Commercial Awareness Discussion Thread

[Daniel Boden]

In today's news, Aston Martin has announced it is seeking to issue new shares and take on new, high yield debt, to raise £260 million in financing. This comes as Aston Martin's new owner, Lawrence Stroll is taking steps to significantly restructure the company and try and turn its fortunes around, as Aston Martin has been lossmaking over the last couple of years, firstly due to the US-China trade war significantly impacting its supply chain and now COVID-19.

See more below:

Aston Martin to raise £260m in share sale and high-interest debt
https://www.ft.com/content/79f611e6-653c-4a30-b581-b66e54cbf231

 

[Daniel Boden]

In an interesting longer article which follows the findings of recent articles on ESG I've shared, companies' ESG strategies are continuing at a pace and have been found to be very profitable, contrary to the predictions from many critics who believed that when market conditions got tough, ESG strategies would take a back seat.

See more below:

ESG strategies still buoyant despite Covid, say in-house lawyers
https://www.ft.com/content/6621918c-a3e8-11ea-a27c-b8aa85e36b7

 

[EEE]

Equally, in other PE news, in a recent survey by Private Equity International, Fund Managers are less confident in public-to-private transactions as a result of the uncertainty caused by COVID-19. The three reasons given in the survey are:

1. The market dislocation caused by COVID-19 creating an uncertain market outlook for the rest of the year
2. It will be harder for a seller to recommend a private takeover to shareholders because of this aforementioned market uncertainty
3. Consideration - it will be harder for firms to finance deals since the debt market is so unstable right now

See more below:

Why GPs are less bullish on P2Ps since COVID-19
https://www.privateequityinternational.com/why-gps-are-less-bullish-on-p2ps-since-covid-19

Hi Daniel, thanks for this post! You appear to be particularly interested in Private Equity, so I thought I'd ask you whether you have any insight on the current trends/opportunities/threats facing Private Equity Real Estate? Would you suggest this will be particularly impacted by the introduction of the 0.1% interest rate by the Bank of England? Many thanks!

 

[Alice G]

Just a note guys, it is possible law firms may well start to branch into case studies revolving around restructuring and insolvency given the current situation. Retail is a space where this is particularly marked and AllSaints has recently sought CVAs to try to avert a more serious crisis. Might be worth reading around and looking into this particular case study to get a better feel for what company voluntary arrangements are and how they fit into the wider context of restructuring and insolvency.

 

[Daniel Boden]

Hi Daniel, thanks for this post! You appear to be particularly interested in Private Equity, so I thought I'd ask you whether you have any insight on the current trends/opportunities/threats facing Private Equity Real Estate? Would you suggest this will be particularly impacted by the introduction of the 0.1% interest rate by the Bank of England? Many thanks!

Thanks for your question!

I can't say I'm all too familiar with PE Real Estate specifically but I would assume that the PE Real Estate industry could have a fair few opportunities in the next few months due to the fact that house prices have fallen significantly due to COVID-19. Equally, the fact that the BoE Base Rate is now at a record-low means that debt finance would be incredibly cheap and so PE firms would be able to continue to leverage their transactions with a high amount of debt at a very minimal cost and then load this debt onto the target company/acquisition as has occurred in recent years.

I hope that helps? Feel free to ask if you have any other queries

 

[Daniel Boden]

In today's news, I have picked out Ineos' acquisition of BP's petrochemicals business for $5bn. This is in response to BPs first-quarter earnings falling by 66% and the need, according to CEO Bernard Looney, to strengthen the energy company's finances and reinvent the company's structure and strategy moving forwards.

See more information below:

BP agrees $5bn sale of petrochemicals business to Ineos
https://www.ft.com/content/565769eb-6618-4d43-a98a-58e8c3db1d76

BP/Ineos: good chemistry
https://www.ft.com/content/c6866bc3-bca4-42d7-9303-276490b50767

 

[Daniel Boden]

In fashion news today, GAP and Kanye West's Yeezy brand have announced that from 2021, GAP will stock Yeezy products and, in exchange, Kanye will receive royalties and GAP equity based on the sales performance of his brand. Clearly, GAP is hoping that this decision will improve its appeal with a younger audience and, therefore, boost sales.

Equally and in other good news for the West family, following its purchase of a majority stake in Kylie Jenner's 'Kylie Cosmetics' last year, today Coty announced it is purchasing a minority (20%) stake in Kim Kardashian West's make-up brand KKW. It would seem that Coty is attempting to modernise its portfolio and utilise the aggressive Instagram marketing of the Jenner-Kardashian clan which has proven to be incredibly lucrative for the two families.

See more below:

Gap/Kanye West: celebrity culture
https://www.ft.com/content/524bbed2-ac4c-43bf-8ae5-7d618e3db4c4

Coty to buy 20% stake in Kim Kardashian West’s beauty line
https://www.ft.com/content/ee526fad-d70d-40c6-a848-f883e1b1d380

 

[IntrepidL]

In fashion news today, GAP and Kanye West's Yeezy brand have announced that from 2021, GAP will stock Yeezy products and, in exchange, Kanye will receive royalties and GAP equity based on the sales performance of his brand. Clearly, GAP is hoping that this decision will improve its appeal with a younger audience and, therefore, boost sales.

Equally and in other good news for the West family, following its purchase of a majority stake in Kylie Jenner's 'Kylie Cosmetics' last year, today Coty announced it is purchasing a minority (20%) stake in Kim Kardashian West's make-up brand KKW. It would seem that Coty is attempting to modernise its portfolio and utilise the aggressive Instagram marketing of the Jenner-Kardashian clan which has proven to be incredibly lucrative for the two families.

See more below:

Gap/Kanye West: celebrity culture
https://www.ft.com/content/524bbed2-ac4c-43bf-8ae5-7d618e3db4c4

Coty to buy 20% stake in Kim Kardashian West’s beauty line
https://www.ft.com/content/ee526fad-d70d-40c6-a848-f883e1b1d380

Thanks for sharing this, @Daniel Boden! I find this very useful

 

[Ifmhouse4]

In fashion news today, GAP and Kanye West's Yeezy brand have announced that from 2021, GAP will stock Yeezy products and, in exchange, Kanye will receive royalties and GAP equity based on the sales performance of his brand. Clearly, GAP is hoping that this decision will improve its appeal with a younger audience and, therefore, boost sales.

Equally and in other good news for the West family, following its purchase of a majority stake in Kylie Jenner's 'Kylie Cosmetics' last year, today Coty announced it is purchasing a minority (20%) stake in Kim Kardashian West's make-up brand KKW. It would seem that Coty is attempting to modernise its portfolio and utilise the aggressive Instagram marketing of the Jenner-Kardashian clan which has proven to be incredibly lucrative for the two families.

See more below:

Gap/Kanye West: celebrity culture
https://www.ft.com/content/524bbed2-ac4c-43bf-8ae5-7d618e3db4c4

Coty to buy 20% stake in Kim Kardashian West’s beauty line
https://www.ft.com/content/ee526fad-d70d-40c6-a848-f883e1b1d380

Thanks for sharing this! I find their aggressive Instagram marketing quite staggering! I read an article earlier which noted that Kylie Jenner's social media influence is so powerful that after tweeting that 'she no longer uses Snapchat', Snapchat's stock market value plunged by £1bn!

 

[Helena]

Just a note guys, it is possible law firms may well start to branch into case studies revolving around restructuring and insolvency given the current situation. Retail is a space where this is particularly marked and AllSaints has recently sought CVAs to try to avert a more serious crisis. Might be worth reading around and looking into this particular case study to get a better feel for what company voluntary arrangements are and how they fit into the wider context of restructuring and insolvency.

This is a good point. In addition Intu- the shopping centre giant has entered administration and was struggling with a large debt pre COVID due to the general declining value of shopping centres. Worth looking into the story which concerns fall in rent collection for retail landlords as well as a change in shopping habits accelerated by the pandemic. Online sales reached a record high and there is a general “fall out of love” with the glossy sterile shopping centre. Intu is facing a regeneration challenge like no other.

 

[Daniel Boden]

In today's news, it has been revealed that Wall Street Banks have received record fees for fundraisings during the pandemic. These fees have been largely boosted by debt fundraisings as companies have desperately attempted to source cash to tide over their finances during this difficult period.

See more below:

Wall Street banks net record fees for pandemic fundraisings
https://www.ft.com/content/84ee3b24-c7f0-44ba-aeba-5ac9c57f810a

 

[Daniel Boden]

Equally, following its failure to acquire Grubhub earlier this month, Uber is now in talks to acquire Postmates in an attempt to speed-up its consolidation of the currently-lossmaking US food delivery market.

See more below:

Uber in talks to buy food delivery start-up Postmates
https://www.ft.com/content/eb600f18-acfa-4def-9fde-2135bf904b8a

 

[Daniel Boden]

There's an interesting feature in PE Insights today which summarises PE's increasing activity in the sports industry which I have mentioned in the last few months.

Firms such as CVC, Advent, Bain Capital, KKR are all looking to invest in the sports sector and are confident that they will get significant returns on their investments due to the fact that the sports industry often has a very good 'bounce-back-ability' since many fans are itching to watch their beloved teams and stars play.

Equally, now is a good time to buy for these PE firms because COVID-19 has reduced the valuations of teams and organisations and has increased the need for financing for teams/organisations previously not in the market for outside investors.

The article is, as ever, linked below:

Game on: Buyout firms aim to score big in sports
https://pe-insights.com/news/2020/06/30/game-on-buyout-firms-aim-to-score-big-in-sports/

 

[Jaysen]

Found this interesting: https://blogs.microsoft.com/blog/20...-digital-skills-needed-in-a-covid-19-economy/.

Microsoft is seeking to provide digital skills to 25 million people by the end of 2020.

"Within only a few months, COVID-19 has provoked a massive demand shock, setting off job losses that far exceed the scale of the Great Recession a decade ago. The world will need a broad economic recovery that will require in part the development of new skills among a substantial part of the global workforce.

The pandemic has shined a harsh light on what was already a widening skills gap around the world – a gap that will need to be closed with even greater urgency to accelerate economic recovery. This longer-term disconnect between supply and demand for skills in the labor market appears to be driven by three primary long-term factors: (1) the rapid emergence of AI-powered technologies that are propelling a new era of automation; (2) the growing need for technological acumen to compete in a changing commercial landscape; and (3) the drop-off in employer-based training investments over the past two decades. Navigating these challenges to close the skills gap will require a renewed partnership between stakeholders across the public, private, and nonprofit sectors."

Might be useful to consider how the pandemic will lead to long-lasting changes in the way we work (and live!).

 

[Daniel Boden]

In today's FT, it has been announced that unsurprisingly due to COVID-19, M&A activity has fallen to its lowest level in more than a decade with companies looking to sure up their existing businesses and tapping up credit lines to ensure financial security during this difficult period.

However, many bankers, lawyers and other dealmakers are confident that this will increase in Q3 & Q4 this year as this COVID-19 world becomes more understood and stable.

It is important to note that Private Equity, due to the significant amount of dry powder PE firms are sitting on, has largely been immune from this drop in M&A activity, with firms such as KKR being very active in Q1 and Q2.

See more below:

Global dealmaking drops to lowest level in more than a decade
www.ft.com/content/92c13865-6c67-4f48-b96b-3429194c2ea2

 

[Daniel Boden]

Further to the above post, it isn't just PE firms who have been continuing to take a long-term view on transactions and continuing to invest in these uncertain times. Sovereign wealth funds have been very active this year so far and have invested $17 billion into venture capital deals in this year alone. The environment of very cheap debt has encouraged Sovereign wealth funds to continue to invest while others have chosen a path more geared towards consolidation.

See more below:

Sovereign Funds Pile Into Venture Capital Investments in 2020
https://pe-insights.com/news/2020/0...ile-into-venture-capital-investments-in-2020/

 

[Daniel Boden]

In today's news, Primark has announced that it will lose 2/3 of its profits due to COVID-19. The lack of an online presence clearly has hurt Primark significantly as it has had to continue to pay its suppliers throughout the lockdown.

See more below:

Primark to lose two-thirds of profits because of coronavirus
www.ft.com/content/02764887-2539-4b52-8e37-5c46507d35d9

 

[Daniel Boden]

Furthermore, EU competition regulators are investigating Google's acquisition deal and how much data Google will access and whether this will cross over to its search engine and advertising businesses. Google has said it has and will continue to be completely transparent throughout this process but it will be interesting to see how this plays out, especially since the questionnaires suggest that Brussels could step in and block the transaction...

See more below:
EU signals deeper investigation of Google Fitbit deal
www.ft.com/content/aba45bc9-ffc8-411e-ac29-dbb3171f4886

 

[Daniel Boden]

In other news, Daimler, the company behind Mercedes-Benz, has announced that its pending restructuring will be more dramatic and worse than previously expected, due to COVID-19. With its shares already falling 26% this year, with profits falling with them, it seems that Daimler could struggle for the foreseeable future. This is because the company struck a deal with its employees promising no compulsory redundancies until 2029 which makes restructuring much more difficult.

See more below:

Daimler: the best, bested
https://www.ft.com/content/50df2125-170d-437a-8631-7b830c7736f7

 

[Daniel Boden]

Apologies for the late stories today guys, my Gibson Dunn resources arrived today and I got a bit distracted! This will be my last day posting for the next two weeks as I start my scheme just so you are all aware.

Further to yesterday's story regarding Daimler's restructuring, today it has been announced that Daimler is to take a stake in a Chinese battery manufacturer, Farasis, indicating that it is pursuing a new direction in electronic or hybrid cars which it hopes will boost its profitability in the future.

See more below:

Daimler to take stake in Chinese battery cell maker Farasis
https://www.ft.com/content/baf2f5d9-a485-4e3a-9412-14d7c89c5ed9