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Tuesday, 11th August 2020
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Getting the story right Back  
Ita Gibney details the media strategy behind Royal Bank of Scotland’s acquisition of First Active, and how it played a role in contributing to the success of the transaction.
IIn September 2003, First Active plc emerged from a five-year protection period following its conversion from a building society to a public company. This protection period prevented anyone from owning more than 15 per cent of the company, effectively preventing a takeover.

Just a month later, the company announced an offer by The Royal Bank of Scotland plc of €6.20 per share, a 33.3 per cent premium over the closing price of €4.65 and a 156 per cent premium over the original flotation price of €2.86. The transaction was viewed as a win-win for both parties: The deal, recommended by the Board, was greeted as an outstanding realisation of shareholder value, especially given the dark days of trading for First Active shares in its early years as a public company, while the acquisition was also seen as a valuable strengthening of Royal Bank of Scotland s position in the Irish market.

First Active, within a short period, had transformed itself into one of the best performing companies in the market, coming from a position where it was deemed to have a dim future. Its share price was depressed, its margins under attack, and it was seen as strategically stranded as a small mortgage player in a consolidating market.

How did the communications strategy adopted by the company and its management, assist and support in the achievement of value for shareholders through the RBS deal? More important, how did the PR strategy help in the repositioning of the company in the period prior to the deal, especially in the months running up to the lifting of protection and in the management of the deal announcement itself?

The PR team worked closely with management in this process since the collapse of the merger talks with Anglo Irish Bank. Enlightened new management saw the communications strategy as a key component in corporate recovery. As the company moved forward out of intensive care, the message to the markets and the media needed to be clear and credible. Goodwill was in short supply. Adjectives such as 'beleaguered' and 'troubled' were used to describe the company in the media. Shareholder confidence was at an all time low and media patience was exhausted. The company knew that mistakes would not be forgiven and that there would be no honeymoon for new management. Credibility had to be regained through strong performance, without any promises or PR hype. Communicating progress as it developed was important. The company reached out directly to shareholders using newsletters and regional shareholder meetings in venues throughout the country. This programme was unique, involving all 140,000 shareholders and helping rebuild trust and confidence in the company. A media programme helped rebuild confidence also in the company and its management. Interviews were given around the financial calendar when the company had important messages to deliver and progress to show.

In the months running up to the offer by RBS, First Active management were clear that they had a legitimate aspiration and plan to continue to drive shareholder value as an independent entity. The focus was on growing the business, not preparing the company to ward off a takeover or to prepare for one. Rather it was to create a win-win position for shareholders whereby the share price was strong and the value put on the company by the markets, or by any potential acquirer, would value the company and its business highly.

For all their stakeholders, this strategy, and the belief that independence was a real option going forward, needed to be articulated, not merely to protect the strong market position achieved by the company but to help to continue the focus of everyone in driving the company forward and protecting the gains made already. Whatever about market commentators, First Active never saw itself primarily as a takeover target, or believed that its future was necessarily through a sale. This stance protected shareholder value. First Active saw itself as master of its own destiny, with choices and a strong future in its own right. When protection was lifted, First Active would not be a soft target for takeover.

The chief executive of First Active, Cormac McCarthy, had now a track record of substantial performance behind him, profit before tax grew from €41.1m in 2000 to €66.1m in 2002 (the last published accounts before the sale to RBS) representing a 60 per cent increase. He also had the confidence and support of the board and management team for the independence strategy.

A programme of keynote speeches and interviews was undertaken as the company neared the lifting of protection. The company publicly stated the legitimate aspiration of First Active to be independent. Internally, morale in the company was high and the markets were beginning to see First Active as it saw itself, not just a takeover play. Certainly the communications strategy helped drive shareholder value then and subsequently when the offer came.

Secrecy and speed was the key as discussions took place privately between RBS and First Active. When the deal was announced to the market at 7.00am on 6th October, many commented on the fact that it did not leak beforehand. The strictest of confidential procedures were put in place alongside intensive preparation of materials to communicate the key messages to all audiences in First Active, Ulster Bank and the external markets as quickly and completely as possible.

Key messages were hammered out - the price was very full and fair value, it enabled shareholders to crystallise the value that had been created in the company in recent years, averaging €6,000 for each typical small shareholder. The PR and media plan were particularly important given the structure of the shareholder base  the majority of them being small shareholders owning less than one thousand shares. Messages were agreed with RBS and Ulster Bank as to the growth opportunity this would create for customers in the Irish market, creating a highly effective challenger to the larger banking competitors, making a major impact on the Irish banking market.

Detailed preparation on messages around all the key issues was undertaken including price, the offer process, the approval process, staff and branches, product and business mix. Letters were drafted to be issued to staff immediately the announcement went to the Stock Exchange, briefings were arranged for management throughout that morning, and a detailed media plan was put in place, kicking off with the RTE Business News at 7.30am following the Stock Exchange announcement at 7.00am. A press conference was called for 11.00am for all business media, attended by the top management of Ulster Bank, First Active and hosted by the chief executive of RBS, Fred Goodwin.

The speed to market with the message gave the opportunity for maximum control of the communications process and clarity of message to all parties. The deal was viewed as an excellent one and came quickly into the consciousness of all commentators as a ‘shut-out’ deal given the price. Staff and unions were kept fully informed about the deal and no comments were made outside the press announcement by any of the parties involved. All target audiences were directly contacted by the companies within the shortest possible timescale after the announcement had been made. All of the media coverage and market commentary was positive and the deal sailed on its way towards approval by shareholders through the regulatory process. There was no negative publicity, and all the media coverage about the deal was accurate. The entire process was concluded successfully and to schedule in January 2004.

Subsequent media coverage voted First Active Company of the Year (Business & Finance), First Active Best Deal of 2003 (Sunday Independent) Cormac McCarthy Best Deal Maker of 2003 (Sunday Independent) and Cormac McCarthy Top 10 CEOs in 2003 (Business Plus).

First Active is a case of where PR was used effectively to support the key business objective of the company, and was one important factor in helping deliver what has been deemed outstanding shareholder value.

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