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Commercial Awareness Update - October 2019
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<blockquote data-quote="Sara Moon" data-source="post: 14522" data-attributes="member: 525"><p><strong><u>3. OECD’s New Corporate Tax Regime [USER=1643]@Moni[/USER]</u></strong></p><p></p><p><strong>The Story:</strong></p><p>The Organisation for Economic Co-operation and Development (OECD) recently proposed a new global corporate tax regime that would change tax rules that have allowed large tech companies like Facebook and Google to move profits around the world in order to minimize their tax bills. Under the proposal countries would have increased rights to levy taxes on corporate income earned from sales earned in their territories. Importantly, the proposals go against the standard rules that companies can only be taxed in jurisdictions where they have a physical presence. The proposals would negatively impact tax havens and low tax jurisdictions. The OECD’s argument is that existing rules are no longer sufficient to ensure a ‘fair allocation’ of taxing rights and believes that their proposals will get the support of leading economies who may be encouraged to implement changes through cooperation rather than unilaterally.</p><p></p><p><strong>Impact on Businesses and Law Firms:</strong></p><p>Many view the OECD proposal as a useful foundation for further discussions, in addition to significant technical work which would need to be done, there would also need to be broad global support in order for the proposals to become law. However, initial support for the proposal shows that countries are seriously considering solutions to what they see as flaws in tax regimes that give tech companies an unfair advantage. The development and implementation of the proposal would also present a significant opportunity for tax lawyers, who in addition to influencing the development of new regulations, will also need to help their clients’ understand the potential impact on their businesses. </p><p></p><p><span style="font-size: 15px"><strong><strong><u>4. WH Smith’s Expansion into the Travel Retail Market ([USER=1550]@Sairah[/USER])</u></strong></strong></span></p><p></p><p><strong>The Story:</strong></p><p>Last Thursday, WH Smith confirmed it will be acquiring Marshall Retail Group, a US retailer that operates stores in airports and casino resorts, from private equity investment firm Brentwood Associates. The deal is valued at $400 million (£312m).</p><p></p><p>This expansion will see WH Smith double its international travel business and strengthen its presence in the $3.2 billion US airport market. Following its $198 million (£155m) purchase of InMotion, a market-leading US digital accessories retailer, last October. </p><p></p><p>WH Smith will obtain an additional 170 stores across the US and Canada, with 59 of them in airports. This will boost WH Smith up to third position in the airport retail market. An excellent move from WH Smith which will compensate for its slow growth in its UK high street division, which is currently down by 2%.</p><p></p><p><strong>Impact on Businesses and Law Firms:</strong></p><p>The proposed acquisition will be financed through a combination of new <strong><em>debt</em></strong>, a £200 million term loan facility. Also, <strong><em>equity</em></strong>, which will be £155 million being raised through an underwritten equity placing*. WH Smith also announced it will temporarily suspend its current <strong><em>share buyback</em></strong> programme, while it conducts the equity placing of the new shares.</p><p></p><p>The two financial advisors, North Point Advisors LLC and William Blair & Company LLC, as well as JP Morgan have been involved in the financial checks of WH Smith. WH Smith has performed strongly in their 2019 financial report, with their travel trading profit up by +14% to $150 million (£117m). Investors were pleased with the results, and it is expected the acquisition of Marshall Retail Group, will instantly contribute a $84 million (£65m) revenue for WH Smith in the future.</p><p></p><p>The law firms acting for WH Smith on this deal are Herbert Smith Freehills and DLA Piper, who will be involved with the necessary M&A process. This includes the comprehensive due diligence checks, as well as drafting the sales and purchase agreement (SPA), the acquisition agreement. Also, if there is any issues along the way, the two law firms acting for WH Smith will also be needed to include any indemnities in the agreement to provide security for WH Smith. Kirkland & Ellis will be acting as legal counsel to Marshall Retail Group. The deal is expected to be completed in the first quarter of 2020.</p><p></p><p>*To understand these terms, please visit TCLA’s Instagram page. </p><p></p><p></p><p><strong><u>5. Back to Basics: Facebook (by [USER=1]@Jaysen[/USER])</u></strong></p><p></p><p><strong>The Story</strong></p><p>Facebook’s image has changed.</p><p></p><p>The Cambridge Analytica scandal showed the world how lax security measures could be used to exploit Facebook users’ data to predict and shape behaviour.</p><p></p><p>The aftermath of the 2016 US election showed how Facebook could be used by other states to influence elections and spread fake news.</p><p></p><p>Facebook’s role in the spread of anti-Rohingya propaganda in Myanmar and anti-Muslim violence in Sri Lanka, showed how the platform could be used to incite hatred and violence across the globe.</p><p></p><p>Facebook is no longer just a US social media company; it now plays a role in the supply of the world’s information. Its newfound position is changing the way laws are used to regulate the digital world.</p><p></p><p><strong>Impact on Businesses and Law Firms</strong></p><p>Facebook’s privacy scandals have turned global regulators against the company. Gibson Dunn recently advised Facebook against its £500,000 fine from the Information Commissioner’s Office, the highest fine under the UK’s pre-GDPR data protection law. Across the Atlantic, Facebook’s practices led to a record $5bn fine from the Federal Trade Commission, while the upcoming California Consumer Privacy Act shows a shift in the US’s previously lax approach to data regulation.</p><p></p><p>Meanwhile, a recent decision by the European Court of Justice set a new precedent for how and where speech should be regulated on the internet. The EU’s highest court found that judges across the EU could order Facebook to remove defamatory or illegal posts, not just in their own country, but across the world. This aligns with a growing view that Facebook is not just a neutral platform, but a publisher, and therefore accountable for particular content posted on its site.</p><p></p><p>Most recently, the recent scandals have damaged Facebook’s attempts at disrupting the world of finance. Fears over how its proposed cryptocurrency could be used to facilitate money laundering and terrorist financiers, as well as undermine the strength of currencies, has led to regulatory pushback. France, Germany and Italy are seeking to block Libra in Europe, while today (Wednesday, 23 October 2019) Facebook’s CEO will be attempt to regain favour with US lawmakers at a Congressional hearing.</p></blockquote><p></p>
[QUOTE="Sara Moon, post: 14522, member: 525"] [B][U]3. OECD’s New Corporate Tax Regime [USER=1643]@Moni[/USER][/U][/B] [B]The Story:[/B] The Organisation for Economic Co-operation and Development (OECD) recently proposed a new global corporate tax regime that would change tax rules that have allowed large tech companies like Facebook and Google to move profits around the world in order to minimize their tax bills. Under the proposal countries would have increased rights to levy taxes on corporate income earned from sales earned in their territories. Importantly, the proposals go against the standard rules that companies can only be taxed in jurisdictions where they have a physical presence. The proposals would negatively impact tax havens and low tax jurisdictions. The OECD’s argument is that existing rules are no longer sufficient to ensure a ‘fair allocation’ of taxing rights and believes that their proposals will get the support of leading economies who may be encouraged to implement changes through cooperation rather than unilaterally. [B]Impact on Businesses and Law Firms:[/B] Many view the OECD proposal as a useful foundation for further discussions, in addition to significant technical work which would need to be done, there would also need to be broad global support in order for the proposals to become law. However, initial support for the proposal shows that countries are seriously considering solutions to what they see as flaws in tax regimes that give tech companies an unfair advantage. The development and implementation of the proposal would also present a significant opportunity for tax lawyers, who in addition to influencing the development of new regulations, will also need to help their clients’ understand the potential impact on their businesses. [SIZE=4][B][B][U]4. WH Smith’s Expansion into the Travel Retail Market ([USER=1550]@Sairah[/USER])[/U][/B][/B][/SIZE] [B]The Story:[/B] Last Thursday, WH Smith confirmed it will be acquiring Marshall Retail Group, a US retailer that operates stores in airports and casino resorts, from private equity investment firm Brentwood Associates. The deal is valued at $400 million (£312m). This expansion will see WH Smith double its international travel business and strengthen its presence in the $3.2 billion US airport market. Following its $198 million (£155m) purchase of InMotion, a market-leading US digital accessories retailer, last October. WH Smith will obtain an additional 170 stores across the US and Canada, with 59 of them in airports. This will boost WH Smith up to third position in the airport retail market. An excellent move from WH Smith which will compensate for its slow growth in its UK high street division, which is currently down by 2%. [B]Impact on Businesses and Law Firms:[/B] The proposed acquisition will be financed through a combination of new [B][I]debt[/I][/B], a £200 million term loan facility. Also, [B][I]equity[/I][/B], which will be £155 million being raised through an underwritten equity placing*. WH Smith also announced it will temporarily suspend its current [B][I]share buyback[/I][/B] programme, while it conducts the equity placing of the new shares. The two financial advisors, North Point Advisors LLC and William Blair & Company LLC, as well as JP Morgan have been involved in the financial checks of WH Smith. WH Smith has performed strongly in their 2019 financial report, with their travel trading profit up by +14% to $150 million (£117m). Investors were pleased with the results, and it is expected the acquisition of Marshall Retail Group, will instantly contribute a $84 million (£65m) revenue for WH Smith in the future. The law firms acting for WH Smith on this deal are Herbert Smith Freehills and DLA Piper, who will be involved with the necessary M&A process. This includes the comprehensive due diligence checks, as well as drafting the sales and purchase agreement (SPA), the acquisition agreement. Also, if there is any issues along the way, the two law firms acting for WH Smith will also be needed to include any indemnities in the agreement to provide security for WH Smith. Kirkland & Ellis will be acting as legal counsel to Marshall Retail Group. The deal is expected to be completed in the first quarter of 2020. *To understand these terms, please visit TCLA’s Instagram page. [B][U]5. Back to Basics: Facebook (by [USER=1]@Jaysen[/USER])[/U][/B] [B]The Story[/B] Facebook’s image has changed. The Cambridge Analytica scandal showed the world how lax security measures could be used to exploit Facebook users’ data to predict and shape behaviour. The aftermath of the 2016 US election showed how Facebook could be used by other states to influence elections and spread fake news. Facebook’s role in the spread of anti-Rohingya propaganda in Myanmar and anti-Muslim violence in Sri Lanka, showed how the platform could be used to incite hatred and violence across the globe. Facebook is no longer just a US social media company; it now plays a role in the supply of the world’s information. Its newfound position is changing the way laws are used to regulate the digital world. [B]Impact on Businesses and Law Firms[/B] Facebook’s privacy scandals have turned global regulators against the company. Gibson Dunn recently advised Facebook against its £500,000 fine from the Information Commissioner’s Office, the highest fine under the UK’s pre-GDPR data protection law. Across the Atlantic, Facebook’s practices led to a record $5bn fine from the Federal Trade Commission, while the upcoming California Consumer Privacy Act shows a shift in the US’s previously lax approach to data regulation. Meanwhile, a recent decision by the European Court of Justice set a new precedent for how and where speech should be regulated on the internet. The EU’s highest court found that judges across the EU could order Facebook to remove defamatory or illegal posts, not just in their own country, but across the world. This aligns with a growing view that Facebook is not just a neutral platform, but a publisher, and therefore accountable for particular content posted on its site. Most recently, the recent scandals have damaged Facebook’s attempts at disrupting the world of finance. Fears over how its proposed cryptocurrency could be used to facilitate money laundering and terrorist financiers, as well as undermine the strength of currencies, has led to regulatory pushback. France, Germany and Italy are seeking to block Libra in Europe, while today (Wednesday, 23 October 2019) Facebook’s CEO will be attempt to regain favour with US lawmakers at a Congressional hearing. [/QUOTE]
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