Bernard Ginns: SMEs looking at acquisitions should beware dark secrets

Cadbury's board finally recommended the cash-and-shares offer, which values the company at 11.4bn, around two weeks ago.

The shareholders are unlikely to reject the offer, but the US food giant will still face significant challenges ahead, not least the integration of two enormous companies, which together have a workforce of more than 140,000.

"Beyond melding disparate corporate cultures, Cadbury's public dismissal of Kraft's business model and manage-ment decisions in recent months increases the challenges of this integration," said one analyst.

Unions, MPs and campaigners fear that the cost-cutting and revenue growth promised by Kraft's CEO Irene Rosenfeld will lead to massive job cuts.

Remember that Cadbury employs 800 in our region, at its sole UK sweet factory in Sheffield. Beyond the headlines and macho posturing, real livelihoods are at stake here.

ON the subject of takeovers, hidden horrors can often be unearthed during investigations after deals are agreed. I'm not suggesting this is the case with Cadbury, but companies eyeing potential acquisitions should make sure they understand the risks before making a bid.

As I understand, target companies in hostile takeovers are not obliged to give the bidder any information unless it has already shared that information willingly with other interested parties, which could make it very difficult to understand what exactly is being taken on.

Andrea Cropley, a partner at Nabarro law firm in Sheffield, told me: "The increase in mergers and acquisitions will see some SMEs moving to buy smaller quoted companies that might also have skeletons in the cupboard where, without the right guidance, they can also buy huge liabilities they never dreamt would be there.

"Hidden health claims and worse often lurk deep in a target company's family tree, so acquisitive companies need to beware and root them out as fast as possible."

She described a recent situation in which an IT firm targeted a computer-aided design (CAD) company for takeover. The target had started life as an in-house department in a shipyard, but was later used as a shell for the shipyard to place its asbestos liabilities.

"No-one would have thought a CAD company was carrying such potentially massive insurance liabilities and this shows the risks where it may not be possible to unearth full information before the deal is done," said Ms Cropley.

My advice for companies contemplating takeovers is to get the target boards onside so offers can be recommended, which will led to disclosure of this kind of information.

Otherwise, it is a big leap into the unknown.

FOLLOWING recent appearances by David Cameron, George Osborne and Ed Balls, Nick Clegg was the latest public school politician to stand on the stage at The Queens hotel in Leeds and try to convince Yorkshire's business community that they should support him.

I'm not a political animal, but I must say Mr Clegg did a fairly good job and judging by the loud round of applause at the end of Friday's speech, so did others.

His wasn't a complicated message. A financial neutron bomb has gone off in the middle of our financial services sector, an industry to which we are massively overexposed and which has combined liabilities four times greater than the entire British economy.

Government must reform that sector and act decisively to rebalance the economy away from the City of London, he said."It is economically irresponsible, socially unacceptable and morally unsustainable to have one sector, one vested interest which is so big that when it goes wrong everyone in this room has to shell out a whole load of money to bail them out and a gun, in effect, is held to the head of the whole economy because of the failings and greed of that one sector. We cannot allow that to happen again."

Well said. But whether he ever finds himself in a position to influence the kind of deep change that is needed remains to be seen.

AT last, Marc Bolland has a starting date for Marks & Spencer. The Flying Dutchman, as I shall call him, will start at the retail flagship on May 1, after Morrisons yesterday said he was free to go.

The Apeldoorn-born 50-year-old spent just three-and-a-half years at Morrisons before jumping ship. He has negotiated a very attractive package with his new employer, including a basic salary of 975,000, plus bonus and share award schemes which will take his annual pay into the stratosphere.

It will be interesting to watch his progress. It's a long way from Market Street to Marks & Sparks.