Endless fears over increasing takeover rules

The Takeover Panel is conducting an independent review of takeover rules prompted by the controversial acquisitions of UK firms by predatory foreign buyers.

Business Secretary Vince Cable said last week he has an "open mind" on the introduction of a public interest test, which his party called for before the General Election.

But Endless LLP, which invests in troubled companies, improves their performance and sells them for a profit, has warned against such a move.

Darren Forshaw, co-founder, told the Yorkshire Post: "Anything that acts as a brake on being able to invest in businesses in a short timeframe increases the prospect of business failure and associated job losses.

"I think we can all understand the emotional issues that underpin Dr Cable's concerns, for example when Kraft acquired Cadbury, but I hope that any regulation is very carefully drafted as often these best intentions have unintentional collateral damage that have much worse consequences for the public than what they set out to stop."

He said decisions on turnaround investments usually have to be made within three weeks and often with incomplete information. Any longer and businesses can close with the loss of jobs, he said.

Mr Forshaw added: "There is a price to be paid for having a capitalist economy. Who can be the judge of the intentions of somebody when they make an investment as opposed to what their ultimate actions are?

"Often businesses are faced with having to make some very unpalatable decisions for the greater good of the rest of the business, which could be seen as asset stripping, but in reality is just pure, common business sense to ensure the rest of the group continues to operate."

Demand for turnaround work is likely to continue, based on the firm's cautious outlook for 2011 and beyond.

Mr Forshaw expects a "benign but difficult" environment and predicts that next month's spending review will not banish the prevailing uncertainty in business sentiment.

"Most people are making the mistake of assuming that there will be clarity in the spending review," he said. Instead, it will take six months for cost-cutting plans to be drawn up and a further six months for them to be put into effect, he said.

Endless has 17 companies in its portfolio. It has invested its first fund, worth 110m, which was provided by Sheffield property developer David Newett, and is nearly half the way through its second fund, worth 164m, making 10 investments to date.

None of its investments are currently being marketed, said Mr Forshaw, but the relative strength of trade buyers, which have built up sizeable war chests in recent years, and a bubble in the private equity market means that Endless cannot rule out disposals this year or next.

"It's part of our value creation plan that we prepare a business for sale so we can go to market as soon as the price is right," he added.

DavyMarkham, the Sheffield-based heavy engineer, and pharma company Excelsyn were both sold earlier this year to trade buyers.

In the private equity market, buyout firms are under pressure to invest funds before agreed dates, which is driving up prices for the best businesses, said Mr Forshaw. He cited Wakefield-based retailer Card Factory and Ripponden-based laundry firm JLA as examples.

The star performer of the second fund is Crown, the paint manufacturer with operations in Lancashire and Hull, which is on target to deliver operating profits of more than 10m this year, said Mr Forshaw.

Endless will soon start raising its third fund, which is expected to be worth 250m to 300m.