Friday, 23 April 2010

IoD on takeovers

The Institute of Directors has put out a position statement type thing on takeovers that is worth a read. Nothing earth-shattering, and some will no doubt read it as the voice of management entrenchment, but there is quite a bit of sense in there.

They say, basically, that takeovers may act as a discipline to directors, but there isn't much evidence that they add value, and actually they may make decision making (by both acquirer and target) more short-termist. As such they agree with raising the required vote for a deal to go through to 2/3rds (ie Labour's policy), though they don't agree with the idea of limiting voting rights to those already on the register at the time of the deal.

The issue with the 2/3rds threshold is that actually it wouldn't make much difference (most deals get much higher votes in favour). So when you hear someone argue that it will entrench management, see if they have any stats to prove this (I'm sure they won't have). It's simply a knee-jerk reaction. Also someone pointed out to me that you need a 2/3rds majority to change a company's articles (but not to decide who owns the company!) so there is a slight precedent.

All that said, I'm personally more inclined to tweak the voting side of things. Still, an interesting intervention.

PS - even this stuff gets partisan press treatment. The Grauniad, which treats this as a business story, says "Institute of Directors backs reform of takeover rules", The Telegraph, which treats this as an election story, says "General Election 2010: IoD criticises plans for 'Cadbury's Law'".

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