Caveat vendor

Gaining approval for deals and avoiding shareholder revolts are just two reasons to keep track of who owns your company.

Gaining approval for deals and avoiding shareholder revolts are just two reasons to keep track of who owns your company.

The threat of shareholder revolts and the need to gain approval for corporate deals are just two reasons to keep track of who owns your company.

Whether seeking acceptance for an M&A transaction or appointing a chairman, listed companies need to seek the approval of shareholders. But for businesses that have undergone significant restructuring following the recession, it can be difficult to keep track of who the shareholders actually are.

David Chase Lopes is the head of M&A at Orient Capital covering the UK and European markets. He says, ‘We have been doing a lot of restructuring work recently and defending companies against opportunistic investors, who seek to gain control of a company on the cheap.’

Orient Capital helps companies identify and contact investors to deliver the management’s recommendations in major transactions. Chase Lopes comments, ‘If it’s a friendly M&A then we help it go more smoothly, or in a scheme of arrangement we make sure that there’s fair representation at the AGM.’

Engineering a deal

In January, Chase Lopes helped the AIM-listed engineering consultancy WYG gain shareholder approval to restructure £22.9 million of debt in exchange for 30 million shares to its creditors. WYG was forced to restructure due to the challenging business circumstances it had been trading in since the beginning of the financial crisis, but this required shareholder approval.

He comments, ‘Our involvement helped to activate a sufficient number of investors who would otherwise have been quite apathetic given the collapse of its share price. Contacting investors was even more challenging because the churn of shareholders was greatly increased by speculative investors.’

Despite getting off to a slow start, Chase Lopes says that M&A activity has picked up in the UK this year, and adds, ‘In the UK there were almost 650 transactions, worth over £60 billion, in the first three quarters of the year, which is up 50 per cent year-on-year.’

By the middle of the year he says bigger deals had started to return, including some worth over £1 billion, which he sees as a sign of increasing market robustness. He says, ‘A lot of companies that were able to survive the recession and restructure and get cash back into the coffers are now looking for acquisition opportunities.’

Across Europe, Chase Lopes has also noticed a rise in aggressive competition for companies coming from countries such as China, particularly in the mining sector: ‘Foreign bidders with money are also taking advantage of the fact that there are distressed assets available, and the UK consumer sector is also a strong target.’

In June, Chase Lopes worked on the £73.3 million takeover of the sat nav technology company Trafficmaster by the US investment company Vector Capital, managing a campaign to persuade shareholders to back the deal. He comments, ‘The campaign was directed at the top 100 investors to ensure that the deal was approved and that fair representation was achieved at the meetings. It also provided the rest of the deal team with clear visibility of the vote outcome well in advance.’ He adds that it is important to have an updated share register analysis that is as detailed as possible for such transactions.

Chase Lopes expects to see continued growth in the M&A market next year, particularly in the natural resources sector, adding that the UK remains attractive to foreign companies.

‘The UK is still the most open-for-business market for M&A because it’s not that hard to do it right. The rules are pretty straightforward, the mechanisms work well and the broker culture is helpful.’

David Chase Lopes
Head of M&A, EMEA
Orient Capital
7th Floor, 51–55 Gresham Street, London EC2V 7HQ
Tel: 020 7776 7574

Nick Britton

Nick Britton

Nick was the Managing Editor for when it was owned by Vitesse Media, before moving on to become Head of Investment Group and Editor at What Investment and thence to Head of Intermediary...

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