CAMPAIGNS: JUDGE AND JURY; Takeover bids for South West Water go down the plughole

Despite getting off to a flying start, Wessex Water and Severn Trent both fell at the regulatory hurdles, says Rory Chisholm, director of GJW Government Relations

Despite getting off to a flying start, Wessex Water and Severn Trent

both fell at the regulatory hurdles, says Rory Chisholm, director of GJW

Government Relations



The Government decision to block both the rival bids for South West

Water took everyone by suprise. Like a sort of OK Corral in reverse, the

one left standing as the gun-smoke cleared turned out to be the weedy

and unpopular South West Water, as the tough guys from Wessex and Severn

Trent hit the dirt. What went wrong?



Both bidders got off to a good start, with the press accepting claims

that they could improve on South West’s hitherto dismal performance.

However this, and the success of other utility bids, seems to have made

them complacent, underestimating how different water is from other

utilities both in regulatory and political terms.



Putting the interests of the City, the press or politicians first can be

counter-productive with the regulators. The strategy of both bidders

seems to have been confused here. Claims that the Government wanted the

bids to succeed, far from inhibiting the regulator, seem instead to have

made him determined to assert his independence by taking a tough line.

Reports stressing the bidders’ unwillingness to be pushed into large-

scale price cuts, backed up by threats to walk away, may have impressed

the City and politicians, but also fed the MMC’s belief that neither

bidder could afford the price cuts required to outweigh the loss of a

comparator. Last minute press speculation only irritated the DTI, thus

disproving the myth that predicting a clearance somehow makes it more

likely.



Lobbying on mergers is restricted by procedural limitations, but both

bidders did well, persuading most (although not all) local MPs that a

regional company’s independence was not worth fighting for. Briefings

were well-organised - if undermined in Wessex’s case by a reluctance to

be specific in terms of benefits to constituents.



Yet ultimately such briefings counted for little against the MMC. This

shows how mistaken it is for bidders to keep their PR/lobbying and legal

advisers apart. Insiders on both teams complain they were not informed

how things were going with the MMC - and were therefore unaware of the

effort needed to convince Ian Lang.



South West’s team emerges best, doing well to organise political, and

even consumer, support. As one MP says: ‘The threat of takeover has done

wonders for South West’s performance. I just hope they keep it up.’



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