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Commercial Awareness Update- September 2019
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<blockquote data-quote="ELA" data-source="post: 13462" data-attributes="member: 1562"><p><strong>18th September 2019 - Welcome to this week’s Commercial News Update!</strong></p><p> </p><p><strong></strong></p><p><strong>Topics covered this week are:</strong></p><p></p><p><strong>1. <u>Saudi Arabia Oil Attacks ([USER=1550]@Sairah[/USER])</u></strong></p><p><strong>2. <u>Back to Basics: The Swiss Verein ([USER=1]@Jaysen[/USER])</u></strong></p><p><strong>3. <u>WeWork Shelves IPO (@AliceG)</u></strong></p><p><strong>4. <u>The HKEX’s Unsolicited Bid to Acquire the LSEG ([USER=1643]@Moni[/USER])</u></strong></p><p><strong>5. <u>The European Central Bank’s Latest Stimulus Package ([USER=1562]@ELA[/USER])</u></strong></p><p></p><p></p><p></p><p><strong>*******************************************************************************************************************************************************************************</strong></p><p></p><p> </p><p></p><p><strong><u>1. Saudi Arabia Oil Attacks ([USER=1550]@Sairah[/USER])</u></strong></p><p></p><p><strong>The Story:</strong></p><p></p><p>On Monday, stocks of oil companies across the USA and Asia-Pacific increased. This led to oil prices rising by nearly 20% at some point, following two drone attacks over the weekend that hit Saudi Aramco’s oil production facilities in Abqaiq (the world’s largest oil plant) and Khurais. The attacks led to Saudi Arabia suspending 5.7 million barrels of daily crude production, equating to 50% of Saudi’s oil output and more than 5% of the world’s oil supply. The attack on Saudi’s oil is the biggest one-day disruption since 2003, that led to the loss of 2.3 million oil barrels.</p><p></p><p>According to the Wall Street Journal, the oil company Saudi Aramco operating the Abqaiq plant has begun to restore production, and expects to resume a third of its crude output by Monday. But, analysts predict it could take weeks for the facilities to reach its full capacity. Despite this, Saudi officials have said they will use other facilities and existing stock to replace the plant’s production. This means it is likely the disruption will not affect crude supplies in the near-term, as there is enough capacity in storage to meet the shortfall in the short-term.</p><p></p><p>President Trump on Sunday stated he would release supplies from the America’s Strategic Petroleum Reserve if required, an attempt to calm the oil markets. Having said this, the world’s richest countries have oil reserves of more than 2 billion barrels, but a possible issue is releasing those to relieve supply concerns could potentially backfire and result in higher prices on the market. This is due to investors worrying about tight supply.</p><p></p><p><strong>Impact on Businesses and Law Firms:</strong></p><p></p><p>Saudi Aramco’s planned initial public offering could be at risk if international investors doubt Saudi Arabia’s ability to defend its important energy infrastructure. According to Al Dhabi Capital, a delay of Aramco’s IPO could be on the cards even on the local exchange.</p><p></p><p>Investors saw a live demonstration of the risk levels of the future revenues of Saudi Aramco this weekend. This has led to investors being forced to re-evaluate their risk models on Aramco. Law firms with a strong presence in the Middle East, such as White & Case, will be needed to help investors conduct a full diligence check on Saudi Aramco before considering any investment deal. Investors may also instruct their own finance lawyers to assess the valuation of Aramco (currently valued at $2 trillion). This is because the international component of Aramco’s IPO will be more sensitive to geopolitical risks, which has in the past been an important factor for valuations across the Middle East.</p><p></p><p>Aramco will have to demonstrate its financial resilience towards such events to gain investors’ confidence. One way this could be achieved is by Aramco’s lawyers drafting future contracts with investors, including force-majeure clauses, which void agreed-upon terms in extreme unforeseen circumstances, like this drone attack.</p><p></p><p></p><p></p><p><strong><u>2. Back to Basics: The Swiss Verein ([USER=1]@Jaysen[/USER])</u></strong></p><p></p><p><strong>The Story</strong></p><p></p><p>Over the past decade, many of the major cross-border mergers have adopted a structure called a Swiss verein. It’s a structure that has made many firms – including DLA Piper, Dentons, Hogan Lovells, KWM, Norton Rose Fulbright – who they are today.</p><p></p><p>A Swiss verein allows for rapid international expansion. Firms ‘merge’ in the sense that they combine under the same brand, however they keep the finances and liabilities separate within each office or region.</p><p></p><p>Importantly, they may adopt the same strategy and IT systems, but they don’t share profit pools.</p><p></p><p><strong>Impact on Businesses and Law Firms</strong></p><p></p><p>But what does this really mean for you?</p><p></p><p>Firms that use the Swiss verein often have a substantial international presence. The structure allows for flexible and quick international mergers. If firms don’t have to share profits, they can worry less about diluting the overall profit pool when merging with less profitable firms. They can also keep the cultures of the firms independent.</p><p></p><p>It’s those benefits that have helped Dentons pursue aggressive international expansion (around 40 combinations between 2013 and 2018). And, as a lawyer, this likely means plenty of international work, as well as potential opportunities for secondments in a broader range of jurisdictions.</p><p></p><p>But you might want to consider the wider impact of ringfencing a firm. A Swiss verein means if partners refer work to the other entities within their network, that work won’t contribute to their profit pool. Now, this doesn’t mean partners won’t still refer work, but the disincentive leads to the question: how does a verein impact law firm culture? If offices are financially and legally separate, are the offices genuinely integrated? Do international offices work together as ‘one firm’?</p><p></p><p>Now, vereins aren’t all the same. You just may not know whether you’re speaking to a Hogan Lovells (a widely successful use of the verein) or a SJ Berwin/King & Wood Mallesons (a disaster).</p><p></p><p></p><p></p><p><strong><u>3. WeWork Shelves IPO (@AliceG)</u></strong></p><p></p><p><strong>The Story:</strong></p><p></p><p>Late on Monday, it was decided that WeWork would not pursue its seemingly imminent IPO until potentially later this year, despite there having been plans to price and list its shares as early as next week. It has been reported that the postponement is due to investors’ fears about the co-founder, CEO Adam Neumann, having too much control over the business, as well as the business’s operating losses. This also means that the company is unable to access a $6bn loan that had been raised by a consortium of banks and which had been contingent upon the successful listing of WeWork.</p><p></p><p><strong>Impact on Businesses and Law Firms:</strong></p><p></p><p>Law firms are instrumental in assisting businesses to list on the stock market and they are the ones who ensure that all the relevant documentation has been processed and arranged for the listing to occur. Although law firms are likely to be paid for all the work they have done so far towards the IPO, its shelving could potentially mean a loss of work involved in finalising the process, should WeWork decide not to list altogether further down the line.</p><p></p><p>Many CEOs are increasingly prominent as key figures, think Elon Musk for example, and their reputation and influence are closely watched by investors. Neumann is considered a controversial figure, and this serves as a brilliant example of how important character, ethics and the strategy of the individual are in the business world.</p></blockquote><p></p>
[QUOTE="ELA, post: 13462, member: 1562"] [B]18th September 2019 - Welcome to this week’s Commercial News Update![/B] [B] Topics covered this week are:[/B] [B]1. [U]Saudi Arabia Oil Attacks ([USER=1550]@Sairah[/USER])[/U] 2. [U]Back to Basics: The Swiss Verein ([USER=1]@Jaysen[/USER])[/U] 3. [U]WeWork Shelves IPO (@AliceG)[/U] 4. [U]The HKEX’s Unsolicited Bid to Acquire the LSEG ([USER=1643]@Moni[/USER])[/U] 5. [U]The European Central Bank’s Latest Stimulus Package ([USER=1562]@ELA[/USER])[/U][/B] [B]*******************************************************************************************************************************************************************************[/B] [B][U]1. Saudi Arabia Oil Attacks ([USER=1550]@Sairah[/USER])[/U][/B] [B]The Story:[/B] On Monday, stocks of oil companies across the USA and Asia-Pacific increased. This led to oil prices rising by nearly 20% at some point, following two drone attacks over the weekend that hit Saudi Aramco’s oil production facilities in Abqaiq (the world’s largest oil plant) and Khurais. The attacks led to Saudi Arabia suspending 5.7 million barrels of daily crude production, equating to 50% of Saudi’s oil output and more than 5% of the world’s oil supply. The attack on Saudi’s oil is the biggest one-day disruption since 2003, that led to the loss of 2.3 million oil barrels. According to the Wall Street Journal, the oil company Saudi Aramco operating the Abqaiq plant has begun to restore production, and expects to resume a third of its crude output by Monday. But, analysts predict it could take weeks for the facilities to reach its full capacity. Despite this, Saudi officials have said they will use other facilities and existing stock to replace the plant’s production. This means it is likely the disruption will not affect crude supplies in the near-term, as there is enough capacity in storage to meet the shortfall in the short-term. President Trump on Sunday stated he would release supplies from the America’s Strategic Petroleum Reserve if required, an attempt to calm the oil markets. Having said this, the world’s richest countries have oil reserves of more than 2 billion barrels, but a possible issue is releasing those to relieve supply concerns could potentially backfire and result in higher prices on the market. This is due to investors worrying about tight supply. [B]Impact on Businesses and Law Firms:[/B] Saudi Aramco’s planned initial public offering could be at risk if international investors doubt Saudi Arabia’s ability to defend its important energy infrastructure. According to Al Dhabi Capital, a delay of Aramco’s IPO could be on the cards even on the local exchange. Investors saw a live demonstration of the risk levels of the future revenues of Saudi Aramco this weekend. This has led to investors being forced to re-evaluate their risk models on Aramco. Law firms with a strong presence in the Middle East, such as White & Case, will be needed to help investors conduct a full diligence check on Saudi Aramco before considering any investment deal. Investors may also instruct their own finance lawyers to assess the valuation of Aramco (currently valued at $2 trillion). This is because the international component of Aramco’s IPO will be more sensitive to geopolitical risks, which has in the past been an important factor for valuations across the Middle East. Aramco will have to demonstrate its financial resilience towards such events to gain investors’ confidence. One way this could be achieved is by Aramco’s lawyers drafting future contracts with investors, including force-majeure clauses, which void agreed-upon terms in extreme unforeseen circumstances, like this drone attack. [B][U]2. Back to Basics: The Swiss Verein ([USER=1]@Jaysen[/USER])[/U][/B] [B]The Story[/B] Over the past decade, many of the major cross-border mergers have adopted a structure called a Swiss verein. It’s a structure that has made many firms – including DLA Piper, Dentons, Hogan Lovells, KWM, Norton Rose Fulbright – who they are today. A Swiss verein allows for rapid international expansion. Firms ‘merge’ in the sense that they combine under the same brand, however they keep the finances and liabilities separate within each office or region. Importantly, they may adopt the same strategy and IT systems, but they don’t share profit pools. [B]Impact on Businesses and Law Firms[/B] But what does this really mean for you? Firms that use the Swiss verein often have a substantial international presence. The structure allows for flexible and quick international mergers. If firms don’t have to share profits, they can worry less about diluting the overall profit pool when merging with less profitable firms. They can also keep the cultures of the firms independent. It’s those benefits that have helped Dentons pursue aggressive international expansion (around 40 combinations between 2013 and 2018). And, as a lawyer, this likely means plenty of international work, as well as potential opportunities for secondments in a broader range of jurisdictions. But you might want to consider the wider impact of ringfencing a firm. A Swiss verein means if partners refer work to the other entities within their network, that work won’t contribute to their profit pool. Now, this doesn’t mean partners won’t still refer work, but the disincentive leads to the question: how does a verein impact law firm culture? If offices are financially and legally separate, are the offices genuinely integrated? Do international offices work together as ‘one firm’? Now, vereins aren’t all the same. You just may not know whether you’re speaking to a Hogan Lovells (a widely successful use of the verein) or a SJ Berwin/King & Wood Mallesons (a disaster). [B][U]3. WeWork Shelves IPO (@AliceG)[/U][/B] [B]The Story:[/B] Late on Monday, it was decided that WeWork would not pursue its seemingly imminent IPO until potentially later this year, despite there having been plans to price and list its shares as early as next week. It has been reported that the postponement is due to investors’ fears about the co-founder, CEO Adam Neumann, having too much control over the business, as well as the business’s operating losses. This also means that the company is unable to access a $6bn loan that had been raised by a consortium of banks and which had been contingent upon the successful listing of WeWork. [B]Impact on Businesses and Law Firms:[/B] Law firms are instrumental in assisting businesses to list on the stock market and they are the ones who ensure that all the relevant documentation has been processed and arranged for the listing to occur. Although law firms are likely to be paid for all the work they have done so far towards the IPO, its shelving could potentially mean a loss of work involved in finalising the process, should WeWork decide not to list altogether further down the line. Many CEOs are increasingly prominent as key figures, think Elon Musk for example, and their reputation and influence are closely watched by investors. Neumann is considered a controversial figure, and this serves as a brilliant example of how important character, ethics and the strategy of the individual are in the business world. [/QUOTE]
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