Commercial News Update - March 2018

[Coralin96]

Silly me completely forgot yesterday was the last day of February. I'll keep all the March posts in this thread.

(01/03/2018)

Headlines

1. The European Commission published guidelines yesterday that will require social media sites to remove illegal content from terrorism to copyright infringement from their sites. In relation to the terrorist content they will have just one hour to remove it. [Great but I don't know how the likes of FB would be able to remove something like that within an hour!]
2. The Bank of England's Term Funding Scheme ended, which means smaller banks now have to compete harder for deposits. This was a scheme where banks could borrow at a cheaper rate provided they increased lending.
3. Spotify is going to be floating on the market in an unusual manner. It's going to live-stream its investor pitch(!). Morgan Stanley, Goldman Sachs and Allen & Co are advising and it's valued at $19.7bn. In comparison Snapchat was valued at $24 billion.

Feel free to comment

 

[jess889]

Silly me completely forgot yesterday was the last day of February. I'll keep all the March posts in this thread.

(01/03/2018)

Headlines

1. The European Commission published guidelines yesterday that will require social media sites to remove illegal content from terrorism to copyright infringement from their sites. In relation to the terrorist content they will have just one hour to remove it. [Great but I don't know how the likes of FB would be able to remove something like that within an hour!]
2. The Bank of England's Term Funding Scheme ended, which means smaller banks now have to compete harder for deposits. This was a scheme where banks could borrow at a cheaper rate provided they increased lending.
3. Spotify is going to be floating on the market in an unusual manner. It's going to live-stream its investor pitch(!). Morgan Stanley, Goldman Sachs and Allen & Co are advising and it's valued at $19.7bn. In comparison Snapchat was valued at $24 billion.

Feel free to comment

That first one is really interesting! Germany recently introduced a hate speech law which is a little similar, but not quite as extreme. It fines social media sites for not removing 'obviously illegal' posts.

 

[Coralin96]

That first one is really interesting! Germany recently introduced a hate speech law which is a little similar, but not quite as extreme. It fines social media sites for not removing 'obviously illegal' posts.

Oh wow I didn't know that! I think the law is playing a bit of catch-up when it comes to online content.

 

[Coralin96]

I am slightly cheating as it's technically the 3rd but here we go

02/03/2018

• Brexit Speech: In her third big speech on Brexit, Theresa May was optimistic about our future with the EU. She said Britain would meet EU standards and called for a new customs agreement. Notably, she wants access to the market but without making budget contributions. Business leaders were reasonably happy, the EU not so much.
• Trump's Trade War: Trump said he'll put tariffs on imports of steel and aluminum in a bid to defend US workers. The EU said it would retaliate and China is expected to. Fears sent stocks down including manufacturers over fear of retaliation. This could cause a lot of uncertainty and hurt companies.
• Cryptocurrencies: The governor of the Bank of England, Mark Carney, has said the time has come for more regulation of cryptocurrencies. The value of bitcoin has fallen significantly since the highs of 2017. We can see differences in regulation from countries. For example China has limits its use, whereas US exchanges has launched bitcoin futures - a way of managing risk from price fluctuations.
• Tesco scandal: The retrial will start soon over Tesco's accounting scandal (the original criminal trial was at its closing stages when one of the executives had a heart attack, so it had to be abandoned). Note - Norton Rose Fulbright is representing that executive.
• Blackrock gun opt-out: Blackrock is looking at a way to help clients invest in funds which exclude gun manufacturers and retailers. Other companies have said they'd limit the sale of guns.

 

[Coralin96]

Next update

05/03/2017

• Italy's election: Voters in Italy moved away from the centre-left and centre-right and towards the right- Five Star Movement, which became the largest party in Parliament. The anti-immigrant party, League, also beat former PM Berlusconi's Forza Italia party and became the main Conservative party in Italy. Italy's market fell in reaction and shares in its banks were hit. Why has this all happened? Many were unhappy with the number of migrants that moved into Italy. The conservative parties also blamed the EU, an indication that anti-establishment politics since Brexit has not died down - even though Italy's history was based on big support for the EU. It contrasts with France who is pushing for more integration with the EU.
• Global fund manager confidence in the UK stock market fallen: A survey from Bank of America found that among global fund managers, UK stocks were the least popular. Its also delivered the lowest total return in dollar terms (including dividends) compared to the US, Eurozone, Japan and Germany. Confidence has falled by these investors because of Brexit, poor wage growth, inflation and political uncertainty. It's also the weakest European economy.
• Private equity firms taking on risk: PE firms have raised the most cash in history amid US tax conditions, lots of cash and a slow economy. At the same time, debt for US and Europe leveraged buyouts is almost at the highest before the financial crisis and PE firms have increasing amounts of money from investors.
• Only 1/6 of UK employers submitted gender pay gap data: Companies with 250 or more staff are required to report gender pay gaps this year. Public companies have until the end of March and private companies have until the beginning of April. So far, the largest gap is in construction then education and then finance and insurance. Among the banks that have reported so far, Barclays has the largest gap. The CEO of Lloyd's of London said that the data is skewed because many of the highest paid male staff are excluded. For example, when it comes to law firms, equity partners are said to be owners instead of employees, so they aren't included.
• Update to Trump's steel tariffs: There's been a variety of reactions from countries to Trump's plans: Theresa May reportedly raised concerns with Trump in a phone call, Canada, the largest outside supplier to the US in steel and aluminium have been lobbying, the EU has drawn up 2.8bn proposed countermeasures. Despite this, Trump threatened to include European car imports in its tariffs.
• Small British businesses unprepared for the GDPR: Less than 1 in 10 small businesses in Britain are prepared for the General Data Protection Regulation according to the Federation of Small Businesses. The group has called for a safe harbour so businesses can get advice rather than face a penalty if they don't comply immediately. The GDPR adds stricter rules on processing and personal data storage, and includes new consent requirements. Businesses that have lots of personal data will need to appoint a data protection officer. I think this will be very relevant for law firms.

 

[Salma]

Next update

05/03/2017

• Italy's election: Voters in Italy moved away from the centre-left and centre-right and towards the right- Five Star Movement, which became the largest party in Parliament. The anti-immigrant party, League, also beat former PM Berlusconi's Forza Italia party and became the main Conservative party in Italy. Italy's market fell in reaction and shares in its banks were hit. Why has this all happened? Many were unhappy with the number of migrants that moved into Italy. The conservative parties also blamed the EU, an indication that anti-establishment politics since Brexit has not died down - even though Italy's history was based on big support for the EU. It contrasts with France who is pushing for more integration with the EU.
• Global fund manager confidence in the UK stock market fallen: A survey from Bank of America found that among global fund managers, UK stocks were the least popular. Its also delivered the lowest total return in dollar terms (including dividends) compared to the US, Eurozone, Japan and Germany. Confidence has falled by these investors because of Brexit, poor wage growth, inflation and political uncertainty. It's also the weakest European economy.
• Private equity firms taking on risk: PE firms have raised the most cash in history amid US tax conditions, lots of cash and a slow economy. At the same time, debt for US and Europe leveraged buyouts is almost at the highest before the financial crisis and PE firms have increasing amounts of money from investors.
• Only 1/6 of UK employers submitted gender pay gap data: Companies with 250 or more staff are required to report gender pay gaps this year. Public companies have until the end of March and private companies have until the beginning of April. So far, the largest gap is in construction then education and then finance and insurance. Among the banks that have reported so far, Barclays has the largest gap. The CEO of Lloyd's of London said that the data is skewed because many of the highest paid male staff are excluded. For example, when it comes to law firms, equity partners are said to be owners instead of employees, so they aren't included.
• Update to Trump's steel tariffs: There's been a variety of reactions from countries to Trump's plans: Theresa May reportedly raised concerns with Trump in a phone call, Canada, the largest outside supplier to the US in steel and aluminium have been lobbying, the EU has drawn up 2.8bn proposed countermeasures. Despite this, Trump threatened to include European car imports in its tariffs.
• Small British businesses unprepared for the GDPR: Less than 1 in 10 small businesses in Britain are prepared for the General Data Protection Regulation according to the Federation of Small Businesses. The group has called for a safe harbour so businesses can get advice rather than face a penalty if they don't comply immediately. The GDPR adds stricter rules on processing and personal data storage, and includes new consent requirements. Businesses that have lots of personal data will need to appoint a data protection officer. I think this will be very relevant for law firms.

Thank you so much for this! Feels like the bright network/finimize commercial updates - concise and interesting to read!

 

[Coralin96]

Thank you so much for this! Feels like the bright network/finimize commercial updates - concise and interesting to read!

Aww thank you . It's my way of motivating myself to stay aware of the business news!

 

[Nicole]

Aww thank you . It's my way of motivating myself to stay aware of the business news!

You're doing so great, keep it up !

 

[Coralin96]

Next update

08/03/2018

1. Another update to Trump's tariffs: Trump has imposed his tariffs! I was watching a video on the FT that said: "this is one of the most radical trade actions an American president has taken since Nixon". It'll officially go in force in 15 days. Canada and Mexico will be exempted subject to the renegotiation of the North American Free Trade Agreement. And other allies can apply for exemptions. It also looks like the EU and China will retaliate so this is quite a big issue and could lead to a trade war (China said a 'justified and necessary response' would be taken). Meanwhile, 11 countries including Japan and China said they will continue with the trans pacific partnership.
2. The European Central Bank (ECB) is beginning to wrap up its stimulus package: Currently the ECB is buying €30 bn in bonds every month as part of its €2.3 trillion stimulus package. This was implemented three years ago when the eurozone was really struggling. At a meeting today, it took out a commitment to expand its programme if growth isn't that good. It's part of a broader trend of central banks going back to normal (and not super low interest rates) and it also suggests more confidence in the region. The president also criticised Trump's tariffs at this meeting.
3. The US has warned Africa about Chinese investments: The US Secretary of State is in Africa this week and he's out to warn against China. He is the first senior official to visit Africa since Trump was elected and is supposedly there to make amends after Trump called some African nations "shitholes" [sorry for the language but that's what he said!]. He warned that African governments should be careful about China's investment of billions of dollars into African infrastructure saying that if the projects go wrongwrong the governments could lose control. The Russian foreign minister criticised the Secretary of State for his comments. This is a sign of how China is investing more in Africa than the US. China has seen opportunity in a country that many in the Western world has given up on. And it'll be interesting to see how the China-Africa relationship develops in the future.
4. Euroclear is to move its holding company from the UK to Brussels ahead of Brexit: The clearing house chose to move for certainty reasons. It holds €29 trillion of client assets. It's also going to open in Dublin so it can support Irish securities after Brexit. This is a restructuring point - which could be relevant for law firms, especially if many other companies follow.
5. Theresa May isn't having much luck negotiating for financial services: Belgium and Paris are going to announce that financial sevrices can't be included in a free trade agreement. And the European Council president, Donald Tusk said the free trade agreement is going to be more like Canada - not a special financial services deal.

 

[Coralin96]

Hey guys - next update

10/03/2016

1. Cryptocurrencies: It's been a hard week for Bitcoin which fell by a fifth thanks to regulatory fears and news that trustees of the now-insolvent largest bitcoin exchange in the world were selling large amounts of bitcoin.
2. Cryptocurrency regulation: The chief executive of the European Banking Authority, Andrea Enria, said he was "yet to be convinced" that cryptocurrencies should fall under extensive regulation in a speech yesterday. This was a view he took in 2014 when commenting on the impact to financial innovation. The comments come as the EU has agreed to regulate cryptocurrencies if some of the risks aren't addressed. The US Treasury and the Bank of England has said it should be regulated and it has already been regulated in Australia and Japan. Some banks have taken this approach too, including Nordea Bank which prohibited employees from dealing in cryptocurrencies in January 2018. Lloyds has banned the purchase of cryptocurrencies with credit cards. Interestingly, a number of law firms are accepting payment using cryptocurrencies - I wonder whether that's something will see more of in the future. It's possible that procedures can be used by companies (and law firms) if cryptocurrencies gets more mainstream. That includes things like Know Your Customer procedures e.g. gathering customer information. Also, Know Your Transaction data. We could see this involvement with financial services regulation at law firms.
3. US output of oil has reached record levels: This is a lot faster than expected and could lead to a repeat of falling oil prices which led to the 2014 oil price crash. This comes as Saudi Arabia is preparing to float Saudi Aramco and hedge funds have backed some of the oil producers in anticipation of rising oil prices.
4. Mifid II costs: The Markets in Financial Instruments Directive (Mifid II) required fund managers to pay for research rather than getting it free from third parties. This has caused them to invest millions in the cost of paying for this investment research and its hurting fees and profit margins.
5. Facebook v YouTube: Facebook looks to be increasing its video content by forming a series of music deals - the latest being with Warner Music, whose artists include Ed Sheeran and Bruno Mars. It also has been working on rights to a variety of live sports deals - the latest being Major League Baseball this year. This comes along companies like Netflix and Amazon are looking to increase engagement in the video market. Currently, Youtube is the most popular online place for music.

 

[Coralin96]

Next update, a lot has happened in five days but here are my chosen stories . I'm going to try something new here and include some thoughts on the impact on law firms.

1. Unilever is leaving the UK

• The story: The company behind big brands like Magnum ice cream, Persil, Marmite and Dove has chosen Rotterdam instead of London for its new single-structure headquarters. Some, including the shadow business secretary, has used this to suggest businesses 'are losing confidence in the government'. But both Theresa May and Unilever have said it is not related to Brexit and Unilever has said it will continue to invest £1bn in the UK. Others think it's because the Netherlands has better protectionist rules to stop against takeover - this comes after Kraft Heinz tried to buy them last year. The company has been in the UK for 130 years and it's the third biggest UK company by market value (£105bn!).
• Impact on law firms: This will require law firms to help with restructuring and relocation. Many companies are doing what Unilever are doing to save costs e.g. moving from having two structures in different locations to one single structure. Typically Slaughter & May normally do a lot of work for Unilever but Linklaters has been more involved recently so if they continue they will need to rely on overseas offices as the central point of contact.

2. The EU is targeting tech companies

• The story: Next week the European Commission will propose a 3% 'digital tax' on companies like Google, Spotify, Facebook and Apple. It's difficult to say whether it will pass because all member states need to agree and some bases like Ireland are normally low-tax jurisdictions. Countries like the UK and France have pushed for more tax avoidance measures in recent times, whilst US tech groups have pushed back against what they see as harsh treatment. It could raise around €4.8bn a year.
• Impact on law firms: Companies that are uncertain about their tax treatment will look for tax advice from lawyers about how to better structure their business. I think law firms will need to be careful that they are complying with the law and not helping companies to avoid tax! Big US tech companies may even think about moving if this does get accepted.

3. The Japan Fair Trade Commission has raided Amazon

• The story: Japan's regulator has raided Amazon's Tokyo headquarters on suspicion of competition issues. It is being investigated for requiring suppliers to assume the costs for its discounts. A similar issue happened in 2016 too when the commission found it had forced suppliers to sell Amazon items at the same or a lower price than elsewhere. Two years ago, Amazon took over its rival and the country is its third biggest market (interestingly first and second is USA and Germany, not the UK).
• Impact on law firms: This is against Japan's antitrust law which prevents firms with a better bargaining position taking advantage of its partner. Lawyers will have to review contracts and Amazon may have to change the terms to ensure it complies with the law. It also comes as regulatory are trying to deal with the size of these companies and the growth of ecommerce companies acting in many countries.

4. Goodbye to Toys R Us

• The story: Quite a sad one this one as Toys R Us are closing all their UK and US stores as they filed for bankruptcy in the US and were then unable to find a buyer in the UK. Again it shows how physical stores have struggled against the likes of Amazon and now many more toy suppliers will shift to these ecommerce platforms helping them to grow even more. This might drag down prices even more. The wider story shows how dangerous debt can be after it was bought by private equity firms in 2005.
• Impact on law firms: The company will need the support of insolvency and restructuring lawyers. We could also see an increase in the sale of smaller manufacturers in areas like toys who can't compete. I wonder if it could also cause regulators to take a closer look at how much debt private equity firms are putting onto businesses.

5. Trump blocked the biggest even technology deal

• The story: Trump blocked Broadcom's attempted $142bn acquisition of Qualcomm. These companies are chipmakers and Apple is a key client of Broadcom. This is the first time a President has blocked a deal over national security fears as they feared it would pave the way for China to lead the growth of 5G wireless technology.
• Impact on law firms: This was a hostile takeover and would have made a lot of money for legal advisers in M&A and finance. Broadcom's advisers included Latham & Watkins and Wachtell Lipton Rosen & Katz, whilst firms like Paul Weiss, DLA Piper and Allen & Overy has acted for Qualcomm in the past. It comes as regulators are increasingly worried about foreign takeovers by Chinese companies (but this one is only Singapore registered which makes it odd!) -so companies may look for advice on how to stay on the side of regulators. Law firms could also see a drop in work for M&A deals from China.

 

[Coralin96]

Update time

18/03/2018-19/03/2018

1. Putin's landslide victory
   • The story: Russia's president won a landslide victory in the Russian elections with an estimated 75.6% of the vote. His campaign spokesman partly thanked the UK, linking the record voter turnout with the UK's accusations against Russia. Britain recently expelled 23 diplomats and blamed Russia for the use of a nerve agent against a former double agent, Mr Skripal, something which Russia has vehemently denied. Boris Johnson has said more sanctions will be put against Russia and accused the country of stockpiling nerve agents.
   • Impact on law firms: This political uncertainty is bad for the markets generally, companies slow down investment at times of unrest. If this escalates it's likely to impact international trade. Few law firms are currently based in Russia (like A&O, White & Case), but the sanctions could further squeeze the economy and affect both investment in and investment out the country. For example, companies may move their supply chains away from the country.
2. Facebook's political scandal
   • The story: Facebook is under fire after it was leaked that Cambridge Analytics, a company which claims to 'change audience behaviours', used data obtained from Facebook users without their consent. This was under the guise of a personality test, an app called "this is your digital life", which was downloaded by hundreds of thousands, and the harvested data was used for political targeting in the Trump election campaign. Channel 4 has reportedly secretly filmed the company, going undercover to pose as clients, and Cambridge Analytics is trying to stop Channel 4 from releasing the film. It was an employee at Cambridge Analytics, Christopher Wylie, who released the information and he was a former law student(!) and coder- you can watch his whistleblowing-inteview with the Guardian here.
   • Impact on law firms: Data protection is becoming more important, especially how far companies should go to protect sensitive data. What I found most interesting is that this wasn't illegal in the US - companies can share third-party information. The issue is that it is illegal under EU data protection law, which shows the differences between the stricter regulation in the EU. It also comes as companies like Facebook will have to prepare for the General Data Protection Regulation, which comes into force in May and can fine 4% of global revenue for failing to report breaches (which is what FB seems to have done). It also comes as FB is blamed for failing to prevent Russian operatives fom creating fake accounts and influencing the US elections. Facebook has also banned Cambridge Analytics and says it may take legal action, whilst MPs have called for Mark Zuckerberg to testify in what some say is his biggest test yet - he reportedly found out about this years ago. In the UK, the data watchdog is looking into it and contacting other analytics companies to see how data is being used.
3. The big hostile takeover
   1. The Story: An investment firm, Melrose Industries, has been in a battle for the last two months to try to buy GKN, one of Britain's oldest engineering companies. It comes after bids have been rejected and politicians, customers and trustees have critised the attempted hostile takeover. Recently Airbus, its biggest customer also came out and said it would be difficult to work with the company if it was acquired because they want a supplier who cares about long term investment - not one that is looking to break up the company and sell. 16 MPs have also written to the business secretary asking the government to block it on grounds of national security. The UK pensions regulator is also said to be concerned.
   2. Impact on law firms: The government can block an attempted acquisition under the 2002 Enterprise Act on public interest grounds. This is something that also happened recently in the US when Trump stopped the attempted acquisition of Qualcomm. It shows the ethical dilemma of investment firms who are seen as having short-term aims for profit despite the fact that GKN has had slowing sales in recent years. I think we could also connect this to private equity firms and the law firms acting for them - whether there should be other aims beyond profit and whether it's ethical to break up a company if it means lots of jobs will be lost.
4. A new development in the Qualcomm acquisition
   • The Story: Above I wrote about Broadcom's failed acquisition of Qualcomm and how the US government intervened over fears of China's emergence in 5G. Now Qualcomm's executive chairman is looking to buy the company. He is looking to do a leveraged buyout and seeking finance to do so.
   • Impact on law firms: I think this is a management buyout or buy-in (does anyone know?). Either way it's a good practical application of something I've been looking at for commercial awareness. The deal was set to be the largest ever financing and I imagine now private equity firms could help the manager if it thinks this is a good opportunity to buy the company.
5. The largest fund for China
   • The Story: Hillhouse Capital Management, an investment firm is raising a fund to invest in Asia which is expected to exceed $10bn. If it does this, it will beat the record fund raised by another private equity firm, KKR, last year.
   • Impact on law firms: The success of these firms and their funds suggests more hope about China compared to two years ago when there were many investors moving out over stock market concerns. It also follows SoftBank and its successful vision fund (I think Linklaters worked on this). The fund helps established companies use technology to compete, which I think there will be a big market for as companies try not to die out against the growing use of technology. it also comes as investors have struggled to get their target returns from the stock market and bonds.

 

[SamT]

This is really helpful thank you!

 

[Coralin96]

This is really helpful thank you!

I'm glad!

 

[Coralin96]

Next update 22/03/2018

1. Facebook's problems grow

• The story: Facebook is facing multiple investigations including from the FTC, a US regulator. Facebook had an agreement with the FTC in 2011 about how it will deal with data and privacy. If this Cambridge Analytics scandal breaches it, then the FTC has the reported power to fine the company $40,000 per user! Mark Zuckerberg, Facebook's founder and CEO said he will also testify. The Cambridge Psychometrics Centre was the original centre who did the study that found you could work out people's psychological profies based on their social media accounts. The original company that created the app had 270,000 users sign up, but because of a flaw in Facebook that allowed you to access your friends data they had information on 50 million people. Channel 4 also did an undercover investigatino where the CEO of Cambridge Analytica mentioned bribery of politicians and spreading fake news. Facebook's share price fell 12% after the scandal was announced wiping of $40bn from the company's value. Mark promised to restrict developer access to data if the app isn't used for 3 months and to investigate companies that had access to lots of data before Facebook's 2014 policy change.
• Impact on law firms: There are increasing concerns over how personal data is being used to influence behaviours. This could lead to more regulation which could face social media companies or even wider - on supermarkets that store shopping data using discount cards. They'll need help from law firms to comply with the regulation. Companies already will need lots of help to comply with the GDPR and if Facebook still doesn't fix it, they will be vulnerable under that EU regulation which can fine companies a huge amount.

2. Amazon becomes second most valuable company

• The story: Amazon became the most valuable company early this week beating Alphabet, Google's parent company who was in second place and sitting just after Apple. Amazon has had a good year with its acquisition of Whole Food and its share value has risen 80% during that time.
• Impact on law firms: Google suffered after the Facebook data scandal because investors are concerned that regulation will be introduced on companies that extract personal data. This would impact their profits because it'll affect things like advertising. It could also extend to companies like supermarkets where data is used on discount cards to see how you show.

3. Fed cautious over interest rates

• The story: The new Chairman of the Federal Reserve, Jerome Powell, had his first official meeting yesterday and signalled a cautious approach to rising interest rates. He said he would follow the gradual approach undertaken by Janet Yallen, the former Fed governor. He did raise the Fed target rate and long-term interest rates but that seems to be expected.
• The impact on law firms: The US economy is doing really well, unemployment is down, US growth and business confidence is up. It's a good sign for law firms which have access to the US and any firms which have recently merged to get a presence there. Interest rates shouldn't be a huge problem for businesses if there continues to be a gradual increase but it might stop companies borrowing less.

4. Trump's tariffs against China

• The Story: It has been reported that the US will propose tariffs against Chinese imports of at least $30bn in value. This is a move to put pressure on China against alleged intellectual property theft.
• The Impact on law firms: China are likely to retaliate and this could be a big mess for companies trading between the US and China or relying on imports from one of the countries. Law firms may need to advise companies and negotiate terms that helps them if this does escalate.

5. Global dealmaking passed $1 trillion at fastest pace

• The Story: In a signal of how well M&A is doing globally, the total value of deals passed $1 trillion in record time. In the UK and Japan M&A dealmaking volume is double last year and in Germany four times as much. Value is also up a lot in a sign that private equity firms are confident to do bigger deals.
• The impact on law firms: M&A and private equity teams are going to be really busy as it looks to reach record levels this year. Firms may bulk up their teams by external hires and expand themselves to make the most of it.

 

[Campbell44]

Next update 22/03/2018

1. Facebook's problems grow

• The story: Facebook is facing multiple investigations including from the FTC, a US regulator. Facebook had an agreement with the FTC in 2011 about how it will deal with data and privacy. If this Cambridge Analytics scandal breaches it, then the FTC has the reported power to fine the company $40,000 per user! Mark Zuckerberg, Facebook's founder and CEO said he will also testify. The Cambridge Psychometrics Centre was the original centre who did the study that found you could work out people's psychological profies based on their social media accounts. The original company that created the app had 270,000 users sign up, but because of a flaw in Facebook that allowed you to access your friends data they had information on 50 million people. Channel 4 also did an undercover investigatino where the CEO of Cambridge Analytica mentioned bribery of politicians and spreading fake news. Facebook's share price fell 12% after the scandal was announced wiping of $40bn from the company's value. Mark promised to restrict developer access to data if the app isn't used for 3 months and to investigate companies that had access to lots of data before Facebook's 2014 policy change.
• Impact on law firms: There are increasing concerns over how personal data is being used to influence behaviours. This could lead to more regulation which could face social media companies or even wider - on supermarkets that store shopping data using discount cards. They'll need help from law firms to comply with the regulation. Companies already will need lots of help to comply with the GDPR and if Facebook still doesn't fix it, they will be vulnerable under that EU regulation which can fine companies a huge amount.

2. Amazon becomes second most valuable company

• The story: Amazon became the most valuable company early this week beating Alphabet, Google's parent company who was in second place and sitting just after Apple. Amazon has had a good year with its acquisition of Whole Food and its share value has risen 80% during that time.
• Impact on law firms: Google suffered after the Facebook data scandal because investors are concerned that regulation will be introduced on companies that extract personal data. This would impact their profits because it'll affect things like advertising. It could also extend to companies like supermarkets where data is used on discount cards to see how you show.

3. Fed cautious over interest rates

• The story: The new Chairman of the Federal Reserve, Jerome Powell, had his first official meeting yesterday and signalled a cautious approach to rising interest rates. He said he would follow the gradual approach undertaken by Janet Yallen, the former Fed governor. He did raise the Fed target rate and long-term interest rates but that seems to be expected.
• The impact on law firms: The US economy is doing really well, unemployment is down, US growth and business confidence is up. It's a good sign for law firms which have access to the US and any firms which have recently merged to get a presence there. Interest rates shouldn't be a huge problem for businesses if there continues to be a gradual increase but it might stop companies borrowing less.

4. Trump's tariffs against China

• The Story: It has been reported that the US will propose tariffs against Chinese imports of at least $30bn in value. This is a move to put pressure on China against alleged intellectual property theft.
• The Impact on law firms: China are likely to retaliate and this could be a big mess for companies trading between the US and China or relying on imports from one of the countries. Law firms may need to advise companies and negotiate terms that helps them if this does escalate.

5. Global dealmaking passed $1 trillion at fastest pace

• The Story: In a signal of how well M&A is doing globally, the total value of deals passed $1 trillion in record time. In the UK and Japan M&A dealmaking volume is double last year and in Germany four times as much. Value is also up a lot in a sign that private equity firms are confident to do bigger deals.
• The impact on law firms: M&A and private equity teams are going to be really busy as it looks to reach record levels this year. Firms may bulk up their teams by external hires and expand themselves to make the most of it.

Dead on about the China tariffs,. I have just read the news story. Would be good to read your thoughts when you do your next one.

 

[Coralin96]

Dead on about the China tariffs,. I have just read the news story. Would be good to read your thoughts when you do your next one.

Haha I know but $60 billion!! That's double what I expected.

I will get the next one out by Monday .

 

[Coralin96]

Update time!

25/03/2018

Brexit transition and financial services

1. The Story: The EU countries signed off on a 21 month transition period for Brexit as Theresa May agreed to pay an exit bill of between £35-39 billion. Many expect the more detailed negotiations will only start next March. That means the actual exit won't be until the end of 2020. Financial services were also mentioned in the draft guidelines for the first time. This is said to be thanks to Luxembourg who have a lot of links to London when it comes to financial services. This is in contrast to France who doesn't want to give the UK a special deal for financial services.
2. Impact on law firms: The wording makes clear that financial services in London will get the same access as any other non-EU country. This suggests banks and companies won't get the same passporting rights that they had before Brexit or any special provisions. The European Central Bank is still assuming a worst case scenario and so telling banks they need to prepare and do contingency planning. Some companies are preparing for the loss of passporting rights, investment banks Deutsche Bank and Goldman Sachs has already started moving people out of London. Law firms will need to help these companies relocate and restructure.

Business with Russia

1. The Story: Despite all the political chaos going on between the UK and Russia, companies in both countries don't seem to have much problem trading with each other. Gazprom recently issued a $750m eurobond in London and the Russian government issued a $4bn bond in London. There's also 57 mainly Russian companies are listed on our stock exchange, the most for any country outside Moscow. and a number of MPs have also taken positions working for or acting on the boards of Russian companies. Fun fact - last year, the wife of the former deputy finance minister of Mr Putin also paid £160,000 to play tennis with Boris Johnson!
2. Impact on law firms: Lawyers are cautious about how the political climate will affect their Russian clients. Many think things will the crisis will sort itself out. But some banks have limited Russian business and investors have become cautious about the impact on wealthy Russian clients. If they move this could impact private client type work and also a law firms business in Russia where some have offices.

More problems for Facebook

1. The Story: $60bn was wiped off Facebook's market value last week and a huge amount of wealth from Mark Zuckerberg in a sign of how damaging the Cambridge Analytics scandal has been. Investors have been worried about fines and the loss of users which show privacy fears are costing users. Elon Musk has deleted the Facebook pages for Tesla and SpaceX in protest. Sonos pulled advertising from Facebook, Instagram, Google and Twitter for a week. Mozilla and Commerzbank also put advertising on hold. Investors have also withdrawn from tech stocks and there was a big sell off.It has become clear how Facebook has control of so much personal data and that it allowed advertising to get out of control by pursuing profits. Many have called for tougher regulation which could affect Facebook's business model.
2. Impact on law firms: Some are now looking at regulators who failed to act, for example the Irish data protection commissioner received 22 complaints from a law student in 2011 alleging it was in breach of EU data protection law. It's possible Ireland was quite lax in its regulation because it wants companies like Facebook to stay there. Many regulators in the EU and US are looking at how to regulate data companies but Europe looks more likely. In 2014 Europe fined Facebook for importing data from whatsapp. Last month it also ordered Facebook to stop tracking people who don't use Facebook as they browse the web! In addition to the GDPR in May, the EU is discussing an e-privacy directive which if passed would signifiacntly restrict the tracking of users' behaviour online. Some things in the US are actually illegal in the EU which shows the difference between their policy approaches. For example Facebook's Messenger for Kids (due to age restrictions) would not be allowed in the EU. Many fear companies with similar data on users could be targeted for more regulation. Google and Facebook's value is largely based on the use of huge amounts of personal data. If this follows to other data companies, data protection teams may help advise these companies to stay in line with the regulation or they could face stricter enforcement measures. They also need to think about how they use data as it looks like this will continue to be a hot issue.

Update to Melrose bid for GKN

1. The Story: Elliot Advisers, the UK part of a hedge fund that owns over 3.8% of GKN said it plans to vote in favour of Melrose's offer to buy GKN for £8bn. They called for other shareholders to do the same. David Cumming, chief investment officer at Aviva, said has also backed the bid. There is four days left before the shareholders have to decide. Melrose is a company that buys up underperforming businesses and sells them in 3-5 years, GKN is one of the oldest British engineering companies.
2. Impact on law firms: This has been called the most hostile takeover since the war. A lobby group has called on the government to block the takeover. Now Melrose has public support of roughly 10% of GKN's shareholders so it will be interesting to see whether they get enough votes. Others have called on the regulators to intervene and asked the government to legislate to protect British businesses and offer protections against businesses. This comes as Unilever moved its headquarters from London to Rotterdam as Dutch law offers more protection. Law firms will be involved in these foreign takeovers and lawyers for the British companies will have to think about how they can protect companies from being bought up.

GlaxoSmithKline withdrew its $20bn bid for Pfizer's consumer healthcare business

1. The Story: The British pharma company, GSK along with its rival Reckitt Benckiser pulled out of the auction to buy the US pharma giant, Pfizer's consumer healthcare business. Reckitt Benckiser withdrew first leaving GSK in a good position to buy the unit that sells painkillers and vitamins but it decided to pull out.
2. Impact on law firms: Large GSK investors were said to be concerned about the acquisition and the impact on dividends which shows the influence of shareholders on company decisions. It's unclear if any businesses are left to buy it so Pfizer's lawyers will need to think about restructuring or selling the business or advising Pfizer to keep it. GSK's share price has fallen since the new chief executive, Emma Walmsley, took over last year as the market is cautious over what direction she is taking. This is part of the pharma debate. Pharma companies do a lot of M&A and the dilemma is whether they should buy up diverse companies like consumer healthcare to hedge against the risk of investments in newer medicines. Some have said this is a success as GSK would also get key information about Pfizer, its competitor, during the due diligence process!

Trump's tariffs on China

1. The Story: Trump's advisers originally came up with $30 billion of tariffs to target China. In Trump's usual fashion he ordered them to double it - so now there is going to be $60 billion worth of annual tariffs. Its a move against China for alleged intellectual property theft and many are worried that this will cause a trade war. China said they don't want a trade war but they will fight back and they've prepared retaliatory tarrifs on 128 US products. China has faced internal pressure to go even tougher and target US soybeans, aircraft and cars but it remains to be seen what their next steps are.
2. Impact on law firms: Japan was seen as the first tragedy of the US-China trade war as Japanese stocks fell and the yen rose. Trump decided not to exempt Japan from tariffs aimed at China and it could significantly damage Japanese profits as companies are dependent on exports. It also affected stocks - US stocks had their worst week in more than two years and European shares fell sharply. The news particularly hit banks and stocks like airlines which do a lot of global trade. Deutsche Bank hit their lowest level since late 2016 and Boeing has seen shares fall 10% as its heavily reliant on supply chains in China. Lawyers may advise companies to slow down on investments and consider their supply routes between the US and China. It could also have a global impact, for example 30% of Australia imports go to China so restructuring may be needed.

 

[Coralin96]

I think this will be the last post for March .

Gender pay reports

1. The Story: More firms have now submitted their gender pay gap figures due to government requirements. These requirements require employers with over 250 employees to publish gender pay. It's a bit unhelpful for law firms and accountancy firms because partners don't have to submit the pay of partners which is mostly male. But accountancy firms responded by including partner earnings and when they did, the salary gap increased. So far of the reported companies, 3 out of 4 pay men more and some of the biggest gaps are in financial services. That's because more men are in the senior positions and more women are often in lower paid roles. Some have criticised the governments reporting measures because it overlooks a lot of factors that determine pay.
2. Impact on law firms: The public reporting has forced firms to come to terms with their gender pay gaps. The results show that firms are making efforts to improve the number of females accessing the profession. For example EY's graduate intake is at 58%. The problem is when you go higher up - 80% of EY's partners are male. More firms are improving retention by helping people return to work after having a child and setting targets for the number of female partners. Employers may be worried about the impact on their brand and future sanctions that may be used with the data. Easyjet for example had a 45.5% gap but compensated by presenting the data early and explaining clearly what it's doing to improve, such as clear targets.
3. Just as an addition I have also been reading about the law firms who have reported their gender pay gaps. Many called for law firms to also reveal their partnership data otherwise it significantly distorts the picture. Clifford Chance became the first to do so, reporting a 66.3% gap, and the firm also called out others to do the same. Only Linklaters has listened so far. It originally reported a figure of 23% for non partners and then revised it to 60.3% when including partners. If we compare the figures for nonpartners, Linklaters has the highest mean hourly gap and Freshfields has the lowest (including one of the lowest out of all the reported firms), partly thanks to its support staff in the Manchester support centre.

Melrose buys GKN

1. The Story: It has been interesting to watch this case develop. The vote took place yesterday and majority of GKN shareholders agreed to sell their shares to Melrose in a £7.9bn cash and shares offer. This was helped by the fact that a substantial minority of the shares were held by hedge funds, keen to get a return on their money and less worried about the fate of a British engineering company. The company has a long history, supplying defence materials in wartime.
2. The Impact on law firms: The close vote at 52.43% indicates a growing sentiment against companies buying out long established UK companies. Politicians, unions and the general public got involved to back GKN. But the battle isn't over yet. The business secretary made Melrose agree to the government's right to veto the sale and it's now up to the government to determine whether there are public interest concerns. This is something that has become more commonplace since the Kraft-Cadbury deal where promises were undone but the government has never been so public in its involvement. It may also be referred to our regulator, the Competitiion and Markets Authority, and some have even called for a review of UK takeover laws, suggesting short term speculators are given favour over employees and longer term investors. To some it also reflects protectionism after Brexit.

Tech stocks back up

• The story - Tech stocks have been falling for a while now, especially since the Facebook scandal and comments made by Trump against Amazon. Trump criticised Amazon for paying minimal taxes and a report also came out suggesting Trump is 'obsessed' with tackling Amazon. This caused Amazon's shares to fall up to 4.6% in a sign of the power of the President's comments. But they rebounded yesterday easing the pressure for tech investors. Meanwhile in China, policies have been approved to encourage big tech companies to list on their stock exchange. A number of companies have already said they are interested in listing in China and comes amid a growing sign that China is investing in key industries to support its control in the economy.
• The impact on law firms: Investors may need to be careful, although these stocks are back up, many people appear to be quite heavily invested in tech stocks which leaves them vulnerable to events like this. Before this, technology stocks were rising for a long time, leading to many concerns that they could be in a bubble. Many were also concerned about the high valuations for tech startups , so-called unicorns that were valued at over $1bn. Fears continue over the regulation of tech companies and the S&P 500, featuring some of the biggest US companies, has had the first quarterly losses since 2015. In relation to the China story, law firms may consider entering China now if they haven't already. If they can eventually practice local law, the capital markets will be a very popular practice area.

Grant Thornton stops auditing

1. The story: Grant Thornton, the UK accountancy firm, is not going to bid for audit contracts anymore for the FTSE 350 companies, some of the largest UK companies, deciding that it's too hard to compete with the Big Four - EY, Deloitte, KPMG and PWC. At the moment PWC has the greatest market share of these companies and Deloite has the highest profits per partner.
2. Impact on law firms: This is likely to invite regulators to assess whether to intervene in the accountancy market and the power that these firms have. If regulators do intervene this will have a large impact on the market - these firms have grown so big that many law firms fear they will increasingly take market share, so clients can get a combined legal and accountancy service. These firms have already taken a lot of market share from consulting companies as they expanded into this area. Recently the Financial Reporting Council, the UK financial regulator, said that the Big Four may need to be broken up and has suggested the Competition and Markets Authority should investigate. It also suggested these accountancy firms should be hit with bigger fines for misconduct. It also follows a number of accountancy scandals like Carillion in the UK, which went into insolvency earlier this year. KPMG and Deloitte were questioned for their audits of the company's financial information and some parallels could be brought with how credit rating companies operating in the lead up to the financial crisis.

M&A activity continues to break records

1. The Story: Despite tariffs, Brexit, protectionism and global political concerns, M&A continues at a record rate up 67% from the same quarter last year.
2. Impact on law firms: It shows that M&A is so confident and economy is doing well even despite all these global issues. There has also been a large increase in big transactions as companies move to beat the disruption of technology, an area which will be attractive for M&A lawyers. European deal volumes have almost doubled from last year especially in private equity, such as the recent acquisition of Akzo Nobel's chemical business by Carlyle, in one of the largest European PE deals in recent years. US tax cuts have also helped the situation. Latham is providing the corporate advice in London and finance advise in the US showing how useful it is for companies to have a strong presence in both jursdictions to secure places on the biggest deals. A Skadden partner also said it's unlikely the deal rate will slow down. At the same time, Chinese overseas dealmaking has slowed to the lowest since 2005, a clear sign of the consequence of Trump's trade policies on M&A. Law firms may need to diversify into other areas.

 

[Nicole]

I think this will be the last post for March .

Gender pay reports

1. The Story: More firms have now submitted their gender pay gap figures due to government requirements. These requirements require employers with over 250 employees to publish gender pay. It's a bit unhelpful for law firms and accountancy firms because partners don't have to submit the pay of partners which is mostly male. But accountancy firms responded by including partner earnings and when they did, the salary gap increased. So far of the reported companies, 3 out of 4 pay men more and some of the biggest gaps are in financial services. That's because more men are in the senior positions and more women are often in lower paid roles. Some have criticised the governments reporting measures because it overlooks a lot of factors that determine pay.
2. Impact on law firms: The public reporting has forced firms to come to terms with their gender pay gaps. The results show that firms are making efforts to improve the number of females accessing the profession. For example EY's graduate intake is at 58%. The problem is when you go higher up - 80% of EY's partners are male. More firms are improving retention by helping people return to work after having a child and setting targets for the number of female partners. Employers may be worried about the impact on their brand and future sanctions that may be used with the data. Easyjet for example had a 45.5% gap but compensated by presenting the data early and explaining clearly what it's doing to improve, such as clear targets.
3. Just as an addition I have also been reading about the law firms who have reported their gender pay gaps. Many called for law firms to also reveal their partnership data otherwise it significantly distorts the picture. Clifford Chance became the first to do so, reporting a 66.3% gap, and the firm also called out others to do the same. Only Linklaters has listened so far. It originally reported a figure of 23% for non partners and then revised it to 60.3% when including partners. If we compare the figures for nonpartners, Linklaters has the highest mean hourly gap and Freshfields has the lowest (including one of the lowest out of all the reported firms), partly thanks to its support staff in the Manchester support centre.

Melrose buys GKN

1. The Story: It has been interesting to watch this case develop. The vote took place yesterday and majority of GKN shareholders agreed to sell their shares to Melrose in a £7.9bn cash and shares offer. This was helped by the fact that a substantial minority of the shares were held by hedge funds, keen to get a return on their money and less worried about the fate of a British engineering company. The company has a long history, supplying defence materials in wartime.
2. The Impact on law firms: The close vote at 52.43% indicates a growing sentiment against companies buying out long established UK companies. Politicians, unions and the general public got involved to back GKN. But the battle isn't over yet. The business secretary made Melrose agree to the government's right to veto the sale and it's now up to the government to determine whether there are public interest concerns. This is something that has become more commonplace since the Kraft-Cadbury deal where promises were undone but the government has never been so public in its involvement. It may also be referred to our regulator, the Competitiion and Markets Authority, and some have even called for a review of UK takeover laws, suggesting short term speculators are given favour over employees and longer term investors. To some it also reflects protectionism after Brexit.

Tech stocks back up

• The story - Tech stocks have been falling for a while now, especially since the Facebook scandal and comments made by Trump against Amazon. Trump criticised Amazon for paying minimal taxes and a report also came out suggesting Trump is 'obsessed' with tackling Amazon. This caused Amazon's shares to fall up to 4.6% in a sign of the power of the President's comments. But they rebounded yesterday easing the pressure for tech investors. Meanwhile in China, policies have been approved to encourage big tech companies to list on their stock exchange. A number of companies have already said they are interested in listing in China and comes amid a growing sign that China is investing in key industries to support its control in the economy.
• The impact on law firms: Investors may need to be careful, although these stocks are back up, many people appear to be quite heavily invested in tech stocks which leaves them vulnerable to events like this. Before this, technology stocks were rising for a long time, leading to many concerns that they could be in a bubble. Many were also concerned about the high valuations for tech startups , so-called unicorns that were valued at over $1bn. Fears continue over the regulation of tech companies and the S&P 500, featuring some of the biggest US companies, has had the first quarterly losses since 2015. In relation to the China story, law firms may consider entering China now if they haven't already. If they can eventually practice local law, the capital markets will be a very popular practice area.

Grant Thornton stops auditing

1. The story: Grant Thornton, the UK accountancy firm, is not going to bid for audit contracts anymore for the FTSE 350 companies, some of the largest UK companies, deciding that it's too hard to compete with the Big Four - EY, Deloitte, KPMG and PWC. At the moment PWC has the greatest market share of these companies and Deloite has the highest profits per partner.
2. Impact on law firms: This is likely to invite regulators to assess whether to intervene in the accountancy market and the power that these firms have. If regulators do intervene this will have a large impact on the market - these firms have grown so big that many law firms fear they will increasingly take market share, so clients can get a combined legal and accountancy service. These firms have already taken a lot of market share from consulting companies as they expanded into this area. Recently the Financial Reporting Council, the UK financial regulator, said that the Big Four may need to be broken up and has suggested the Competition and Markets Authority should investigate. It also suggested these accountancy firms should be hit with bigger fines for misconduct. It also follows a number of accountancy scandals like Carillion in the UK, which went into insolvency earlier this year. KPMG and Deloitte were questioned for their audits of the company's financial information and some parallels could be brought with how credit rating companies operating in the lead up to the financial crisis.

M&A activity continues to break records

1. The Story: Despite tariffs, Brexit, protectionism and global political concerns, M&A continues at a record rate up 67% from the same quarter last year.
2. Impact on law firms: It shows that M&A is so confident and economy is doing well even despite all these global issues. There has also been a large increase in big transactions as companies move to beat the disruption of technology, an area which will be attractive for M&A lawyers. European deal volumes have almost doubled from last year especially in private equity, such as the recent acquisition of Akzo Nobel's chemical business by Carlyle, in one of the largest European PE deals in recent years. US tax cuts have also helped the situation. Latham is providing the corporate advice in London and finance advise in the US showing how useful it is for companies to have a strong presence in both jursdictions to secure places on the biggest deals. A Skadden partner also said it's unlikely the deal rate will slow down. At the same time, Chinese overseas dealmaking has slowed to the lowest since 2005, a clear sign of the consequence of Trump's trade policies on M&A. Law firms may need to diversify into other areas.

Lovely post as always. I came across this recently, The guy tracks some of the things Google knows about you!
https://twitter.com/iamdylancurran/status/977559925680467968