Mark Kleinman’s must-read column: Apollo, Ofgem and Hargreaves Lansdown
Mark Kleinman is Sky News’ Business Editor and writes a must-read column for CityAM on the biggest business stories of the week
Apollo’s failed missions will make take-private landings harder
Apollo and ground-breaking missions of accomplishment have long been synonymous. Right now, for the US-based investment firm of the same name, simply getting the takeover of a UK-listed company over the line would rank alongside the lunar landings as an achievement.
In the space of a week, Apollo Global Management has abandoned offers for THG, the online beauty and nutrition retailer, and Wood Group, the oil and gas engineering company – the latter after five written takeover proposals and several months of pursuit.
Bankers frequently complain that public-to-private deals have become acutely difficult in recent years after revisions to the UK takeover code. Apollo’s flakiness can only exacerbate that sentiment.
Boards’ fiduciary obligation to take seriously any bona fide offeror who comes knocking is now at risk of causing their directors major embarrassment. In Wood Group’s case, countless board meetings, substantial advisory fees and the inevitable distraction from running its business might all be put down to the everyday perils of life as a listed company.
The risk feels asymmetrical, however. True, Apollo itself incurred substantial financial costs from its forays into the THG and Wood boardrooms. These were, however, minuscule in the context of its global scale and $550bn of assets under management.
Tyre-kicking is, of course, part-and-parcel of a private equity investor’s approach to sizing up deal opportunities. But add RPC Group, Pearson, William Hill and Wm Morrison to the list of public companies that Apollo has approached and failed to consummate a deal with in recent times, and a pattern is obvious.
“Taking companies private in the UK is hard enough,” a rival buyout firm executive lamented. “Apollo is going to make it harder for the whole industry.”
The private equity firm headed by Marc Rowan shouldn’t, then, be surprised if boards seek more anti-embarrassment measures like go-shop clauses into future negotiations with it. Apollo’s next UK mission looks like being even tougher to pull off.
Tyrie mightn’t tire of the task at Ofgem
The Financial Conduct Authority, the Court of the Bank of England, a stint as chairman of the Competition and Markets Authority: there aren’t many public sector jobs that Lord Tyrie, former chair of the Treasury Select Committee, hasn’t either done or been linked with in recent years.
He can now add Ofgem, the energy regulator, to the list. And while Lord Tyrie’s candidacy may well strike fear into the heart of the Ofgem chief executive, Jonathan Brearley, there are sound reasons to consider him seriously for the role.
First, Ofgem is in need of a radical shake-up. By its own admission, it failed to deliver a sufficiently robust licensing regime for domestic gas and electricity suppliers, paving the way for the collapse of dozens of them.
True, the watchdog cannot be faulted for failing to anticipate the soaring wholesale prices exacerbate by Russia’s invasion of Ukraine, but its lack of robust contingency plans was inexcusable.
It has also performed lamentably in its handling of the pre-payment meter scandal, preferring to hound journalists to disclose their sources instead of fulfilling its mandate to protect consumers and ensure the smooth functioning of the market.
Belatedly, Brearley and his team have started to act: many of Ofgem’s new licensing rules and restrictions on meter installers make sense.
That brings us back to Tyrie. His recent criticisms of economic regulation in Britain – in an article written jointly with the Conservative backbencher Bim Afolami, chair of the Regulatory Reform Group – underlined his reformist credentials.
“The regulators that shape the British public’s daily lives are far too often black boxes — inscrutable institutions offering little explanation of their decisions,” they wrote.
“It can sometimes be difficult to tell if a decision has been made in pursuit of a clear goal or if regulation is simply the unforeseen side-effect of a decision made elsewhere.
“Nor is it always clear if multiple regulators are communicating effectively in pursuit of shared goals.”
Assuming that this call to arms represents in part a pitch for the Ofgem chairmanship – or a role at any other regulator – Tyrie would be committing to an overdue transparency.
As abrasive as he can be, he may be the right kind of figure to put the spark into a body at which the lights seemed to have gone out long ago.
Meet the new boss – soonish
It’s been more than five months since the FTSE-100 investment platform Hargreaves Lansdown named Dan Olley as its new chief executive amid pressure from founder-turned activist Peter Hargreaves.
He still hasn’t turned up though. Insiders say that Tesco, where Olley runs the data consulting arm dunnhumby, is keeping him to the letter of his 12-month notice period unless it finds a successor who can start earlier, according to insiders.
A spokesperson for HL said it was “looking forward to Dan joining as CEO and will announce his start date as soon as possible”.
It’s far from ideal for Hargreaves Lansdown given its co-founder’s vocal criticism of the company’s strategy and performance. With a sizeable stake, Hargreaves is destined to continue being a thorn in its leadership’s side.
Tesco’s stance must be particularly aggravating for Deanna Oppenheimer, the company’s chairman. After all, she spent years on the board of Britain’s biggest retailer. Every little doesn’t always help, it seems.