The level playing field is good but not essential

By Penny Hawthorne | 12 September 2005

Yesterday's Observer newspaper had an article on the current takeover and mergers boom in the UK:

One chief executive, who spoke on condition of anonymity, said: 'Britain's liberal capitalistic approach means that our market is open to bids from our continental rivals, but it is more difficult for us to cement deals in Europe, especially on a hostile basis.'

Anthony Vickery, a mergers and acquisitions partner at accountants Ernst & Young, said: 'Takeovers are fine, but only if the playing field is level.

But while a level playing field is good, it is not a necessary thing. If you are an investor in British Telecom and France Telecom decides offers you money for your shares, you make a choice about whether that's a good a deal for you. It does not matter if France Telecom is protected or not from overseas ownership.

Of course, British Telecom might not be pleased to be prevented from making a strategic purchase of France Telecom. It would be better for the world economy if the French government did not try and restrict foreign ownership - British investors would benefit from French openness because it would increase the choice of companies in which to invest. Moreover, French takeover protectionism reduces investment in French companies, hurting their ability to compete in world markets. It makes French shareholders poorer too. But Britain shouldn't throw bricks at its harbours just because France does.