Carrying on As If Nothing Has Happened...

It’s worrying for the workers of Cadbury that they have been bought over by Kraft, and is also worrying for consumers who enjoy their products. As another part of the shared “British” heritage is sold to overseas hands, who we doubt could ever understand our needs and desires, we really should be used to our businesses being bought by foreign companies, shouldn’t we? Well, no because the sound of silence from our elected leaders is deafening.


What is worrying though is that this take-over was facilitated by a huge loan, with the Cadbury’s business as the collateral. If memory serves, there are 3 main examples of these “leveraged take-overs”, and none of them have been stunning successes. In June 2006 Ferrovial bought BAA for, at the time, the highest leveraged takeover for £10 billion. Cadbury went for £11.5 billion. BAA hasn’t really endeared themselves to the public by capitalising on the captive customers they have by selling overpriced food & drinks airside of security.

The other main example of a leveraged take-over was Malcolm Glazer’s takeover of Manchester United in May 2005 for £790 million, which in the wake of the recession is now having an effect on Manchester United’s competiveness. Leveraged takeovers do seem to be rather like asking for some money from someone and then killing them.

The age of borrowing money against thin air is clearly not over yet.