Following the abortive foreign takeover bid for household Dove-to-Marmite giant Unilever, questions are being asked about Britain’s ‘open borders’ M&A policy, says Matthew Hardeman
News that Anglo-Dutch giant Unilever is exploring a £6 billion sale of its spreads brands Flora and Stork adds credence to demands for reform of Britain’s very open borders when it comes to mergers and acquisitions. It’s no coincidence that it comes just weeks after the FTSE giant fended off a takeover bid by the US foods behemoth Kraft Heinz – one that prompted talk of the need to arrest some of the outflow of UK plc’s crown jewels.
The Unilever-Kraft debate, of course, follows a string of big-ticket buyouts that have seen the UK’s corporate firepower diced and spread around the globe. In September 2016, the UK’s biggest technology firm, Cambridge-based ARM Holdings, was sold to Japanese telecommunications company SoftBank Group for £23.4 billion – a landmark deal that saw one of the country’s leading tech businesses expatriated, following the likes of Autonomy, sold to Hewlett Packard.
That deal was made on the strength of several important commitments to the UK, including one to keep ARM’s headquarters in Cambridge and to agree to at least double its staff in the next five years. (Interestingly, since then it’s been reported that SoftBank is to sell a quarter of its stake in ARM to a Saudi-backed investment group.) The Financial Times has reported that Downing Street was aware of this transaction and did not raise any concerns.
But these examples are interesting in that they have prompted genuine debate about whether they are in the national interest or not, when previously it was an article of faith, as it were, that they were. And Britain has enjoyed the ride: in 1997, eleven of the world’s top 100 companies by revenue were listed in the UK, while by 2017, that number was five. It may soon be four…
It’s worth remembering that UK and nationally-domiciled firms generally pay more tax and spend more on research and development – both of which power a country’s economic pulse into the long-term. These have to be paired against the need to remain ‘open for business’ and for the freedom of capital and markets. Yet without scrupulous consideration of future deals, Britain could easily see the last of its giants sucked out of the national ecosystem, gobbled up by ever-growing international conglomerates from around the world, for whom our small and sceptred isle will always remain just a small piece of the global market puzzle.
And naturally the drop in the pound is driving hungry overseas demand for British businesses – businesses the country arguably ought to be trying to keep, particularly when some firms at least have openly speculated about leaving the country in the wake of Brexit. The bumps of Brexit may also cause the pound to dip further, making these prized corporate assets all the more attractive.
It might make for uncomfortable reading at Davos and City C-suites, but reality has a funny way of catching up with everyone: exhausted by the spectre of unfettered capitalism and global trade, populations (and populism) are fuelling a new international order – from the Philippines to Tanzania to Washington DC. With globalism on the back foot, in all its guises, and the pound having recently fallen to a 168-year low, surely there’s never been a better time for the prime minister to start figuring out how to put a filter on the drain – and come up with a plan. The question is, where do we draw the line? Should the government tighten up the rules on foreign acquisitions of British majors? You bet – with the trials of Brexit mostly still ahead, it needs to act fast.
Matthew Hardeman is Senior Researcher at Spear’s