Their shares are mopped up for the most part by hedge funds buying for the duration of the bid and hoping with their collective muscle to squeeze more out of the buyer than the latter had hoped to pay.
Retail investors – the individuals with direct shareholdings in a company – rarely count for much except in smaller companies, or in a few exceptional large ones such as Sainsbury’s, where they are family and have a large holding.
One would have thought there would be a diminishing role for PR, on the basis that hedge funds are perfectly capable of making up their own minds and pride themselves on the independence and objectivity of their judgments.
But, if anything, the opposite is proving to be the case. The ABN Amro fight was conducted in huge part through the media. The pace and tone of the battle for Sainsbury’s likewise. In the case of the still-running battle in the life assurance sector for Resolution between Friends Provident, Standard Life and Pearl, it is the third bidder Pearl that has controlled the debate and framed the terms by which each bid should be judged.
But today’s PR is quite different. Takeover PR used to be about promoting the merits of the specific client’s offer in terms of the closeness of the business fit, the talents of the incoming management and the future prospects of the combined business. But hedge fund investors’ only concern is price.
So PR has changed focus – not so much promoting its own client’s vision but seeking to undermine the credibility of rival bidders. Thus the opposition’s management is undermined, and the integration risk to the opposing business is emphasised. The intention is that the opposition’s own shareholders will lose their stomach for the fight and make it impossible for the management to pay the price needed to secure victory – which is what happened with Barclay’s and probably will with Friends Provident and Standard Life.