Category: Finance

CBI outline Challenges and Changes in 2015
FinanceInfrastructure and Project Finance

CBI outline Challenges and Changes in 2015

Focusing on three areas of action, he reminded politicians of all shades that reducing the deficit and cementing the UK’s reputation as one of the best places to do business must remain top priorities for the next government.

Turning to education, he called for radical reforms to the system by scrapping GCSEs, and urged political leaders to place facts first in the debate on the UK’s membership of the European Union.

John asserted that 2014 had been a successful year for the UK economy, which has emerged stronger and more able to tackle the challenges ahead – there are now 1.2 million more jobs than this time last year and employment is set to grow in every region of the UK in 2015.

UK growth is expected to hit 2.5% in 2015. John stressed that, if politicians and businesspeople make the right choices, we can increase living standards, spread the benefit of growth for the country and move forwards with confidence this year.

Growth in Online Christmas Spend Underlines Importance of Online Category Management Expertise
Corporate Finance and M&A/DealsFinance

Growth in Online Christmas Spend Underlines Importance of Online Category Management Expertise, Says Bridgethorne

That’s the message from category, customer and shopper management specialist Bridgethorne <http://www.bridgethorne.com> after Experian and online retail trade association IMRG reported that number of visits made to shopping websites was up 25 per cent on last Christmas Day, to an estimated 142 million. This follows the earlier Centre of Retail Research figures, which forecast a growth of 19.5% online, compared to the £14.5bn spent in 2013. Ecommerce sales, they said, would account for 23.4% of all sales in the six-week Christmas period from mid-November to Christmas.

John Lewis was the first retailer to confirm that online purchases have driven sales growth over the Christmas period. It reported that total like-for-like sales rose 4.8% to £777m in the five weeks to 27 December, with online purchases up 19%

“This Christmas demonstrates that understanding category management online is going to be core,” explains John Nevens, co-founder of Bridgethorne. “Online is not the future, it is the here and now and it continues to evolve. Online will
be the fastest growing channel over the five year period, fuelled by new market entrants, lower delivery charges and greater shopper engagement with mobiletechnology.”

Although a growing proportion of ecommerce sales took place over mobile devices – an estimated 29.8% of all online Christmas sales were over tablets and smartphones, 301% more than at the same time last year – the majority of sales still took place over PC and laptop.

Nevens says that over the next five years, the three fastest growth channels of convenience, discount and online will increase their sales by £31.3bn, equivalent to 110% of market growth.

“Most shoppers shop across all channels and through all media. In a digitised retail world, the shopper dictates the purchase journey, not the retailers. We operate in a multi-channel world so ensuring the shopper’s journey is seamless and consistent across all channels is a priority. Retailers expect suppliers to organise themselves on this basis too. Suppliers must adjust to this new reality. Retailers want to see suppliers having a clear online strategy, being able to deliver the basics, ensuring that their plans are integrated and that their channel plans act as one. “

Nevens says that the challenge facing suppliers, now and in the future, is not only to talk the talk of shopper and category, it’s to walk the walk too and that’s what Bridgethorne is working with clients to do.

British SMEs Thriving and Growing
Corporate Finance and M&A/DealsFinance

British SMEs Thriving and Growing

British SMEs had a strong 2014 with three quarters (75%) improving or maintaining their turnover compared to 2013
180,000 people started running their own business in 2014.

A fifth (21%) of SMEs took on more staff in the past year and 4% employed people for the first time.

One in twenty (4%) SMEs[1] has no insurance cover in place, equivalent to over 200,000 companies across the UK
British SMEs are thriving with business owners reporting that profits are up in the past year and the outlook is positive. SMEs interviewed in the research included sole traders and companies employing up to 250 people.

New research by LV= Broker reveals that three quarters (75%) of SMEs improved or maintained their turnover in the past year. Four in ten (41%) British SMEs have seen their turnover increase in the past 12 months, while a further 34% say turnover remained steady at 2013 levels. In addition, a new generation of SME owners has entered the market as 180,000 people started running their own business in the past twelve months[2].

Employers’ Liability

As well as increasing turnover, SME owners have also created more jobs. A fifth (21%) of SME owners say they have taken on more staff in the past year and 4% have employed people for the first time – equating to at well over 200,000 new jobs[3].

By law, all businesses employing staff must have employers’ liability (EL) insurance as a minimum otherwise they can be fined up to £2,500 a day by the Health and Safety Executive (HSE)[4]. Despite this, the research found that 80,000 SMEs who employ staff have no cover in place, leaving them vulnerable to prosecution and fines[5].

Pubic Liability

As well as being vulnerable to fines from the HSE, business owners with premises open to the public or clients could find themselves heavily out of pocket should someone make a liability claim against them. Almost two thirds (62%) of consumers say they would make a claim against a small business if they slipped over or were injured while on its premises.

Slips and trips can result in expensive compensation claims running to tens of thousands of pounds. Analysis of LV= data shows that the number of liability claims being made against businesses has been steadily increasing in recent years and SME owners need to be prepared for them.

The Insurance Gap

While the economic outlook is very positive for British SMEs, running a business is not without risk. An unforeseen event, such as a fire or flood, can stop trading for days or even weeks while repairs are undertaken and stock replaced. Depending of the type of business, this can spell financial ruin for companies that are unable to continue trading at alternative premises.

Despite this, one in six (15%) SMEs have no financial back-up plan in place if they were unable to trade for any reason and one in twenty (4%) SMEs have no insurance, equivalent to over 200,000 companies across the UK. When asked why, four in ten (38%) of these don’t see the need for any contingency plan, 21% can’t afford one and one in ten (10%) say they plough all their profits back into the business.

The insurance needs of a business will vary according to the type of business and the market it operates in, as well as its turnover, stock levels and whether it employs staff. Those running their own business should seek independent advice from a commercial insurance broker to insure they get the right cover for their business needs.

“SMEs are the lifeblood of the British economy and it is great to see that so many have increased their turnover in the past year and taken on more staff. The research shows that thousands are leaving themselves vulnerable to prosecutions and fines by the HSE for not having appropriate insurance in place. Getting the right advice on cover from a specialist insurance broker is invaluable for business owners and can make the difference between being able continue trading or not should the worst happen.”

Mike Crane, Commercial Lines Director at LV= Broker

UK Small and Medium Business Success May Be Stifled by Skills Shortage and Red Tape
Corporate Finance and M&A/DealsFinance

UK Small and Medium Business Success May Be Stifled by Skills Shortage and Red Tape

With 2015 on the horizon, research commissioned by npower has today revealed that small and medium sized businesses (SMEs) are confident about their business and the economy.

The research of 1,008 SME senior decision makers, in the Manufacturing, Retail, Leisure & Hospitality and Business Services sectors in Britain, showed 50 per cent of those surveyed expect to see an increase in business turnover during the next 12 months, while 46 per cent are confident their business would be able to recruit people with the right skill set during the same period, assuming they were able to pay market rate or above.

However the research did reveal fears over the amount of red tape and taxes imposed upon SME businesses (32 per cent), as well as concerns over the availability of credit and skills, with 49 per cent of businesses worried that tough legislation and regulation will hamper their ability to grow in the next 12 months, potentially putting the brakes on the success of small businesses just as things are looking up.

The study stressed that whilst SME headcount is expected to increase (21 per cent stated this), 28 per cent of SME decision makers are concerned about recruiting talented staff with the right skills. Other barriers to future growth include lack of bank lending, cited by 47 per cent.

The research also highlighted that whilst SMEs are considering the short term success of their business, the long term succession plan is becoming a thing of the past with a staggering 71 per cent of those surveyed saying their businesses have no succession plan in place.

Jason Scagell, Director of npower Business at npower, said: “While we’ve seen a clear acknowledgement of the contribution that SMEs make to UK plc in the recent Autumn Statement as well as through initiatives like Small Business Saturday, this study highlights that there is still some way to go before SMEs can honestly say that they are performing at the level they would like. These businesses are often described as the lifeblood of the UK economy and it’s obviously vital that they get the support they need to develop and grow.”

npower Business customer Chris Simmons, Owner of Chase Golf Club (which includes a Par 72 course, gym, spa, restaurant and pro golf shop), said: “We work hard to ensure that we are continually planning for the future. Whilst the UK is out of recession, as a small to medium sized business owner there are many areas where we are still feeling the pinch – from tax to staff salaries. As we approach 2015, I believe it will be the job of both the Government and larger businesses to ensure that they are doing all they can to support businesses like mine in the UK, by taking steps to reduce the barriers to growth such as red tape and lack of bank lending.”

The Return of M&A: 2014 the Strongest Year Since the Crisis
Corporate Finance and M&A/DealsFinance

The Return of M&A: 2014 the Strongest Year Since the Crisis

Title Here

-Megadeals dominated; 94 high-value global deals over GBP5billion, an 81% increase on 2013;
-Hostile bids increased by 600% from 2013 to 2014;
-Cross-border M&A transactions were at their highest level since 2007;
-Leading sectors were TMT and Life Sciences, closely followed by Energy which had a strong Q1;
-The U.S. and Western Europe, followed by Asia Pacific, were the most active M&A markets; activity in CIS and CEE slowed as a result of the Ukraine crisis.

The prospects for a continued recovery in 2015 are dependant, in part, on the macro-political environment, (in particular (i) what happens in Greece and its effect on the Eurozone more broadly, (ii) Russia, (iii) the general election in the UK, and (iv) North Korea), as the economic fundamentals are sound and there are strong cash reserves on balance sheets, historically low interest rates and relatively stable equity markets.

For the calendar year 2014 there were 3,282 deals overall, worth a total of USD3.12 trillion*, compared with 2263 deals worth USD1.83tn in 2013.

The two regions that drove strong growth in M&A were the U.S and Western Europe, despite the sluggish economic environment in the latter. The U.S accounted for 34% of all activity by volume and 45% by value. The UK was the number one target for U.S outbound acquisitions with a total of 65 transactions, followed by Canada with 28 and Germany with 20. A majority of the deals in the U.S were completed by strategic investors to either extend their portfolios or bolt on new areas of growth.

Despite inconsistent economic growth in Western Europe, overall transaction values were up by nearly USD400bn compared with the same time last year to reach a high of USD863bn. The success was driven by strong Life Sciences and TMT sectors. The UK saw the biggest deal in the insurance industry for 15 years in Q4 with Aviva buying Friends Life for GBP5.6bn. The outlook in Europe is for a diverse M&A market with key deals in 2015 expected in a number of sectors, assuming concerns regarding the macro-political environment do not have a negative effect.

Activity in CEE and the CIS slowed dramatically due to Russia’s economic uncertainty in light of the Ukraine crisis. Transaction volumes were a tenth of their 2013 levels totalling just USD4bn. Russia’s economic situation looks stark as it heads into expected recession this year with a tumbling oil price expected to impact investor confidence, at least in the short-term, and the political uncertainty and sanctions continue.

Across the board, the Life Sciences sector played a central role in propelling overall M&A activity to pre-crisis levels. The value of deals totalled USD530bn and was driven by tax inversion strategies, patent cliffs, companies making strategic disposals and using cash on their balance sheets to invest in smaller biotech companies with active drug development pipelines. The return of the white knight bid was evidenced in the largest deal of the quarter with the USD65bn bid by Actavis for Allergan.

In 2014 Private Equity funds became more active, particularly in the Life Sciences space. While exits remain the priority, more significant buyouts are starting to return. However as larger, strategic deals build momentum, PE funds remain cautious and are unwilling to compete with strategic players paying premia.

TMT businesses around the world are in a state of transformation, and 2014 was a year in which game-changing deals took place. The prospective ramifications of the GBP12.5bn tie-up between BT and EE go beyond the UK at a time when consumers across the world want access to high-quality content irrespective of the device they are using. As delivery systems fragment, many content creators see the benefit of joining forces, evident in the Apollo Global Management and 21st Century Fox joint venture that brought together Endemol, Shine Group and CORE Media Group.

There is optimism for a buoyant 2015 M&A market with continuing strong cash reserves and confidence expected to spur on activity, underpinned by privatisation strategies in a number of markets including Europe and Asia Pacific. With confidence comes increasingly hostile and competitive bids, which was a feature of 2014 that is likely to remain. Shareholder activism will also be part of the deals landscape ahead, not only in the U.S, while the closure of the inversion loophole will see tax-driven deals dry up.

Andrew Ballheimer, Global Co-Head of Corporate at Allen & Overy, commented: “2014 saw the much anticipated return of M&A come to fruition. CEO confidence, relatively cheap financing and low interest rates drove a number of mega, transformative deals. These conditions, along with increasing numbers of hostile takeover attempts, and positive shareholder reaction to M&A, should remain key drivers for deal activity, but there remains uncertainty in the macro-political environment, which may inhibit deal flow.”

The M&A Index provides market insight and commentary by Allen & Overy partners, backed up by independently commissioned quarterly research on (USD100m ) global M&A deal types and analysis of top global outgoing buyers and target markets.

Nick Clegg Signs £357m Growth Deal for Greater Birmingham and Solihull
FinanceInfrastructure and Project Finance

Nick Clegg Signs £357m Growth Deal for Greater Birmingham and Solihull

Title Here

The Deputy Prime Minister, Nick Clegg,  signed a historic Growth Deal for Birmingham and Solihull, bringing over £357 million of investment to the region to support economic growth. While in Birmingham, Nick Clegg will also be visiting precision valve manufacturer HydraForce, which received an award of over £1.8 million from the government’s Regional Growth Fund (RGF).

The Growth Deal will help to deliver at least 13,000 jobs, allow up to 4,000 homes to be built and up-skill 7,633 people by 2021, as well as generating up to £80 million in public and private investment.

In addition, the Regional Growth Fund is providing £1.8 million towards a £17 million investment which has enabled HydraForce UK to build a new, bespoke 120,000 square-foot factory in Birmingham, which will be completed by mid-2015. This will create and safeguard almost 200 long-term jobs while generating upwards of 100 jobs in HydraForce’s supply chain.

The Deputy Prime Minister is today confirming other Regional Growth Fund awards in Birmingham. Dana UK Axle has secured a £1 million grant to increase capacity and install cutting-edge technology, creating 400 jobs in high-tech manufacturing. Sertec Group Holdings secured a £1.425 millionRGF grant to help deliver its project to invest in new stamping equipment and robotic welding cells at their plants in Aston, Coleshill and Tyseley. This will lead to 200 new jobs.

The Deputy Prime Minister Nick Clegg said:

“I’m delighted to be finalising this historic deal bringing real change to our second largest city in the UK. This significant Growth Deal will enable a whole host of jobs to be created, see scores of homes built and transport services improved. All of this is a major boost to the economy in Greater Birmingham and Solihull.”

“Growth Deals are about local areas leading their own growth, giving more power to people in the regions so we can work together to build a strong economy and a fairer society.”

“I was impressed with HydraForce’s ambitious plans to double its turnover and significantly increase its UK workforce. This US company has been in Birmingham for over a quarter of a century and this investment is securing its future in the Midlands.”

The key features of the deal are:

investing in growth in Greater Birmingham and Solihull, including station improvements at Snow Hill, major maintenance of the Tame Valley Viaduct, phase two of the Hoobrook Link Road to improve accessibility of the South Kidderminster Enterprise Park, a growth and regeneration programme in East Staffordshire and the mid-Cannock road/rail freight interchange
maximising the benefits of HS2, including station improvements between New Street and Moor Street, extensions of the Midland Metro, a Bus Rapid Transit scheme from Birmingham City Centre to Quinton and walking and cycling improvements in Birmingham city centre
enhancing growth sectors, and supporting and growing businesses, including new courses to improve skills capacity in the automotive supply chain and life sciences sector, a Solihull Aviation Engineering Training Centre to develop maintenance and repair skills, the Skills Excellence Hub in Birmingham for food technology, the Centre of Excellence for Advanced Technologies at Birmingham Metropolitan College, the Advanced Manufacturing Hub and a Life Sciences Campus

Balfour Beatty Awarded £32m Liverpool 'Baltic Triangle' Residential and Commercial Scheme
FinanceInfrastructure and Project Finance

Balfour Beatty Awarded £32m Liverpool ‘Baltic Triangle’ Residential and Commercial Scheme

Balfour Beatty’s UK construction business has been awarded the £32m contract to build Baltic Triangle, a three-tower residential development in Liverpool city centre for developer Neptune Investments.

The two year project will see Balfour Beatty delivering 324 new apartments across three separate towers, which will be thirteen, ten and eight storeys in height respectively. The project will also involve the creation of commercial space, a gym and concierge, and underground car parking for 358 cars.

Balfour Beatty will continue construction on a building previously begun by another developer, strengthening the existing basement and helping to reduce delivery time and costs by using pre-cast wall panels.

Balfour Beatty will recruit apprentices to the project and utilise its established links with Liverpool John Moores University to provide opportunities for students.

Jon Adams, Balfour Beatty Managing Director for Northern Major Projects, said: “Balfour Beatty has extensive experience in delivering high-end residential schemes and of working in Liverpool, where we have recently delivered the Liverpool One and Aloft Hotel developments.

“We have a fifteen year relationship with Neptune Investments and we look forward to working with them to deliver this exciting new £32m development in the heart of the Liverpool docklands.”

Will pride come before a fall for deal-makers in 2015?
Corporate Finance and M&A/DealsFinance

Will pride come before a fall for deal-makers in 2015?

Acquirers in 2014 set new records for performance, with share prices out-performing non-acquiring companies by an average of 5.8 percentage points (pp), compared to 4.5pp in the prior year. 2014 was also a boom year for M&A in terms of volume according to Towers Watson’s Quarterly Deal Performance Monitor (QDPM) in partnership with Cass Business School, with a total of 928 deals*, an increase of 208 on 2013 figures and the most deals completed in a single year since before the financial crisis.

Asian acquirers were the star performers of the year, maintaining an impressive outperformance above the regional index throughout the year averaging 24.7pp. Their success overshadows the outperformance of acquirers in Europe, which rebounded as forecast in 2014, achieving 4.1pp, and North America at 2pp above their respective regional indexes.

The market returned for larger, more complex, deals in a big way last year. By year end a record-breaking 176 large deals (worth over $1 billion) and 12 mega deals (worth over $10 billion) had been completed. This compares to 120 large and 4 mega completed deals in the prior year.

Steve Allan, Towers Watson’s M&A practice lead in EMEA, said: “Deal activity picked up as we moved through 2014 to a level not seen for many years and is showing no sign of slowing down anytime soon. Market confidence is riding high, even for the complicated larger mergers, but with the more apparent inorganic growth opportunities already taken, we may see some failures making headlines in the near future with the latecomers falling off the crest of the merger-wave.”

Towers Watson’s 2015 M&A predictions:

1. Financial services to rise out of the doldrums

As the age of “banker bashing” fades away, financial services will be one of the sectors to watch with deal volumes slowly picking up. Meanwhile pharmaceuticals will remain one of the main drivers of global deal activity (driven by deal fundamentals rather than financial engineering).

2. Mega-deal comeback to gain more momentum

It was obvious at the end of 2014 that mega-deals were back with a vengeance but their prevalence will become even more significant in the year ahead. As markets remain high, with robust corporate cash balances and low interest rates, expect to see larger, more complex, deals completing at a surprising rate.

3. Asia to dominate the performance league

The runaway success of Asian acquirers last year in terms of share price return is undisputed. Armed with the recipe for success, Asia is set to remain triumphant in 2015 and may even further accelerate its lead ahead of Europe and North America. 

4. We will learn how not to do it

Beware hubris – the early birds have the worm, we may now start to see the “me-too” and the “just-get-it-done” deals. This could be the year that we begin to see more deal-makers getting their fingers burned and by the end of the year we will have a new benchmark deal to hold up as how not to do it.

Steve Allan said: “2015 is likely to be an exciting year for spectators with a continued flurry of activity. For acquirers it will feel more precarious, with the pressure not to get left behind in the race to growth coupled with the fear of not being the one that gets it wrong. It has been proven time and time again that victory comes from thinking beyond the deal in purely financial terms. Companies that recognise the importance of merging hearts and minds, as well as operations, will be the ones to achieve long-term success in deal-making.”

Risky Ground for UK Businesses in 2015
Corporate Finance and M&A/DealsFinance

Risky Ground for UK Businesses in 2015, say Chief Financial Officers

Global risk has risen in recent years and businesses are slowly coming to terms with trading in this new landscape, one in which results for economic indicators can fluctuate greatly.

UK businesses trading internationally face an added currency risk, which is tethered to investor sentiment surrounding economic events.

Despite the mounting global uncertainty, CFOs are still optimistic about growth in investment and earnings this year. Businesses require more help than ever this year, be it through robust currency hedging strategies to minimise risk, or the right guidance on trading in emerging markets.

Best Buy to Sell Five Star Business in China
Corporate Finance and M&A/DealsFinance

Best Buy to Sell Five Star Business in China

Best Buy Co., Inc. today announced that it has entered into a definitive agreement for the sale of its Five Star business to the Jiayuan Group, a prominent China-based real estate firm led by Chairman Yuxing Shen. This sale does not affect Best Buy’s private label operations in China.

“Over the last two years we have worked to improve our business in China and are proud of the progress we have made there,” said Hubert Joly, president and chief executive officer of Best Buy. “We were recently approached by Jiayuan Group, a respected Chinese investment group, which offered to acquire the business with plans to further expand it. The Jiayuan Group has agreed to work with Five Star Chief Operating Officer Yiqing Pan, who will become chief executive officer of Five Star. Mr. Pan has been with the business for many years and has a deep respect for Five Star employees, as well as a vested interest in continuing to work with them to build a stronger presence in China,” Joly said.

“The sale of Five Star does not suggest any similar action in Canada or Mexico. Instead, it allows us to focus even more on our North American business. We will also continue to invest in and grow our China-based private label operations, with brand names that include Dynex, Insignia, Modal, Platinum and Rocketfish,” Joly added.

Best Buy entered the Chinese retail market by purchasing a majority interest in Jiangsu Five Star in 2006 and now operates 184 stores in China, all under the Five Star brand. The transaction, which is subject to regulatory approval, is expected to close in the first quarter of fiscal 2016. The sale of the Five Star business is not expected to have a material impact on the results of operations, financial position or cash flow of Best Buy.

Change in Volvo Executive Team
Corporate Finance and M&A/DealsFinance

Change in Volvo Executive Team

Henry Sténson has been appointed Head of the newly established Group function, Corporate Communication & Sustainability Affairs. Sténson has longstanding experience of management roles at senior executive level in companies including Ericsson and SAS, but has also been employed previously at the Volvo Group in such positions as CIO for Volvo Aero and Volvo Cars. Sténson will take up his position on January 1 and will also join Volvo Group Executive Team.

As previously announced, Corporate Communication & Sustainability Affairs is the name of the new Group function comprising both of the previous functions, Corporate Communication and Sustainability & Public Affairs. In conjunction with publication of the report on the third quarter of 2014, it was announced that the Executive Team would be reduced from the current 16 members to 10 as of January 1.

Volvo has previously announced that the reduction in the number of members is also to take place through a merger of the three sales and marketing organizations in Group Trucks, by no longer including the Heads of Volvo CE and Volvo Financial Services in the Executive Team as of January 1 and by placing the organization of Corporate Process & IT under the Group’s Chief Financial Officer (CFO).

Global Climate Finance Falls for a Second Year
FinanceInfrastructure and Project Finance

Global Climate Finance Falls for a Second Year

Global investment in activities that reduce the threat of climate change fell for the second year in a row from US$359bn in 2012 to US$331bn in 2013. Climate Policy Initiative’s Global Landscape of Climate Finance shows that while public sources and intermediaries contributed US$137bn, a figure largely unchanged from last year, private investment totaled US$193bn, falling by US$31bn from 2012.

The study credits the decrease in private investment largely to falling costs of solar PV, with deployment of this technology growing as investment shrinks. Solar deployment cost US$40bn less in 2013 than would have been the case with 2012’s solar investment costs. However, the situation remains grave: The International Energy Agency estimates that an additional US1.1tn in low- carbon investments is needed every year between 2011 and 2050, in the energy sector alone, to keep global temperature rise below two degree Celsius. In cumulative terms, the world is falling further and further behind its low-carbon investment goals.

Climate finance spending was split almost equally between developed (OECD) and developing (non-OECD) countries, with US$164bn and US$165bn respectively. Strikingly, almost three-quarters of all spending was domestic: It originated in the country in which it was used. Private actors had an especially strong domestic investment focus with US$174bn or 90% of their investments remaining in the country of origin. These figures illuminate a bias by private investors toward environments that are more familiar and perceived to be less risky. However, public sector money made up the vast majority of developed to developing country flows, which fell by around USD 8 billion from the previous year to between US$31 and US$37bn in 2013.

“As policymakers prepare a new global climate agreement in 2015, climate finance is a key ingredient to bring the world on a two degree Celsius pathway. Our analysis shows that global investment in a cleaner more resilient economy are decreasing and the gap between finance needed and actually delivered is growing,” said Barbara Buchner, Senior Director of Climate Policy Initiative and lead author of the study. She added, “Our numbers demonstrate that most investment is happening at the national level with investors favoring familiar environments they perceive to be less risky. This implies that domestic policy frameworks and appropriate risk coverage are critical to encourage investment.

News Corp Completes Acquisition of Move
Corporate Finance and M&A/DealsFinance

News Corp Completes Acquisition of Move, Inc.

News Corp has announced that it has successfully completed its acquisition of Move, Inc. Move is a leading provider of online real estate services and operates a network of sites, including realtor.com®, the official website for the National Association of Realtors®.

Through realtor.com® and its mobile applications, Move displays more than 98% of all for-sale properties listed in the US. The Move network of websites reaches more than 30 million people per month, who spend an average of 22 minutes each on its sites.

“In partnership with the National Association of Realtors® and its one million members, we look forward to turbo-charging realtor.com® and making it the most popular and profitable property site in America,” said Robert Thomson, Chief Executive of News Corp. Mr. Thomson said that the acquisition of Move extends News Corp’s operations globally and digitally, and substantially bolsters the real estate pillar of its business.

The previously announced tender offer by a subsidiary of News Corp for all of the outstanding shares of Move common stock at a price of $21.00 per share expired as scheduled at the end of the day, 12:00 midnight, New York City time, on November 13, 2014. Excluding shares tendered by notice of guaranteed delivery, a total of approximately 34,299,586 shares were validly tendered into and not withdrawn from the tender offer, representing, together with the shares owned by News Corp and its subsidiaries, approximately 83.1% of Move’s outstanding shares. As a result, News Corp, through its subsidiary, has accepted for payment and will promptly pay for all such validly tendered shares pursuant to the terms of the tender offer.

Following its acceptance of the tendered shares, News Corp completed the acquisition by causing the merger of its subsidiary with and into Move without a vote of Move’s stockholders, pursuant to Section 251(h) of the Delaware General Corporation Law. Upon completion of the merger, Move became an indirect, wholly-owned subsidiary of News Corp. As a result of the merger and in accordance with the terms of the merger agreement, all eligible Move shares not tendered into the tender offer were cancelled and converted into the right to receive $21.00 per share in cash, without interest and less any applicable withholding taxes, the same price per share offered in the tender offer. As a result of the acquisition, Move shares ceased to be traded on the NASDAQ Stock Market.

REA Group Limited, in which News Corp owns a 61.6% interest, has entered into a definitive agreement with News Corp to acquire a 20% stake in Move. The transaction is expected to be completed on November 17, 2014.

Pabst Brewing Company Completes Sale to Blue Ribbon
Corporate Finance and M&A/DealsFinance

Pabst Brewing Company Completes Sale to Blue Ribbon

Pabst Brewing Company, North America’s largest privately held brewing company, announced today that it has completed its sale to Blue Ribbon Intermediate Holdings, LLC. Blue Ribbon is a partnership between American beer entrepreneur Eugene Kashper and San Francisco-based TSG Consumer Partners LLC, a leading investor in growth consumer brands. Terms of the transaction were not disclosed.

“We are thrilled to complete the acquisition of this great company,” said Mr. Kashper. “I started my career with The Stroh Brewery Company, selling many of Pabst’s classic brands, such as Old Milwaukee, Schaefer, Schlitz and Stroh’s. In the twenty years since then, I have been selling, marketing and brewing beer – and have loved every minute of it. The opportunity to work with a timeless American brand like Pabst Blue Ribbon is a dream come true. We will stay true to Pabst’s roots and are committed to investing in the Company’s organization and brands.”

Brian Krumrei, Managing Director at TSG said, “We are excited to partner with Eugene and the rest of the management team to build on Pabst’s heritage of over 170 years. Pabst is an exceptional story and we look forward to being part of its future growth with consumers and distributors in the U.S. and abroad.”

Mr. Kashper has been named Chairman and Chief Executive Officer of Pabst, and the rest of Pabst’s Executive Leadership team will continue in their current roles. Pabst’s Board of Directors will include Mr. Kashper, Mr. Krumrei and Brooklyn Brewery Chief Executive Officer Eric Ottaway. Mr. Kashper and his family are relocating from New York to Los Angeles, where Pabst is headquartered.

Berkshire Hathaway to Acquire Duracell Battery Business from P&G
Corporate Finance and M&A/DealsFinance

Berkshire Hathaway to Acquire Duracell Battery Business from P&G

Berkshire Hathaway Inc. announced today that it has entered into a definitive agreement with Procter and Gamble whereby it will acquire the Duracell battery business from Procter & Gamble. Pursuant to the agreement, in exchange for a recapitalised Duracell Company, which will include approximately US$1.7bn in cash at closing, P&G will receive shares of P&G’s common stock currently held by Berkshire Hathaway having a current value of approximately US$4.7 bn. The transaction is expected to close in the second half of 2015 and is subject to obtaining various regulatory approvals as well as certain other customary closing conditions.

“I have always been impressed by Duracell, as a consumer and as a long-term investor in P&G and Gillette,” commented Warren E. Buffett, Berkshire Hathaway chief executive officer. “Duracell is a leading global brand with top quality products, and it will fit well within Berkshire Hathaway.”

“We thank the Duracell employees for their many contributions to the business. They’ve made Duracell the global market leader in the battery category,” said A.G. Lafley, P&G chief executive officer. “I’m confident this new ownership structure will provide strong support for Duracell’s future growth plans.”

Corporate Banking Hires at Deutsche Bank
Corporate Finance and M&A/DealsFinance

Corporate Banking Hires at Deutsche Bank

Deutsche Bank has announced two appointments within its Corporate Finance group in North America. Allen Blankenship joins as a Managing Director in Corporate Banking Coverage (CBC) Industrials and Michaela Galluzzo joins as a Managing Director in CBC Consumers. Corporate Banking is part of Capital Markets and Treasury Solutions within Corporate Finance at Deutsche Bank and is focused on delivering a broad range of banking and treasury solutions to clients.

“We expect continued activity in the Industrial and Consumer sectors and with Allen and Mica’s extensive experience, we will be well positioned to provide holistic advice to our clients whether it is debt origination, cash management, syndicated loans, structured finance, rates, foreign exchange or trade finance.”

Blankenship joins Deutsche Bank from Citi where he was most recently a Senior Corporate Banker responsible for the North American Surface Transportation & Logistics and Diversified Industrials sectors. He has over 23 years experience in Corporate Banking and is expected to join the bank in January, reporting to Stefan James, who joined Deutsche Bank in June as Head of CBC North America.

Galluzzo joins Deutsche Bank from Royal Bank of Scotland where she was responsible for large corporate relationships in the Consumer Products, Retail and Leisure sectors. She has a wealth of experience in Corporate Banking with a career spanning over 16 years. Galluzzo is based in New York and reports to Tim King, Head CBC Consumers North America.

“We continue to invest in our CBC franchise to ensure we have the resources needed to support our market share growth,” said Erich Mauff, Head of Capital Markets and Treasury Solutions North America. “We expect continued activity in the Industrial and Consumer sectors and with Allen and Mica’s extensive experience, we will be well positioned to provide holistic advice to our clients whether it is debt origination, cash management, syndicated loans, structured finance, rates, foreign exchange or trade finance.”

Dow Increases Divestiture Target
Corporate Finance and M&A/DealsFinance

Dow Increases Divestiture Target

The Dow Chemical Company has announced an increased divestiture target aligned to further enhance the value of its portfolio and support the company’s market-driven, integrated strategy.

On track to complete its goal of realizing US$4.5bn to US$6bn in proceeds by year-end 2015, and with additional portfolio management actions underway, Dow is now increasing its divestiture target to US$7bn to US$8.5bn to be complete by mid-2016. Since 2013, the company has generated US$2.5bn in proceeds, reallocating this capital to remunerate shareholders, fund growth and reduce debt.

“As part of our ongoing process to drive value through a best owner mindset and using economic value add as our lens, we are consistently looking across our portfolio to identify additional sources of long-term value creation and maximize the returns on the capital we invest,” said Andrew N. Liveris, chairman and chief executive officer. “Our focus on continuously and increasingly rewarding shareholders is at the core of every decision and action we take.”

Dow continues to assess opportunities to enhance the value created across its portfolio, including rationalising its position in major joint ventures and divesting Dow businesses that, while valuable, no longer align with Dow’s integration strategy.

In line with this strategy, and as announced earlier today, Dow plans to reduce its equity position in all of its Kuwait joint ventures, which will release capital for other strategic purposes including shareholder remuneration. The company also announced the signing of a definitive agreement for the divestiture of its ANGUS Chemical business for US$1.215bn in net proceeds.

Rolls-Royce Wins $100m USAF Contract
Corporate Finance and M&A/DealsFinance

Rolls-Royce Wins $100m USAF Contract

The US Air Force has awarded a contract worth over $100 million to Rolls-Royce to purchase spare engines and parts for its C-130J fleet and to support Foreign Military Sales customers.

Rolls-Royce AE 2100 engines power all C-130J aircraft in the US military and global fleets, while legacy C-130 aircraft are powered by Rolls-Royce T56 engines.

Tom Hartmann, Rolls-Royce, Senior Vice President, Customer Business, said, “Rolls-Royce AE 2100 engines provide the dependable, efficient power required by the US Air Force and our allies to complete their transport missions with the C-130J fleet. We also successfully manage propulsion support for the Air Force to keep its C-130J fleet operating at peak efficiency, while continuing to focus on affordability for our customers.”

The AE 2100 is part of the Rolls-Royce AE family of engines, with nearly 6,000 total engines delivered and more than 61 million flight hours across the military and commercial fleets.

Yahoo to Acquire BrightRoll
Corporate Finance and M&A/DealsFinance

Yahoo to Acquire BrightRoll

Yahoo! Inc. and BrightRoll, Inc. have announced a definitive agreement for Yahoo to acquire BrightRoll, a leading programmatic video advertising platform. The transaction will combine Yahoo’s premium desktop and mobile video advertising inventory with BrightRoll’s programmatic video platform and publisher relationships to bring substantial value to advertisers on both platforms. BrightRoll is a large, growing and profitable business with net revenues expected to exceed $100 million this year. Yahoo expects the transaction to enhance its EBITDA.

The acquisition will accelerate Yahoo’s strategy, which is focused on search, communications, and digital content through growth in mobile, social, native, and video advertising. Acquiring BrightRoll will dramatically strengthen Yahoo’s video advertising platform, making it the largest in the US.

Online video advertising is increasingly fragmented across thousands, if not millions, of sites and mobile apps. More so than with traditional broadcast television, advertisers are seeking ways to buy online video advertising at scale across many sites in fewer, simpler transactions. BrightRoll provides an elegant solution, aggregating high-quality publishers together into a unified network and utilizing programmatic advertising and aggregation to allow real-time buying on the largest set of online video advertising inventory available. BrightRoll’s approach not only benefits advertisers and publishers, but also improves experiences for consumers, through better quality, more relevant advertisements.

“Video, along with mobile, social, and native, is driving a surge in digital advertising. Here at Yahoo, video is one of the largest growth opportunities, and BrightRoll is a terrific, strategic and financially compelling fit for our video advertising business,” said Marissa Mayer, Yahoo CEO. “As with every acquisition, we have been extremely thoughtful about our approach to the video advertising space. This acquisition will accelerate the growth of both companies – we can help BrightRoll scale to even more advertisers globally and they can bring their tremendous platform offering to Yahoo’s advertisers. The combination builds positive momentum for Yahoo’s broader display advertising business in 2015.”

“We believe the next step for programmatic video advertising as an industry is to extend and standardize globally, make cross-device buying simple and measurable, and complement and integrate with TV,” said Tod Sacerdoti, BrightRoll CEO and Founder. “We are excited to join Yahoo to materially advance efforts in each of these areas. We’re still in the early innings as an industry, and together, BrightRoll and Yahoo are committed to the vision of helping grow the entire video advertising ecosystem.”

Hansteen Sells HPUT for £146.1 Million
Corporate Finance and M&A/DealsFinance

Hansteen Sells HPUT for £146.1 Million

Hansteen Holdings PLC (LSE: HSTN), the UK and Continental European property investment company, announces the sale of the Hansteen UK Industrial Property Unit Trust (“HPUT” or “the Fund”), a UK multi-let industrial property portfolio, in two transactions for a total of £146.1 million (after the deduction of rental top-ups).

The 41 assets in HPUT have been acquired by a fund advised by Brockton Capital LLP (“Brockton Capital”) in a partnership with Dunedin Property for £110.5m. A separate 50/50 joint venture between Brockton Capital and Hansteen has acquired Saltley Business Park in Birmingham for a net price of £35.6 million. Hansteen will continue to manage Saltley Business Park.

HPUT was launched in July 2009 with £90 million of equity from Hansteen and five institutional investors. On exit it comprised 42 assets across England, Wales and Scotland with a combined floor area of 3.04 million sq ft, a void rate of 9.65% (293,644 sq ft), a passing rent of £10.0 million per annum, equating to average rents across the portfolio of £3.68 psf, and a contracted rent of £11.5 million. Additionally the Fund had 25.7 acres of development land.

The 41 assets sold within the Fund have a passing rent of £7.6 million per annum, a contracted rent of £8.5 million per annum and a void rate of 13.5% (272,724 sq ft).

Saltley Business Park has a passing rent of £2.4 million per annum, a contracted rent of £3.0 million per annum and a void of 2.05% (20,920 sq ft).

Mark Ovens, Director UK of Hansteen commented: “We launched HPUT to take advantage of the economic downturn which had resulted in high levels of distress throughout the sector. Acquisitions were made up to December 2011, predominantly from situations where banks were involved. Intensive asset management and some smaller sales followed before the final exit. It is tremendously satisfying to have launched the Fund, met the investment return objectives and returned the capital to unitholders within the timescale envisaged at the outset.”

James Havery, Director UK of Hansteen, commented: “HPUT played an important role in Hansteen’s return to the UK market, allowing us to stretch our equity base and enjoy an equity return alongside co-investors, together with management fees. The success of HPUT led to a second fund, HPUT II, being established in May 2013; and our re-capitalisation of the Ashtenne Industrial Fund (AIF) in August 2013 is the third successful example of co-investing alongside institutional investors. We are currently rigorously asset managing HPUT II and AIF through our regional network of teams.”

Morgan Jones, Joint Chief Executive of Hansteen, commented: “We are delighted to have established a new partnership with Brockton Capital at Saltley Business Park and look forward to working with them on what is a significant and strategically important landholding in Birmingham. The site has a history of being traded at very high prices and whilst it falls into the zone of influence of HS2, we believe the property and its business plan has a strong future, not least because of its strong income profile based off conservative levels.”

Tony Edgley of Brockton Capital, added: “We are delighted to have bought the HPUT assets in a continuation of our joint venture with Dunedin, through these corporate acquisitions. This is a first class, geographically diversified portfolio with excellent credit risk and a wide range of properties for all types of light industrial, storage and business users across a range of sectors. It also gives us the opportunity of working in partnership with Hansteen at Saltley Business Park. This is the first in a number of light industrial estate acquisitions that we are likely to undertake.”

Lenovo Completes Acquisition of Motorola Mobility from Google
Corporate Finance and M&A/DealsFinance

Lenovo Completes Acquisition of Motorola Mobility from Google

Lenovo and Google have announced that Lenovo’s acquisition of Motorola Mobility from Google is complete.

The acquisition of the Motorola brand and Motorola’s portfolio of innovative smartphones like Moto X, Moto G, Moto E and the DROIDTM series, as well as the future Motorola product roadmap, positions Lenovo as the world’s third largest maker of smartphones.

Lenovo will operate Motorola as a wholly-owned subsidiary. Motorola’s headquarters will remain in Chicago. With the completion of the acquisition, Lenovo welcomes the addition of a new portfolio company with nearly 3,500 employees around the world – including about 2,800 in the U.S. – who design, engineer, sell and support Motorola’s outstanding devices.

“Today we achieved a historic milestone for Lenovo and for Motorola – and together we are ready to compete, grow and win in the global smartphone market. By building a strong number three and a credible challenger to the top two in smartphones, we will give the market something it has needed: choice, competition and a new spark of innovation,” said Yang Yuanqing, chairman and CEO, Lenovo. “This partnership has always been a perfect fit. Lenovo has a clear strategy, great global scale, and proven operational excellence. Motorola brings a strong presence in the U.S. and other mature markets, great carrier relationships, an iconic brand, a strong IP portfolio and an incredibly talented team. This is a winning combination.”

“Motorola is in great hands with Lenovo, a company that’s all-in on making great devices,” said Larry Page, CEO, Google.

Liu Jun, Lenovo executive vice president and president of Lenovo’s Mobile Business Group, is chairman of the Motorola Management Board. Rick Osterloh, a Motorola veteran, will remain president and chief operating officer of Motorola.

“Motorola has already built solid momentum in the market, and their recent results show consumers are excited about their exceptional products that stand out for their design and simplicity,” said Liu Jun. “With the complementary strengths of our two companies, we expect to sell more than 100 million mobile devices this year – including smartphones and tablets – by leveraging the Lenovo brand’s leading market position in China, our shared momentum in emerging markets, and Motorola’s strong foothold in mature markets like the U.S.”

Motorola already has strong momentum in the marketplace led by highly successful new product launches and groundbreaking innovations, which have provided solid growth. Beyond smartphones, the Moto 360 watch has captured consumer attention and established Motorola as a company expanding into emerging mobile device areas. As previously stated, Lenovo expects to make the Motorola business profitable in four to six quarters.

“This acquisition empowers Lenovo to enter the Australian and New Zealand smartphone markets under the Motorola brand,” said Matt Codrington, Managing Director, Lenovo Australia and New Zealand. “Motorola has a strong heritage, both globally and locally, and we aim to build on that knowledge and expertise as we develop new products with the brand. At Lenovo ANZ, we’re looking forward to expanding existing relationships with our current retail partners JB Hi-Fi and Harvey Norman and enabling new partnerships in the future.”

Google will maintain ownership of a majority of the Motorola Mobility patent portfolio, while Motorola will receive a license to this rich portfolio of patents and other intellectual property. Motorola will retain over 2,000 patent assets and a large number of patent cross-license agreements, as well as the Motorola Mobility brand and trademark portfolio.

The total purchase price at close was approximately US$2.91 billion (subject to certain post-close adjustments), including approximately US$660 million in cash and 519,107,215 newly issued ordinary shares of Lenovo stock, with an aggregate value of US$750 million, representing about 4.7 percent of Lenovo’s shares outstanding, which were transferred to Google at close. The remaining US$1.5 billion will be paid to Google by Lenovo in the form of a three-year promissory note. A separate cash compensation of approximately US$228 million was paid by Lenovo to Google primarily for the cash and working capital held by Motorola at the time of close.

New Corporate Finance and M&A Heads at KPMG in the UK
Corporate Finance and M&A/DealsFinance

New Corporate Finance and M&A Heads at KPMG in the UK

KPMG in the UK has announced the appointment of Neill Thomas as head of Corporate Finance and Andrew Nicholson as head of M&A.

Both will replace Richard Clarke, who held both roles before recently being appointed to take up a new position as head of investment management within the firm’s Financial Services practice.

In addition, Jonathan White becomes KPMG’s UK Head of Valuations, taking over from Doug McPhee, who continues as Global Head of Valuations.

Neill Thomas will continue as KPMG’s Global Head of Capital Advisory and Chair of the KPMG Makinson Cowell management board, responsible for a network of over 200 capital advisory practitioners located in centres of excellence covering all the world’s major capital markets. He was previously head of KPMG’s UK Debt Advisory business, where he acted as lead advisor to major companies including Britvic, InterContinental Hotels and William Hill.

Prior to joining KPMG in 2001, Thomas worked for fifteen years for Schroders. During his career, he has advised companies and financial institutions in establishing more than £300 billion of financing.

Andrew Nicholson has over 15 years’ experience in M&A, with specialist expertise in the healthcare sector. During his career, he has owned and operated businesses, as well as advising companies, investors and management teams on acquisitions, disposals, joint ventures and fund raisings.

Nicholson joined KPMG eight years ago from Rothschild, and has since built KPMG’s dedicated Healthcare M&A team which has gone on to lead many deals within the UK healthcare services market. Recent examples include acting as lead advisor on the sale of Asteral to Permira; the sale of European Care Group and the sale of City & County to Graphite Capital.

Neill Thomas, head of Corporate Finance for KPMG in the UK, said: “This is a fantastic time to be taking charge of our Corporate Finance business which, over the last twelve months, has led on some landmark transactions across the UK and grown revenue by over 25 percent. With the UK economic recovery now having firmly taking hold, we intend to strengthen our range of services to help new and existing clients.”

Andrew Nicholson, head of M&A for KPMG, added: “While recent data from the ONS suggests that deal completions for the first half of 2014 were relatively flat on the prior year, KPMG has grown its market share with a strong increase in completed transactions. We expect the number of completions to increase further over the next year, providing buoyant conditions for companies to find new partners, and investors to be able to close opportunities.”

New Tech Will Kill off Many of World's Largest Firms
Corporate Finance and M&A/DealsFinance

New Tech Will Kill off Many of World’s Largest Firms, Claims New Book

A new book entitled iDisrupted by John Straw and Michael Baxter claims that only 19 of the world’s 100 largest companies in 2012 will still be in that list in 2042. However, it says that even this bold claim may be understating how things will pan out.

Throughout history, new technologies have had a disruptive effect on businesses and the economy, proving fatal to some well-known companies. In the new book, iDisrupted, the authors claim that the rate of fatality is set to increase.
Of the top 100 global companies identified in 1912, 29 companies had experienced bankruptcy or similar; and 48 had disappeared by 1995. Eastman Kodak was one of just 19 companies that stayed in the list during these years, yet at the start of the 21st century, with the onset of digital cameras, home printing and photo sharing websites, it too fell victim to the rise of new technologies.

In iDisrupted, co-authors John Straw and Michael Baxter claim that many of the industries we currently see as strong, such as oil, car manufacturers, banks and energy companies, could also be heading for the corporate graveyard within the next few decades. They say that only 19 of the world’s 100 largest companies in 2012 will be in that list in 2042. However, even this may be an understatement.

Straw states: “The big corporate success story of the 20 century related to oil companies, but just because they flourished in the 20th century, this does not necessarily mean they will flourish in the 21st century.” The rise in electric cars, self-driving cars and advances in solar power and energy storage, will all play a part in the energy industry as we currently understand it.

Baxter adds: “In our book, we try to explain why it is that technology is set to change the world like it has never been changed before. This is exciting, but it is also scary. There will be winners and losers, and some of the world’s largest companies will be amongst the losers.”

M&A Markets See Highest Average Deal Size Since 2007
Corporate Finance and M&A/DealsFinance

M&A Markets See Highest Average Deal Size Since 2007

M&A markets have staged a strong recovery in 2014, with deal values in the first three quarters of the year already higher than for the same period in 2013 and average deal sizes at their highest levels for many years, according to Allen & Overy’s latest M&A Index.

For now the recovery is looking resilient and optimism is high, fuelled by low interest rates and large cash reserves on corporate balance sheets, although the equity markets are currently undergoing some unhelpful volatility.

Deal values for 2014 to date are up 51% on the same period in 2013. More significantly, the value of cross-border transactions is higher than at any time since 2007, with U.S. companies leading the charge, followed by growing activity from Chinese, UK, German and Canadian strategic investors.

Commenting on the third quarter M&A Index, Andrew Ballheimer, Allen & Overy’s Global Co-Head of Corporate, said: “CEO confidence is certainly back. It is apparent in the size of transactions, with 70 deals worth more than USD5 billion compared to 52 this time last year. But, more importantly, it is evident in the scope of and ambition of transactions. There have been a number of highly strategic deals which have been significant enough to transform companies and in some cases, entire sectors. This consolidation, which has defined the landscapes of several sectors, has driven companies to reassess their strategies. CEOs are acting while market conditions are favourable, rather than risking being left on the sidelines.”

Traditionally, the third quarter is quieter, but transactions have continued at a healthy pace over the summer and the deal pipeline is strong enough to suggest the recovery will continue through the winter and into 2015.

TMT continues to be the leader by deal value, followed by life sciences, with the number of deals so far in 2014 for the former, exceeding the whole of 2013.

The pattern of this recovery continues to between continents and sectors. While the U.S. and Western Europe do now seem to be motoring ahead, and Asia Pacific registered its best start to the year on record, in Q3 deal activity went into sharp reverse in the CEE and CIS region, as the impact of the Ukraine crisis took its toll across the region.

Elsewhere, regulatory requirements continue to dampen M&A in the financial services sector, while private equity has seen more deals so far this year than in any since 2007, although exits still predominate.

Overall though, M&A sentiment is strong and the outlook into 2015 remains positive, if the current volatility in the equity markets is resolved.

Choppy Outlook for European IPO Market
Corporate Finance and M&A/DealsFinance

Choppy Outlook for European IPO Market

Proceeds from European IPOs in the traditionally quieter third quarter settled back to €6.6 billion, from €22.3 billion in Q2 2014. Nevertheless, Q3 proceeds were more than double those of Q3 2013 (€3.0 billion), primarily as a result of a number of large IPOs in July, including NN Group in the Netherlands (€1.5 billion), FinecoBank in Italy(€673 million) and Logista in Spain (€606 million).

2014 IPO activity has almost quadrupled compared to last year. In the nine months to September 2014, €40.3 billion has been raised by 289 companies, in comparison to €11.7 billion from 173 companies in the same period in 2013.

Mark Hughes, partner in the UK Capital Markets Group at PwC said:

“The European IPO market performed strongly in the traditionally quiet third quarter against a backdrop of geo-political uncertainty in the Ukraine and the Middle East and, closer to home, the Scottish Referendum.

“Whilst we have seen a promising start to the final quarter with a number of large IPOs completing there are a number of warning signs on the horizon. However, if the markets continue to be receptive to IPOs, I expect the fourth quarter to surpass the €15 billion raised in Q4 2013.”

The exchanges of London, Milan and Euronext accounted for the majority of proceeds raised in the quarter, together contributing over 70% of the total IPO proceeds in Q3 2014. Euronext saw eight IPOs raising €1.7 billion, with the largest IPO of the quarter, NN Group, contributing almost 90% of exchange proceeds. Milan raised €1.1 billion from 10 IPOs and London continued to be the busiest IPO centre in Europe with 23 companies raising €1.9 billion.

Financials dominated the quarter, contributing nearly half of the proceeds raised, with 14 companies raising €3.1 billion and four IPOs in the top ten.

Richard Weaver, partner and Head of the UK Capital Markets Group at PwC, said:

“The big story this quarter was one of demergers. NN Group, the Dutch insurance division spun out of ING Bank, was the largest European IPO, and we also saw listings of FinecoBank in Italy, Citizen Financials in the US and, in the previous quarter, TSB Bank here in the UK.

“These large and usually complex transactions have been primarily driven by regulatory requirements, and we expect this trend to continue.”

Global IPO activity year to date stands at its highest level since PwC started publishing IPO Watch with €137 billion raised in 9 months. The US market led the field, reaching €28.7 billion in the quarter and €52.4 billion year-to-date, with the IPO of Alibaba being the largest on record raising €16.8 billion alone.

KPMG Appoints New Global and UK Restructuring Heads
Corporate Finance and M&A/DealsFinance

KPMG Appoints New Global and UK Restructuring Heads

KPMG has announced the appointment of David Burlison as Global Head of Restructuring and Mark Firmin as UK Head of Restructuring.

David Burlison replaces Philip Davidson, who has taken up a new role as KPMG International Chief Operating Officer, while Mark Firmin takes over the role as UK Head of Restructuring from Richard Fleming, who has led the team since 2008 alongside his primary role as KPMG’s UK Head of Advisory.

David Burlison was appointed partner in 2004, specialising in advising both companies and stakeholders on large and complex cross-border restructurings. It was his experience in these areas that provided the foundation to work alongside Philip Davidson, co-leading one of the world’s largest ever restructurings in Dubai.

David then joined KPMG in the UAE to establish a permanent restructuring practice there. For the last two years, David has acted as principal in a series of multi-billion dollar restructurings, as well as co-managing a significant investment fund. He has now returned to the UK, where he will combine his new role as global head with leading the development of the firm’s company-side restructuring practice in the UK, encompassing its debtor financial restructuring capability, Chief Restructuring Officer offering and distressed debt advisory function.

Commenting on his appointment, David Burlison, global head of restructuring, said: “’I am delighted to take over the global restructuring role from Philip Davidson and look forward to the challenge. The last five years in the Middle East where I have been involved with restructurings covering a range of regions from South East Asia, Africa, Europe and North America, and also dealing with investors and lenders from across the globe, has highlighted the importance to me of a truly joined up global restructuring practice. Combining our local knowledge with our international capabilities and network enables us to differentiate ourselves in the market, and deliver what our clients expect from a global firm such as KPMG.”

Mark Firmin was promoted to partner in the firm’s Leeds office in 2006. He took over from Richard Fleming as KPMG’s Northern Head of Restructuring in 2009 and, just under two years ago, became Head of Restructuring for KPMG’s regional businesses.

During his career, Mark has advised a wide variety of stressed and distressed companies and their stakeholders. His clients range from specialist lending teams in all the main clearing banks, other large financial institutions and major PLCs to the boards of small owner managed businesses. As a licensed insolvency practitioner, Mark has also led many insolvency appointments over the years and has consequently run companies operating across a wide variety of sectors.

Mark Firmin, Head of Restructuring for KPMG in the UK, said: “I am delighted to be taking over the reins of our UK Restructuring practice from Richard Fleming at this pivotal point in the economic cycle. Over the years, we have developed a highly skilled and experienced team of people who, in conjunction with specialists from the wider KPMG firm, have been hugely successful at helping businesses and their stakeholders navigate through periods of stress and distress. I’m excited and proud to be leading such a high performing team into the next economic cycle and look forward to the challenges ahead.”

WEF Annual Meeting 2015 to Address the New Global Context
FinanceSustainable Finance

WEF Annual Meeting 2015 to Address the New Global Context

The 45th Annual Meeting of the World Economic Forum, which will take place 21-24 January in Davos-Klosters, Switzerland, is to convene under the theme The New Global Context.

The theme reflects the period of profound political, economic, social and technological change that the world has entered, which has the potential to end the era of economic integration and international partnership that began in 1989.

Participating in the meeting will be 2,500 leaders, including the heads of 1,000 of the world’s largest and most successful businesses, heads of state or government from the G20 group and other nations, the heads of the world’s foremost international organizations alongside leaders from civil society, labour unions, the world’s major religions, media and the arts. The Forum’s New Champions communities; Young Global Leaders, Global Shapers, Global Growth Companies,Technology Pioneers and Social Entrepreneurs, will also contribute.

The Annual Meeting 2015 will provide a platform for over 50 initiatives that are currently being led by the Forum, with the aim of contributing positive, transformative change to the global agenda, as well as those of industry, business and the world’s regions. These include a public-private initiative to help achieve zero net tropical deforestation caused by key agricultural commodities by 2020; an endeavour to build a broad-based, multilateral global architecture for governing the internet; and the Forum’s Gender Parity Taskforces, which work with governments worldwide to improve economic opportunity for the female half of the population.

Supporting these endeavours, the Meeting’s programme will feature over 250 sessions, each researched and designed using input from the Forum’s Global Agenda Councils, a network of over 1,500 world-class experts that is focused on identifying and delivering solutions to over 80 individual global, regional and business challenges. This programme will be more open to the public than ever before, with over 20 televised sessions and an expanded multilingual webcast capability covering 60 sessions, all contributing to a real-time conversation to be played out over social media as well as the Forum’s own blog.

RBS Forced to Lower Citizens IPO Price
Corporate Finance and M&A/DealsFinance

RBS Forced to Lower Citizens IPO Price

It was hoped that RBS would achieve up to $3.5b in the IPO having priced the shares in the $23 to $25 range. However, the British-based bank was forced to lower the price to $21.50 to relieve investor fears over Citizens’ abilities to hit financial targets.

The sale on Tuesday eventually raised around $3b in the 25% total stock sale which will rise to $3.46 should an overallotment option be exercised.

The bad news for RBS, majority-owned by the British taxpayer, comes on the back of other less than stellar IPOs in the financial services sector. However, there was hope that the sale would pick up on some of the feel-good nature left in the air from the record $25b Alibaba float.

Given until the end of 2016 to sell Citizens, (with a conditional 2-month extension dependant on market conditions), the SEO of RBS Ross McEwan said:

“Selling Citizens will significantly improve our capital position and help us to create a strong and secure bank that can continue to fully support the needs of its customers.”

With a number of other financial firms looking at an IPO, share placings or a sale in the future, the the Citizens Financial offering will continue to be closely monitored by analysts and forecasters.

Starbucks to Buy Out Japanese Joint Venture
Corporate Finance and M&A/DealsFinance

Starbucks to Buy Out Japanese Joint Venture

Takamex / Shutterstock.com

 The acquisition will see Starbucks Japan purchase the remaining 60.5% majority stake presently held by its partner.

Starbucks Japan and Sazaby have been operating the joint venture since 1995.

With the country being home to some of the coffee giant’s most profitable outlets, Japan represents Starbucks’ second biggest market in volumes of sales across more than 1,000 cafes.

The chairman of the firm, Howard Schultz, released a statement saying:

“Japan is a market we know well and care deeply about, with more than 25,000 partners serving millions of customers every week at more than 1,000 stores.”

The move is widely expected to come ahead of an expansion in the region by Starbucks. It already has a presence in the market with its ready drinks products and canned coffee, with the acquisition likely to fuel further grocery store sales.

Nepal Signs Biggest-Ever FDI to Launch Hydropower Growth Plan
FinanceForeign Direct Investment

Nepal Signs Biggest-Ever FDI to Launch Hydropower Growth Plan

A Mountain River in NepalPicture courtesy of Shutterstock

The deal with Indian firm GMR will see the creation of a 900 megawatt (MW) dam on the upper Karnali River. The project was agreed in principle with the infrastructure group six years ago but has been in limbo due to the ongoing political and civil tensions in Kathmandu.

Ending Nepal’s powercuts

The project is set to be the first in a series of four such projects undertaken by Investment Board Nepal (IBN).

In addition to helping end Nepal’s own power shortages electricity will be exported to India.

It is the next step in a trend to exploit the untapped power within Himalayan Rivers. Bhutan, located to the east of Nepal, recently announced its own round of hydropower projects.

In Nepal, the potential for hydropower is thought to be around 80,000MW. Of this, just 700MW is presently tapped. One of the world’s poorest countries and with a dearth in exports, the economy is propped up by income directed from expats and through tourism.

Of its own energy consumption around 75% presently comes from the burning of firewood – according to the IBN. It has one of the worst ongoing instances of power cuts across the globe.

Transforming Nepal’s finances

The IBN was advised on the FDI deal by Adam Smith International. Speaking to the Financial Times, Peter Young from Adam Smith said:

“It’s a major change for Nepal in that it’s actually opening up this hydropower on a large scale,”

My Young went on to say that the deal, which has been financed by aid from Britain, should ‘transform’ the financial position of the Nepali government as well as turn around its power supply issues.

Mr Young also went on to explain the terms of the deal which will see Nepal given:

• 27% of free equity share of the project
• 12% of the electricity output

The project is expected to be signed off by 2021.

It is understood that the project will be wholly transferred to Nepal after the dam and tunnel system’s 25-year operating-life concession has ended.

 

Chinese FDI Falls to Two-and-a-Half Year Low
FinanceForeign Direct Investment

Chinese FDI Falls to Two-and-a-Half Year Low

Courtesy of Shutterstock

Undermining the economic growth in the country, the August figures come as the country suffers from slowing output growth and falling levels of imports.

The Commerce Ministry figures show that in August, China saw $7.2 billion (4.45 billion pounds) in FDI heading its way. That is a drop of 14% from August 2013 and the lowest total value since February 2012.

For the year to date the country has accrued $78.3 billion in FDI. That too is down on 2013 figures by 1.8%. One of the economists at ANZ, Zhou Hao, commented:

“It reflects the downward pressure on the manufacturing sector,

“The sector has not been doing well so it’s logical that companies are reducing their investment.”

Though FDI in China is an important indicator as to the health on a global level, the contribution it makes to the overall flow of working capital is fractional compared to other factors. The export level is more important for example, achieving a level of around $2 trillion last year.

Domestic Slump

The growth of output falling back to its slowest rate in six years is more of a worry for investors in China with fears rising of an impending downturn. The news has also seen a number of economists downwardly adjust their Chinese forecasts for the year.

Another concern is the drop in domestic demand which, together with a slowdown in the housing market, is dragging the economy away from a higher rate of growth.

The news that FDI has fallen in China is still a concern though.

Steady Growth and Records

This is largely because it has maintained a steady rate of year on year growth since joining the World Trade Organization in 2001 reaching a record high last year of $118 billion.

Despite the fall in August many are still predicting another record year in 2014. Excepting a disruption to global capital flow, it China’s FDI this year could attain $120 billion.

Levels of FDI into China are also up from some countries, with investment from South Korea increasing by over 31% annually. Investment from Britain too has leapt up by nearly 19%.

Conversely, Japanese investment has plunged by over 43% with US and European investment falling by around 17% to 18%.

IMF Issues Warning Over Excessive Risk Taking
FinanceSustainable Finance

IMF Issues Warning Over Excessive Risk Taking

Courtesy of Shutterstock

Issuing a warning, the IMF said the dual threat could undermine what is already an uneven and weaker recovery than had been expected.

The warning comes as part of a report prepared by the IMF which will be put in front of the G20 finance ministers and central bank governors in Australia this weekend. The report also discusses problems in the US economy and the eurozone. Together with challenges facing the economies of China, Japan, Latin America and Russia, the IMF said the growth target of 3.6% for this year will not be achieved.

However, looking ahead to next year, the Washington-based body said that the rate of growth should pick up. Citing the long-term low interest rates across the world, supportive measures introduced by central banks and the steady increase in share prices, the global prospects and challenges said that there will be a number of key contributing factors to the growth increase.

US Set to be Strongest 2015 Economy

This better news was itself tempered however. The IMF went on to say that further new threats could be on the horizon, causing further disruption and an unsettled atmosphere in investment markets.

The other threats it sees approaching are:

• Low inflation
• Permanent growth rate slowdown in the west
• Lower growth in emerging economies
• Potential disruption as a result of the US Federal Reserve raising interest rates

Analysing individual economies across the world, the IMF paper continued to say that it expects the US economy to perform best next year. It also said that the growth forecasts in the UK should remain ‘solid’. The same is true of growth forecasts for many developed Asian markets, as well as the economies of Australia and Canada.

However, it went on to say that the eurozone will continue to see an ‘uneven’ and ‘more gradual’ recovery, despite recent measures to stimulate activity by the European Central Bank.

Though backing the US and the UK, the IMF went on to advise Washington and London policymakers to prepare to remove their stimulation efforts that have been in place for over five years.

PBoC Injects Cash into China
FinanceInfrastructure and Project Finance

PBoC Injects Cash into China

It is understood the cash injection is a response to the economic slowdown revealed last month.

In data for August, industrial output in the country posted an underwhelming 6.9% annual growth rate. It is the lowest rate since the global downturn of the last few years.

The figures were also revealed amid other weak economic data.

The cash is already starting to arrive in a set of five nominated banks from the People’s Bank of China. The cash started being channelled yesterday (Wednesday 16 September), with tr transfers likely to complete through the course of today.

The Rmb500bn injection represents an equivalent cut of 50 base points to the country’s reserve requirement ratio. This is the level that commercial cash lenders must maintain with PboC, according to economists in the country. Citi analyst Shen Minggao said:

“The effectiveness of this policy move will largely depend on the interest rate charged on this lending by [the] PBoC, which is unknown,

“If the news is true, we believe the PBoC is maintaining an easing bias in its monetary policy stance to neutralise the property-sector down-cycle.

It is not the first action taking by the central bank to support flagging areas of the economy. The country has already seen cuts to RRR for lenders in rural communities, while an relaxation on home buying in the country was also introduced.

According to analysts, it is about taking careful steps to stimulate growth without panicking the market. Lessons have also been learned from 2009, where China introduced a huge stimulus package which resulted in huge debts being run up, among other significant negatives.

Alibaba Lifts Fund Raising Target
Corporate Finance and M&A/DealsFinance

Alibaba Lifts Fund Raising Target

Responding to demand, the group has raised its fund-raising target. Alibaba has lifted its price range for the initial public offering (IPO) from $60 to $66 to $66 to $68 for each American depositary share.

If realised, that will see the sale raise up to $21.8 billion and value the e-commerce giant at a staggering $165.5 billion at the new range midpoint.

It is the only logical step to raise the price of course and, such has been the demand that despite the increase, the underwriters are looking to close the book early – perhaps as early as today, Tuesday 16 September. However, that the firm held back on lifting the price much higher demonstrates a good conscious effort on behalf of the board and its advisers.

The reaction from investors has profound in many people’s eyes, with over 800 people attending the presentation of the price increase.

Orders for shares have also been coming in from every quarter, despite investors knowing they will not realise anything near the number of shares they want.

One hedge fund is even rumoured to have requested several billion dollars’ worth, despite only presently managing about $3 billion in assets.

However it is understood that the Alibaba board is targeting big mutual funds and other long-term investors. It is not interested in people looking to make a quick profit from flipping their shares.

It is thought this was a key driver in keeping the price lower than could have been achieved. Another factor is likely to have been the price bump by Facebook, which left investors not taking part in the offering little room for moving in.

 

ConocoPhillips to Exit UK Oilfield
Corporate Finance and M&A/DealsFinance

ConocoPhillips to Exit UK Oilfield

The announcement comes just days ahead of the vote for independence in Scotland – the campaign for which has seen the oilfields of the UK come under much scrutiny.

Conoco presently holds a 24% stake in the oilfield, with sources close to the firm advising that it has already hired banks to facilitate the sale. It is unclear as to how much the firm could get for its holding, but industry predictions suggest it could be as high as $3bn.

Highly Valued

The Clair oilfield sits in the North Sea off the coast of Scotland, west of the Shetland islands.

It is also one of the most highly valued assets in the UK.

However, the exit by Conoco is indicative of the challenging environment the oil industry is facing. Despite having access to valuable sources of oil still, accessing it is complex and, with increasing regulation and attitudes, expensive to extract.

Despite being isolated in 1997, it was only nine years ago that the Clair oilfield started being exploited while work to develop a second site has just started. That is due to get up to production in three years, with many suggesting high revenues will be forthcoming.

However, holding 28.6% in the oilfield, biggest stakeholder BP is still undergoing an appraisal of the site.

Potential Production Problems

The stance taken by BP highlights the biggest issue that Conoco has with its sale – the perceptions of potential buyers. There are worries over the UK oilfield’s ongoing production rates.

Selling its stake would allow Conoco to continue its strategy of exiting from a sweeping range of international holdings. The continuing strategy is to free up funding for investment in the US shale industry, which its most recent forecast suggesting that there were $2.6bn recoverable barrels in its Texas shale field of Eagle Ford.

In the past three years, Conoco has sold its stake in Lukoil and its 8.4% in the Kazakhstan Kashagan oilfield.

Details of the sale have not been disclosed at the time of writing.

The other shareholders on the Clair oilfield are Royal Dutch Shell and Chevron with a 28% and 19% holding respectively.

Calpers to Exit from Hedge Funds
Corporate Finance and M&A/DealsFinance

Calpers to Exit from Hedge Funds

It is understood that Calpers believes they are too expensive and complex – not a response to the performance of the program that is in place.

30 Hedge Funds to be Divested

Presently Calpers has 30 hedge fund investments; 24 hedge funds and a further six hedge fund-of-funds including funds managed by:

• Och-Ziff Capital Management Group LLC
• Bain Capital LLC’s Brookside Capital
• Lansdowne Partners LP
• Canyon Partners LLC
• Rock Creek Group LLC
• Pacific Alternative Asset Management Co.

No decisions have been made where to divert the investment by the board, with the interim chief investment officer for the $298 billion pension fund, Ted Eliopoulos, advising:

“We concluded that we would eliminate the hedge fund program in order to reduce the complexity, reduce the costs in the program, particularly in relation to our view that given the scale of Calpers, we would not be able to scale a hedge fund program to a size that would really move the needle,”

Risk Averse Despite Records

Calpers first invested in hedge funds in 2002 but, since the financial collapse, has undertaken a strategy of reducing its risk. Throughout the crash of the last few years, Calpers saw over 30% of its wealth wiped out.

To June 31 this year, the fund paid $135 million in fees for its hedge fund commitments, which earned 7.1%. That is a contribution of 0.4% on total fund performance. In the last 10 years, the annualized rate of return is 4.8%. Calpers’ return target for its investments is 7.5%.

Its returns on global stocks in the same period earned the fund 18.4%.

However, the hedge funds have contributed to stunning growth in recent years. Back in July, Capers announced it had hit a total value of $300 billion. The first time the fund has risen so high, that put it second to just two firms listed on the Dow Jones Industrial Average.

Recently though, hedge funds have been attracting record levels of assets, reaching a high of $2.8 trillion as institutional investors head for alternative investments.

There are over 1.6 million members in the Calpers retirement system, with more than 1.3 million registered members in its health plans.

The fund also administers health and retirement benefits for over 3,000 local agency, public school and state employers.