City & Corporate: Sunday secret to merger success

PR works on the same principle through the Sunday papers. An adroitly timed and planned release can capture coverage in the Sunday business sections to set the agenda and catch the target off guard. The opposition finds it hard to muster a coherent response in time. The attackers appear purposeful, while the defenders appear to be plodders.

Sir Peter Burt and Sir George Mathewson were the driving forces behind the Bank of Scotland and Royal Bank of Scotland respectively until the earlier part of this decade. Advised by Neil Bennett of Maitland (himself a distinguished former City editor of The Sunday Telegraph), they made public their intention to seek to derail the Lloyds TSB takeover of HBOS last weekend. Their initial charge, with pages of coverage and barely a word from the other side, must have succeeded beyond their wildest dreams.

The other trick of such attacks is not to overreach. Trying to grab too much is dangerous because it can lead to a collapse of credibility. Burt and Mathewson would have been much less effective if they had claimed they were going for a full takeover of HBOS. They set themselves a much more limited, but attainable, target of blocking the proposed deal and changing management. They need just 10 per cent of shareholders to call for an EGM to challenge management. They need the support of just 25 per cent to block the takeover at a meeting of HBOS shareholders on 13 December. Both those targets look intriguingly within reach.

Having been put so firmly on the defensive, the challenge for Lloyds TSB and HBOS is to know how to regain the initiative. Their early remarks seem designed to kindle fear by warning of the dire consequences if the merger does not go through. Negativity is a difficult sell but it may be the best they can do.

Anthony Hilton is City commentator on London's Evening Standard.