Despite a slowdown in transaction work in the first quarter of
1997, financial PR firms say there were no casualties and are already
gearing up for what they predict will be an extremely busy second half
in deal terms.
Pre-election jitters were the main cause of the interruption to deal
flow in the first quarter of 1997. Robert Swannell, head of UK corporate
finance at Shroders, says that activity in the M&A and takeovers market
bottomed out ahead of the election partially because of political
concerns, but company strategy also played a role.
’The mergers and acquisitions market was particularly busy last year,
perhaps fuelled by fears of what a Labour Government might bring with
it,’ he says. ’But the decline this year wasn’t necessarily down to
company financial engineering ahead of the election. Simple industrial
strategy was also a key factor.’
Deals in the flotation market also petered out, a fact substantiated by
a recently released survey by KPMG Corporate Finance which shows that
money raised on the main market fell to just pounds 246 million in the
first three months of this year, compared to pounds 2.025 billion raised
in the final three months of 1996.
On paper, the evidence points to less transactional business. However,
financial PR practitioners say the high profile nature of those deals
that did materialise more than compensated for any slackening of
Deals such as the pounds 1.3 billion Williams Holdings merger with Chubb
Security, Associated British Foods unloading of its Irish supermarket
chain on Tesco for pounds 630 million and Abbey National’s pounds 1.4
billion takeover bid for Scottish Amicable were just some of the sexier
transactions that demanded the media skills of the City’s financial PR
In addition to this, financial PR companies have a substantial bedrock
of retained work which may also be considered the ’bread and butter’
money for many houses.
Andrew Cornelius, director of Dewe Rogerson, concedes that first quarter
transactional volumes have been slightly lower than preceding
However, he argues that the decline in contested bids this year may have
created the illusion that there had been less activity.
’At least three-quarters of the deals that came on line this year were
agreed bids, which made them less intensive,’ he says. ’We worked on the
Cook defence which was one of the few contested transactions to
Electra Fleming successfully took the quoted steel castings William Cook
private in a white-knight deal that came in the face of a pounds 72.8
million hostile bid from Triplex Lloyd late last year. The deal was
concluded in February 1997.
For its part, Dewe Rogerson had what one consultant described as ’a
semi-educational’ role to play. But the sensitive nature of proceedings
meant that they had to be prepared for all eventualities.
Anthony Cardew, director of Cardew and Co, agrees with Cornelius that
transactional volumes dipped slightly but says that Cardew and Co was
involved in a lot of demerger work which made up for losses
He expects this to continue into the next year and is already working on
two demergers for the next quarter.
Besides this demerger activity, Cardew says that other transactional
business, including M&A and flotation work, is already heating up now
that the election is out of the way. He’s anticipating ’a huge
resurgence’ of work in these areas.
Interestingly, the Boards of Grand Metropolitan and Guinness announced
that they had agreed the terms of a proposed merger of the two
companies, to create GMG Brands, less than two weeks after the election.
A spokesman for Grand Metropolitan said the 1 May election had no
influence on the announcement as talks had begun at the beginning of
Whatever the reason, more new transactions came hot on its heels.
Citigate Communications managing director Jonathan Clare says that there
has already been a big upturn in business, which he partly attributes to
the more stable political climate but also, as Shroders’ Swannell says,
to ’company strategy’.
Clare says that he is already seeing a lot of interest from companies
seeking to float later in 1997, prompted by expansion plans which
require capital and the high valuation of the market.
’We are now pitching for four medium-sized companies that are
considering flotations and we are already working on a defence project,’
Citigate Communications’ recent appointment by Nasdaq, the world’s
second biggest stock market, to increase awareness of its facilities
among UK financial institutions and companies moving to market, is clear
evidence of the recognised investment potential here, says Clare.
Alex Mackey, director of Ludgate Communications, is also confident that
there will be a wave of new transactional business in the second
After a brief hiatus following the general election, he also says that
activity is already picking up again, driven by the current high
liquidity of the market.
Initially, Mackey says that the large building society flotations and
demutualisations will provide a large catchment area of work for the
financial PR sector. Halifax floated earlier this month and the Woolwich
intends to seek a listing in July.
Beyond the financial institutions work he says there are early
indications of heavy consolidation in the UK retail, sports and media
’There are disposals, acquisitions, flotations and general restructuring
in these sectors that will provide a lot of work for the industry,’ he
says. ’Sports Division is considering a flotation, Sears is involved in
some restructuring and in the media we just have to look at Capital’s
proposed acquistion of Virgin Radio as an indication of things to
Given the complex nature of all this pipeline work, it is rarely tied to
a rigid timetable. Tony Friend, managing director of Ludgate
Communications, describes it as a ’moveable feast’ with potential to hit
the market in either the third or fourth quarters.
Although the UK will provide a hefty portion of that feast, he adds that
a number of European and International companies will be seeking to
access the London market and will need to draw on the expertise of
existing local financial PR consultancies.
’When you think of a Deutsche Telecom client, the need for an
international perspective becomes immediately transparent,’ he says.
’Financial PR consultancies will need a more global outlook to compete
for this international business.’
Colin Trusler, managing director of Shandwick, also says that he is
expecting more transactional work from the European and international
business communities, especially as they realise ’the merits of
’Europe is becoming a great centre for cross-border capital raising,
which is where we will be expecting to generate a lot of business,’ he
says. ’London won’t be as active ... there’s a change in the tone of the
financial markets here.’
In addition to developing a wider geographic presence to facilitate this
growth area, Trusler says that part of the new skills brief will be
gaining a thorough knowledge of the mechanics of the capital markets
outside London, in order to deliver the same standard of service.
Julian Hanson-Smith, managing director of Financial Dynamics, agrees and
says that the propensity for international companies to look to London
for financial PR support is set to accelerate, given the recognised
professionalism of the financial PR sector.
’London is known as a centre for communication excellence. We have a
talent for marshalling the argument and telling the story, which when
well crafted can by definition translate to a huge base both in the UK
and outside of the market place,’ he says.
POWER GAMES: PRIVATISING REGIONAL ELECTRICITY COMPANIES
American Electric Power Co Inc and Public Service Company of Colorado’s
agreed takeover of the UK’s Yorkshire Electricity illustrates clearly
the high profile nature of the type of merger and acquisition deals that
surfaced in the first quarter.
The much publicised pounds 1.5 billion deal pulled on the pool of
resources offered by financial PR units, Ludgate Communications and
Financial Dynamics, which handled the interests of Yorkshire Electricity
and the American duo respectively, but still worked in close quarter
with each other.
The acquisition of one of Britain’s last independent regional
electricity companies to create trans-Atlantic synergies in power
supply, technology and generation demanded strong media management
skills at all levels.
Of the regional electrics companies already taken over, Northern, East
Midlands, South Western, London, Seeboard and Midlands had been bought
by American companies so worries about job losses surfaced again.
For its part, Ludgate Communications had to manage the media at a local
and national level. On the former it had to present a convincing
argument on the benefits accrued for Yorkshire and the neighbouring
regions from the more advanced US power services, according to Alex
Mackey, director of Ludgate Communications.
Emphasising the additional resources that the American companies could
bring to the party was the thrust of the national campaign that was
ultimately targeted at both companies’ investors.
’We had to make analysts and the financial media aware of benefits for
both sides and of the economic advantages in particular for Yorkshire
Electricity,’ says Mackey.
Added to the equation was the way-ahead-at-the-polls-Labour Party, that
had been extremely vocal about its planned windfall tax on the
privatised utilities. Given the then proximity of the UK election, the
issue became even more sensitive.
The media brief expanded. In the UK context, shareholders had to be
assured that the US companies could shoulder any potential windfall
taxes while US shareholders had to be equally convinced of the benefits
of the union.
Financial Dynamics worked for the US side on a project basis and had to
address the fears in the market place about what was perceived as a US
predator without commitment to the UK market.
The deal went unconditional in February backed by the seasoned media
skills of Ludgate Communications and Financial Dynamics.
AVIS FLOAT: PUTTING FD IN THE DRIVING SEAT
Car hire company Avis Europe, which floated on the London stock exchange
back in April, highlights the growing trend of European companies to
recruit London’s financial PR skills.
Belgian car importer D’Ieteran, which has a majority sharehold in Avis
Europe, decided on the listing back in February after a merger with its
former American parent AVIS was ruled out.
Financial Dynamics handled the PR side which chief executive Nick Miles
describes as an ’extremely complex campaign’, given the fact that this
was the company’s second flotation. It floated in 1986 under the then
parent US AVIS Inc, a venture that was not wholly successful.
Financial Dynamics consultant Nicola Marsden explains that a large part
of the campaign brief was to dissipate ’information baggage’ in the
’There was a barrage of criticism and negative sentiment that had to be
dealt with,’ she says. ’While AVIS has an effective PR machine we, as a
London consultancy, are more in touch with the press here and were able
to advise the company on the parameters within which it could talk.’
Julian Hanson-Smith, managing director of Financial Dynamics, adds that
a lot of the pre-float press campaign was to educate the media about the
’As Eurodollar (another floated car-rental company) was the only
comparative, there was a focus on that company’s poor performances and
the high risks connected with the business,’ he says.
Against this backdrop of media-hype, FD introduced a host of more
investor-friendly information. For instance, Euro airline passenger
volumes are growing rapidly which will ultimately trigger more car-hire
demand. On an environmental note, more people are being encouraged to
use trains for business travel and rent cars at the far end to complete
And there’s the safety aspect where holiday makers take fewer risks
renting from an established car-rental unit.
The campaign was targeted towards the potential investor base. Its
success translated into a shares premium on the first day of trading on
the London Stock Exchange on 26 March. AVIS Europe began trading
unconditionally on April 4.