There was a lot of talk about takeover reform during and after the Cadbury takeover by Kraft in 2010.
Those of you with long memories will recall the current Lib Dem leader Vince Cable was pretty outspoken, for example, in criticising the impact of big businesses in acting for short-term gain.
Afterwards, while as Business Secretary, Mr Cable launched a consultation into corporate governance and economic short-termism but, critically, no reform of policy then followed to offer better protection for UK firms in hostile takeover situations after the City lobbied for no change.
The City’s Takeover Panel in particular rejected any fundamental changes to the takeover regime.
Related: Labour would block hostile takeovers of firms such as GKN and Cadbury, says Jeremy Corbyn
Of course, that came as no surprise.
As I’ve noted before here on the Birmingham Post, the panel is in fact made of up City of London takeover specialists (accountants, bankers, lawyers) in a form of self-regulation of the industry.
It’s the same bankers, lawyers and accountants who make huge fees from keeping the M&A merry-go-round so active (some £140 million just on the Melrose side of the current attempted takeover).
It’s no wonder such people don’t want to kill the golden goose that lays their bonus eggs.
Perhaps, as someone once suggested, we need a “takeover of the takeover panel”. Indeed, reforming the takeover panel might be one part of a wider set of reforms.
Recall that the takeover panel rejected radical proposals first mooted by former Cadbury chairman Roger Carr that would have (i) increased the acceptance threshold for acquisitions and (ii) disenfranchised shares held by short-term investors like hedge funds which piled into Cadbury shares so as to sell them on and make a fast buck.
Instead, after Cadbury, all that actually happened was the panel made a few tweaks, such as in making it easier to find out how much cash the City stacks up during takeover battles (in the Kraft/Cadbury case the fees stacked up by the army of advisers on both sides could have topped $400 million to $500 million).
The Takeover Panel’s tweaks were in fact a clever PR effort by a City which feared that genuine legislative change could throw a spanner in the works of the hugely profitable takeover industry.
To be fair to the Takeover Panel, only our politicians can look at the wider public interest and do something to promote longer-term economic development.
On that, politicians might note the key fact here: most mega takeovers fail.
They fail to lead to improved performance after takeover and fail to deliver returns to shareholders of the acquiring firm.
We still need legislation to slow the takeover process down, maybe to give other stakeholders than just shareholders a say, and to promote longer-term thinking.
And, to repeat a point I’ve made frequently, other countries do intervene on a much greater scale than in the UK.
For example, takeovers in France can be frustrated by a government that intervenes to protect what it sees as ‘strategic’ industries.
Even in the US, a special ‘Committee on Foreign Investment in the US’ (CFIUS) vets foreign takeovers in high tech and strategically sensitive areas.
It has generally taken a liberal stance but has intervened in a few cases to restructure bids and can even block deals it finds against the national interest.
And the Canadian government is quite prepared to step in to prevent takeovers not deemed in the national interest.
A few years ago, a proposed takeover by BHP Billiton of a Canadian mining firm, the Potash Corporation, was stopped, with the Canadian industry minister stating he was unconvinced a BHP Billiton takeover would create a “significant net improvement in the level and nature of economic activity”.
By contrast, the UK Government has no power to intervene, except on narrow competition grounds.
I would argue for the restoration of a ‘public interest’ element to takeover policy so that if need be the UK government has the same sort of policy instruments available as in Canada.
But even those against outright government intervention might note that takeovers – especially hostile ones – are anyway often more difficult in other countries.
In the US, firms can use ‘poison pill’ defences to resist corporate raiders while in Germany the key threshold for gaining control is 75 per cent, not 50.1 per cent as here in the UK.
So, even without direct government intervention, takeovers are more difficult anyway because of different institutional arrangements.
This is something I’ve been banging on about for years.
But in the past, when making the case, I’ve usually been up against outright free marketeers eager to defend the position of the City of London to broker such deals and earn fat fees.
But I suspect that Cadbury changed things.
With the GKN case, we’re now seeing politicians from across parties, led by Birmingham MPs Richard Burden and Jack Dromey, pointing out that wider reform is needed.
They are saying even the very narrowly defined ‘public interest’ test in the 2002 Enterprise Act can be used in this case on national security grounds, given GKN’s military aerospace activities.
Cross party co-operation could open up a wider debate about how far a ‘public interest’ test in government policy should go.
Add in raising the bar in takeover situations and only allowing longer-term shareholders to have a say, and we could give firms like GKN a much better chance of fending off speculative bids like the Melrose attack right now.
That, at least, would be a welcome and much-needed change.
Professor David Bailey works at the Aston Business School in Birmingham