Takeover Panel ready to review mergers and acquisitions process

The Takeover Panel today began its long awaited consultation on the rules that guide Britain's mergers and acquisitions. The review follows the $17bn takeover of Cadbury, by Kraft, which was criticised by former business secretary Peter Mandelson for being pushed by parties who only focused on short-term gains. The review will study whether the need to have "50% plus one" minimum acceptance condition threshold for a takeover should be raised, and whether bidding companies should be required to give more information about the takeover's financing plans, as well as their potential impact, the Takeover Panel said. The consultation was not about "economic nationalism," said Vince Cable, the new business secretary, who launched the review. "We welcome foreign investors but we want all shareholders to be empowered, the takeover process to be more transparent, directors to think about their wider long-term legal duties, and takeovers to be decided on the basis of long-term shareholder value rather than short-term speculation," Cable said. The watchdog is also seeking opinions on whether "success fees" should be restricted or details of the fees payable to advisers should be disclosed. Critics have questioned the role played by mergers and acquisitions bankers, who pitch for deals to companies, as they receive in fees a percentage of the value of the transaction – a sum that can reach millions of pounds in the biggest takeovers. Research has often indicated that mergers do not deliver the expected results. In 2007, a study by the Hay Group and the Sorbonne found that more than 90% of mergers in Europe failed to reach financial goals. Failed deals include the purchase by German carmaker Daimler of US auto company Chrysler, which went bust. In 2007, the Royal Bank of Scotland and European banks Fortis and Santander bought Dutch bank ABN Amro, in what became the biggest banking takeover in history. The move later pushed RBS into huge losses, derived from the ABN Amro loan books and toxic asset holdings. British Airways and Spain's Iberia airline have been working on a merger for months but it is still to be executed. The Takeover Panel will also re-examine the "put up or shut up" regime, whereby a bidder is forced to either put in the bid or walk away after it has announced an intention to acquire a company but without having committed to it.