The Blog

Its Not Just Foreign Takeovers Than Need Oversight

Foreign takeovers may need to be assessed. But so too do takeovers by British companies. All takeovers should be examined, from many different angles.

Lord Heseltine, who is conducting an economic review on behalf of the government, is due to recommend this week that restrictions be placed on foreign takeovers of British companies. This is unlikely to go down well with free marketers. But even if we leave ideologies on one side, there are practical issues with the recommendation.

There is little doubt that some foreign takeovers of British companies are not in the best interests of the company, its workers or customers. The takeover by Kraft of Cadburys a couple of years ago is the most obvious. But there are also plenty of examples of takeovers by foreign companies which have benefited, sometimes even saved British companies. Just look at the motor industry.

Obviously we won't know the detail of this recommendation until it comes out. But at first brush it seems like a one size fits all solution- foreign takeovers need to be investigated before proceeding. This might sound good as a policy headline, but it doesn't begin to address many of the issues raised by the takeover of one company by another.

Penguin have just announced a merger with Random House. For a while it looked as if Penguin would be taken over by Harper Collins instead. Harper Collins is a NewsCorp company and many Penguin authors were up in arms at the prospect of their work being published by an organisation with such a different brand identity and reputation. Penguin staff were no doubt dismayed too.

The point about any takeover is that there are many different interested parties. In a world of austerity, business is no longer just about the stakeholders. It can't be, customers need to be wooed, top talent within the company needs be retained, suppliers need to be managed effectively. Takeovers need to be assessed by looking at their potential impact on the whole universe of stakeholders, not just the shareholders.

That's why Lord Heseltine's recommendation appears to be too simplistic. Foreign takeovers may need to be assessed. But so too do takeovers by British companies. All takeovers should be examined, from many different angles. We live in a complex, fast changing world. We have to keep abreast of and manage change, not be propelled unwittingly forwards because of regulatory regimes which only kick in under certain circumstances. Any merger or takeover which may affect jobs, the economy or society at large should be investigated. Not just foreign ones because to control them gives the politicians good headlines. A country cannot be run by soundbites alone.