For public companies (including those that are unlisted), an unsolicited offer can come at any time. The responsibility of the Board is to consider the offer in the interests not only of the business and its shareholders, but other interest groups as well.
Whilst the most obvious aspect of a bid defence is an assessment of the offer price, there are a broad range of considerations to take into account.
The bid readiness assessment is a review to identify what gaps exist in providing senior management and the Board with the information to respond quickly, thoroughly and professionally. Key coverage areas include:
- Are corporate valuations, including a sum of the parts valuation for multi-business groups up to date
- Implications of historical share price performance and relativity to appropriate benchmarks
- Consideration of a bid on other stakeholders such as employees, customers and suppliers
- Implications of new initiatives and opportunities
- Understanding shareholder needs and the status of the investor relations function
- Review of historical financial performance to assess implications for a potential bid, including accounting policies, pro forma financial information and non-core or discontinued operations
- Are budgetary and forecasting systems robust to produce outlook statements and to potentially publish forecasts?
- Suitability of internal controls and corporate governance
- Readiness of communication protocols
- How quickly can external support be marshalled and get up to speed
- Other due diligence considerations which could include, but not limited to environmental, legal and operational issues
This is an independent review on the ability of a public company to respond to an offer, which is aimed at providing practical advice on its readiness.