BIM46460 - Specific deductions: professional fees: take-over bids

There is detailed guidance at BIM38260 onwards.

A company may avail itself of a number of different types of professional and financial services (whether bought in or undertaken by the company's own staff) in the course of making or defending a takeover bid. The costs may be charged under a number of different heads in the accounts. For example:

• Profit forecasts will be put together in consultation with merchant banks and accountants, usually the company's own auditors.
• Merchant bankers and stockbrokers may also earn very substantial fees from giving general advice and on such matters as researching the track record and financial soundness of the predator.
• Specialised legal advice will also be needed because the regulations governing conduct during a bid are complex and as attempts may be made to have a bid referred to the Monopolies and Mergers Commission.
• An advertising campaign may be launched to maintain the loyalty of small shareholders.
• Costs (for example, paid to public relations consultants) will also be incurred in briefing individually major institutional investors.
• The costs of printing and distributing defence documents will themselves be substantial.

Even where bid defence costs are identified separately in the annual report it is still worth considering whether everything has been included.

You should critically examine claims that the costs are deductible in the light of the legal principles at BIM42101 - BIM42105 (trading companies) and CTM08350 (investment companies).

You will need to undertake detailed and comprehensive fact gathering, and the application of the legal principles to the particular facts can be complex.