Brexit unlikely to affect 2017 mergers and acquisitions, says new survey

Miranda Wadham
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Brexit unlikely to affect 2017 mergers and acquisitions, says new survey

Post-Brexit challenges are unlikely to affect business mergers and acquisitions, according to the latest research from KBS Corporate.

The study revealed that 94 percent of Private Equity and Venture Capital Houses were confident about the long-term future of the M&A market, and the wider economy in general. 97 percent of the survey respondents planned to use their funds at the same rate for the rest of this year and going into 2017, showing an undeniable optimism about the UK economy going forward.

KBS Corporate’s director, Simon Daniels, commented:

“Our research also found that respondents were of the opinion that a fundamentally profitable business is an attractive acquisition no matter the circumstances, indicating that 2017 may well be in line with record levels experienced in 2015.

“Acquisitions of ‘UK centric’ businesses, whose operations are unaffected by the European Union, are also likely to continue at the current pace going into 2017.

“Meanwhile, UK exporting businesses are becoming increasingly more attractive following the recent depreciation of the value of the pound against other major currencies. The effect of this is cheaper UK imports for foreign businesses and consumers, which has accelerated demand.”

KBS Corporate see investors becoming more active in 2017, widening the pool of potential suitors to negotiate with and ultimately creating a more productive environment for businesses hoping to sell.

According to Daniels, now is also the most tax-efficient time in recent history to sell.

“Entrepreneurs’ tax relief, which grants business owners a preferential capital gains tax rate of just 10 percent on business gains of up to £10 million, has been extended to include long-term investors, whilst capital gains tax has been slashed by 8 percent for all business owners,” he added.

AT&T shares fall despite CEO’s confidence on Time Warner merger

Miranda Wadham
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AT&T shares fall despite CEO’s confidence on Time Warner merger

Shares in US telecoms group AT&T fell nearly 2 percent today, despite its CEO saying he is confident the company’s proposed acquisition of Time Warner will be approved by US regulators.

US lawmakers and both presidential candidates have voiced concerns over the merger, which was announced on Saturday. However AT&T’s CEO Randall Stephenson believes the deal will be approved, saying in an interview with CNBC:

“While regulators will often times have concerns with vertical integrations, those are always remedied by conditions imposed on the merger, so that’s how we envision this one to play out.”

If the deal goes ahead, it will be the biggest merger announced so far this year. AT&T have agreed to pay $85.4 billion for the company, which owns CNN and HBO. It will combine AT&T’s 130 million strong customer base with content from Warner Brothers and three major US cable TV channels; HBO, Cartoon Network and CNN. A Senate sub-committee responsible for competition will hold a hearing in November and are set to examine any anti-trust issues arising from the merger. AT&T shares fell nearly 2 percent on Monday, currently trading down 1.63 percent at 36.88 (1753GMT). Several credit ratings companies have lowered their assessment of the companies in the wake of the announcement. MoffettNathanson downgraded Time Warner to “neutral”, saying in a report today: “We are unprepared at this point to assign anything higher than a 50/50 probability of deal approval.” 
24/10/2016

Manufacturing exports boosted by sterling weakness, CBI says

Nicole Jeary
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Manufacturing exports boosted by sterling weakness, CBI says

Manufacturing exports have benefited significantly from the weakness of the pound, according to the latest data by the Confederation of British Industry (CBI).

The industrial trends survey has revealed that exports grew by their fastest pace in over two and a half years in the three months up to October. The data showed around 29 percent of firms polled reported an increase in total orders, with 20 percent reporting a decrease. One in five companies said they were more optimistic about the business situation than three months ago, but 28 percent were less so.

Since the June vote, the pound sterling has fallen considerably to around a fifth of its pre-referendum value which had on the whole proved profitable for the industry.

“Manufacturers are optimistic about export prospects and export orders are growing, following the fall in sterling,” commented Rain Newton-Smith, CBI’s chief economist.

“However, the weaker pound is also feeding through to costs, which are rising briskly and may well spill over into higher consumer prices in the months ahead.

“Access to skills clearly remains a high priority, so manufacturers will be looking to the government to implement a new migration system that meets the needs of business while responding to clearly-stated public concerns.

“Maintaining a preferential route between the UK and the EU, our largest trading partner, will be important,” she stated.

Additionally, the CBI warned that the pound’s weakness was “a mixed blessing”, and its devaluation had resulted in the fastest rise for price of average units in over three years.

Moreover, 47 percent of those surveyed said the depreciation of the pound had impacted their business negatively, while 32 percent said deemed the impact to have been a positive development.

The CBI stated that companies will be largely focused on the Chancellor’s November Autumn Statement for further clarification on the Goverment’s intended industrial strategy.

“Ultimately, all businesses need greater clarity from the Government on the fundamental issues of skills and barrier-free access to EU markets as soon as possible,” added Ms Newton-Smith.

Hanjin announce closure of European operations

Nicole Jeary
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0
Hanjin announce closure of European operations

Global shipping firm Hanjin have announced their intention to close all European operations, causing shares to plunge by 12 percent.

The company has said it is likely to cease its activities in more than 10 countries, including its European headquarters in Germany. The firm expects to initiate the closure process in Europe as early as this week, following approval from the Seoul Central District Court. Earlier in the month, Hanjin received permission to auction major assets, including its Asia-US route network, in order to commence repayments to creditors.

The announcement resulted in a 13.9 percent plunge in share price during trading in Seoul. Almost 80 percent of Hanjin’s value has been wiped out over the past year following the report of a £342 million loss.

The South-Korean firm filed bankruptcy claims earlier this year after encountering persistent financial difficulties. Hanjin Shipping then filed for receivership in August, following the refusal of creditors to go ahead with a proposed restructuring plan for the firm’s $5.4 billion (£4.4 billion) debt. This has marked the biggest bankruptcy declaration in the shipping industry to date.

The continued financial struggles of The South Korean shipping company have been attributed to the ongoing general downturn in the container shipping industry in recent years. This has been considered to be as a result of a combination of factors including weak global GDP, overcapacity on container vessels, changing consumer spending patterns as well as the economic slowdown in China.

Hanjin is South Korea’s largest shipper, and it also makes up one of the top ten in the world’s largest carriers in terms of capacity potential.

London remains attractive to real estate investors despite Brexit

Miranda Wadham
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0
London remains attractive to real estate investors despite Brexit
London remains the top destination to invest in commercial real estate, despite Britain’s decision to leave the European Union, coming in ahead of Paris, Berlin and Munich. 38 percent of institutional real estate investors cited London as the top European city to invest in commercial real estate, ahead of Berlin at 36%, Munich at 31% and Paris at 22%. The figures, released by real estate platform BrickVest, suggest fears that Britain may be unattractive to investors in the wake of the European Referendum result may be exaggerated. According to BrickVest, three in ten institutional investors believe Brexit will either increase or significantly increase European commercial real estate investment opportunities. A further one in four institutional investors believe that Brexit will have no impact on commercial real estate investment opportunities. Emmanuel Lumineau, CEO at BrickVest, commented: “Our research has identified London as the number one European city to invest in commercial real estate as investors seek to capitalise on potential price discounts and market uncertainty. However Germany dominates across the leaderboard and we have seen plenty of appetite from investors looking to capitalise on income producing portfolios across Europe and take advantage of the Brexit vote.

Four of the top ten European cities named in the research were German, highlighting a clear positive trend towards German commercial real estate.

Immediately after the referendum result in June investment into UK commercial property dropped to lowest level in two years, causing prices for British real estate began to fall. However, BrickVest’s research suggests this may be shortlived. “Like any trading market out there, you need a critical mass but you also need standardisation, automisation and trust, as well as institutional quality to make it happen which we believe is lacking in our real estate industry,” Lumineau added.  

Burberry soars 7 percent intra-day on bid speculation

UK Investor Magazine
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Burberry soars 7 percent intra-day on bid speculation
Shares in Burberry soared over 7 percent on Friday on increasing speculation that US rival Coach could be looking to make an approach. Shares in Burberry have fallen considerably since their highs of 1900p back in February last year. The luxury brand’s market update earlier this week caused shares to take a further hit, with a slowdown in sales in Hong Kong and the slide in US demand offsetting the foreign currency benefits from the weaker pound. According to Betaville, Coach, listed on the New York Stock Exchange with a market cap of US$10 billion, has been working with Evercore for several weeks on a possible deal. “Burberry could indeed be seen as the British Coach, as we as analysts had pointed out years ago,” said Luca Solca, head of luxury goods at Exane BNP Paribas. “Yet, contrary to Coach, most of the efforts at Burberry in the past 20 years have gone in the direction of elevating the brand and moving it into mega-brand price territory, rather than squarely into accessible luxury.” “A more aggressive commercial strategy could be that of running Burberry harder – the ‘American way,'” Solca continued. “As promising as this looks short-term, this would increase the risk of future brand trivialisation and compromise long-term growth and valuation multiples. We have seen this meteoric trajectory at work several times already, at Coach, Michael Kors and Abercrombie & Fitch.” Solca went on the comment, “A merger of Coach and Burberry would primarily be a merger of problems,” he said. “M&A history in luxury has shown that mergers don’t obviously help in regaining brand traction and desirability, while cost efficiency in the face of declining brand momentum are often just a way to run in order to stand still.” Both Coach and Burberry declined to comment.

Nestle shares sink as weak sterling impacts growth

Miranda Wadham
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0
Nestle shares sink as weak sterling impacts growth
Swiss food giant Nestle saw shares fall in early trade on Thursday, after cutting its annual growth forecast by 0.7 percent. The group lowered its growth forecast from 4.2 percent, given in August, to 3.5 percent as the weak pound impacts trading. Sales increased in the first nine months of the year to 65.51 billion Swiss francs, up from 64.86 billion in the same period last year. However, like many other large firms such as Unilever, the weak pound has caused a need to raise prices and is set to impact negatively on sales. The Pound has fallen 16 percent against the euro since Britain’s vote to Leave the European Union in June. Nestle chief executive Paul Bulcke said in a statement: “In an environment marked by deflation and low raw material prices, we continued to privilege volume growth.” Nestle (VTX:NESN) shares plunged at the open of Thursday’s session, before climbing higher. They are currently trading down 0.87 percent at 74.00 (1305GMT). 
20/10/2016
 

Robo-advisers could help reduce the “financial advice gap”, says FCA

Miranda Wadham
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0
Robo-advisers could help reduce the “financial advice gap”, says FCA
16 million UK savers could be stuck in a “financial advice gap”, according to the latest report by the Financial Conduct Authority. The FCA have called on the industry to make financial advice more available for those that need it, after discovering that 85 per cent of investors were not willing to pay the high average cost of investment advice. The report also highlighted the issue that many financial advisers are unwilling take on clients with relatively small assets, leaving a large part of the population on a middle income unable to find suitable advice. After the findings were released, the FCA leant their support to the new wave of ‘robo-advisers’ taking the investment world by storm. These platforms offer anything from online advice and guidance to their own investment platform and products, at a far lower cost than many brokers. Some sites are free, such as newcomer Investment Superstore, which aims to arm investors with all the information needed to make the most of their savings. Others, such as Nutmeg, offer an investment platform and a range of products in which customers can invest, for a fraction of the price an advisory service may charge. In July, the FCA admitted the gap had widened since the introduction of new measures under the Retail Distribution Review, which aimed to increase transparency and lower the costs of receiving financial advice. However, it has led to many financial advisory services increasing their upfront costs and pricing out middle-income consumers.

Morgan Stanley profit report surpasses expectations

Nicole Jeary
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0
Morgan Stanley profit report surpasses expectations

Morgan Stanley (NYSE:MS) reported a 57 percent rise in quarterly profits on Wednesday, after a strong growth in bond trading revenue.

The New York-based investment bank posted better-than-expected quarterly figures, reporting a profit of $1.6 billion (81 cents per share), marking a significant 62 percent increase on the $939 million reported for the same period of last year. Conversely, analysts commissioned by Reuters had initially predicted Morgan Stanley to earn around 63 cents a share, on revenue of $8.17 billion.

Morgan Stanley’s chief executive James Gorman said in a statement:

“While the environment was more challenging for our equity underwriting and asset management businesses, our expense initiatives remain on track. Overall the results reflect steady progress against our long term strategic goals.”

In particular the bank saw a rise in bond trading revenue, with profit almost tripling within this sector. Previously the area had been a continued source of concern, as it struggled to profit from difficult capital requirements. Earlier in the year, Morgan Stanley instigated an effective restructuring of the area, reducing 25 percent of staff as well as appointing new management.

Bond trading has generally been profitable across all recently released Wall Street revenue reports, having benefited on the back of the UK’s destabilising vote to leave the European Union.

Additionally, revenue from their wealth management sector, which the bank has been developing for several years, rose 7 percent to $3.9 billion. As a result, the business hit a 23 percent pre-tax margin effectively meeting Gorman’s last quarter target.

Despite strong revenue figures, Morgan Stanley shares were up by less than 1 percent at 0.5 percent in early trading. The Wall Street bank was the last of the leading US-based banks to post profit earnings for the last quarter this week. Similarly, Goldman Sachs Group Inc (NYSE:GS), Morgan Stanley’s largest competitor, reported a better-than-expected 58 percent growth in third-quarter profit on Tuesday.

Apple supplier Laird PLC nose dives on profit warning

UK Investor Magazine
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0
Apple supplier Laird PLC nose dives on profit warning
Component supplier Laird PLC (LON:LRD) saw shares fall 50 percent in early trade on Wednesday after issuing a profit warning amidst a challenging smartphone market. Laird supply components to smartphone makers including Samsung and Apple, and been impacted by slowing growth in the smartphone market. People are changing mobile phones less frequently in developed markets, and where it was once customary to upgrade each year, more consumers are now taking up 2 year contracts. In early trade Laird shares were trading down 50 percent from the previous day’s close changing hands below 154p a share. Shares attempted a short-lived rally which petered out in afternoon trade. Information technology research company Gartner noted: “The smartphone market has reached 90 percent penetration in the mature markets of North America, Western Europe, Japan and Mature Asia/Pacific, slowing future growth. Furthermore, users in these regions are not replacing or upgrading their smartphone as often as in previous years. In the mature markets, premium phone users are extending life cycles to 2.5 years, which is not going to change drastically over the next five years.” This has resulted in Laird warning that underlying pre-tax profits would be about 30% lower than last year. In their third-quarter trading statement, they said: “The acceleration of production for mobile devices has come much later than in previous cycles and visibility on volumes remains poor. “In addition, we have experienced increased margin pressure due to unprecedented pricing pressures and some operational factors. “This has led to a very challenging trading performance in PM (performance materials) in Q3 and we now anticipate full year group underlying profit before tax to be around £50m.” The full Q3 RNS statement can be viewed here. 
19/10/2016
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