Commercial Awareness - April 2018

[Nick]

Likewise, this is also insightful:

https://www.ft.com/content/0532a6ae-25f0-11e8-b27e-cc62a39d57a0

At the bottom of the article there's a breakdown of the different renumeration systems that a law firm may may have in place.

 

[Salma]

Haha it sounds weird. I'm personally not keen on the idea..

hahah me too but I think what makes it funnier is the ease/composition of both law firm names.. Maybe they should consider it after all

 

[MightyMoe]

Likewise, this is also insightful:

https://www.ft.com/content/0532a6ae-25f0-11e8-b27e-cc62a39d57a0

At the bottom of the article there's a breakdown of the different renumeration systems that a law firm may may have in place.

It looks like there's so many articles about the rise of US law firms v the magic circle. Think I'm going to look at applying to more US law firms.

 

[Jaysen]

https://www.ft.com/content/b9c96d04-376c-11e8-8eee-e06bde01c544

Quite an interesting read...

I'm impressed with the level of detail in that article. Great post.

 

[Nick]

Hey guys,

I signed up for Finimize's daily emails a while ago and I thought it would be a useful resource to share on here. You receive a brief email every morning with the latest global financial news (it only takes a couple of minutes to read and it isn't too technical) - it's quite useful for building commercial awareness.

https://www.finimize.com/finimize?utm_expid=92329539-9.NCQxJ61QSw-55NB5MznLiw.2&utm_referrer=https%3A%2F%2Fwww.google.co.uk%2F

 

[Nick]

https://www.ft.com/content/b497a134-2d21-11e8-a34a-7e7563b0b0f4

I know @Jaysen will enjoy this one.

 

[Jaysen]

https://www.ft.com/content/b497a134-2d21-11e8-a34a-7e7563b0b0f4

I know @Jaysen will enjoy this one.

Interesting article. There does seem to be a lot of fluff with companies professing to use AI because it's trendy, so it can be hard to work out what is actually AI. But I am looking forward to seeing what comes out over the next few years.

 

[Nick]

https://www.economist.com/news/busi...ter-pay-british-law-firms-seek-similar-across

 

[Coralin96]

I didn't know O'Melveny & Myers were mostly litigation, it seems a bit strange to me that the two firms want to partner up - is A&O big on litigation?

 

[Nick]

I didn't know O'Melveny & Myers were mostly litigation, it seems a bit strange to me that the two firms want to partner up - is A&O big on litigation?

I agree, I personally thought A&O would be looking for a firm that is better positioned to tap into the US finance market. However, litigation is also highly profitable in the US, so it could make sense.

 

[Coralin96]

Next update

13/04/2018

Trump reconsidering trade agreement

• The Story: Trump is said to be looking to rejoin the Trans-Pacific Partnership but he wants to see a better deal for the US than before. Trump originally withdrew from TPP and criticised it during his campaign.
• Impact on law firms or clients: TPP is an agreement between 12 countries to cut tariffs and create rules for international trading. The aim is to stop China from setting trade practices across the world by getting there first and it means stricter intellectual property laws. TPP is meant to lead to uniform rules in many areas like intellectual property, patents, employment and the environment. So businesses will have a lot of new opportunities to trade and that will open up new income streams for law firms. It may also force some countries to get their laws up to speed which could mean more legal certainty for businesses operating in those jurisdictions. Companies will be able to move productions to countries where it is cheapest to do business - which is encouraging for law firms that have gone global. It could also mean more avenues for litigation teams because companies can sue governments for laws that affect them.

Avast aiming for one of the largest tech flotations on the London Stock Exchange

• The Story: Avast, one of the world's largest cyber security companies that operated direct to consumer is planning to raise $200m in an IPO. Existing shareholders are going to be selling shares in th ecompany which is backed by the private equity firm CVC Partners.
• Impact on law firms or clients: Avast chose to list in London rather than New York in a sign of the competitiveness of the LSE despite concerns like Brexit. It also comes as the cyber security market is expected to grow rapidly over the next few years as companies and law firms are trying to build systems to better protect themselves from hackers. Finally, the number of IPOs backed by private equity firms are expected to grow a lot this year, so private equity and M&A lawyers can expect to be busy,

Trump continues to go to war with Amazon

• The Story: Trump has ordered a task force to investigate how the US postal service prices Amazon deliveries. This follows his recent claim that Amazon has contributed to the post service's losses. This comes as the US is questioning Facebook founder Mark Zuckerberg.
• Impact on law firms or clients: As the big tech companies have grown in size they have had the power to influence people's lives significantly and now politicians and regulators are getting more and more involved. Part of the issue is that regulators have struggled to understand the businesses of these complex tech companies, which makes them hard to regulate. We're also in new territory, especially with companies that leverage huge amounts of data through the internet and can influence people's psychologies. Over the next few years it looks like politicians may introduce new competition laws that need to balance regulation with encouraging businesses to thrive.

US investment banks earnings report

• The Story: JPMorgan, Well Fargo and Citigroup are releasing their earnings for the first-quarter today, more will follow. This will give an idea of the strength of the lending market, the impact of US volatility and how easing regulations will impact their balance sheets.
• Impact on law firms or clients: It's hoped that bank earnings will help to stabilise the market as many investors are concerned about a trade war, the Middle East and US politics. If it doesn't rally the market, there are concerns about the future of the US economy and its ability to handle this uncertainty.

Middle East crisis

• The Story: In response to alleged chemical attacks in Syria, Trump has been speaking to France and the UK about military strikes. French president Emmanuel Macron, said he had proof that these weapons were used and Theresay May has backed Trump. Russia responded and said US airstrikes could trigger a war.
• Impact on law firms or clients: Just as the market was cooling over a trade war with China, this uncertainty caused stocks to fall especially in Russia, where they suffered the worst session in four years. The markets have been repeatedly hit by political issues because investors are cautious in times of uncertainty.

 

[Campbell44]

Not so good reaction to the merger: http://www.legalweek.com/sites/lega...cepticism-as-doubts-emerge-among-partnership/

 

[MightyMoe]

Anyone noticed the new format of The Lawyer? I can't work out if I like it or not

 

[Nick]

https://www.bloomberg.com/news/arti...ts-inside-the-world-s-most-profitable-company

This IPO is going to be huge when it goes live. Exciting times for the lawyers working at White & Case.

 

[Jaysen]

https://www.bloomberg.com/news/arti...ts-inside-the-world-s-most-profitable-company

This IPO is going to be huge when it goes live. Exciting times for the lawyers working at White & Case.

Great share. Back when I was applying, the collapse of oil prices was all over the news. Part of the excitement behind a Saudi Aramco IPO was its mystery: investors didn't know how much money the company made. I imagine the company isn't too pleased that the figures were released - but they would have had to disclose the information anyway before an IPO. Some huge profits there but quite dependent on oil prices staying at a reasonable level in the long term.

 

[Nick]

Great share. Back when I was applying, the collapse of oil prices was all over the news. Part of the excitement behind a Saudi Aramco IPO was its mystery: investors didn't know how much money the company made. I imagine the company isn't too pleased that the figures were released - but they would have had to disclose the information anyway before an IPO. Some huge profits there but quite dependent on oil prices staying at a reasonable level in the long term.

I'm very curious to see how they'll structure the IPO. I hear a private placement may be an option, I know they're considering a domestic floatation, as well as a foreign one/or two. New York, London, and Hong Kong are the potential candidates - however, I see NY being a bit tricky if I'm honest, Saudi Aramco will need to obtain some serious concessions to list on the NYSE and I doubt that will happen, the NYSE is known to be quite robust. London is the more likely destination, the LSE is more willing "to play ball" and grant them the regulatory concessions needed. Hong Kong is also a good option commercially, I think investing in Saudi Aramco would appeal to Chinese investors. But I wouldn't advise solely listing on the HKEX (maybe in combination with a floatation on the LSE).

 

[Jaysen]

I'm very curious to see how they'll structure the IPO. I hear a private placement may be an option, I know they're considering a domestic floatation, as well as a foreign one/or two. New York, London, and Hong Kong are the potential candidates - however, I see NY being a bit tricky if I'm honest, Saudi Aramco will need to obtain some serious concessions to list on the NYSE and I doubt that will happen, the NYSE is known to be quite robust. London is the more likely destination, the LSE is more willing "to play ball" and grant them the regulatory concessions needed. Hong Kong is also a good option commercially, I think investing in Saudi Aramco would appeal to Chinese investors. But I wouldn't advise solely listing on the HKEX (maybe in combination with a floatation on the LSE).

I agree with a lot of this. At this point I think a domestic listing is almost certain but I'm becoming less convinced that we'll also see an international listing. It seems very risky, especially if they're relying on the funds for the country's economic reforms.

If they do go for a dual listing, I'm still undecided on the venue choice. I would still say New York is a priority. It's just a much bigger market and has many beneficial political implications - which is just as important as the financial benefit, if not more. But at this stage I agree that it won't happen unless they get concessions. It's too dangerous to list and then get stuck defending your company in court.

Yes we seem to be really bending backwards to court the company. The FCA proposals to allow state owned enterprises to get a premium listing is quite substantial and that's on top of the already light-touch regulations that we have. If we do get it, it would be huge for May - boosting the reputation of the LSE whilst Brexit is going on and potentially attracting more state owned enterprises, so I see why she's doing it. It's a good example of how economic interests influence political agendas.

On the Trump side, so far I've only seen him tweet: https://twitter.com/realDonaldTrump/status/926793510723796993?ref_src=twsrc^tfw&ref_url=https://qz.com/1124971/london-could-lose-the-saudi-aramco-ipo-to-new-york-because-of-britains-dysfunction/&tfw_creator=johndetrixhe&tfw_site=qz. Although he does seem keen.

 

[Nicole]

I didn't know O'Melveny & Myers were mostly litigation, it seems a bit strange to me that the two firms want to partner up - is A&O big on litigation?

As Nick said it's an unexpected pairing but A&O has been investing in litigation for a while and the US legal market is very lucrative. They both have similar profits per equity partner and it'll give A&O a strong platform in the US. If this doesn't happen then I think we'll see one soon, A&O has been quite vocal about being interested in a US merger. Rof has some more info here: http://www.rollonfriday.com/TheNews...d/5620/fromTab/36/currentIndex/1/Default.aspx.

Personally I think Shearman would be a good match but it's profits fall a bit short.

 

[taneshS]

Great share. Back when I was applying, the collapse of oil prices was all over the news. Part of the excitement behind a Saudi Aramco IPO was its mystery: investors didn't know how much money the company made. I imagine the company isn't too pleased that the figures were released - but they would have had to disclose the information anyway before an IPO. Some huge profits there but quite dependent on oil prices staying at a reasonable level in the long term.

I remember this happening during uni. Could you explain why oil prices collapsed? I have some idea but articles seem to say different things. I'm choosing this topic as my commercial awareness story so that would be really helpful.

 

[Jaysen]

I remember this happening during uni. Could you explain why oil prices collapsed? I have some idea but articles seem to say different things. I'm choosing this topic as my commercial awareness story so that would be really helpful.

Sure. In short, demand stopped exceeding supply.

Developments in technology allowed US companies to access underground oil reserves that were previously irretrievable. The US began pumping lots of oil to take advantage of high oil prices. Soon, the US produced more oil than Saudi Arabia and Russia. With oil flooding the market, prices started to fall.

Historically, when oil prices fell, Saudi Arabia would cut production, along with the rest of OPEC (a collection of the big oil producing countries). But they didn't this time. Many think that Saudi Arabia didn't want to lose their market share and wanted to drive out the new US competition (OPEC can survive on lower prices of oil, the US and Russia can't).

Whilst supply was increasing, demand for oil was falling. China, one of the world's largest oil importers, faced a slowdown in growth and cut back on oil imports. Europe was also on the brink of a recession. Reduced demand led to an excess of oil and depressed prices further.