British firms will continue to face barriers to carrying out acquisitions
and mergers in Europe after a proposal to establish a common takeover rule was
rejected by the European Parliament.
The regulation would have increased the power of shareholders in Europe to
influence whether a company merges with another. In the UK, shareholders make
the final decision, whereas in some European countries the decision is left to
the board.
The failure of the takeover directive will handicap UK companies looking to
expand into Europe, claims Robbie Gilbert, chief executive of the Employers’
Forum on Statute and Practice.
The regulation would also have required the bidding company to detail in its
prospectus the impact of its offer on employment, working conditions and the
location of operations. Employees’ views would then have to be attached to the
recommendation presented by the board to the shareholders.
The European Parliament rejected the takeover directive on the casting vote
of the chairman after extensive lobbying against it by German MEPs, who want to
maintain the status quo in Germany, where only board members are involved in
decisions on takeovers.
Gilbert thinks the European Commission will try to introduce a watered-down
directive, which would impose consultation requirements on companies, but not
remove barriers to takeovers and acquisitions where they exist.
"The prospect is that the commission will be looking for an early way
of reviving the proposal.
"If the commission is determined to press ahead, it is liable to be
tempted to bend some way to the German’s wishes.
"Instead of opening up markets across Europe to mergers and
acquisitions, it would impose a drag on the ability of British businesses to
act in this way," he said.
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Frits Bolkestein, the European commissioner responsible for the directive,
said the defeat is a serious setback for the EU’s ambition to become the
world’s most competitive economy by 2010.
By Ben Willmott
