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Commercial Awareness Update - January 2020
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<blockquote data-quote="Jiraiya" data-source="post: 21935" data-attributes="member: 4295"><p>Hi everyone,</p><p></p><p>Here's the latest commercial awareness update!</p><p></p><p></p><p><strong>Goldman Sachs to stop doing IPOs for companies with a “non-diverse” board</strong></p><p></p><p>By Curtley Bale</p><p></p><p><strong>The Story</strong></p><p><strong></strong></p><p>One of Wall Street’s largest investment banks, Goldman Sachs, has announced its intentions to stop helping companies deliver IPOs if they do not have a “diverse’ board. Beginning on 1st July, the new rule will only apply to European and American businesses. This leaves out Asian companies who traditionally have the worst record for gender equality. The announcement comes after a review of taking around 60 companies public since 2018 with all-male boards.</p><p></p><p><strong>Impact on businesses and law firms</strong></p><p></p><p>Goldman Sachs has made this move as CEO David Solomon believes board diversity is “very, very important”. He is also quoted as saying companies on the market are likely to perform “significantly better” if they have at least one female member on the board. For firms looking to go public, this new condition from Goldman could mean they are forced to change their approach when appointing board members or even find new advisors.</p><p></p><p>Goldman Sachs could potentially see huge losses if companies do not meet the criteria. Based on an analysis conducted by Bloomberg Law, Goldman could have lost up to $101m in underwriting fees if the rule had been in place in 2019. They took 18 non-diverse companies public, accounting for around a third of the $318.68m they earned in IPO advisory fees that year.</p><p></p><p>The consequence of this for Goldman is that they may have to look elsewhere for new streams of revenue. This could potentially explain their moves into the consumer credit and small loans market. This move from Goldman Sachs comes as a first in the market. Whilst other large investment banks may agree with the idea of promoting a diverse board, competitors such as JP Morgan Chase and Morgan Stanley are yet to commit to adopting such pledges.</p><p></p><p></p><p><strong>Boeing's latest financial result</strong></p><p></p><p>By Brian Chiu</p><p></p><p><strong>Story</strong></p><p><strong></strong></p><p>Boeing, the American planemaker, has announced an annual loss of $636m despite booking a $76.6bn in revenue, the first annual loss in more than two decades as it continues grappling with the 737 Max 8 fiasco—its best-selling jets crashed twice killing a combined 346 people because of a reported faulty flight control system. The crashes occurred first in Indonesia in October 2018, and five months later in Ethiopia in March 2019. The crisis has cost around $18.6bn, more than double its previous estimate, caused primarily by the worldwide grounding of the 737 Max.</p><p></p><p><strong>Impact on businesses and law firms</strong></p><p></p><p>The aircraft manufacturer has long been criticised for its hard-nosed culture due to lack of competition in the sector.(Below: <u>Its main rival Airbus was fined in a corruption scandal)</u> To recover from the crisis, the company must work on two aspects: get the planes safely back to the air and re-establish confidence. The company announced halting the model's manufacturing last week as the backlog of 737 Max, which incurred significant maintenance costs, would take at least two years to clear; Also, the Federal Aviation Administration (FAA) refused to set a timeframe for the model's certification. In the long term, the company must overhaul its culture to prioritise safety over profitability and corners-cutting particularly after the revelation of multiple Boeing's damaging internal communications, the worst of which was “this aeroplane is designed by clowns …supervised by monkeys”</p><p></p><p>Worse, the legal costs have not been factored into the company's troubled financial situation. Facing worldwide litigations, Boeing requires assistance from aviation law firms like Clyde & Co, HFW and White & Case to negotiate the settlement package with the victims. A common tactic to negotiation is to first move the case out of the US to lower the penalty. Furthermore, its in-house lawyers would have to review contracts with buyers, some of whom may decide to walk away or re-negotiate for a better price---aircraft purchase agreements often include terms to let airlines walk away if there is a significant delay in delivery and airlines would use that to pressure for discount.</p><p></p><p><strong>Ovo overcharging its customers</strong></p><p></p><p>By Heerim Hwang</p><p></p><p><strong>The story</strong></p><p></p><p>Ovo Energy, Britain's second-largest energy supplier after acquiring SSE Energy Services, was found by regulator Ofgem to have inaccurately billed more than 500,000 customers between July 2015 and February 2018.</p><p>Ovo has since agreed with Ofgem on a settlement package of £8.7m (which will be paid to vulnerable customers instead of the treasury) to avoid a fine.</p><p></p><p><strong>Impact on businesses and law firms</strong></p><p></p><p>Ofgem's criticism and firm action on Ovo Energy send a clear message that businesses must ensure that there are proper compliance processes and up-to-date IT systems put in place. The inaccurate billing is said to have stemmed from the IT system and compliance process failures.</p><p></p><p>Similarly to Ovo Energy, energy supplier Utility Warehouse has also been ordered by Ofgem to pay £650,000 after overcharging customers due to a system error. However, unlike Utility Warehouse, Ovo Energy did not self-report the issues despite being aware of them which consequently resulted in the enforcement action. For this, Ofgem also heavily criticised the energy supplier’s slow action on fixing things and for prioritising the expansion of its business instead.</p><p></p><p>Law firms will be key in assisting businesses to comply with regulatory demands on matters such as putting correct compliance processes in place. With Ovo Energy's recently completed acquisition of SSE Energy services in mind, Ovo Energy's breaches also demonstrate the importance of discovering any potential litigation or regulatory disputes through thorough due diligence during M&A.</p></blockquote><p></p>
[QUOTE="Jiraiya, post: 21935, member: 4295"] Hi everyone, Here's the latest commercial awareness update! [B]Goldman Sachs to stop doing IPOs for companies with a “non-diverse” board[/B] By Curtley Bale [B]The Story [/B] One of Wall Street’s largest investment banks, Goldman Sachs, has announced its intentions to stop helping companies deliver IPOs if they do not have a “diverse’ board. Beginning on 1st July, the new rule will only apply to European and American businesses. This leaves out Asian companies who traditionally have the worst record for gender equality. The announcement comes after a review of taking around 60 companies public since 2018 with all-male boards. [B]Impact on businesses and law firms[/B] Goldman Sachs has made this move as CEO David Solomon believes board diversity is “very, very important”. He is also quoted as saying companies on the market are likely to perform “significantly better” if they have at least one female member on the board. For firms looking to go public, this new condition from Goldman could mean they are forced to change their approach when appointing board members or even find new advisors. Goldman Sachs could potentially see huge losses if companies do not meet the criteria. Based on an analysis conducted by Bloomberg Law, Goldman could have lost up to $101m in underwriting fees if the rule had been in place in 2019. They took 18 non-diverse companies public, accounting for around a third of the $318.68m they earned in IPO advisory fees that year. The consequence of this for Goldman is that they may have to look elsewhere for new streams of revenue. This could potentially explain their moves into the consumer credit and small loans market. This move from Goldman Sachs comes as a first in the market. Whilst other large investment banks may agree with the idea of promoting a diverse board, competitors such as JP Morgan Chase and Morgan Stanley are yet to commit to adopting such pledges. [B]Boeing's latest financial result[/B] By Brian Chiu [B]Story [/B] Boeing, the American planemaker, has announced an annual loss of $636m despite booking a $76.6bn in revenue, the first annual loss in more than two decades as it continues grappling with the 737 Max 8 fiasco—its best-selling jets crashed twice killing a combined 346 people because of a reported faulty flight control system. The crashes occurred first in Indonesia in October 2018, and five months later in Ethiopia in March 2019. The crisis has cost around $18.6bn, more than double its previous estimate, caused primarily by the worldwide grounding of the 737 Max. [B]Impact on businesses and law firms[/B] The aircraft manufacturer has long been criticised for its hard-nosed culture due to lack of competition in the sector.(Below: [U]Its main rival Airbus was fined in a corruption scandal)[/U] To recover from the crisis, the company must work on two aspects: get the planes safely back to the air and re-establish confidence. The company announced halting the model's manufacturing last week as the backlog of 737 Max, which incurred significant maintenance costs, would take at least two years to clear; Also, the Federal Aviation Administration (FAA) refused to set a timeframe for the model's certification. In the long term, the company must overhaul its culture to prioritise safety over profitability and corners-cutting particularly after the revelation of multiple Boeing's damaging internal communications, the worst of which was “this aeroplane is designed by clowns …supervised by monkeys” Worse, the legal costs have not been factored into the company's troubled financial situation. Facing worldwide litigations, Boeing requires assistance from aviation law firms like Clyde & Co, HFW and White & Case to negotiate the settlement package with the victims. A common tactic to negotiation is to first move the case out of the US to lower the penalty. Furthermore, its in-house lawyers would have to review contracts with buyers, some of whom may decide to walk away or re-negotiate for a better price---aircraft purchase agreements often include terms to let airlines walk away if there is a significant delay in delivery and airlines would use that to pressure for discount. [B]Ovo overcharging its customers[/B] By Heerim Hwang [B]The story[/B] Ovo Energy, Britain's second-largest energy supplier after acquiring SSE Energy Services, was found by regulator Ofgem to have inaccurately billed more than 500,000 customers between July 2015 and February 2018. Ovo has since agreed with Ofgem on a settlement package of £8.7m (which will be paid to vulnerable customers instead of the treasury) to avoid a fine. [B]Impact on businesses and law firms[/B] Ofgem's criticism and firm action on Ovo Energy send a clear message that businesses must ensure that there are proper compliance processes and up-to-date IT systems put in place. The inaccurate billing is said to have stemmed from the IT system and compliance process failures. Similarly to Ovo Energy, energy supplier Utility Warehouse has also been ordered by Ofgem to pay £650,000 after overcharging customers due to a system error. However, unlike Utility Warehouse, Ovo Energy did not self-report the issues despite being aware of them which consequently resulted in the enforcement action. For this, Ofgem also heavily criticised the energy supplier’s slow action on fixing things and for prioritising the expansion of its business instead. Law firms will be key in assisting businesses to comply with regulatory demands on matters such as putting correct compliance processes in place. With Ovo Energy's recently completed acquisition of SSE Energy services in mind, Ovo Energy's breaches also demonstrate the importance of discovering any potential litigation or regulatory disputes through thorough due diligence during M&A. [/QUOTE]
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