Unsolicited takeover bids are back in vogue. For communications teams, it means aggressive battles, engagement with a variety of stakeholder groups – and long, long hours. Neil Gibbons reports

"Cadbury is an exceptional business worth much more than the offer put forward by Kraft. Kraft is trying to buy Cadbury on the cheap to provide much needed growth to their unattractive low-growth conglomerate business model. Don’t let Kraft steal your company with its derisory offer.”

This strongly worded statement was made by Cadbury chairman Sir Martin Carr, in an ultimately futile attempt to fend off an unwanted £10.2 billion bid by US food giant Kraft. The most high-profile hostile takeover of recent years, the Kraft buyout is seen as a turning point: the reawakening of the hostile M&A market, posing challenging questions to investor relations and communications practitioners.

Kraft’s unwanted offer for national treasure Cadbury suggests life is returning to the mergers and acquisitions business, coming as it did on the back of hostile approaches by energy company Centrica for oil and gas company Venture Production, acquisition vehicle Resolution for insurer Friends Provident and mining group Xstrata for rival Anglo American.

Hostile takeovers became rare in the 1990s and, as recently as 2002, worldwide there were only 15 hostile bids of $500 million or more. But that number increased from the middle of this decade to a high of 81 in 2006, before plunging along with all other M&A activity during the economic crisis. However, with the worst over for the economy, credit is becoming available and share prices appear cheap by historic standards. These are ideal conditions for a new era of hostile takeover approaches.

There was more than $260 billion in hostile and unsolicited bids launched last year, more than double the total in 2009, according to Thomson Reuters data.

“We are likely to see a continued increase in hostile activity,” says Gary Posternack, head of M&A for the Americas at Barclays Capital. He believes an upswing in M&A is underway, with potential buyers looking aggressively at strategic acquisition opportunities.

The new breed of hostile takeover looks set to employ many of the same platforms used in the 1990s, but a select few are using more cutting edge techniques.

In November 1999, a hostile takeover bid from British mobile phone group Vodafone AirTouch for Mannesmann saw deputy chair of the Mannesmann supervisory board, Klaus Zwickel, sharply criticise Vodafone’s “brutal behaviour” as “predator capitalism” which “aims only at shortterm profits for the shareholders”.

In response, Vodafone president Chris Gent placed an open letter to the employees of Mannesmann into all leading German daily newspapers, reassuring them that a merger would not mean any additional job losses.

It’s become a common tactic in hostile takeover. More recently, BHP Billiton’s ultimately unsuccessful hostile bid for Potash Corp was driven home with a full-page ad in Canada’s leading national newspaper The Globe to convince people its vision made sense.

But it’s only recently that companies have begun to embrace Web 2.0 to communicate their side of their story.

When Kraft’s £10.2 billion bid for Cadbury was turned down, it quickly produced an investor-facing video for its corporate website.

Featuring chairman and CEO Irene Rosenfeld fielding admittedly softball questions in a staged interview (Why is this proposed transaction right for Kraft foods? Where are the synergies you identified coming from? What is your favourite Cadbury brand?), the video provided a platform for Kraft to explain the benefits of its proposal to a wide group of stakeholders.

Kraft was following in the footsteps of US brewer InBev, which used the same tactic in its successful takeover of Anheuser-Busch.

That video managed to present InBev as a sympathetic party in its bid to take over a beloved American institution. It also helped to humanise a hostile bid with InBev’s CEO Carlos Brito confessing his love for Budweiser and speaking earnestly to camera about his ambitions for the combined firm.

But more important than the preferred medium is the overarching outlook, the strategic approach to telling the story of the bid or defence.

John Dawson is president of the UK Investor Relations Society. He believes that, when an unsolicited bid comes in, an investor relations officer must “build on a successful IR and communications programme to reinforce trust and confidence in management”.

Good IR, he says, means being prepared. Communicators should give thought in advance to attack strategies and immediate actions for defence in the first few days.

With a plan in place, those tasked with speaking on behalf of the company must stick to agreed messages and avoid off the record briefings. “They undermine confidence if you later have to change position (which can be frequent) or when new information comes to light,” says Dawson. “Bold statements, challenged well by the opponent, can become embarrassments, even if true, and undermine management.

Crucially, he believes that investor relations and communications teams must have a voice at the top table. “Bankers and other advisers can dominate discussions and they are not always right, or truly reflective of investor sentiment and therefore value.”

In the UK, the takeover process is governed by the Takeover Panel’s reformed timetable. With the 60-day timetable now in place, speed really is of the essence.

“The key to success for both sides is to try and secure the support of key shareholders as early in the process as possible, as a small group of big holders will often have the most say in whether or not a deal succeeds,” says Andrew Jacques, CEO investor and financial communications of MHP Communications. “The vast majority of the communications action, along with any unexpected twists and turns, will usually happen in the first few days and weeks after the deal is initially made public. As always opinions are formed very quickly, which is why it is so important to be well prepared, to be in a position to act fast as things develop, and to try to get the story out in a controlled way wherever possible.”

From a communications point of view, this means getting a clear and convincing set of key messages across from the outset, preferably with a clear and attractive set of values, on why your proposed course of action is the right one.

Central to an effective communications strategy in a takeover is an understanding of how messages will play to different stakeholder groups – it’s not all about convincing shareholders.

“Clearly the investors’ key concern will centre around value and, in a well-managed process, key shareholders will have been strongly targeted at an early stage to address this,” adds Jacques. “But employees are of course by far the most sensitive audience, and getting a positive response from the media is often a helpful factor in conveying the right messages to the people whose livelihoods are at stake.”

“As for the press,” he adds, “they will obviously be keen to delve into all the details that make the deal stand out as an interesting story for their readers, which unfortunately will often include how many employees’ jobs might be in danger, as well as things like a comprehensive company history, all the grisly details on how much money each board member may be set to make, and any hint of controversy that arises as the takeover process plays out.”

Simon Hayes, CEO of stockbroking and advisory house Peel Hunt, agrees that employees are a key audience. “Internal communication is as necessary as strong external communication: never forget this. Employees have different requirements, but should remain at the centre of the communications strategy throughout.”

He warns against treating the media as necessarily helpful in communicating key messages. “The media generally has conflicting objectives and priorities; and there is clearly always a danger that the media will get in the way or pose a threat to smooth communications channels.”

For him, the key ingredients to a successful takeover comms strategy are focus and clarity of purpose. “If you go to war half-heartedly, you will not win,” he says. “Remember that the process is a negotiation, and that information is power. However, having good access to relevant information helps and controlling the flow of information is vital.”

Paul Maher, currently director of Positive Marketing Communications, has seen hostile takeovers from both sides. He was formerly communications director of IT giant Mercury Interactive, which took over a number of companies in a period of acquisitive growth and was itself acquired by HP in 2003 for $4.5 billion.

For him, the key lies in being clear what the advantages are for mounting or defending takeovers are. That lucidity of thought is essential in a tight time frame, which means hitting the ground running. “High-level comms must be involved from Day One,” he says. “It might only be one board-level individual. The rest of the team can be alerted in the last two to three days only.”

With strict time pressures, the adversarial nature of an unsolicited bid, and the emotive issues at stake, it’s easy to see why emotions run high. These bids aren’t called ‘hostile’ for nothing. “Aggression is to be avoided though,” Maher says. “It can get paranoid and out of control, but this needs to be crisis-managed and ideally kept within the building.”

From an IR point of view, hostile takeovers can get very aggressive. But, says Dawson, “This is typically where you are failing to keep control of message and media, and it can become very unproductive as a result.”

But then, the pressures on senior management and the comms team lend themselves to frayed tempers.

“Seven day weeks, lots of conference calls, managed work streams, lots of consultants, bankers and lawyers, long, long meetings and too many opinions,” says Dawson. “A day in the life of IR and comms during a hostile takeover is never either dull or short.”

In fact, ask anyone with experience of hostile bids, and the recurring descriptor is ‘long’. As Jacques says: “The long days run on into long nights and all too frequently on into further long days, and while the teams of bankers and lawyers take a good share of the strain, it is not unusual for the comms team to be putting in some excessively long hours, losing weekends and being on 24-hour standby to react to any new developments.”

From his experiences of takeovers, Maher recalls a truly hectic workload. “From final decision to announcement can involve consecutive all-nighters and most likely will mean last-minute flights to HQ for regional heads,” he says. “Final briefing for global teams will almost certainly involve a 24-hour cycle of informing regional teams, receiving feedback, revising the message and then informing local employees and media. For large announcements, there will also be 24 to 36 hours of media relations, dealing with enquiries and requests for interviews. Executives need to be rationed and so empowering local execs is very desirable.”

But when the stakes are so high, it is not surprising to hear about underhand tactics all too often coming into play, says Jacques. “Throw in the fact that there are usually some big egos around the boardroom table, not to mention amongst the advisers, and it’s easy to see how things can get really hostile.” 

Centrica’s bid for Venture

Centrica’s communications strategy for the hostile acquisition of North Sea oil and gas company Venture Production had the media at its heart. They were seen as key for communicating with Venture’s investors and employees, as direct shareholder communication was severely restricted. 

As the perceived aggressor, the media relations strategy anticipated themes such as David v Goliath, Scotland v England and entrepreneur v utility. 

The communications team maintained a factual, confident and measured tone, electing not to engage in a ‘tit for tat’ debate with Venture Production.

With so few recent hostile bid situations, there were no obvious case studies to guide the team. But the decision to make a ‘best and final offer’ early in the process was a standout feature of the campaign. For many observers in the City, this approach served to create a sense of urgency among media commentators that shareholders should take care not to miss out, which helped push acceptances over the 50% point at a relatively early point in the bid process. Confidently and calmly communicating the strategic rationale for undertaking this approach was a core element to its success.

The acquisition generated 180 media items across UK outlets. The overwhelming majority (69%) supported the deal. 

So successful was the strategy, it was named best investor relations campaign at the CIPR Excellence Awards 2010.