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Commercial Awareness Update - July 2019!
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<blockquote data-quote="Syafiqkay92" data-source="post: 11904" data-attributes="member: 376"><p>Hi</p><p></p><p>Thanks for writing the story about business news and current affairs.</p><p></p><p></p><p></p><p>I just thought I add something to this piece.</p><p></p><p>It seems to me that British Steel could be a target for private equity investment. I'm thinking distressed M&A. Greybull Capital, a private equity firm specialising in turnaround distressed companies, has attempted to improve the business but seems unable to do so. This means that British Steel might be an unattractive investment, even to private equity capital whose dry powder is increasing at an unprecedented level.</p><p></p><p>Despite initial interest from several buyers, British Steel did not receive any bids and that makes me wonder why. In practical terms, private equity firm tends to look at their cash flow projection. There are more factors that negatively affect their cash flow than benefits. This include factors such as increasing cost of energy, UK's commitment towards becoming carbon neutral by 2050, competition with steel supply from China and increasing cost of credit as a result of increase central bank interest rate.</p><p></p><p>One risk in particular is the decrease in steel prices affecting its revenue. This is due to Chinese companies over supplying the market with steel causing the price to fall. This could be an unintended impact of US-China trade war on the UK. As the tariff is affecting Chinese export of steel to the US, there is lower demand for their steel in the US, so they export that steel to the UK market instead.</p><p></p><p>As British Steel is the UK's second largest steel maker, if it does collapse, it means that 4000 jobs are at risk. This could also affect 20,000 jobs in the supply chain. This could have a strong impact on UK economic growth which increases the risk to UK inbound investors, making them less likely to invest in the UK.</p><p></p><p>This news shows how the bigger issues such as US-China trade war, Brexit uncertainty, and rising interest rate environment could affect a company. This means that companies need to review their financing arrangement and this would require the help of law firms to negotiate a more favourable financing, so that their operation is more resilient towards macroeconomic factors.</p><p></p><p>I hope this makes sense and I am keen to hear if anyone has a different view about this that I can learn from.</p><p></p><p>Best wishes,</p><p>Syafiq.</p></blockquote><p></p>
[QUOTE="Syafiqkay92, post: 11904, member: 376"] Hi Thanks for writing the story about business news and current affairs. I just thought I add something to this piece. It seems to me that British Steel could be a target for private equity investment. I'm thinking distressed M&A. Greybull Capital, a private equity firm specialising in turnaround distressed companies, has attempted to improve the business but seems unable to do so. This means that British Steel might be an unattractive investment, even to private equity capital whose dry powder is increasing at an unprecedented level. Despite initial interest from several buyers, British Steel did not receive any bids and that makes me wonder why. In practical terms, private equity firm tends to look at their cash flow projection. There are more factors that negatively affect their cash flow than benefits. This include factors such as increasing cost of energy, UK's commitment towards becoming carbon neutral by 2050, competition with steel supply from China and increasing cost of credit as a result of increase central bank interest rate. One risk in particular is the decrease in steel prices affecting its revenue. This is due to Chinese companies over supplying the market with steel causing the price to fall. This could be an unintended impact of US-China trade war on the UK. As the tariff is affecting Chinese export of steel to the US, there is lower demand for their steel in the US, so they export that steel to the UK market instead. As British Steel is the UK's second largest steel maker, if it does collapse, it means that 4000 jobs are at risk. This could also affect 20,000 jobs in the supply chain. This could have a strong impact on UK economic growth which increases the risk to UK inbound investors, making them less likely to invest in the UK. This news shows how the bigger issues such as US-China trade war, Brexit uncertainty, and rising interest rate environment could affect a company. This means that companies need to review their financing arrangement and this would require the help of law firms to negotiate a more favourable financing, so that their operation is more resilient towards macroeconomic factors. I hope this makes sense and I am keen to hear if anyone has a different view about this that I can learn from. Best wishes, Syafiq. [/QUOTE]
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