News Analysis: Now it's personal in M&S showdown

As Philip Green mulls a hostile bid for retail icon Marks & Spencer, Thomas Williams investigates the role that PR is likely to play in the psychological battle to win over both corporate and individual shareholders.

Philip Green's announcement last week of his intention to buy Marks & Spencer was a carefully planned affair.

Finsbury co-founder Rupert Younger had been working with Green for at least two weeks prior to the move, and the billionaire owner of Arcadia's statement was only issued after market speculation began to move M&S shares significantly north.

But as carefully orchestrated as Green's offer was, neither he nor Younger could have foreseen how M&S's surprise appointment of Stuart Rose as chief executive and Paul Myners as chairman would trump the move.

'The fact that Rose can immediately drop Brunswick and bring in Tulchan Communications in a situation like this shows that Rose is pretty confident,' says M Communications co-founder Nick Miles.

Sure enough, M&S dismissed Green's first offer out of hand, stating that it 'significantly undervalues the group and its prospects'. PR and the appearance of confidence and competence could be just as important in the battle for M&S as hard financial data.

In the battle for M&S, as in all takeover battles, the conflict will be fought over a surprisingly small number of hearts and minds. According to Thomson Financial, just 30 investment institutions hold more than 45 per cent of the FTSE 100 constituents' stock.

But despite this concentrated focus, the more controversial the takeover battle, the more the struggle has to be framed in a wider context.

In its 1999 £3.3bn bid for hotel chain Forte, for example, Granada succeeded in portraying Forte's management as out of touch and out of date. The fact that Forte chief executive Sir Rocco Forte was away shooting grouse in Yorkshire the morning Granada CEO Gerry Robinson phoned to reveal his intentions did not help Forte's defence in investors' minds.

Similarly robust PR in defence of ICI against Hanson's 1991 bid for the chemical company led the Financial Times to conclude that Hanson bosses were 'now past normal retirement age and appear to have done little to groom successors. In these circumstances, there must inevitably be doubts about the group's medium-term direction and stability.'

Wall House Consulting managing partner Rupert Ashe says that similar PR tactics could be open to M&S in its defence. ' If M&S can spin it that Green is not the sort of person who should be running the company or that adding M&S to his portfolio would give him disproportionate power in the high street, the company's management could well win through,' he says.

And the audience for such a strategy would go beyond the Competition Commission, Takeover Panel or even M&S's shareholders.

Since M&S - along with the likes of Safeway and ITV - is a famous brand with thousands of employees, it is likely to have more than the usual number of private individual shareholders.

So an appeal to the emotions not shared typically by the cold and objective City could be seen to be a more effective approach.

As Catullus Consulting founder Alex Mackey puts it: 'M&S is an antique brand that creates a lot of emotion. The last thing that Green would want is to buy a business where 95 per cent of staff are against him.'

Therein lies the importance that PR will play in deciding the future of M&S. Shareholders will make the final decision on the fundamentals of the company's balance sheet and the hard figures of what Green is proposing. But how that proposal and the M&S response to it is made could count for everything.

'I don't think PR is a substitute for a good story,' says one senior banker who prefers not to be named. 'But PR could be a major factor in this battle as it could boil down to a good story that is not communicated well.'

PRESENTING THE EVIDENCE

JONATHAN CLARE, CHIEF EXECUTIVE OF CITIGATE DEWE ROGERSON

Acted for Morrisons on its takeover of Safeway and Granada on its hostile bid for Forte.

'What can be done and said during a takeover is structured by regulations governed by the Takeover Panel and the London Stock Exchange. Both sides will be dealing with information already in the public domain.

'It is a hearts and minds campaign where you have to convince shareholders that their best interests are served by having your client in charge.

'The media per se may not influence the City but shareholders do take note of what is said in the Financial Times Lex column or The Sunday Times.

'Numbers are important and a cash offer is always going to be attractive, but if shareholders are offered shares, it comes down to the quality of the management.

'It is also important to present the offer as realistic. The message that Morrisons' takeover of Safeway would create a fourth force in the supermarket sector underpinned much of the case made to the Takeover Panel.'

NICK MILES, CO-FOUNDER OF M COMMUNICATIONS

Advised Vodafone on its £103bn takeover of Mannesmann, the biggest in history 'PR and the media can be both very good and very bad for morale in this situation.

'If you produce an offer document which you and your PR adviser believe will play well and which is then trashed, not only does it show that your PR was bad, it means that your judgement was bad, and that is demoralising.

'If the media reviles a presentation to which investors respond well, the reaction will have an impact on the City's decision.

'PR can also be used to demoralise or mislead the opponent, which is trying to work out what the bidder will do next.

'But while there is a place for an offensive strategy, that is not always the right thing to do, as Chris Gent (then chief executive of Vodafone) decided with the bid for Mannesmann.

'Nobody could fail to spot an Englishman in Germany on a mission to explain why the bid would be good, while institutional shareholders came to see Mannesmann as about saying no.'

RUPERT ASHE, MANAGING PARTNER OF WALL HOUSE CONSULTING AND FORMER CHAIRMAN OF GCI FINANCIAL

'It is during a hostile takeover that PR is at its most effective as shareholders are trying to make a future judgement.

'If Stuart Rose can convince shareholders that he can deliver them better value he will save Marks & Spencer. But there is no hard evidence for him to call on that will show he can actually give them that better value.

'PR is probably less important in a situation where the company has given itself up for sale and it is simply a question of who is prepared to pay the most cash.

'In the case of Philip Green's offer to M&S shareholders, it is all down to the analysts and the company's main shareholders who will have to decide whether to take back some of their money now and leave the rest with Green.

'If they agree to the takeover in a year's time, they will either make a lot of money or, if the shares fall back to £2.50, look pretty silly.'

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