When he abandoned his takeover plan last week he was dismissed by one analyst as 'fit only for television'. So just what did he do to invite this scorn? Simply he pointed out to the investment community what fools they were, and asked them to be foolish once more for his benefit. Instead, not altogether surprisingly, they turned on him.
Robinson proposed a deal whereby he would be installed as chairman and hire a new team to run Rentokil. Raphoe, the private vehicle he substantially owned, would get around £70m if he improved the fortunes of Rentokil in the next few years and around £30m if he failed. The benefit to shareholders would be that if his plan worked their shares would increase substantially in value.
The reason he might have thought the deal would be acceptable is that shareholders agree to similar financial engineering every time they accept a bid from a private equity house for a company they own. Indeed, the rewards Robinson was claiming were modest compared with those a private equity house typically takes – and he has noted that the institutional shareholders never complain about that. The difference, significantly, is that the private equity house buys the shareholders out at a small premium on the market price so they secure a small profit up front.
Robinson was trying to persuade them to forgo this small profit in return for the chance, but not the guarantee, of a much larger profit later on.
Shareholders say they rejected the deal because they did not trust Robinson to deliver. That was probably part of it. But the main concern was that he made utterly transparent the amount of value these professional investors give away in private equity bids, and he embarrassed them by asking them to do it again in full public view.
They could not bring themselves to do this. His PR mistake was not understanding human nature.