Commercial Awareness Discussion Thread

[Daniel Boden]

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

Agreed! It's really great at summarising key M&A deals and definitely makes what could be otherwise dull news more interesting!

 

[Daniel Boden]

Afternoon all, I forgot to include this yesterday but there was an interesting feature in the FT about how, despite COVID-19, M&A activity in Spain has been very busy in the last few months e.g. the PE takeover of MasMovil, the merger of O2 & Virgin Media and Puig's purchase of a majority stake in Charlotte Tilbury.

See more below:
Spanish dealmaking defies pandemic
https://www.ft.com/content/b9cc77d4-47fd-48bc-ba75-9b178f079bfd

 

[Daniel Boden]

In other news, Boohoo has added Oasis and Warehouse to its growing portfolio of brands, paying a little over £5 million and expects to grow its revenues by 25% this fiscal year, despite the uncertainty created by COVID-19. This goes to show the importance of having a flexible supply chain model which allows a company to respond quickly to continually evolving market situations and unexpected market events such as COVID-19.

See below:

Boohoo predicts revenue boost as it snaps up Oasis and Warehouse brands
https://www.ft.com/content/5e7b46e1-04b0-4edd-b63b-3fa1f9c88a03

 

[NourJ]

In other news, Boohoo has added Oasis and Warehouse to its growing portfolio of brands, paying a little over £5 million and expects to grow its revenues by 25% this fiscal year, despite the uncertainty created by COVID-19. This goes to show the importance of having a flexible supply chain model which allows a company to respond quickly to continually evolving market situations and unexpected market events such as COVID-19.

See below:

Boohoo predicts revenue boost as it snaps up Oasis and Warehouse brands
https://www.ft.com/content/5e7b46e1-04b0-4edd-b63b-3fa1f9c88a03

Hi Daniel! Thank you for the update. But what exactly do you mean by flexible supply chain model?

 

[Daniel Boden]

Hi Daniel! Thank you for the update. But what exactly do you mean by flexible supply chain model?

Good question @N21! So in this case, the fact that Boohoo manufactures at least 40% of its products in the UK allows it to react very quickly to market trends whereas other brands outsource entirely to the far east which obviously takes longer to adjust to trends because of the distance that the products have to travel. Also, the fact that it deals directly with its suppliers without using a buying agent or intermediary further makes it a lean but very adaptable model.

 

[Daniel Boden]

Equally, further to recent M&A deals, in a potentially significant story, the EU is looking to limit the ability of government-backed companies e.g. Chinese-government-backed companies, from taking over EU businesses.

See more below:

EU seeks to curb state-backed foreign rivals
https://www.ft.com/content/8f8fc72d-1c05-488e-93f0-f60a4dce18b6

 

[Dennis Varghese]

Interesting news in competition/M&A arena - Brussels is looking into the Fiat Chryslar - PE merger. Apparently, the merger would mean the company is twice the size of the likes of Renault and Ford.

Note - I suppose something I never realised is that authorities don't look at car production as whole when looking at the competition i.e. this is with regards to European vans market only. The merger would result in Fiat Chryslar controlling a third of vans production in the EU market. To make matters worse, Fiat Chrysler has failed to justify or provide reasons for the merger within the deadline given.

 

[Demna87]

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

Another update to the story: https://uk.reuters.com/article/us-h...m-hertz-selling-new-shares-cnbc-idUKKBN23O2MR

Shares of Hertz have halted trading today following the US Securities and Exchange Commission telling Hertz that it has issues with its plan to sell stock.

 

[NourJ]

Good question @N21! So in this case, the fact that Boohoo manufactures at least 40% of its products in the UK allows it to react very quickly to market trends whereas other brands outsource entirely to the far east which obviously takes longer to adjust to trends because of the distance that the products have to travel. Also, the fact that it deals directly with its suppliers without using a buying agent or intermediary further makes it a lean but very adaptable model.

Thank you so much Daniel!

 

[Daniel Boden]

Thank you so much Daniel!

A pleasure my friend

 

[S87]

Guys,

Bank of England is going to pump an additional £100bn into the UK economy to maintain the government borrowing costs down. This is another example of quantitative easing together with keeping interest rates 0.1% (never been so low).


https://www.ft.com/content/9c2744fa-5162-489d-b117-18b2df88b6bd

 

[Daniel Boden]

Guys,

Bank of England is going to pump an additional £100bn into the UK economy to maintain the government borrowing costs down. This is another example of quantitative easing together with keeping interest rates 0.1% (never been so low).


https://www.ft.com/content/9c2744fa-5162-489d-b117-18b2df88b6bd

Haha I was just about to post the same thing! Great minds and all that

 

[Daniel Boden]

Another good feature in the FT's Due Diligence today is a good summary of how PE firms have not been afraid to invest in the market uncertainty created by COVID-19. A lot of PE houses in particular, such as KKR, see tremendous opportunities given that many companies are now undervalued and are available to be purchased and financed cheaply, due to the record low-interest rates mentioned previously.

Here are the articles below:

Private equity flexes its muscles with $40bn of deals in a crisis
https://www.ft.com/content/ce366768-3ca6-4543-8004-09d3dc311362

Private equity steps in where others fear to tread during pandemic
https://www.ft.com/content/912929f7-7366-45d0-90ce-4467b9fec7f0

 

[S87]

Haha I was just about to post the same thing! Great minds and all that

ahahah..you made me laugh and God knows that I needed that.

 

[S87]

Just one question guys.

When we think about business there is so much going on behind the scenes but one thing is more important than others (personally) and it is people.
Now because of Covid we had to go in lockdown to avoid people dying. After more than 3 months we are the only EU country not being able to lower down the rate infection, nevertheless the government is easing the lockdown.
But if we have such an high rate (1500 new infections as of yesterday only in Brent northwest London), and not essential shops are reopening don't we risk another lock down?

 

[S87]

The BBC gives a clear definition of quantitative easing: What is quantitative easing?

Quantitative easing (QE) is designed to lower the cost of borrowing for businesses, individuals and the government, thereby stimulating economic growth.

The Bank of England - which can create new money electronically - buys up large amounts of government bonds. These are promises to pay back a certain sum of money in the future, and pay interest in the meantime.

By driving up demand, the prices of those bonds rise on the open market, while the interest rates on them fall.

Many interest rates offered by banks to businesses and individuals are influenced by the price of government bonds.

QE also makes it cheaper for the UK government to borrow large sums of money, which is key to funding its coronavirus response

https://www.bbc.co.uk/news/live/world-53074391

 

[Daniel Boden]

Just one question guys.

When we think about business there is so much going on behind the scenes but one things is more important than others (personally) and it is people.
Now because of Covid we had to go in lockdown to avoid people dying. After more than 3 months we are the only EU country not being able to lower down the rate infection, nevertheless the government is easing the lockdown.
But if we have such an high rate (1500 new infections as of yesterday only in Brent northwest London), and not essential shops are reopening don't we risk another lock down?

I completely hear and share those concerns. I think it really is almost a catch-22 for the government because the economy is in such a bad way which could have a disastrous longer-term impact on the country. I think in the big short there's a stat that for every 1% increase in unemployment, nearly 40,000 people die (which has since been factually confirmed) so it could argue that from a longer-term perspective, the economy tanking is potentially worse than COVID-19. What is clear though is that there needs to be a very careful balancing act between economic stability and public health

 

[futuretraineecity]

My Uni have just subscribed to the FT - does anyone have any recommendations for which newsletters to subscribe to?

 

[Daniel Boden]

Further to the PE feature I mentioned earlier, today Bridgepoint announced it will be buying directly from another PE firm, EQT, in a deal that will see Bridgepoint purchase EQT's credit business. This comes at a time where many companies are looking for fresh financing as a result of COVID-19 so this could be particularly lucrative for Bridgepoint.

As ever, the article is attached below:

Bridgepoint to buy private equity firm EQT’s €3.9bn credit business
https://www.ft.com/content/957617c7-37a1-43c2-a44e-b0f6f2355316

 

[Daniel Boden]

My Uni have just subscribed to the FT - does anyone have any recommendations for which newsletters to subscribe to?

It depends what you're interested in! But for me, I'm subscribed to Due Diligence and Scoreboard