Elon Musk's Twitter Mess Would Never Happen in the UK
The UK takeover regime isn't kind to private equity buyers. It got even tougher after Kraft Foods Inc.'s bitter acquisition of rival confectioner Cadbury in 2010. But are its rules too restrictive?
If the leveraged finance market bounces back, UK stocks should be a prime hunting ground for the private equity industry. Yet local M&A rules are often seen as a brake.
Blair Jacobson, co-head of European credit at Ares Management, told a Financial Times summit last week that “everything in the UK is on sale” and weak sterling was an advantage for US dollar-denominated funds. At the same time, he cautioned that negotiating the takeover regulator's requirements could be difficult.
It's a common observation from the buyout industry. UK transactions are governed by a 433-page “code” that is enforced by the Takeover Panel. The slightest whiff of a possible bid, and the regulator forces the putative buyer to clarify their interest. After the disruptive four-month siege of Cadbury, a rule was introduced requiring bidders to formalize any offer within 28 days, unless the takeover target is happy with an extension.
Above all, acquirers must have guaranteed funds — vouched for by their advisers — before making a formal offer.
A corporate buyer with ready cash, supportive banking relationships and the option of paying for a takeover using its shares won't be too phased by all this. But the rubric is a challenge for private equity given its reliance on hefty amounts of debt. If a deal leaks, the clock starts ticking and there's not much time to finish kicking the tires and secure funding. The argument, then, is that the rules make buyout firms steer clear of riskier transactions to avoid the possibility of being seen to try and
Read more on tech.hindustantimes.com
