Defense is not a reaction, it’s a mindset
Public market valuations remain subdued, particularly across the UK mid-cap universe, while private equity firms continue to hold record levels of capital. In 2024 and into 2025, this imbalance has created fertile ground for takeover activity.
According to the Office for National Statistics, inbound M&A by non-UK acquirers reached £9.3 bn in Q2 2025, compared to just £3.4 bnfor domestic deals. Total UK M&A value in the first half of 2025 stood at around £57 bn, despite deal volumes being down 19 percent year-on-year. Private equity buyers remain a dominant force, supported by an estimated £190 bn in UK-managed ‘dry powder’ waiting to be deployed.
Valuations remain compressed: European corporate transactions are averaging 8.5 times EV/EBITDA, while private equity deals often command 11 times or higher, a differential that continues to draw opportunistic bids.
Which companies are most exposed?
While any listed company can become a target, certain profiles face heightened vulnerability:
- UK mid-caps and AIM-listed companies: lower liquidity and limited analyst coverage make them easy targets for stake-building
- Undervalued cyclicals: industrials, construction and consumer businesses trading below intrinsic value
- High free-cash-flow generators: self-funding, cash-rich companies that reduce execution risk for bidders
- Asset-light and IP-rich firms: undervalued intangible assets attract bidders seeking to unlock hidden value
- Consolidating sectors: peer activity drives momentum: when one firm is bought, attention often turns to the next.
Defense is not a reaction, it’s a mindset
Dan Homan, head of IR at UK retailer Currys, recently told the Enquire podcast about what defense readiness really means and how IR fits within that picture.
‘We had a defense manual, and we refresh it once a year,’ he explained. This document provides a blueprint for how the board and advisers respond when an offer is received. But beyond documentation, it represents a mindset of readiness, a recognition that defense is as much about perception and credibility as it is about mechanics.
The defense manual underpins a company’s ability to act decisively under pressure. It defines the logistics, but it also reinforces a culture of discipline and awareness.
Its purpose is to:
- Prepare the company for hostile or friendly bids
- Ensure clarity of authority, timing, and decision-making
- Enable rapid coordination between the board and advisers.
Typical contents may include:
- Key contacts, advisory responsibilities and escalation procedures
- Internal valuation materials and supporting financial data
- Draft announcements and communications templates
- Shareholder-engagement and media-response protocols
- Governance checklists and code compliance guidance
- Scenario planning and lessons from previous bid situations.
Functions which contribute to it include:
- Financial adviser – leads valuation, bid strategy and market testing
- Broker – monitors trading, share-register changes and investor sentiment
- Company secretary – manages disclosure, governance and regulatory compliance
- Legal counsel – oversees announcements, documentation and Takeover Code timelines
- IR – ensures coherent shareholder communication, manages perception and coordinates messaging with advisers.
While IR may not own the manual, it should help shape it, particularly sections concerning market messaging, investor engagement and response strategy.
The strategic role of IR
IR sits at the intersection of finance, strategy and communication making it uniquely positioned to shape perception before a takeover approach materializes.
1. Influencing valuation through consistent storytelling
By articulating a clear, credible equity story and reinforcing it across results, roadshows and investor meetings, IR helps ensure the market correctly understands the company’s value drivers.
A disciplined narrative, linking strategic decisions to financial outcomes, reduces valuation gaps that attract opportunistic bidders.
2. Highlighting hidden assets and growth levers
IR can ensure investors appreciate assets that may not be fully valued in analyst models: intangible IP, underappreciated cash-flow streams or long-term platform potential. Bringing these to light enhances perceived value and positions management as proactive, not reactive.
3. Anticipating activist or bidder narratives
Through regular engagement and sentiment tracking, IR teams can spot early signals of activist activity, such as concentrated shareholdings, short-term positioning or critical public commentary. By understanding how a bidder might frame its case (‘unlocking value,’ ‘improving governance,’ ‘streamlining costs’), IR can help the board prepare counter-narratives before they gain traction.
4. Building coalitions across stakeholders
Modern defense extends beyond equity investors. IR increasingly plays a coordinating role across:
- Retail shareholders, who can be vocal in public forums
- Proxy advisors, whose recommendations shape institutional votes
- ESG-focused funds, for whom narrative credibility and governance practices matter as much as returns
- Bondholders, who assess financial stability and refinancing implications in takeover scenarios.
A strong IR program ensures all these audiences understand the company’s long-term strategy and alignment, reinforcing loyalty when a bid emerges.
5. Integrating activist and M&A defense
Activism and takeover defense are two sides of the same coin. Many hostile or unsolicited bids are preceded by activist pressure through public criticism, stake-building or calls for strategic change. Companies that treat activism as a separate issue often miss early signals of a broader threat.
A strong defense strategy recognizes that activist defense is bid defense. Both rely on vigilance, preparedness and control of the narrative.
IR plays a pivotal role in this overlap:
- Early-warning monitoring: IR is often first to detect subtle register changes, new positions among top shareholders, unusual shorting activity or shifts in tone from previously supportive investors
- Sentiment analysis: Continuous feedback provides insight into whether investors are aligned or drifting toward activist narratives
- Narrative control: Consistent, evidence-based communication around value creation deprives activists and potential bidders of easy talking points
- Playbook integration: The company’s activist response plan and M&A defensemanual should be unified, sharing the same escalation paths, advisers and communications protocols.
An effective IR function therefore acts as the early warning radar in both activist and takeover contexts translating market signals into actionable intelligence and ensuring the company remains a step ahead.
Warning signs and market vigilance
Brokers, advisers and IR teams should remain alert to:
- Unusual share-price or volume movements
- Sustained negative or activist feedback
- Unexplained changes in the share register
- Sector consolidation or media speculation.
Maintaining vigilance and rapid information-sharing ensures a constant state of readiness.
Regular valuation reviews, blending internal plans with broker analysis, enable the board to respond confidently to unsolicited approaches. For example, when Currys received a bid from Elliott Advisors, it had refreshed its internal view on valuation only weeks earlier, ensuring clarity and control.
When an approach becomes public, coordination among advisers is critical:
- Establish a board defense committee
- Confirm a single spokesperson and unified narrative
- Activate s.793 procedures to identify beneficial owners
- Verify supporting data and ensure valuation accuracy
- Run a fire drill to test the process
- Release key defense themes quickly and consistently.
Good preparation underpins credibility and credibility underpins defense.
Case studies and lessons learned
- Morrisons (retail sector)
- After rejecting a £5.5 bn bid from private-equity firm CD&R as undervaluing the business, Morrisons compelled bidders to compete and ultimately accepted a £7 bn offer.
- Lesson: Defenses are not always about rejection. They can be about forcing price discovery. A credible board, confident in its valuation, can extract higher value.
- G4S (security and outsourcing)
- When faced with a hostile £3 bn bid from GardaWorld, G4S defended by emphasizing its fundamentals and independence. Ultimately, it accepted a £3.8 bn offer from Allied Universal choosing a consensual exit.
- Lesson: Strong defense messaging can shift dynamics, enabling a move from confrontation to negotiation without eroding credibility.
- Aveva (technology)
- Aveva’s eventual acquisition was friendly, not hostile, but its experience underscores the importance of clarity in intangible asset valuation.
- Lesson: In tech and IP-rich sectors, under-communicating future growth levers leaves room for bidders to define your narrative for you.
Engage and educate internally
Effective defense involves the whole organization, not just the board or advisers. Employees, regulators, the media and even customers can all influence how a defense is perceived and, ultimately, whether it succeeds.
When an approach becomes public, employees look for reassurance, customers seek continuity and regulators and journalists scrutinize every statement. A fragmented message across these groups can undermine credibility, while a consistent, measured narrative reinforces control.
Investor Relations plays a central role in aligning messaging across all audiences, ensuring the company speaks with one voice. Working closely with communications, HR, legal and corporate affairs, IR helps craft a unified story that reflects the company’s long-term value and strategic intent.
As Dan Homan noted, Currys invested in internal ‘lunch and learn’ sessions to help employees understand how investors think and what drives share-price performance. Extending that approach company-wide so every spokesperson, employee and partner can articulate the same strategic story creates cohesion and credibility when it matters most.
IR checklists
In addition to broad readiness, IR teams should maintain a standing set of defense essentials:
- Maintain a ‘shadow’ share-register analysis: identify changes in holdings, including derivatives and short positions
- Keep top 20 shareholder contacts warm: ensure you can reach key decision-makers directly and quickly
- Run quarterly scenario drills: test response processes and messaging alignment
- Review investor perceptions regularly: understand how your story is landing and address misalignments early
- Coordinate with advisers: ensure brokers and financial advisers have current materials and understand the equity story
- Prepare template communications: leak announcements, Q&A briefs and investor letters should always be in draft form
- Link defense and activism monitoring: share intelligence between teams to spot patterns early.
IR teams should also do the following:
- Understand the defense manual and their defined role within it.
- Maintain updated valuation materials and consensus models.
- Track market sentiment, trading anomalies and activist activity.
- Articulate undervalued strengths such as cash flow, IP, market share to close perception gaps.
- Build relationships with proxy advisors, ESG funds and bondholders.
- Conduct regular scenario planning and ‘fire drills’ with advisers.
- Keep messaging consistent and pre-empt bidder or activist narratives.
- Align internal and external communications across all stakeholders.
Conclusion
In a market awash with private equity capital and undervalued UK assets, defense readiness is not optional but a fiduciary necessity.
IR is not a cost center; it is a strategic line of defense. A strong IR function can make the difference between selling under pressure or retaining control and realizing full value.
By owning the company’s narrative, anticipating market pressure points and maintaining deep relationships across the capital base, IR helps boards defend not just the share price but the company’s independence, credibility and long-term potential.
Clara Melia is the founder of Equitory, an IR and communications consultancy based in London
