Notice the spring in the step of city corporate financiers of late. Their profitable game of chess, the hostile takeover battle, is back in fashion. And some of the grandmasters are back in the thick of it, led by Sir Owen Green's BTR, with its £1.5bn bid for Hawker Siddeley. They scent economic recovery and have pounced before a rising stock market makes targets too expensive. The possibility of a Labour government banning hostile bids has also been a spur.
Critics of hostile takeovers argue that too much corporate energy is wasted pursuing short-term takeovers; energy which could be applied to shaving costs or hunting out new markets and products. It is no coincidence that 75% of European takeover activity is concentrated in Britain, one of Europe's least successful economies. Hostile takeovers are virtually unknown in Germany and Japan. But some takeovers here have worked brilliantly: the combination of Guinness and Distillers created a world-beating drinks business; the best takeovers of Hanson or BTR have revived moribund and complacent companies. But the fact remains that too much time and energy in the FT-100 companies is spent either plotting takeovers or fending them off. This chess match is too expensive and sapping for Great Britain plc.
The European Community is flexing its muscles over British takeovers. Last year, the City's Takeover Panel ceded power to the Commission to vet mergers between companies with a worldwide turnover of over £3.5bn. There is the justifiable suspicion in British government circles that the EC's approach to takeovers is based on the old 70's formula of supporting national champions and picking winners with the State (in this instance the Commission) meddling to arrange mergers for the sake of 'industrial logic'. It has proved disastrous in trying to revive the European computer industry which, apart from ICL (Japanese-owned), is collectively losing billions of pounds of shareholders' and taxpayers' money.