The bear hug is an increasingly sensible way to play UK M&A

{"text":[[{"start":4.95,"text":"In the UK, the ideal takeover was traditionally one where agreement is reached behind closed doors, avoiding any public unpleasantness. There are a few of those still: Mitie shareholders heard nothing about a bid from rival outsourcer OCS until Tuesday, when the company’s directors recommended it unanimously. But more and more negotiations are being played out in public as would-be buyers seek to turn the screws on their targets. Breaking cultural norms looks increasingly worthwhile. "}],[{"start":38,"text":"Groups that have recently tried a more or less hostile route — broadly defined as a war of words without actually launching an unrecommended offer — include US real estate giant Prologis, which is attempting to buy Segro, US private capital firm Castlelake in its pursuit of easyJet and Swiss insurer Zurich for rival Beazley. The rough playbook involves the bidder setting out its stall in public and either pointing out the merits of its bid or — gasp — the flaws in its quarry’s defence. Prologis, for example, reckons that Segro’s view of its value rests on unrealistic assumptions and is aspirational. "}],[{"start":74.15,"text":"Why the slew of semi-hostile approaches? In a dislocated market where valuations are low and have been for some time, the board’s view of what a company should be holding out for may differ from that of some of its investors. Sometimes, the board is apparently willing to countenance a lower price: Irish energy group DCC said it was “minded to recommend” a £5.7bn offer that a number of its investors think is too low. But, by and large, it is the other way around. "}],[{"start":103.4,"text":"Boards poll their investors’ views through the particular British institution of the corporate broker, but they tend to base their target value on the company’s long-term fundamental value. Some shareholders, meanwhile, may prefer a bird in the hand to the company’s projections. Testing firm Intertek, for instance, came under pressure from activist investors to strike a deal with Swedish private equity firm EQT. "}],[{"start":130.20000000000002,"text":"How much support boards can count on as they mount their defences depends, of course, on the price they are being offered. But the composition of their shareholder register also plays a part. Unfortunately for UK boards, the presence of investors most likely to be aligned with their view — local long-term institutions such as pension funds and insurers — has been declining for years. "}],[{"start":null,"text":"

"}],[{"start":151.15,"text":"It is true, of course, that public and protracted takeover campaigns can be disruptive for the target, or even for the bidder. An exchange of unpleasant jibes, too, may harden negotiating stances. But to the extent that it exposes rifts between boards and shareholders, it is well worth coming across as less than genteel. "}],[{"start":178.5,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1784692213_5839.mp3"}