found that deal completion rates are the lowest and deal premiums highest for targets in leaked deals where both the proportion of female executive and non-executive directors is above 30%. The authors suggest that targets with greater female board representation may be less willing to accept leaked bids due to the potential market abuse and misconduct surrounding M&A leaks. In turn, that may motivate bidders to offer relatively higher premiums in order to persuade these target firms to accept an offer.

John Jenkins