View from City Road: No let-up in bid failure rate

THREE bids in a row have failed, and already merchant bankers are wondering if they have a future. Cowie's failure to win control of Henlys yesterday comes hard on the heels of Kalon's bid for Manders and Greene King's for Morland.

All three bids, none of them worth more than pounds 100m, have been predominantly for shares rather than cash. Had the bidders offered cash they might have had more success. It is probably more significant that all were made against the background of deepening gloom from industrialists concerned by the prolonged recession.

But overall the failure rate this year is no higher than it was last, when there were some notable failures including Williams Holdings' bid for Racal Electronics and Whyte & Mackay's for Invergordon. It looks as if institutions have been reluctant to accept bids, especially where the cash element is too low, for fear they will lose out in any upturn. They may also be worried about accusations of short-termism, so prevalent in the Eighties.

The difference between this year and last is that the number of bids is running at an even lower level, so investors have lost one of the props they might have hoped for after a recession this long. It looks as if companies are still not confident enough of recovery to take advantage of much reduced share prices. TI and Redland are the only large British companies to have launched succesful bids this year, and their takeovers were dwarfed by Hongkong and Shanghai Banking Corporation's swoop for Midland.

Venture capitalists, who have millions of pounds in the bank, are also not prepared to launch bids in this climate. Perhaps they too are worried about continuing recession.

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