Achieving success in M&A in a protectionist world

The Kraft Heinz approach to Unilever, followed by the quick withdrawal, has focused attention on the pressure which governments can start to exert on international takeovers as the world starts to look more protectionist.

For many international investors, there will be real concerns at the apparent fraying of the liberal consensus welcoming international trade and investment. While the roots of this concern pre-date the Brexit vote and the election of an avowedly protectionist president in the US, the political climate raises difficult questions for investors looking to buy assets in the UK or elsewhere.

There will be considerable scepticism regarding the motivation of foreign investors (never in short supply) and suspicion of those seen to be shopping for a quick bargain on the back of currency movements. Acquirers – and targets – need to rethink how they consider the political element of any deal, and to be fully prepared from Day 1 in case there is an early leak. Far from being a secondary consideration, it needs to be at the heart of the strategy – and informed by the best advice (particularly given the more onerous rules regarding hostile takeovers that were introduced in the wake of the Kraft/Cadbury deal). Clearly, the rules of engagement are changing when you remember that it is the same Brazilian investors behind the failed Kraft Heinz approach who very successfully navigated the regulatory issues for AB Inbev around the acquisition of the UK company SABMiller in 2015.

In spite of the challenges, there is still a good case for the benefit of foreign investment in the UK and a ready audience looking to support a persuasive argument. The government has vowed to pursue the goal of building a ‘Global Britain’ following Brexit and the benefits of international expertise and capital for improving productivity and funding investment are still broadly recognised.

But it is undoubtedly true that those trying to make that case will face a more sceptical audience, particularly from government, and they will quickly run into trouble if they misjudge – and mishandle – the political mood.

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