The Takeover Panel has announced that it will review the UK's rules on corporate acquisitions amid mounting political pressure to reduce the influence of short-term investors.

The move, which has been closely followed by City professionals, was welcomed by business secretary Vince Cable (pictured), who argued that short-term speculators such as hedge funds should not determine the outcome of corporate bids.

The consultation follows criticism of Kraft Foods' £11.5bn acquisition of UK chocolate manufacturer Cadburys. The US company controversially failed to reverse Cadburys' planned closure of its Somerdale factory, contradicting statements made during the bid process.

The Liberal Democrats had pledged in their general election manifesto to reform the UK's takeover regime to introduce a public interest test and reforms to favour long-term shareholders over hedge funds.

However, it remains unclear whether the coalition Government will press ahead with major reform as the Conservative Party has previously been hostile to the notion of ushering in a less liberal rulebook for M&A.

Proposals to overhaul the UK's takeover regime have generally been unpopular with M&A lawyers, who argue that the current rules have attracted investment to the UK. Many lawyers also argue that it will be difficult to separate short-term investors like hedge funds from institutional fund managers.

Nabarro corporate partner Iain Newman commented: "Most of the points raised come out of the political dissatisfaction with short-term investors and their perceived ability to deliver a target company into a [bidder's] hands in circumstances which politicians might view as contrary to the national interest."

Areas the review will cover include the '50% plus one' voting requirement for takeovers to go ahead, whether voting rights should be withheld from shares bought during an offer period and whether the 1% disclosure threshold for dealings and positions in target companies should be reduced. It will also review whether inducement fees and other deal protection arrangements should be restricted.

Norton Rose corporate partner Paul Whitelock said: "While proposals around the acceptance threshold and voting disenfranchisement would appear the most far-reaching, market participants will no doubt feed in strong views on a number of areas, particularly in relation to the proposed timetable changes and potential reform of the 'put up or shut up' regime."

Hogan Lovells corporate partner Nigel Read told Legal Week: "The consultation paper features fundamental proposals which cannot be achieved unless they come in conjunction with changes to company law. However, they are right to take the line that they have – putting out issues for discussion rather than recommending specific changes."

The consultation period will close on 27 July.

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