Time for Balfour Beatty and Carillion bosses to rebuild bridges – Bottom Line
Playing hard to get has always been an obvious tactic for any bunch of executives who find their firm targeted by a takeover-hungry rival. Yet knocking back your suitors has become especially modish this year, with the boards of Astrazeneca and Time Warner notably resolute in their determination to go it alone.
To some extent this makes sense. A more bullish economy tends to lead to greater M&A activity, yet also emboldens targets. A positive macro climate allows them to argue that their business plans can work without the help of any merger.
But for the latest obdurate target, Balfour Beatty, it’s difficult to argue that they’re better off staying single. While the construction firm is massive, it really hasn’t fared too well of late, issuing a string of profit warnings. Shares fell from 320p in March to 216p last month, before news broke of a possible deal with Carillion.
What’s more, the deal makes a huge amount of strategic sense. Synergies will be considerable, even if you’re cynical about the £250m figure that was floated. The market greeted the original news of a potential deal warmly, Carillion stock jumping seven per cent and Balfour’s getting an even sharper nine per cent hike.
Negotiations have tested the relationship between Carillion’s Philip Green and Balfour’s Steve Marshall. This is understandable, yet despite all this year’s defiance, execs (and non execs) must remember that their duty is to secure the best outcome for shareholders. In this case, that means getting back around the table.