FOR those both inside and outside the City, the Takeover Panel is a mysterious organisation – a cross between a classic Quango, the Masons, and the Spanish Inquisition.
There are some who think it is a fine body and a much superior system to the chaos and litigation prevalent during bid battles in many other countries. However, some who have dealings with the Panel find its rules arcane and its pronouncements obscure and unpredictable. It operates free from public scrutiny, able to invent and waive rules as it sees fit, helping to decide the structure of British industry. Is it the best system to police public company amalgamations?
Technically the Takeover Panel is a non-statutory body but it can punish offenders by reporting breaches of its rules to various regulators including the Department of Trade and Industry and the Financial Services Authority. In practice this means most City players take its machinations very seriously since they can be driven out of business if they ignore the Panel. There are instances of overseas companies quoted in London but registered overseas to which the Takeover Code does not apply, but these situations are rare.
The bible the Panel administers is the City Code on Takeovers and Mergers. This is a complex manual which is too obscure to have an index or numbered pages. It is full of curious terms such as “Whitewash” and “Concert Party” which tend to have opaque meanings. It seems deliberately esoteric in order that only specialist advisers understand it. These people think nothing of charging thousands of pounds for simple interpretations of a few sentences.
The Panel executive is made up of lawyers, accountants and investment bankers, most of whom are on secondment from big City firms. They help manufacture work for their colleagues in professional firms in a delicious merry-go-round of fees for the Square Mile elite. At least, this is how the Panel’s decisions can appear on a bad day.
My experience has been that the Takeover Code is applied pretty rigidly to any British public company, no matter how small it is or even if it is completely unquoted. This means the whole rigmarole of expensive and time-consuming offer timetables has to be followed whether or not it is realistic given the size and resources of the company in question.
It would be a good idea for the Takeover Code to be substantially modified for unquoted public companies and smaller public companies. The cost and time taken to comply with it and its quirks can be extortionate for small companies or those in trouble.
Even though it purports to be independent, the Bank of England effectively runs the Takeover Panel. It is full of figures from the financial establishment such as Andrew Buxton, Sir Christopher Benson and Lord Stevenson. Of the 16 members, only two are from industry – the rest are investment bankers, lawyers, accountants and institutional investors.
The panel’s members are mostly chosen by Sir Eddie George and his chums. I think they should choose more members from industry and develop a more open selection process when assembling the panel. Ideally the panel should be totally separated from the Bank of England to give it true independence.
It is interesting to compare the Panel with the regulatory regimes in other countries. In the United States the Securities and Exchange Commission controls takeover activity among public companies. Tender offers there are drawn out and highly litigious compared with bid battles here. The situation is complicated by the existence of both state and federal laws governing corporate acquisitions.
Our Takeover Panel appears a far more flexible and simple organisation than all the paraphernalia in place in the US. In places such as France and Germany there is no independent, experienced, non-governmental body which makes sure shareholders are treated fairly during takeovers. It means takeovers there are fraught with tactical litigation and political interference.
Indeed, if one compares the workings of the Takeover Panel with organisations such as the London Stock Exchange or the Office of Fair Trading, then it seems a low-cost, efficient outfit.
There has been vague talk that it should become a statutory entity, rather than a voluntary body. This would be a bad idea. It has been successfully supervising Britain’s public company takeover scene since 1968 and should be allowed to remain broadly as it is – with perhaps just a few tweaks to make it more user friendly and economic – just like a workable web site!
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