Be prepared! Developing a defence strategy in a depressed market

Since the start of 2023, the UK market has seen an exodus of listed companies, as UK and overseas buyers, attracted by depressed valuations and helpful exchange rates, have seized the opportunity to take them private. Indeed, as of the time of writing, there are 27 M&A transactions valued at more than £100m that have taken or will take listed companies off the UK market.

Some Boards recommend these takeovers to shareholders as an opportunity to take the business to the next level under new ownership. Others believe they still have more value to build before a sale and are more sceptical of what they consider to be opportunistic targeting in a depressed market.

Whatever the situation, it’s clear that every listed company now needs to have an up-to-date defence strategy ready for activation at very short notice to combat any hostile bid for the business.

In the present climate, any company whose share price is below fair value risks becoming the subject of media and market speculation that it is a takeover target. If these rumours build momentum, a timely response is critical to taking back control of the narrative.

Increasingly, we are seeing that rumour and speculation are indeed followed by an unsolicited bid. When the Board believes the offer price is too low, a pre-prepared strategy is critical to defend the company and management team from an unwanted outcome.

At the very least, all listed companies should be doing the following:

· Scoping possible hostile bid scenarios eg: Activist investor, Private Equity, Trade.

· Developing a comprehensive strategic communications plan, with draft leak statements, key messages for media, and briefing notes for important stakeholders.

· Monitoring analyst sentiment monitoring, to understand the likely stance of any independent sell side analysts, and support with briefing notes and feedback.

· Scaling up media monitoring and media strategy planning to identify key relevant themes and potential opportunities to reinforce their investment case ahead of any approach.

· Mapping their media universe for an M&A situation and arranging tactical briefings to get on the front foot to ensure the company’s investment case is fully recognised and understood.

Until we see a notable upturn in market sentiment, it’s a fair assumption that more UK listed companies will be vulnerable to takeover bids. Those that haven’t prepared for this eventuality will struggle to resist a determined hostile approach.