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In the July 28 WSJ, an article asks whether larger deals (particularly those involving hedge funds and private equity groups) are more prone to leaks: As the boom in corporate takeovers continues, unusual trading in obscure investments or via offshore accounts is raising concerns about insider trading. Suspicious trading patterns -- including increased activity and well-timed bets -- have cropped up in several companies' securities in advance of news of their involvement in big transactions, suggesting Wall Street's deal-making machine may be leaking confidential information. The list includes deals both mammoth and modest: the just-announced $21 billion leveraged buyout of hospital operator HCA Inc.; the $1.7 billion buyout of Petco Animal Supplies Inc.; the $2.6 billion sale of Maverick Tube Corp. to Tenaris SA; and Anadarko Petroleum Corp.'s $21 billion offer for both Kerr-McGee Corp. and Western Gas Resources Inc. Some of the trading is in a corner of the financial markets that hardly existed during past takeover waves, which featured questionable trades mainly in plain-vanilla stocks, bonds and options. In advance of the HCA deal, there was a notable uptick in trading in financial contracts tied to HCA's bonds -- derivatives known as credit-default swaps. Read the whole thing here (online subscription required). It seems plausible that there could be an increase in "leakage"for larger deals. Bigger transactions are more likely to be done by (big surprise here) consortiums with larger numbers of firms. In addition, deals are taking longer to be consummated, which also increases the likelihood of leaks. It might make for an interesting study to see if there's more stock price runup, spikes in trading volume, or abnormal options-related activity surrounding deals with a greater number of players and/or private equity/hedge fund involvement.

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