Are institutional investors influence over publicly listed companies over-stepping the mark? | Business

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The beginning of the industrial revolution created new opportunities as well as problems for the business enterprises of that era in that there were a limited number of individuals as well as investors who could finance the large sums of capital needed to underwrite the vast scale of equipment, resources and expansion required. In order to capitalize upon the numerous opportunities which were presenting themselves as well as avoid being overexposed in any one venture, financial markets rose as a means for several investors to join in sharing the risks as well as the financial investment. The beginnings of the preceding, financial markets, started in Europe to finance the industrial revolution as well as the expansionist policies of the British empire (eCommercenow, 2005)..

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Today’s financial markets are the medium for the processing of variousbusiness financial transactions ranging from new issues to stocktrading. Through the issuance of shares as well as financial reportingand public disclosure businesses are able to raise capital to financenew plant and equipment, expansion, research and development along withother purposes to increase sales, market share and bottom lineperformance. The ability to raise capital does come with certainexpectations on the part of shareholders who hold a stake in theperformance of the company, thus its directors and management mustproduce bottom line results. This measure of influence afforded bystock regulations and shareholder representation in the affairs of thecompany through annual shareholder meetings and voting on the Boardcreates interesting scenarios. Shareholders are able to reviewmanagement’s performance and as such can question various aspects atthe shareholders meeting. Substandard performances have seen directorsand executives removed from their positions, as well as serving to fueltakeover bids by investment companies who advise shareholders that theycan receive a better return under their management. The reverse of thisscenario also occurs. When the company has done and/or is doing well,the accumulation of assets, cash and other related positive financialaspects serve as attractive bait for various investment companies toseek to take over operations.
In the United States, the quintessential corporate investment firm isKohlberg, Kravis Roberts (KKR), known for their utilization of theleveraged buyout (LBO) through the creation of limited partnerships totake control of corporations. Known for their leveraged buyout of RJRNabisco, Gillette, Safeway, Borden and other companies (kkr, 2005),they have acquired the reputation as corporate raiders. Known as aninvestment holding company, Guinness Peat Group Plc focus on acquiringpositions in as well as owning public companies engaged in variousindustry sectors. This case study shall examine the offer by GuinnessPeat for De Vere Group Plc focusing upon the reasons resulting in theoffer as well as the factors contributing to same.

Chapter 1 – Case Study, Guinness Peat Plc / De Vere Group Plc

1.1 The Climate
The events leading up to the offer by Guinness Peat Plc for De VereGroup Plc find themselves rooted in the overall climate of global aswell as the British stock markets preceding 2004 when the indicatedoffer was tendered.

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