The independence of advisers when successive offers are made by the same offeror for the same target company

Published 1 September 2007

During the period of the Code’s existence, there have been a number of occasions where bidders have made successive offers for the same target company. In the initial years these “follow-up” offers tended to be made a year or more after the first offer had failed to achieve total control for the bidder. However over the past two years some follow-up offers have been made very soon after the closure of the first offer. There is no restriction in the Code on how soon a follow-on offer can be made after an earlier offer has closed.

In two of these follow-on takeovers the same independent adviser was approved by the Panel to prepare the independent adviser reports under rule 21 of the Code as had prepared the first report. However, in another case, the Panel declined to approve for the second report the adviser who had prepared the first rule 21 report.

This decision was no reflection on the competence or integrity of the particular adviser. Instead, the decision reflected a number of factors including:

  • that this was the last independent adviser’s report that shareholders would receive before compulsory acquisition was initiated, and outstanding shareholders could have the right to object to the compulsory acquisition price;
  • the proximity between the time of preparation of the two reports;
  • the fact that there had been no significant change in the business, circumstances or prospects of the company through the period covered by the two offers;
  • the fact that the offer price for the second offer was above the top of the valuation range in the first report;
  • whether the shareholders were likely to benefit from receiving an adviser’s report prepared by a different advisory firm.

Every application for approval of an independent adviser is considered on its merits and in the particular circumstances of the transaction. Where the transaction is a follow-on cash takeover offer for a Code company being made in close proximity to an earlier offer, and the offer is expected to reach the compulsory acquisition threshold, then it is likely that the Panel would not approve the same adviser to prepare the rule 21 report for the final offer that it had approved to prepare the rule 21 report on the previous offer.