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Commercial Awareness Discussion
Commercial News Update - March 2018
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<blockquote data-quote="Coralin96" data-source="post: 465" data-attributes="member: 15"><p>I think this will be the last post for March <img src="data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7" class="smilie smilie--sprite smilie--sprite1" alt=":)" title="Smile :)" loading="lazy" data-shortname=":)" />.</p><p></p><p>Gender pay reports</p><ol> <li data-xf-list-type="ol"><strong>The Story: </strong> More firms have now submitted their gender pay gap figures due to government requirements. These requirements require employers with over 250 employees to publish gender pay. It's a bit unhelpful for law firms and accountancy firms because partners don't have to submit the pay of partners which is mostly male. But accountancy firms responded by including partner earnings and when they did, the salary gap increased. So far of the reported companies, 3 out of 4 pay men more and some of the biggest gaps are in financial services. That's because more men are in the senior positions and more women are often in lower paid roles. Some have criticised the governments reporting measures because it overlooks a lot of factors that determine pay.</li> <li data-xf-list-type="ol"><strong>Impact on law firms: </strong>The public reporting has forced firms to come to terms with their gender pay gaps. The results show that firms are making efforts to improve the number of females accessing the profession. For example EY's graduate intake is at 58%. The problem is when you go higher up - 80% of EY's partners are male. More firms are improving retention by helping people return to work after having a child and setting targets for the number of female partners. Employers may be worried about the impact on their brand and future sanctions that may be used with the data. Easyjet for example had a 45.5% gap but compensated by presenting the data early and explaining clearly what it's doing to improve, such as clear targets.</li> <li data-xf-list-type="ol">Just as an addition I have also been reading about the law firms who have reported their gender pay gaps. Many called for law firms to also reveal their partnership data otherwise it significantly distorts the picture. Clifford Chance became the first to do so, reporting a 66.3% gap, and the firm also called out others to do the same. Only Linklaters has listened so far. It originally reported a figure of 23% for non partners and then revised it to 60.3% when including partners. If we compare the figures for nonpartners, Linklaters has the highest mean hourly gap and Freshfields has the lowest (including one of the lowest out of all the reported firms), partly thanks to its support staff in the Manchester support centre.</li> </ol><p>Melrose buys GKN</p><ol> <li data-xf-list-type="ol"><strong>The Story: </strong>It has been interesting to watch this case develop. The vote took place yesterday and majority of GKN shareholders agreed to sell their shares to Melrose in a £7.9bn cash and shares offer. This was helped by the fact that a substantial minority of the shares were held by hedge funds, keen to get a return on their money and less worried about the fate of a British engineering company. The company has a long history, supplying defence materials in wartime.</li> <li data-xf-list-type="ol"><strong>The Impact on law firms: </strong>The close vote at 52.43% indicates a growing sentiment against companies buying out long established UK companies. Politicians, unions and the general public got involved to back GKN. But the battle isn't over yet. The business secretary made Melrose agree to the government's right to veto the sale and it's now up to the government to determine whether there are public interest concerns. This is something that has become more commonplace since the Kraft-Cadbury deal where promises were undone but the government has never been so public in its involvement. It may also be referred to our regulator, the Competitiion and Markets Authority, and some have even called for a review of UK takeover laws, suggesting short term speculators are given favour over employees and longer term investors. To some it also reflects protectionism after Brexit.</li> </ol><p>Tech stocks back up</p><ul> <li data-xf-list-type="ul"><strong>The story</strong> - Tech stocks have been falling for a while now, especially since the Facebook scandal and comments made by Trump against Amazon. Trump criticised Amazon for paying minimal taxes and a report also came out suggesting Trump is 'obsessed' with tackling Amazon. This caused Amazon's shares to fall up to 4.6% in a sign of the power of the President's comments. But they rebounded yesterday easing the pressure for tech investors. Meanwhile in China, policies have been approved to encourage big tech companies to list on their stock exchange. A number of companies have already said they are interested in listing in China and comes amid a growing sign that China is investing in key industries to support its control in the economy.</li> <li data-xf-list-type="ul"><strong>The impact on law firms</strong>: Investors may need to be careful, although these stocks are back up, many people appear to be quite heavily invested in tech stocks which leaves them vulnerable to events like this. Before this, technology stocks were rising for a long time, leading to many concerns that they could be in a bubble. Many were also concerned about the high valuations for tech startups , so-called unicorns that were valued at over $1bn. Fears continue over the regulation of tech companies and the S&P 500, featuring some of the biggest US companies, has had the first quarterly losses since 2015. In relation to the China story, law firms may consider entering China now if they haven't already. If they can eventually practice local law, the capital markets will be a very popular practice area.</li> </ul><p>Grant Thornton stops auditing</p><ol> <li data-xf-list-type="ol"><strong>The story: </strong>Grant Thornton, the UK accountancy firm, is not going to bid for audit contracts anymore for the FTSE 350 companies, some of the largest UK companies, deciding that it's too hard to compete with the Big Four - EY, Deloitte, KPMG and PWC. At the moment PWC has the greatest market share of these companies and Deloite has the highest profits per partner.</li> <li data-xf-list-type="ol"><strong>Impact on law firms: </strong>This is likely to invite regulators to assess whether to intervene in the accountancy market and the power that these firms have. If regulators do intervene this will have a large impact on the market - these firms have grown so big that many law firms fear they will increasingly take market share, so clients can get a combined legal and accountancy service. These firms have already taken a lot of market share from consulting companies as they expanded into this area. Recently the Financial Reporting Council, the UK financial regulator, said that the Big Four may need to be broken up and has suggested the Competition and Markets Authority should investigate. It also suggested these accountancy firms should be hit with bigger fines for misconduct. It also follows a number of accountancy scandals like Carillion in the UK, which went into insolvency earlier this year. KPMG and Deloitte were questioned for their audits of the company's financial information and some parallels could be brought with how credit rating companies operating in the lead up to the financial crisis.</li> </ol><p>M&A activity continues to break records</p><ol> <li data-xf-list-type="ol"><strong>The Story</strong>: Despite tariffs, Brexit, protectionism and global political concerns, M&A continues at a record rate up 67% from the same quarter last year.</li> <li data-xf-list-type="ol"><strong>Impact on law firms</strong>: It shows that M&A is so confident and economy is doing well even despite all these global issues. There has also been a large increase in big transactions as companies move to beat the disruption of technology, an area which will be attractive for M&A lawyers. European deal volumes have almost doubled from last year especially in private equity, such as the recent acquisition of Akzo Nobel's chemical business by Carlyle, in one of the largest European PE deals in recent years. US tax cuts have also helped the situation. Latham is providing the corporate advice in London and finance advise in the US showing how useful it is for companies to have a strong presence in both jursdictions to secure places on the biggest deals. A Skadden partner also said it's unlikely the deal rate will slow down. At the same time, Chinese overseas dealmaking has slowed to the lowest since 2005, a clear sign of the consequence of Trump's trade policies on M&A. Law firms may need to diversify into other areas.</li> </ol></blockquote><p></p>
[QUOTE="Coralin96, post: 465, member: 15"] I think this will be the last post for March :). Gender pay reports [LIST=1] [*][B]The Story: [/B] More firms have now submitted their gender pay gap figures due to government requirements. These requirements require employers with over 250 employees to publish gender pay. It's a bit unhelpful for law firms and accountancy firms because partners don't have to submit the pay of partners which is mostly male. But accountancy firms responded by including partner earnings and when they did, the salary gap increased. So far of the reported companies, 3 out of 4 pay men more and some of the biggest gaps are in financial services. That's because more men are in the senior positions and more women are often in lower paid roles. Some have criticised the governments reporting measures because it overlooks a lot of factors that determine pay. [*][B]Impact on law firms: [/B]The public reporting has forced firms to come to terms with their gender pay gaps. The results show that firms are making efforts to improve the number of females accessing the profession. For example EY's graduate intake is at 58%. The problem is when you go higher up - 80% of EY's partners are male. More firms are improving retention by helping people return to work after having a child and setting targets for the number of female partners. Employers may be worried about the impact on their brand and future sanctions that may be used with the data. Easyjet for example had a 45.5% gap but compensated by presenting the data early and explaining clearly what it's doing to improve, such as clear targets. [*]Just as an addition I have also been reading about the law firms who have reported their gender pay gaps. Many called for law firms to also reveal their partnership data otherwise it significantly distorts the picture. Clifford Chance became the first to do so, reporting a 66.3% gap, and the firm also called out others to do the same. Only Linklaters has listened so far. It originally reported a figure of 23% for non partners and then revised it to 60.3% when including partners. If we compare the figures for nonpartners, Linklaters has the highest mean hourly gap and Freshfields has the lowest (including one of the lowest out of all the reported firms), partly thanks to its support staff in the Manchester support centre. [/LIST] Melrose buys GKN [LIST=1] [*][B]The Story: [/B]It has been interesting to watch this case develop. The vote took place yesterday and majority of GKN shareholders agreed to sell their shares to Melrose in a £7.9bn cash and shares offer. This was helped by the fact that a substantial minority of the shares were held by hedge funds, keen to get a return on their money and less worried about the fate of a British engineering company. The company has a long history, supplying defence materials in wartime. [*][B]The Impact on law firms: [/B]The close vote at 52.43% indicates a growing sentiment against companies buying out long established UK companies. Politicians, unions and the general public got involved to back GKN. But the battle isn't over yet. The business secretary made Melrose agree to the government's right to veto the sale and it's now up to the government to determine whether there are public interest concerns. This is something that has become more commonplace since the Kraft-Cadbury deal where promises were undone but the government has never been so public in its involvement. It may also be referred to our regulator, the Competitiion and Markets Authority, and some have even called for a review of UK takeover laws, suggesting short term speculators are given favour over employees and longer term investors. To some it also reflects protectionism after Brexit. [/LIST] Tech stocks back up [LIST] [*][B]The story[/B] - Tech stocks have been falling for a while now, especially since the Facebook scandal and comments made by Trump against Amazon. Trump criticised Amazon for paying minimal taxes and a report also came out suggesting Trump is 'obsessed' with tackling Amazon. This caused Amazon's shares to fall up to 4.6% in a sign of the power of the President's comments. But they rebounded yesterday easing the pressure for tech investors. Meanwhile in China, policies have been approved to encourage big tech companies to list on their stock exchange. A number of companies have already said they are interested in listing in China and comes amid a growing sign that China is investing in key industries to support its control in the economy. [*][B]The impact on law firms[/B]: Investors may need to be careful, although these stocks are back up, many people appear to be quite heavily invested in tech stocks which leaves them vulnerable to events like this. Before this, technology stocks were rising for a long time, leading to many concerns that they could be in a bubble. Many were also concerned about the high valuations for tech startups , so-called unicorns that were valued at over $1bn. Fears continue over the regulation of tech companies and the S&P 500, featuring some of the biggest US companies, has had the first quarterly losses since 2015. In relation to the China story, law firms may consider entering China now if they haven't already. If they can eventually practice local law, the capital markets will be a very popular practice area. [/LIST] Grant Thornton stops auditing [LIST=1] [*][B]The story: [/B]Grant Thornton, the UK accountancy firm, is not going to bid for audit contracts anymore for the FTSE 350 companies, some of the largest UK companies, deciding that it's too hard to compete with the Big Four - EY, Deloitte, KPMG and PWC. At the moment PWC has the greatest market share of these companies and Deloite has the highest profits per partner. [*][B]Impact on law firms: [/B]This is likely to invite regulators to assess whether to intervene in the accountancy market and the power that these firms have. If regulators do intervene this will have a large impact on the market - these firms have grown so big that many law firms fear they will increasingly take market share, so clients can get a combined legal and accountancy service. These firms have already taken a lot of market share from consulting companies as they expanded into this area. Recently the Financial Reporting Council, the UK financial regulator, said that the Big Four may need to be broken up and has suggested the Competition and Markets Authority should investigate. It also suggested these accountancy firms should be hit with bigger fines for misconduct. It also follows a number of accountancy scandals like Carillion in the UK, which went into insolvency earlier this year. KPMG and Deloitte were questioned for their audits of the company's financial information and some parallels could be brought with how credit rating companies operating in the lead up to the financial crisis. [/LIST] M&A activity continues to break records [LIST=1] [*][B]The Story[/B]: Despite tariffs, Brexit, protectionism and global political concerns, M&A continues at a record rate up 67% from the same quarter last year. [*][B]Impact on law firms[/B]: It shows that M&A is so confident and economy is doing well even despite all these global issues. There has also been a large increase in big transactions as companies move to beat the disruption of technology, an area which will be attractive for M&A lawyers. European deal volumes have almost doubled from last year especially in private equity, such as the recent acquisition of Akzo Nobel's chemical business by Carlyle, in one of the largest European PE deals in recent years. US tax cuts have also helped the situation. Latham is providing the corporate advice in London and finance advise in the US showing how useful it is for companies to have a strong presence in both jursdictions to secure places on the biggest deals. A Skadden partner also said it's unlikely the deal rate will slow down. At the same time, Chinese overseas dealmaking has slowed to the lowest since 2005, a clear sign of the consequence of Trump's trade policies on M&A. Law firms may need to diversify into other areas. [/LIST] [/QUOTE]
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