Equity & Law

"Heatley’s exposure to Brierley’s from the inside was causing him to re-evaluate the way the company operated. One deal in particular shocked him. Brierley’s owned 30 per cent of British life insurance company Equity & Law. By law, an investor could not buy more than 33 per cent of a British company without bidding for all of it. Heatley recalled Brierley saying that BIL would bid for Equity & Law because two other companies wanted it and he was certain one of them would bid higher. That would push up the value of the New Zealand investor’s 30 per cent stake. Heatley was torn between being impressed by the brazenness of the strategy and alarmed by its potential consequences. BIL was not bidding to buy, but bidding so that someone else would overbid and push up the total value. He thought it a dangerous ploy. What was more, these were big sums in play. Brierley’s was bidding on a scale he had not previously seen. ‘I’d never thought you’d risk NZ$1 billion thinking that you weren’t really going to buy something because you thought someone else was going to buy it. But I was just listening and thinking, Well, these guys are brilliant, they know what they’re doing.’"

"BIL made its first bid for Equity & Law in early September 1987 and Brierley was proved correct when the French giant Compagnie du Midi quickly overbid. BIL now stood to make a £20 million profit on its 30 per cent stake. Then, Heatley recalls, Brierley said, ‘Oh, they’ll pay more than that.’ Brierley’s upped its bid for the company it did not want, to 450p per share, valuing the company at £453 million. There was a nervous wait before Compagnie du Midi came back and overbid again at 455p per share. Brierley’s brinkmanship had made his company a £42.9 million ($NZ106 million) profit. But just five days after the binding offer was made, sharemarkets around the world crashed. Brierley’s timing had been impeccable but far too close for comfort. ‘If Brierley’s had not been overbid they would have been in massive strife right then,’ Heatley recalls. ‘The French must have felt sick, although they ended up owning the company, and Brierley’s looked like heroes while I was left just thinking, Wow, these guys are cowboys.’ It seems ironic that Heatley’s General Motors suggestion had BIL thinking that he was too great a risk-taker for its taste just at the point where Heatley was reaching the same conclusion about Brierley’s. They were destined to part and, given their history, perhaps that should have been no surprise. Very soon there was a lot more on everyone’s minds than investment possibilities, though. In mid-October 1987, stock markets around the world began to slide. For many investors, executives, workers and companies, catastrophe was coming."