A PE fund wishes to buy a significant stake of 24% in a listed company and has been discussing with the company about the transaction as a combination of funding the company and acquiring secondary shares from a big institutional investor

A PE fund wishes to buy a significant stake of 24% in a listed company and has been discussing with the company about the transaction as a combination of funding the company and acquiring secondary shares from a big institutional investor. In the meantime, a buy-out fund makes a hostile bid by announcing an open offer to acquire 51% of the company. In a bid to save the company, the promoter group with a shareholding of 32% requests the assistance of the PE fund as a white knight to make a counter offer. The financial advisor of the PE fund advises the fund that such a step would amount to acting in concert with the promoters, and its own position will become that of an acquirer leading to an obligatory open offer. The i-banker advising the company states that the advisor is clearly wrong and the PE fund’s support to the promoters will form part of the same on-going PE transaction. Who is right?

(a) The financial advisor (b) The investment banker