Election 2010: Party Policies for Business
Public Takeover by Foreign Company
Labour – the “Cadbury Law”
The Kraft/Cadbury deal highlights the issues involved in pubic takeover deals, especially those with foreign bidders. Under the Labour manifesto, the UK’s relatively liberal M&A regime may change as the party aims to “bring any takeover decision back to shareholders” and to demonstrate Labour’s opposition to any takeover with the aim of “making a fast buck”. The manifesto hence promises:
- to introduce a requirement for two-thirds majority shareholders’ vote in corporate takeovers;
- to increase disclosure requirements in respect of share-ownership and advisors’ fees;
- to require bidders to set out how they will finance their bids; and
- institutional shareholders will be required to declare how they vote.
In addition to the manifesto, the Labour party has also proposed the following reforms since March 2010:
- lowering the threshold for disclosure of share ownership during a bid from one per cent to 0.5 per cent so that “(target) companies can see who is building up stakes on their register”;
- giving bidders less time to “put up or shut up” so that “the phoney takeover war ends more quickly”;
- requiring bidders to set out publicly their plans for the acquired company, including details of how they intend to make cost savings; and
- cut voting rights of short-term shareholders such as hedge funds.
If all these are implemented, bidders in public takeovers are likely to face much higher hurdles under a newly elected Labour Government.
The Conservative manifesto does not have any specific measures in relation to takeover deals. But the party opposes Labour’s proposals and believes that only shareholders should have a say in takeover decisions.
The Liberal Democrats promise to:
- restore a “public interest test” to the takeover rules “so that a broader range of factors other than just competition can be considered by regulators when takeovers are proposed; and
- ensure the outcome of takeover bids is determined by the long-term shareholder base.
While the public interest test could allow some bids which would have been blocked under the previous regime to be cleared, the new test could also add uncertainty and time to the deal-making process, and ultimately adding to the cost of shareholders.
Funding for Small Companies
All three parties agree that the growth of SMEs is a key element to the economic recovery of the country.
The Labour manifesto promises a new UK Finance for Growth Fund which would bring together a total of £4 billion of public funds and combine it with private money to channel equity to businesses.
Within this, the Growth Capital Fund will focus on SMEs which need capital injections of between £2 and £10 million, while the Innovation Investment Fund will focus on the needs of high-tech firms.
The party also promises a new Small Business Credit Adjudicator with statutory powers to ensure that SMEs are not turned down unfairly when applying to banks for credit finance.
The Conservative Party’s support for SMEs is to a large extent based on the Small Business and Government: the Richard Report commissioned by the party in 2008. Its manifesto promises to create more diverse sources of available credit for SMEs based on the “big, bold and simple” National Loan Guarantee Scheme.
One key difference between Labour’s and the Conservative’s measures for SMEs is that the latter also places more emphasis on a range of tax reliefs to investors.
The Liberal Democrats’ support for SMEs has a more localised focus and proposes the establishment of:
- Regional Stock Exchanges for businesses to access equity without the heavy regulatory requirements of a London listing, a more radical idea than the other parties have proposed; and
- Local Enterprise Funds to help local investors put money into growing businesses in their own part of the country and support the development of new products from research to production.
This is an area where the Conservatives manifesto promises a major overhaul of the existing FSA-Bank of England-Treasury (tripartite) regulation system by abolishing the FSA and moving its financial regulation roles to the Bank of England.
The Labour Party, as the original architect of the tripartite system, is relatively silent on the subject and instead promises to require banks to disclose their remuneration policies to shareholders for explicit approval in order to curb excessive risk-taking by bankers.
The Liberal Democrats manifesto again echoes the party’s emphasis on local focus, and promises to establish a clear separation between low-risk retail banking and high-risk investment banking, and encourage the development of local and regional banks.
A New Green Investment bank
Both the Conservatives and Labour agree to establish a Green Investment Bank, one which not only has a lower risk profile than traditional investment banks but also invests specifically in green technologies. The Liberal Democrats manifesto does not propose to establish such a bank for green technologies, but the party supports green policies via other routes, e.g. working through the EU.
- Alon Domb
- Michael Hatchwell
- Rebecca Ferguson
- Jeanette Gregson
- Jonathan Metliss
- Jonathan Lass
- Paul Toolan
- Max Gower
- John Hiscock
- Judith Gershon
- Robin Henry
- Gerald Montagu
- Jenny Constable
- Natalie Wright
- Richard Elliott
- Alan Barnett
- Natasha Duffy-Jones
- David Martin
- Helen Flynn
- Fola Sanu
- James Ogilvie
- Gabriel Chan
- Joel Grossmark
- Russell Joseph