FOCUS: FINANCIAL PR - Shopping on the London market/With the election over, financial PR consultancies are preparing for a busy season as companies hungry for acquisitions can now safely loosen their purse strings. Jackie Rodgers reports

Despite a slowdown in transaction work in the first quarter of 1997, financial PR firms say there were no casualties and are already gearing up for what they predict will be an extremely busy second half in deal terms.

Despite a slowdown in transaction work in the first quarter of

1997, financial PR firms say there were no casualties and are already

gearing up for what they predict will be an extremely busy second half

in deal terms.



Pre-election jitters were the main cause of the interruption to deal

flow in the first quarter of 1997. Robert Swannell, head of UK corporate

finance at Shroders, says that activity in the M&A and takeovers market

bottomed out ahead of the election partially because of political

concerns, but company strategy also played a role.



’The mergers and acquisitions market was particularly busy last year,

perhaps fuelled by fears of what a Labour Government might bring with

it,’ he says. ’But the decline this year wasn’t necessarily down to

company financial engineering ahead of the election. Simple industrial

strategy was also a key factor.’



Deals in the flotation market also petered out, a fact substantiated by

a recently released survey by KPMG Corporate Finance which shows that

money raised on the main market fell to just pounds 246 million in the

first three months of this year, compared to pounds 2.025 billion raised

in the final three months of 1996.



On paper, the evidence points to less transactional business. However,

financial PR practitioners say the high profile nature of those deals

that did materialise more than compensated for any slackening of

activity.



Deals such as the pounds 1.3 billion Williams Holdings merger with Chubb

Security, Associated British Foods unloading of its Irish supermarket

chain on Tesco for pounds 630 million and Abbey National’s pounds 1.4

billion takeover bid for Scottish Amicable were just some of the sexier

transactions that demanded the media skills of the City’s financial PR

community.



In addition to this, financial PR companies have a substantial bedrock

of retained work which may also be considered the ’bread and butter’

money for many houses.



Andrew Cornelius, director of Dewe Rogerson, concedes that first quarter

transactional volumes have been slightly lower than preceding

periods.



However, he argues that the decline in contested bids this year may have

created the illusion that there had been less activity.



’At least three-quarters of the deals that came on line this year were

agreed bids, which made them less intensive,’ he says. ’We worked on the

Cook defence which was one of the few contested transactions to

emerge.’



Electra Fleming successfully took the quoted steel castings William Cook

private in a white-knight deal that came in the face of a pounds 72.8

million hostile bid from Triplex Lloyd late last year. The deal was

concluded in February 1997.



For its part, Dewe Rogerson had what one consultant described as ’a

semi-educational’ role to play. But the sensitive nature of proceedings

meant that they had to be prepared for all eventualities.



Anthony Cardew, director of Cardew and Co, agrees with Cornelius that

transactional volumes dipped slightly but says that Cardew and Co was

involved in a lot of demerger work which made up for losses

elsewhere.



He expects this to continue into the next year and is already working on

two demergers for the next quarter.



Besides this demerger activity, Cardew says that other transactional

business, including M&A and flotation work, is already heating up now

that the election is out of the way. He’s anticipating ’a huge

resurgence’ of work in these areas.



Interestingly, the Boards of Grand Metropolitan and Guinness announced

that they had agreed the terms of a proposed merger of the two

companies, to create GMG Brands, less than two weeks after the election.

A spokesman for Grand Metropolitan said the 1 May election had no

influence on the announcement as talks had begun at the beginning of

April.



Whatever the reason, more new transactions came hot on its heels.

Citigate Communications managing director Jonathan Clare says that there

has already been a big upturn in business, which he partly attributes to

the more stable political climate but also, as Shroders’ Swannell says,

to ’company strategy’.



Clare says that he is already seeing a lot of interest from companies

seeking to float later in 1997, prompted by expansion plans which

require capital and the high valuation of the market.



’We are now pitching for four medium-sized companies that are

considering flotations and we are already working on a defence project,’

he says.



Citigate Communications’ recent appointment by Nasdaq, the world’s

second biggest stock market, to increase awareness of its facilities

among UK financial institutions and companies moving to market, is clear

evidence of the recognised investment potential here, says Clare.



Alex Mackey, director of Ludgate Communications, is also confident that

there will be a wave of new transactional business in the second

half.



After a brief hiatus following the general election, he also says that

activity is already picking up again, driven by the current high

liquidity of the market.



Initially, Mackey says that the large building society flotations and

demutualisations will provide a large catchment area of work for the

financial PR sector. Halifax floated earlier this month and the Woolwich

intends to seek a listing in July.



Beyond the financial institutions work he says there are early

indications of heavy consolidation in the UK retail, sports and media

sectors.



’There are disposals, acquisitions, flotations and general restructuring

in these sectors that will provide a lot of work for the industry,’ he

says. ’Sports Division is considering a flotation, Sears is involved in

some restructuring and in the media we just have to look at Capital’s

proposed acquistion of Virgin Radio as an indication of things to

come.’



Given the complex nature of all this pipeline work, it is rarely tied to

a rigid timetable. Tony Friend, managing director of Ludgate

Communications, describes it as a ’moveable feast’ with potential to hit

the market in either the third or fourth quarters.



Although the UK will provide a hefty portion of that feast, he adds that

a number of European and International companies will be seeking to

access the London market and will need to draw on the expertise of

existing local financial PR consultancies.



’When you think of a Deutsche Telecom client, the need for an

international perspective becomes immediately transparent,’ he says.

’Financial PR consultancies will need a more global outlook to compete

for this international business.’



Colin Trusler, managing director of Shandwick, also says that he is

expecting more transactional work from the European and international

business communities, especially as they realise ’the merits of

Anglo-Saxon capitalism’.



’Europe is becoming a great centre for cross-border capital raising,

which is where we will be expecting to generate a lot of business,’ he

says. ’London won’t be as active ... there’s a change in the tone of the

financial markets here.’



In addition to developing a wider geographic presence to facilitate this

growth area, Trusler says that part of the new skills brief will be

gaining a thorough knowledge of the mechanics of the capital markets

outside London, in order to deliver the same standard of service.



Julian Hanson-Smith, managing director of Financial Dynamics, agrees and

says that the propensity for international companies to look to London

for financial PR support is set to accelerate, given the recognised

professionalism of the financial PR sector.



’London is known as a centre for communication excellence. We have a

talent for marshalling the argument and telling the story, which when

well crafted can by definition translate to a huge base both in the UK

and outside of the market place,’ he says.



POWER GAMES: PRIVATISING REGIONAL ELECTRICITY COMPANIES



American Electric Power Co Inc and Public Service Company of Colorado’s

agreed takeover of the UK’s Yorkshire Electricity illustrates clearly

the high profile nature of the type of merger and acquisition deals that

surfaced in the first quarter.



The much publicised pounds 1.5 billion deal pulled on the pool of

resources offered by financial PR units, Ludgate Communications and

Financial Dynamics, which handled the interests of Yorkshire Electricity

and the American duo respectively, but still worked in close quarter

with each other.



The acquisition of one of Britain’s last independent regional

electricity companies to create trans-Atlantic synergies in power

supply, technology and generation demanded strong media management

skills at all levels.



Of the regional electrics companies already taken over, Northern, East

Midlands, South Western, London, Seeboard and Midlands had been bought

by American companies so worries about job losses surfaced again.



For its part, Ludgate Communications had to manage the media at a local

and national level. On the former it had to present a convincing

argument on the benefits accrued for Yorkshire and the neighbouring

regions from the more advanced US power services, according to Alex

Mackey, director of Ludgate Communications.



Emphasising the additional resources that the American companies could

bring to the party was the thrust of the national campaign that was

ultimately targeted at both companies’ investors.



’We had to make analysts and the financial media aware of benefits for

both sides and of the economic advantages in particular for Yorkshire

Electricity,’ says Mackey.



Added to the equation was the way-ahead-at-the-polls-Labour Party, that

had been extremely vocal about its planned windfall tax on the

privatised utilities. Given the then proximity of the UK election, the

issue became even more sensitive.



The media brief expanded. In the UK context, shareholders had to be

assured that the US companies could shoulder any potential windfall

taxes while US shareholders had to be equally convinced of the benefits

of the union.



Financial Dynamics worked for the US side on a project basis and had to

address the fears in the market place about what was perceived as a US

predator without commitment to the UK market.



The deal went unconditional in February backed by the seasoned media

skills of Ludgate Communications and Financial Dynamics.



AVIS FLOAT: PUTTING FD IN THE DRIVING SEAT



Car hire company Avis Europe, which floated on the London stock exchange

back in April, highlights the growing trend of European companies to

recruit London’s financial PR skills.



Belgian car importer D’Ieteran, which has a majority sharehold in Avis

Europe, decided on the listing back in February after a merger with its

former American parent AVIS was ruled out.



Financial Dynamics handled the PR side which chief executive Nick Miles

describes as an ’extremely complex campaign’, given the fact that this

was the company’s second flotation. It floated in 1986 under the then

parent US AVIS Inc, a venture that was not wholly successful.



Financial Dynamics consultant Nicola Marsden explains that a large part

of the campaign brief was to dissipate ’information baggage’ in the

market place.



’There was a barrage of criticism and negative sentiment that had to be

dealt with,’ she says. ’While AVIS has an effective PR machine we, as a

London consultancy, are more in touch with the press here and were able

to advise the company on the parameters within which it could talk.’



Julian Hanson-Smith, managing director of Financial Dynamics, adds that

a lot of the pre-float press campaign was to educate the media about the

car-hire industry.



’As Eurodollar (another floated car-rental company) was the only

comparative, there was a focus on that company’s poor performances and

the high risks connected with the business,’ he says.



Against this backdrop of media-hype, FD introduced a host of more

investor-friendly information. For instance, Euro airline passenger

volumes are growing rapidly which will ultimately trigger more car-hire

demand. On an environmental note, more people are being encouraged to

use trains for business travel and rent cars at the far end to complete

the journey.



And there’s the safety aspect where holiday makers take fewer risks

renting from an established car-rental unit.



The campaign was targeted towards the potential investor base. Its

success translated into a shares premium on the first day of trading on

the London Stock Exchange on 26 March. AVIS Europe began trading

unconditionally on April 4.



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