Commercial Awareness Update - March 2020

Discussion in 'Commercial Awareness Forum' started by Rachel S, Mar 4, 2020.

  1. Rachel S

    Rachel S Star Member

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    Hi guys,

    This week's articles:
    @Alice Manners - Heathrow Expansion.
    @Jiraiya - Amazon's cashless go supermarket.
    @Curtley Bale - CVC's intention to buy a stake in the Six Nations tournament.
    @Rachel S - Blackstone agreeing to buy IQ Student Accommodation.

    Heathrow expansion ruling - @Alice Manners

    The Story

    On Thursday the Court of Appeal held that the proposed expansion of Heathrow Airport under the ‘Airports National Policy Statement’ is unlawful as it does not take into account the Government’s commitment to the Paris Agreement on climate change.

    The ruling does not mean that there will be no third runway, but that the Secretary of State for Transport should have considered the development’s compliance with the Paris Agreement.

    The current Transport Secretary has said they will not be appealing the decision, but Heathrow Airport have said that they will appeal to the Supreme Court as an interested party. The Department for Transport could now withdraw the plans or resubmit the application, ensuring the Policy Statement explains how the expansion would comply with the Paris Agreement.

    Impact on Businesses and Law Firms

    The case could have far reaching implications. It is certainly a warning that the UK needs to put the Paris Agreement at the forefront of policymaking and comply with its commitment to make significant reductions in emissions. Future regulation and cases surrounding infrastructure may be decided with the same emphasis on climate change commitments.

    The ruling could also inspire challenges to other similar projects, with possible challenges to HS2 already in the pipeline. This will provide work for many law firms - seven firms, including Freshfields, BCLP and Eversheds are on Heathrow’s legal panel. Climate litigation is increasing significantly, and climate compliance is likely to be at the forefront of businesses, and law firms’ considerations.

    The ruling is a significant obstacle to the development, which hundreds of businesses are set to be involved in. Supporters of the third runway argue the ruling risks losing both jobs and trade, particularly as the UK negotiates post-Brexit, and businesses may be disappointed that there will be a delay to them gaining the benefits of a world-leading airport.


    CVC finalise stake in Six Nations competition in a plan to reshape world rugby - @Curtley Bale

    The Story

    Luxembourg-based private equity firm CVC is close to finalising a deal worth £300m to gain a 14% stake in the Six Nations competition. This comes months after the initial enquiry was made in September 2019. CVC began their interest in world rugby with a 27% stake in the English Premiership rugby competition in 2018. Since then, the private equity firm has made its intentions clear that they wish to commercialise the sport and grow its global audience.

    Impact on Businesses and Law Firms

    CVC has committed to changing the traditional method of buying out an organisation before selling it for a profit. They see world sport as a “massive area” for development. Their share in the Six Nations reflects this commitment but also helps them access the global rugby market. As such, they have since been in negotiations with governing bodies from New Zealand and South Africa regarding the development of new competitions.

    The biggest potential change could come in the form of a TV rights package deal. It has been rumoured that CVC is investigating whether they could gain all the rights to world rugby and combine it in one single package. Alternatively, there are rumours to sell the package rights to streaming companies such as Amazon. This would totally revolutionise the way rugby is delivered to customers. Currently, the Six Nations is exclusive to terrestrial TV. It will be necessary to balance up removing the delivery of coverage in this traditional way against the wider audience a streaming service may reach.

    Law firms will be involved in advising CVC in terms of their initial investment in the Six Nations as well as the prospective TV rights. Magic Circle heavyweights Freshfields advised CVC’s first investment in English rugby in 2018. The private equity firm will likely require advice when it comes to acquiring broadcasting rights and entering the market with a potential streaming service.


    Amazon Go Supermarket—a shop(lifting) experience? - @Jiraiya

    The Story

    The Amazon Go Supermarket in Seattle is the e-commerce giant's latest attempt to disrupt the retail industry.

    Through deep-learning algorithms, facial recognition and machine learning, customers in this supermarket will have a cash- and cashier-free experience as customers can simply bag and go after scanning their IDs when entering. No more waiting at the tills or self-service machines.

    Compared to its predecessor, the Amazon Go convenience stores, the brand new supermarket requires more sophisticated technologies to deliver a natural consumer experience due to a wider variety of unpackaged items.

    Despite teething problems like accurately weighing fruits and vegetables, putting back a product in its original place if they do not want to be charged for it, it has only been 2 years since the release of the Amazon Go technology. Imagine what can happen in another two years.

    Impact on Businesses and Law Firms

    The E-commerce giant's entry into the retail industry is proof that even in a post-digital age, a digital business strategy still requires a physical presence to diversify its income channels.

    The speculation is that Amazon would not open stores in England to test the water, due to the UK grocery market being characterised by low-growth and cut-throat price competition. Since Amazon has already registered the trademark of Amazon Go, a more probable course will be to “licence” out the technology to Sainsbury and Tesco which simply do not possess the technological prowess to materialise such change themselves.

    To law firms, this breakthrough raises numerous exciting legal questions and opportunities. Data privacy is top on the chart. As Amazon’s technology tracks and analyses customers’ preference when they browse the store, supported by its online customers' data, it can produce more tailored recommendations. Lawyers could find themselves drafting terms and conditions for customers entering the supermarket that comply with the Data Protection Act.


    Blackstone to buy UK student accommodation - @Rachel S

    The Story

    Private equity firm Blackstone has agreed to buy UK-based student accommodation group, IQ from Goldman Sachs and Wellcome Trust. Valued at £4.7 billion, this will be the UK’s largest private real estate transaction ever. Blackstone plans to refurbish and expand some of IQ’s sites and build new properties, signalling optimism for the UK’s purpose-built student accommodation market which is valued at more than £50 billion.

    This comes days after Blackstone committed to invest in UK infrastructure from a $14 billion Saudi-backed fund. Blackstone’s Global Head of Infrastructure, Sean Klimczak described their approach to the UK as “bullish” viewing the UK as “undervalued” and a “significant opportunity.”

    More broadly, UK real estate has seen a so called ‘Boris Bounce’ with the Conservative government victory halting fears of infrastructure nationalisation under a Labour government. Student accommodation is particular area of undersupply with world-renowned higher education establishments and the government’s plans to increase the number of international students in the country by a third.

    Impact on Businesses and Law Firms

    As an investment, student accommodation is no longer being seeing as an alternative asset class. Typically predictable returns and projected growth in demand may see continued real estate investment and property developers will pursue new developments in an attempt to meet this demand.

    Kirkland & Ellis are advising Blackstone with a specialist from Gowling WLG’s real estate team. Jones Day is leading IQ with Simpson Thatcher & Bartlett advising on finance. Lawyers will play a part in fund formation, negotiating deal terms, due diligence, organising financing, tax structuring and clearing regulatory hurdles. For future development, real estate lawyers will be involved with obtaining planning permission, land registry, reviewing third-party rights, environmental issues and drafting lease agreements. Faced with high competition for deals, lawyers will be needed to maximise efficiency and navigate increasing government regulation in the sector.
     
    #1 Rachel S, Mar 4, 2020
    Last edited: Mar 4, 2020
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  2. Jaysen

    Jaysen Legendary Member
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  3. Curtley Bale

    Curtley Bale Star Member

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    Please find this week's report below!

    Aviation industry hit by COVID-19 By Brian Chiu

    The Story

    The impact of Covid-19 on the aviation sector is increasingly pronounced. More than 54 countries have now issued travel restrictions to China and the wider APAC region.

    With Standard & Poor’s index of major US airlines falling by 8.2%, the biggest drop since the financial crisis, aviation investors are right to be worried. The International Air Transport Association (IATA), an industry body, warned that the industry may take a hit as much as $113bn (£87bn) because of the virus outbreak.

    Impact on Businesses and Law Firms

    This situation is unprecedented to airlines, both financially and operationally.

    Asian airlines are worst-hit as a significant portion of their customers is from China, the epicentre of the outbreak. Cathay Pacific, a Hong Kong premium carrier, has reduced its services to and from mainland China by at least 50% and asked its staff to take three weeks of unpaid leaves.

    Various American airlines have also suspended services to China and several European countries. European airlines already admit flying nearly empty planes when the Italian government also announced to lock down the entire country.

    You may be thinking: Why not slash flight schedules to stop the bleeding?

    Airport slot allocation rules in most countries require airlines to meet 80% of the required usage rates or risk losing its take-off and landing slots to competitors. There is an increasing demand for governments to waive airlines from the rules and offer tax reliefs during these extraordinary times.

    Governments may have a hard time deciding as some budget airlines are not well-managed in the first place e.g. Flybe (see Alice Manners’ article below).

    On the positive side, airlines can benefit from the oil price plunge as a result of the price war between Russia and Saudi Arabia (see Rachel Strickland’s article below). Still, lower fuel costs could not save empty flights.

    Commercially, it is in the common interests of financiers and lessors to accommodate cash-strapped carriers during this challenging time than driving its customers into insolvency. Law firms could hence advise on setting up transitory arrangements for struggling airlines.

    Aon to buy Willis Towers Watson By Curtley Bale

    The Story

    The world’s second-largest insurance broker, Aon, has reached an agreement to buy the world’s third-largest broker, Willis Towers Watson (WTW). The all-share deal is said to cost $30bn. This news comes just 12 months after Aon expressed and then closed their interest in buying WTW within a 24-hour period. It is expected that the deal will create a new leader in the commercial insurance brokerage market, overtaking rival Marsh & McLennan. Aon shareholders are expected to hold around 63% of the new company.

    What it means for Businesses and Law Firms

    Aon has been keen to consolidate its position in the market, whilst also developing its current capabilities. A deal with WTW will allow Aon to secure its position as well as tap into the expertise that WTW has. The firm is actively looking to develop its expertise in cybersecurity and IP rights and they see a deal with WTW as a way to do this.

    Moreover, it is estimated that this tie-up will lead to $800m in synergies. The result of this is likely to be a much more capable firm with the ability to serve a range of clients. Cost-saving and consolidating are also a benefit in a small market which is often affected by the low interest rates. Based on 2018 figures, the combination of Aon and WTW would have had a revenue of $19bn. This would put it ahead of the current market leader Marsh & McLennan at $17bn. This demonstrates the strength the two companies may have once merged.

    A huge range of law firms and investment banks have been called in to advise on the deal. Aon has relied on Freshfields and Arthur Cox to lead the London leg of the deal with Latham & Watkins heading up the American side. They have also obtained advice from Credit Suisse. The main focus is likely to be on gaining regulatory clearance as well as finalising the terms of the all-share deal. WTW has turned to US giants Weil, Gotshal & Manges and Skadden to help advise them, alongside Goldman Sachs.

    Oil Price War By Rachel Strickland

    The Story

    Last week, OPEC’s members proposed cutting crude oil output by 1.5 million barrels to drive up the weakened oil price. However Russia, who allies with OPEC, refused to commit to the cuts, wanting to assess the impact of the coronavirus on oil demand and not wanting to allow US shale producers an advantage. Since then, the largest OPEC member, Saudi Arabia has committed to raising production and will offer steep discounts in what has been described as an ‘oil war’. This oversupply and fear of continued depreciating prices has lead to crude oil trading between $30 and $40 a barrel this week.

    The coronavirus has had a huge impact on oil demand with restricted travel and falling production. However oil companies have been suffering from low commodity prices and lower market capitalisation for the past year.

    Impact on Businesses and Law Firms

    Businesses such as airlines and shipping companies who rely heavily on oil will benefit from continued depreciated prices. However, low oil prices and lack of demand are damaging to countries reliant on oil exports, oil companies that are facing unsustainable profits and the corporate bond market with oil companies at risk of default.

    A price war will hit oil-dependent countries like Nigeria and Angola particularly hard as they have less scope to increase output or access finance. However this is a global problem and US producers have been shedding jobs and suffering from bankruptcies as less investment is entering the US shale market. The shares in Saudi Aramco have dropped 9% and lesser energy revenues could tarnish Saudi Arabia’s Vision 2030 plans to modernise the economy and diversify away from oil.

    For those causalities of this intense competition, lawyers may advise on complex restructurings and international disputes. Increased output will mean oil companies will look to maximise efficiency through streamlining processes and drilling techniques, investing in new technology, or closing down dormant subsidiaries to lower operational costs. The high global competition and volatility will mean opportunities for corporate lawyers in capital markets and private equity to raise finance.
     
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  4. Curtley Bale

    Curtley Bale Star Member

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    Flybe Collapse By Alice Manners

    The Story

    Flybe, the largest regional airport in Europe, has entered into administration after being “unable to overcome significant funding challenges”.

    We have previously heard about these challenges and the (much criticised) proposed government rescue deal (covered by Heerim Hwang in January), but neither the loan nor an overhaul of the Air Passenger Duty ultimately materialised.

    The impact of the coronavirus appeared to be the final straw (see Brian Chiu’s article above), as the airline collapsed and left 2,400 jobs at risk last week.

    Impact on Businesses and Law Firms

    Significant proportions of flights from airports such as Anglesey, Southampton, Exeter and Belfast City were operated by Flybe. The collapse could therefore have a detrimental impact on business as Flybe provided a vital link for these otherwise difficult to reach areas. This does not just affect those travelling for meetings – industries such as construction could be affected as their employees use regional flights to work on projects in other areas of the UK.

    The failed rescue appears to hinder government plans to connect and “level up” the regions. The PM has promised improvements to road and rail networks, but these will not be implemented anytime soon, and it will be interesting to see how the collapse impacts new infrastructure. The Government has said it is “working closely with the industry to minimise any disruption to routes operated by Flybe” and is likely to try to persuade more airlines to take over the routes, before possibly considering providing state support to the most vital.

    Only six months after Thomas Cook ceased trading, the collapse highlights challenges to the aviation industry that will be faced by other airlines, including lower demand, regulatory decisions that are impacted by carbon emissions targets, and rising fuel costs. Flybe also faced difficulties as their earnings were in GBP, which weakened after the Brexit referendum.

    Law firms will play a continuing role in providing advice and assistance within the industry. BCLP are advising Flybe on their administration, and other firms will likely become involved, acting for creditors and contractual counterparties. Employment lawyers may also be on call, with some of Flybe’s employees apparently set to argue that they were not properly consulted before the collapse.

    Volkswagen and Centrica agree on a three-year partnership By Heerim Hwang

    The Story

    Volkswagen and Centrica have agreed on a three-year partnership to provide home charging hardware for owners of new Volkswagen Electrical Vehicles (EVs).

    Elli, a subsidiary of Volkswagen, will work with British Gas, which is owned by Centrica, to deliver a “package of home charging installations, after-sales services and preparatory electrical upgrades” across the UK.

    Impact on Businesses and Law Firms

    The “all-in-one” package will help customers seamlessly transition to emission-free driving with an EV. As part of the Volkswagen Group, SEAT, ŠKODA and Volkswagen Commercial Vehicles will be involved in the partnership. Although it is yet to be confirmed, there are also plans for Audi to join later this year.

    The package will offer a British Gas EV tariff which will allow consumers to enjoy off-peak electricity prices by scheduling EV charging during cheaper night time hours. Chargers will be exclusively installed by British Gas and the energy company will also be responsible for after-sales services and electrical upgrades.

    The partnership between Volkswagen and Centrica signals confidence in the Electric Mobility market and a strong commitment to The Paris Agreement on climate change. Centrica’s newest venture could also help British Gas remain competitive in an increasingly difficult market. Similarly, such partnerships have also been agreed by Ovo Energy and Nissan, Centrica and Ford, and Renault Trucks UK and EO charging.

    In the near future, lawyers are likely to be needed by their clients to help navigate through new legislation on the environment. For example, the UK government has plans to bring the ban on sales of petrol and diesel cars forward to 2035 to try and reduce air pollution. Careful guidance will also be necessary to ensure proper compliance of regulations while clients try to achieve their carbon emission goals - a lesson Volkswagen would have learned from the Volkswagen Emissions Scandal back in 2015.
     
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  5. Jessica Booker

    Jessica Booker Legendary Member
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  6. Jaysen

    Jaysen Legendary Member
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  7. Jaysen

    Jaysen Legendary Member
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    Good article in the FT today on the impact the current situation is having on the private equity industry: https://www.ft.com/content/7acbea18-6808-11ea-800d-da70cff6e4d3. Will be relevant to those of you who are applying to private-equity-focused firms.

    For those that can't access it, here's the highlights:
    • In recent years, private equity firms have built up a substantial amount of dry powder (large amounts of capital committed by investors but unspent by private equity firms)
    • Now, with the situation in the markets, some believe private equity firms are going to find attractive deals and new opportunities to invest their cash
    • One issue at the moment, however, is there are challenges raising debt to finance acquisitions, as well as portfolio companies facing an unprecedented situation (e.g. sectors like theme parks and holiday companies that will be hit hard by social distancing policies)
    • Closing deals and undertaking due diligence are also likely to be difficult with remote working/challenges to undertaking site visits
    • Some are also concerned that investors might struggle to meet capital calls (where private equity firms drawn down on the money investors have committed)
     
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  8. Jiraiya

    Jiraiya Star Member

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    Here's this week article. Hope everyone is staying safe under the current situation. :)

    Central banks’ responses to Covid-19 By @Brian Chiu

    The Story

    Investors tend to see the world as an alternation between prosperity and ruin.

    As the coronavirus rages, the massive disruption to global businesses fuels market fear of a recession.

    Dow Jones Industrial Average, a leading market index indicative of American and global economic outlook, has tumbled more than 20% from its peak last week. The panicky sell-off marks an end to the 11 years of positive momentum of the market. Some US stocks even recorded the largest one-day drop since the 1987 crash.

    To cushion the coronavirus’ economic impact, the Federal Reserves and Bank of England made an emergency cut in interest rates. (For an excellent introduction on interest rate, see @Jaysen Sutton’s article) Since the eurozone has long been in the negative interest territory, the European Central bank opts for other monetary measures to follow suit.

    Impact on Businesses and Law Firms

    Just as prompt actions are required to contain the spread of coronavirus, these economic responses will be critical to encourage lending and boost market confidence.

    Due to the abnormal and sudden nature of the coronavirus, small and medium businesses(SME) could lack enough cashflow to weather through the drastic drop in demand, potentially triggering a wave of insolvencies and job cuts. With a lower borrowing cost, businesses are encouraged to take on loans until the public fear subsides.

    Business analysts stress the need for lenders to show forbearances on loan repayment too.

    This is easier in China as banks are state-owned. In the West, banks are private entities and unwilling to take on more credit risks. This is when the UK Budget(For details, See @Rachel Strickland’s article below), an unprecedented stimulus package, becomes vital. Combined with the interest rate cut, it intends to prop up investors’ and financial institutions’ confidence and to stabilise stock markets.

    Law firms as businesses are heavily influenced by interest rate cuts as it generally means a quieter market but insolvency and litigations lawyers may benefit.

    The cost of COVID-19 on English football By@Curtley Bale

    The Story

    The outbreak of the Coronavirus has caused not only widespread hysteria and panic; it has also led to a curtailing of sport across the globe. English football has been suspended for a minimum period of two weeks whilst clubs and health officials get together to decide on how best to proceed. The business impact of this may be that the Premier League cannot fulfil its contractual obligations to the broadcasters. This is set to land the footballing body a fine of around £750m.

    Impact on Businesses and Law Firms

    The Premier League (PL) as a business will be adversely affected if it has to pay a fine of nearly £1bn. The PL has contracts worth £3.6bn and £885m with Sky and BT Sports respectively. The deal spans until 2022 and includes an unprecedented number of live games. Breaching their contracts may see a financial penalty for the PL. This costly litigation suit will hurt financially, but it may also weaken their bargaining power for future deals. In house counsel and external advisers are already combing through the terms of the contracts. It is said that the broadcasters are feeling the pressure from customers who are paying for live sport. To this end, Sky has agreed to allow customers to ‘pause’ their subscriptions.

    Clubs outside of England’s top flight are facing serious plight. Most clubs run as small businesses with owner’s funding the football club from their other business ventures. The English Football League relies on a TV package deal of only £595m, compared to the giant figures in the Premier League. This means that clubs cannot pay staff, rent or utility bills without revenue from football. Clubs such as Barnet have already made non-playing staff redundant. It is likely the COVID-19 outbreak will lead to heavy restructuring for football clubs as well as potential re-financing. Whilst the virus may have stopped football in its tracks, it looks set to entertain a wide range of lawyers.
     
    #8 Jiraiya, Mar 18, 2020
    Last edited: Mar 18, 2020
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  9. Jiraiya

    Jiraiya Star Member

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    The UK Budget By@Rachel Strickland

    Story


    New Chancellor Rishi Sunak announced the UK budget on Wednesday, raising overall government spending by £76bn over five years to aid the flagging UK economy. This comes after an emergency interest rate cut from 0.75% to 0.25%. While extensive, key themes are Covid-19, levelling up the regions, housing, and the environment.


    Small businesses fared particularly well. To name a few, business rates (with a rateable value below £51,000) will be abolished for the year, £130m is allocated to business start-up loans, and businesses with fewer than 250 employees can reclaim the cost of providing Statutory Sick Pay (‘SSP’) to employees off work in light of Covid-19 for up to 14 days.


    As the UK looks to cement its position on a world stage, the promise to more than double spending on Research & Development (‘R&D’) by 2024, and invest £5bn in faster broadband across the country has been welcomed. Alongside £400m for the development of homes on brownfield sites, a new fund is set up to improve roads and infrastructure in cities— £5.2bn for flood defences alone between 2021 and 2027.


    Other notable policies include scrapping the ‘tampon tax’ from January next year, promising to spend whatever it takes on the NHS and a plastic packaging tax to come into force from April 2022.


    Impact on Businesses and Law Firms



    For businesses, beyond managing the combination of weakened demand, supply chain difficulties and staff absence in part of Covid-19, government support and lower interest rates will be welcomed. Construction output will rise with increased infrastructure investment, housing development will pick up and the UK may experience an increase in foreign direct investment with R&D, increased digital connectivity and support of UK start-ups.


    Law firms will be involved with procurement strategy, advising on tax structuring, and housing development. Considering the focus on correcting the regional disparity, law firms with an established network of UK offices outside of the city like DWF, Pinsent Masons and Eversheds Sutherland may stand to benefit in the longer term. Similarly, the trend of law firms ‘northshoring’, moving legal and business services to regional bases like Hogan Lovells in Birmingham or Latham & Watkins in Manchester could grow.
     
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  10. Alice Manners

    Alice Manners Star Member

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    Hi all, here's this weeks commercial update :)

    Blackstone invests in UK e-commerce sites despite COVID-19 outbreak by @Curtley Bale

    The Story

    Despite the downturn of economic activity due to the spread of COVID-19, private equity firm Blackstone have ramped up their interest in the UK e-commerce market. The firm has agreed a £120m deal to buy 22 UK logistic sites and warehouses across the country. The deal will mean adding around 2msqft in floor space to their already sizeable logistics portfolio.

    Impact on Businesses and Law Firms

    Although global activity is at an all-time low, Blackstone is making a bet for the future through this deal. It is unlikely that the demand for warehouse and logistics space will fall at any time soon. In fact, there has been a huge surge in necessity following the Coronavirus spread and demand for home delivery. Therefore, Blackstone is entering a market that is very much moving, despite global trends.

    The private equity firm is growing its logistics portfolio with its ‘Mileway Division’ being responsible for this deal. The division has a European portfolio of over 1,300 properties worth €8bn. Blackstone’s commitment to the industry and the UK as a whole demonstrates the UK’s importance in the growing field of online commerce. It is one of the only sectors still operating, and even growing, in spite of the global epidemic. This commitment to the UK has been echoed by private equity rivals such as KKR who last week purchased British recycling company Viridor for £4.2bn.

    Blackstone has traditionally been advised by firms with strong real estate or private equity practises. This includes firms such as BCLP, Kirkland & Ellis and Weil, Gotshal & Manges. Lawyers will have worked on structuring the deal and balancing Mileway’s portfolio in the most cost-efficient way. The challenge will not only have been in the complexity of the deal, but also incorporating the remote-working system now in place across the UK.

    Stockpiling & the Rise of Online Grocery Deliveries by @Rachel S

    The Story

    Panic buying across the UK is leading to unprecedented demand for online grocery deliveries and supermarket adaption.

    Online grocery retailer, Ocado, experienced such a rapid increase in online orders last week that operators reportedly thought the system was experiencing a software attack and closed the website for maintenance for four days. The website has since been updated to ensure “fair” distribution of products to customers. Even retailer behemoth, Amazon, has limited fulfilment centres to restrict warehouse stocks to household essentials and medical supplies until the 5th April showing the current scale of demand.

    Aside from the rise of online deliveries, the impact of Covid-19 will drastically change grocery production and supply chains. Vehicles, drivers and products from the catering trade are being switched to the retail supply chain with the closure of bars and restaurants. Supermarkets are increasing their click-and-collect capacity, restaurants are moving to online deliveries and a hiring spree is taking place to replenish stock levels in distribution centres and supermarkets.

    Impact on Businesses and Law Firms

    With such demand, online models of delivery are being stress-tested. Supermarkets will need to consider restructuring their supply chains, recruitment, and investment in new equipment like delivery vehicles and IT to manage increased demand.

    Law firms may advise on establishing online platforms, data management, service agreements with new suppliers and flexible employment contracts. Regulations are also changing rapidly in these exceptional circumstances. For example, the Department of Transport has relaxed the rules for delivery driver’s hours in transporting essential items. Retailers have also demanded a relaxation of competition policy to allow collaboration between retailers to maintain food supplies and reconsideration of the Groceries Supply Code of Practice which requires a “reasonable notice” of changes to supply contracts.
     
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  11. Alice Manners

    Alice Manners Star Member

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    Price Gouging by @Alice Manners

    The Story

    In the midst of the COVID-19 panic, some shops and individual sellers have been increasing prices of ‘in demand’ goods, including hand sanitiser, toilet roll and face masks. This is described as price gouging.

    This may contradict section 18 of the 1998 Competitions Act, which states that businesses could be abusing a dominant position by ‘directly or indirectly imposing unfair purchase or selling prices.’

    The Competition and Markets Authority has therefore been contacting traders and platforms and has launched a UK ‘taskforce’ to deal with inquiries and identify harmful sales and pricing practices.

    They have said they will take “direct enforcement action” against those charging above the market rate for these goods, and where they cannot act they will advise the government on steps they could take.

    Impact on Businesses and Law Firms

    Individuals increasing the price of goods raises questions of how liable a seller is as to what is sold on their platform. Amazon have terminated marketplace accounts unfairly increasing prices and eBay have heavily restricted the sale of masks and hand sanitiser.

    France announced this month that the sale of hand sanitiser would be regulated and many US states already have restrictions on price gouging. Businesses operating internationally will have to ensure they comply with laws across the globe, and lawyers will need to keep up with the changing regulatory environment.

    Businesses will have also to grapple with the fine line between what is legal and what is ethical, a problem law firms will have to help advise on. How businesses act during this crisis could have an impact on how consumers perceive and use them long-term.

    The UK government may be under pressure to introduce similar anti-price gouging legislation. However, this would likely face criticism as increasing prices due to increased demand is a measure which makes economic sense. If problems in production or trade due to travel bans or lockdowns occur, businesses could suffer if they cannot increase prices of these goods.

    Covid-19’s impact on currencies by @Jiraiya

    The Story

    Pound Sterling has now fallen to a 35-year low against the dollar—1 GBP to 1.16 USD—as Covid-19 continues to rip through global markets. The pound has not been this weak since the 1980s when the US President Reagan instituted a series of economic policies which created a strong demand for dollars. By the same token, the dollar is appreciating against sterling—and all other major currencies.

    Impact on Businesses and Law Firms

    You may wonder why the USD is swimming against the tide. The dollar is traditionally seen as the global haven during times of economic crisis and geopolitical uncertainty. Investors believe the dollar is the safest form of liquid asset to preserve value.

    Just as you may be going to Sainsbury to stock up on essentials in fear of extended lock-down, investors, experiencing market crashes (and heart attacks), are selling off their riskier assets for dollars to mitigate their losses.

    With the dollar skyrocketing, a large number of companies will go into wall. The overall size of global liabilities(debts) denominated in the dollar is $12tn, meaning companies globally have to pay regular dollar bills when demand is already faltering. The ever-increasing price of the dollar outside of the US makes repayment more expensive and companies may default their loan payments, triggering a series of insolvencies.

    This, however, does not explain why the pound is singled out. The outflow of capital, Johnson government’s early strategy to deal with the pandemic and a potentially delayed Brexit all potentially weigh on the pound—even after the Bank of England slashed interest rates to 0.1% and the Exchequer rolled out a series of unprecedented financial measures.

    Currencies are the bloodstream of the global financial system. Central banks are now scrambling to set up arrangements with the Federal Reserve for exchanging their own currencies into dollar. The aim is to steady their home markets by maintaining the supply of the dollar. The effect of these measures remains to be seen as no one knows the full scale of the pandemic yet. An unknown enemy is the hardest to defeat.
     
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