How your rival can make you millions

In contested deal situations over the past seven years, rival bidders typically pay an average 18.9pc more than an already existing deal scenario, according to Mergermarket figures.

Unsolicited takeovers, which end up in a board recommendation typically require a premium of around 21pc in order to win over a board.

Typically, a company’s share price is already inflated by takeover speculation when it publicly enters talks with one party. However, a rival bidder can substantially increase it and offer a lift.

One trader said the entrance of a counterbidder was "a sure-fire way to make money". This is because provided the original deal does not collapse, a target company's share price can only increase as a rival bidder has to punch above what has already been agreed..

In the UK, recent rule changes mean that a target company cannot be bound to sticking with a deal just because of a break fee, which would penalise it if it called the deal off in favour of a third party. This means that the door is always left ajar for another bidder to appear on the scene and potentially blow a deal out of the water.

The market was stunned earlier this month by a rival Brazilian bidder threatening the $1bn banana merger between US group Chiquita and Irish fruit producer Fyffes.

Just two days earlier, London-listed Hyder Consulting announced it was switching to a better £268m deal with Nippon Koei after the Japanese interloper trumped a previously agreed deal with Dutch group Arcadis. Once details of Nippon’s interest emerged, Hyder’s shares jumped by almost 10pc.

Meanwhile, Glencore gatecrashed Caracal Energy’s agreed merger with TransGlobe in April after offering £807m in cash for the London-listed natural resources company.

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