Business View: Just say 'boo' and private equity offers melt away

If they really want their prey, they need to stop being so wimpish

For heaven's sake. Doesn't anyone have any gumption any more? What would have happened if the army were run by the people masterminding City takeover bids these days? "Excuse me, Mr Hussein, can we invade your country and oust you from power." "No! Push off." "Oh, OK then."

In the past few weeks, Prudential, HMV, House of Fraser, ITV and the London Stock Exchange have all seen off bidders by jumping out from behind the sofa and going "boo".

It is little surprise to see the HMV and ITV offers crumble. Private equity firms have long been known for their reluctance to get involved in hostile situations. This is because they are greedy and won't divvy up the cash unless they can have a good squint at the target's books first. Bidders should beware, though: these venture capitalists often use "due diligence" as a way of getting you to cut your price.

Shareholders in ITV might feel a little miffed that they were not able to decide for themselves on the revised offer tabled by Greg Dyke's consortium on Thursday. But the 130p-a-share bid - with its attendant complications of extra leverage, high fees and Mr Dyke himself - was hardly generous. Apax must be more miffed: it has been trying to mount this bid for more than a year and it cratered within 10 days of its inception.

Permira showed little less fortitude in its HMV offer, while Apax again was routed by House of Fraser refusing to eat its greens. There are those who will argue that this is the fightback by stock market investors unwilling to let private equity take companies off their hands and then scoop the pool in three years or so by floating them at twice the price. But it is hard for quoted companies to take the tough decisions needed to improve long- term profitability when shareholders are fretting about quarterly results.

The idea that this is the stock market finally resisting the private equity houses just won't wash. As my colleague Danny Fortson points out on the facing page, a lot of money is sitting in the pockets of the venture houses and that means more offers. But if they want their prey, they need to stop being wimps.

The same can be said for Aviva, which chickened out of bidding for the Prudential. I had lunch with a senior stockbroker last week who said Aviva could have secured the Pru for less than 800p a share (for the record, it offered 700p). Well, a FTSE 100 chief executive once argued to me that overpaying by 10 per cent is entirely in order if you think a company is worth buying: the extra 10 per cent will be forgotten if it is a good deal, and saving the 10 per cent will not protect your back if it is a bad one. If this was truly a once-in-a-lifetime deal for Aviva, it should have shown the balls to secure it.

The London Stock Exchange, though, is a different beast. Nasdaq offered 950p and readers will recall I thought this was generous. The LSE did not. Its board refused to entertain Nasdaq, hinted that it really wanted to merge with the Franco-Dutch Euronext and was emboldened when its shares ran up to 1,190p. But Nasdaq refused to be bullied: it took its bat and ball and went home.

The City now talks of a rival offer from the New York Stock Exchange - whose regulatory issues on this deal simply won't go away - or the LSE staying independent. LSE shares are back to the 1,050p mark and will slip further in the absence of any more bid activity.

It is betting that someone has more in their tank than Nasdaq had to offer. But given the way deals are falling apart for companies listed on the LSE, this is one heck of a gamble.

j.nisse@independent.co.uk