Commercial Awareness Discussion Thread

[Daniel Boden]

I still think it's very risky to commit to an IPO. On Monday the S&P 500 erased it losses from the pandemic and was within touching distance of its February peak. But on Tuesday it went down again on the news of a glass half-empty outlook from the ECB. I do think one major insolvency or a poor jobs report would send stock markets down. Also, the situation isn't helped by the influx of retail investors who have used Robinhood - bankrupt stocks are now soaring. I think this stresses the sheer speculation and vulnerability of the stock market right now. I think an IPO would be ideal when more M&A deals have gone through than fallen apart.

Here's the link on the zombie rally: https://ftalphaville.ft.com/2020/06/09/1591692634000/The-zombie-rally/

I think if a company is in a position to list in the next month or two then it should proceed as evidently there is strong demand for listed stocks and the Fed has pledged to continue its extraordinary level of market support. That said if a company isn't ready for an IPO in that short timeframe then I agree it should hold off due to the market volatility as you mention because I think it's inevitable the markets will drop again sharply this year. Although unemployment figures went down in the US last month, the numbers are still incredibly high.

 

[Daniel Boden]

I get your point. But I think as always, it depends on the company financials - a loss-making startup, like WeWork, probably will not be well received. Conversely, with debt, I think almost any bond offering would do well due to the Fed's comments today.

Yeah that's very true and completely agree re bond offerings - do you think debt funds will be more popular now as a result?

 

[Daniel Boden]

In today's news the big story is perhaps Just Eat Takeaway's merger with Grub Hub in a deal worth £5.7 billion which gives Just Eat Takeaway a significant foothold in the lucrative US takeaway market. Slaughter & May and Kirkland & Ellis were among the firms advising the two parties and just goes to show that big mergers can still happen despite the difficulties caused by COVID-19.

Last month we saw the merger between O2 and Virgin Media take place even though the world was still in the relatively early stages of dealing with COVID-19 so perhaps the fact that these two deals have been able to complete successfully is indicative of a change to the legal working landscape going forwards?

More info on the Just Eat Takeaway and Grub Hub merger is below:
Just Eat Takeaway combines with Grubhub in $7.3bn deal
https://www.ft.com/content/58c0f467...egmentId=269ab16c-599f-119f-3d76-260b55fc8e43

 

[Daniel Boden]

Equally, in another big story, Unilever is seeking to abandon its Anglo-Dutch corporate structure and instead become a single UK company in an effort to make any future equity-based acquisitions or disposals faster and more streamlined.

Here are the links below:
Unilever to combine Anglo-Dutch arms in UK company
https://www.ft.com/content/ffbe3980-ff77-43bf-8ba3-169a87cb0824

Unilever unification: soap saga
https://www.ft.com/content/7fdfe84b-3df3-44ea-a191-7a1c2222a023#myft:my-news:page

 

[S87]

The Fed made its announcement this afternoon and pledged its continued market support, predicting no interest rate increases until the end of 2022 which was in line with market expectations. As such, the markets reacted positively to this news and the Nasdaq and S&P 500 both rose with the Nasdaq crossing 10,000 points today.

That said, it is clear that the US is in for a painful economic recovery with still 13.3% of people unemployed.

Here are links below to these big stories:
Fed predicts no rate increases until at least the end of 2022
https://www.ft.com/content/e9d79319-492d-45cb-b491-fd61cc90effc

Nasdaq passes 10,000 as Fed pledges to maintain support
https://www.ft.com/content/0e3872ed-7cb4-45d3-bbbd-a9378c8fe7ff

I read this morning that The Federal Reserve might support the economy via yield curve control.

https://www.brookings.edu/blog/up-front/2020/06/05/what-is-yield-curve-control/#:~:text=Under yield curve control (YCC,from rising above its target.&text=Because bond prices are inversely,to lower longer-term rates.

 

[Daniel Boden]

I've read about a lot of debt funds being raised since the pandemic began, so in short, yes they are more popular right now (e.g. KKR, Angelo Gordon). I think a lot will target distressed M&A - but on the whole, it's something I need to look into in more depth before I comment

You called it @Raam! Article in PE Insights today examining how many PE firms are now targeting distressed funds and private debt going forwards according to data gathered by Institutional Investor.

I'd recommend all those who are tracking PE to read this and research this in sufficient detail so you feel confident talking about it in an interview - I'd recommend the free course on Coursera about Private Equity & Venture Capital to help with your understanding

Private Equity Managers Eying Distressed Funds, Private Debt
https://pe-insights.com/news/2020/0...funds-private-debt/?ct=t(20200528_NL+Week+24)

 

[Daniel Boden]

Equally, in other PE news, KKR has come under fire today after (very cheekily in my view) asking its advisors to discount their fees, while investing $18 billion in deals since February - it remains to be seen if this will approach will be followed by other PE firms which is obviously a worry for advisors such as law firms...

KKR asks advisers to ‘share the pain’ amid $18bn spending spree
https://www.ft.com/content/9bb061a1-9b7a-4c75-8cb2-826235384b37

 

[WMA]

Hi @Jaysen I seem to rememer that you posted somewhere a really good thread on the basics of an M&A transaction, but I can't find it. Do you happen to have a link? Thanks!

 

[Jaysen]

Hi @Jaysen I seem to rememer that you posted somewhere a really good thread on the basics of an M&A transaction, but I can't find it. Do you happen to have a link? Thanks!

Hmm I'm trying to remember!

Was it a link to an external site? And do you remember if it was general M&A or a private equity transaction?

 

[WMA]

I just managed to find it, it was this one https://www.thecorporatelawacademy.com/mergers-and-acquisitions-case-study/ which is super helpful btw! Thanks

 

[Jaysen]

I just managed to find it, it was this one https://www.thecorporatelawacademy.com/mergers-and-acquisitions-case-study/ which is super helpful btw! Thanks

Okay great I'm glad! That should be plenty for interviews, but I'd just flag that there's a fair bit I'd improve on now (I wrote it some time ago). I'll be circulating a new one in the near future!

 

[Daniel Boden]

Evening everyone! New week, new stories!

The most interesting story I found today was from the FT's feature on 'supply-chain finance' which is what Softbank and Credit Suisse have been partaking in over the last few months - 'the arrangement has allowed SoftBank effectively to provide financial assistance to other Vision Fund companies by paying their suppliers upfront but through a fund commingled with other investors and financing other companies'.

See more in the articles linked below:

SoftBank/Credit Suisse: funnel vision
https://www.ft.com/content/15342ea0-30f1-4a11-8e1e-55ab1dbaab7f

SoftBank invests in Credit Suisse funds that finance its technology bets
https://www.ft.com/content/6995af3b-5f66-4e1b-9143-1e9daccfc9b4

 

[Demna87]

There's a really interesting article about Robinhood here - https://marker.medium.com/how-robin...ade-their-way-through-a-pandemic-1a1db97c7e08

The beginning is mostly background on how the app started, but about two thirds of the way through it talks about the pandemic and why it has caused trading participation of retail investors to increase. Maybe not the best for pure commercial knowledge but it is a good read for understanding the equities market generally and why it's behaving so strangely!

 

[Jaysen]

There's a really interesting article about Robinhood here - https://marker.medium.com/how-robin...ade-their-way-through-a-pandemic-1a1db97c7e08

The beginning is mostly background on how the app started, but about two thirds of the way through it talks about the pandemic and why it has caused trading participation of retail investors to increase. Maybe not the best for pure commercial knowledge but it is a good read for understanding the equities market generally and why it's behaving so strangely!

Really good article - I'm not so familiar with Robinhood but think more candidates should be taught the basics of savings and passive investing, especially for when you guys go onto become lawyers.

 

[Daniel Boden]

Afternoon all, in private equity news today, dealmaking is still occurring at a significant pace with KKR investing $650 million into the property arm of Vietnam's largest conglomerate, in a deal which is one of the largest ever private equity investments into the south-east Asian markets.

After our interesting conversation into recent investment into the Indian company Jio (backed by the Indian conglomerate Reliance), it is clear that PE firms see India and Vietnam as popular emerging markets with a lot of potential.

See more below:

KKR leads $650m deal for stake in Vietnam property group
https://www.ft.com/content/ffccbf16-90dc-4c2a-a4f7-0c5c373bccd6

 

[Daniel Boden]

Equally, Latham & Watkins, one of the leading private equity firms in the world has written a really interesting feature on the growing number of PE investments into the sports industry which is definitely worth a read:

Scoring on Sports Deals
https://www.latham.london/2020/06/scoring-on-sports-deals/

 

[Daniel Boden]

There's a really interesting article about Robinhood here - https://marker.medium.com/how-robin...ade-their-way-through-a-pandemic-1a1db97c7e08

The beginning is mostly background on how the app started, but about two thirds of the way through it talks about the pandemic and why it has caused trading participation of retail investors to increase. Maybe not the best for pure commercial knowledge but it is a good read for understanding the equities market generally and why it's behaving so strangely!

Following on from this, in today's 'Due Diligence' feature in the FT, the impact of Robinhood investing is laid bare by reference to Hertz which, although bankrupt, is planning on selling $1 billion worth of shares to investors to try and survive restructuring in a move which has left a lot of analysts scratching their heads. This is because, normally, a company would look to restructure its businesses with debt and not equity.

Here is more below - it is really well explained in simple terms, so I'd encourage all those who were a little confused (like I was) as to how this was able to happen to give it a read:

Hertz: buyer beware
https://www.ft.com/content/9cf7759c-7d02-4051-a551-18d15c9986e3

 

[S87]

Equally, Latham & Watkins, one of the leading private equity firms in the world has written a really interesting feature on the growing number of PE investments into the sports industry which is definitely worth a read:

Scoring on Sports Deals
https://www.latham.london/2020/06/scoring-on-sports-deals/

Yes this Is my topic for one of my tc apps

 

[Daniel Boden]

Also today Royalty Pharma had the largest IPO of the year thus far, selling $2.2 billion worth of shares, proving that many companies are still pursuing IPOs despite the market uncertainties caused by coronavirus.

See more below:
Royalty Pharma poised for biggest US listing of this year
https://www.ft.com/content/dc25d047-e72a-4019-96ae-62113b84db4b

 

[J32]

Following on from this, in today's 'Due Diligence' feature in the FT, the impact of Robinhood investing is laid bare by reference to Hertz which, although bankrupt, is planning on selling $1 billion worth of shares to investors to try and survive restructuring in a move which has left a lot of analysts scratching their heads. This is because, normally, a company would look to restructure its businesses with debt and not equity.

Here is more below - it is really well explained in simple terms, so I'd encourage all those who were a little confused (like I was) as to how this was able to happen to give it a read:

Hertz: buyer beware
https://www.ft.com/content/9cf7759c-7d02-4051-a551-18d15c9986e3

Due Diligence is such an entertaining read - always enjoy reading it during breakfast!