REPORT

Market Outlook 2014

February 2014

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Financier Worldwide gathers the opinions of the corporate advisory and dealmaking community to explore insights into current and emerging trends for the year ahead.

 

MERGERS & ACQUISITIONS

Daniel Domberger

Livingstone Partners LLP

"Increased volumes of mid-market M&A in 2014 will be driven by two key trends – increased strategic acquisition by both domestic and international corporates, and increased leverage in private equity-backed transactions. Together, these trends will support strong valuations, particularly for businesses positioned well in ‘hot’ sectors or demonstrating scarcity value. The Media / Tech and Business Services sectors will see the most activity, with the Consumer sector picking up significantly in the second half of the year following a rush of flotations of retailers and similar businesses."

 

Brian L. Zimbler

Morgan Lewis

"M&A in the Russian market remains active and there are possibilities that deal flow will increase in 2014. However, M&A growth could be affected by various challenges. In macroeconomic terms, the outlook is mixed. The World Bank recently cut its GDP growth forecast for Russia to 2.2 percent, which still remains better than the 1.3 percent experienced in 2013. The Ruble also recently came under substantial pressure, and Russian equities have fallen somewhat in line with emerging markets generally (the MICEX Index declined about 3 percent in January)."

 

PRIVATE EQUITY & VENTURE CAPITAL

Benjie M. Thomas

KPMG LLP

"From the gloomy depths of the post-recession valley, when deal values plummeted by almost 98 percent, Canada’s private equity market has returned – not with a vengeance but with sustained momentum. Deal values last year totalled $12.3bn, up 5 percent from the previous year and a vast improvement from 2009’s total of just $5.2bn."

 

Chris Hale

Travers Smith LLP

"2013 was mixed for private equity. According to the Centre for Management Buyout Research, only 360 buyouts were completed in the year, the lowest total since 1985. The combined value of these buyouts was £14.3bn, down on the £17.1bn for 2012 and a long, long way from the peak year 2007 when the value hit £47.3bn."

 

BANKRUPTCY & RESTRUCTURING

William P. Angrick

Liquidity Services, Inc.

"Companies do not typically plan to be faced with a turnaround, restructuring, or closure decision. Once the decision is made, however, the manner in which it is carried out can make all the difference to investors, business partners, and employees. A poor plan can not only damage staff morale, it can also harm a company’s reputation, injuring recovery on assets. By leveraging a partner’s expertise in market values for assets and best practices, companies can avoid these potential risks, while reinforcing strategic objectives and netting the company greater value."

 

BOARDROOM INTELLIGENCE

Adam Fanaki

Davies Ward Phillips & Vineberg LLP

"Businesses operating in Canada face an increasingly complex and evolving regulatory environment. In addition to an ever- growing list of regulations, Canadian businesses also face more significant consequences for regulatory breaches, including fines, terms of imprisonment and civil liability. This article focuses on two recent developments in the area of regulatory compliance for businesses with Canadian operations, namely: (i) the coming into force in July 2014 of federal legislation to regulate the transmission of unsolicited commercial electronic messages, also known as ‘spam’; and (ii) amendments made in June 2013 that demonstrate heightened enforcement of anti-corruption legislation in Canada."

 

RISK MANAGEMENT

Jerry Oldham

1stWEST Financial Corporation

"It was Winston Churchill who once said that “there are times when there is nothing left to do but what is required”. And so it is with risk management and due diligence – when making an investment of debt or equity into a business, what is required is the proper due diligence necessary to make the most informed decision possible. Being casual about this is not doing the proper level of investigation about the assets being financed or purchased, or the management team being backed and vetted. Therefore, managing risk and due diligence is a serious business in any market and should begin with a policy and a plan."

 

INTELLECTUAL PROPERTY

Marc S. Kaufman

Reed Smith LLP

"Patents are intended to protect innovation by providing the patent owner with a right to exclude others from using their innovation, for a limited time, in exchange for disclosing the full details of that innovation to the public. Historically, patents have been asserted by patent owners who practice the patented innovation against competitors who are believed to be copying the patented innovation. Recently, new business models have created open markets for buying, selling, and monetising patents and, as a result, various players are buying patents as an investment."

 

LITIGATION & DISPUTE RESOLUTION

Philip R. White

Dentons

"Predicting the path forward in construction disputes is a difficult business, but at the risk of projecting my experience in a small part of a large and complex market onto the industry as a whole, I see that 2014 will continue the trends we have seen for the last few years: the number of disputes will continue to be down from the heights of a dozen or so years ago, but the disputes that do occur will be more complex, more intractable and more of a threat to the businesses involved. While many in our industry see this as a by-product of the Great Recession, I feel that it is caused by structural change."

 

Louise Stoupe

Morrison & Foerster LLP

"Multinational companies should take comfort in the Supreme Court’s recent decision in Daimler AG v. Bauman which limited the ways in which foreign parent companies will be subject to general jurisdiction in the United States. To recap, there are two avenues by which US courts claim personal jurisdiction over foreign entities. First, courts claim general jurisdiction which means that the court has jurisdiction over the corporation for all worldwide disputes (e.g., activities in China could be litigated in New York courts). Second, courts claim specific jurisdiction based on activity that has some connection to the state (e.g., activities directed towards New York customers could be litigated in New York courts)."

 

COMPETITION & ANTITRUST

Linda Evans

Clayton Utz

"It is now more than four years since Australia introduced major changes to its cartel regime, including the introduction of criminal sanctions for cartel conduct. In that time a number of cartel investigations have been initiated and proceedings commenced covering both domestic and international cartels, yet no criminal proceedings have been instituted. In many respects that is unsurprising given the desire of the Australian Competition and Consumer Commission (ACCC) to ensure that, when it does bring criminal proceedings, it brings the ‘right proceedings’."

 

Andrew Skudder

Fangda Partners

"The Hong Kong Competition Ordinance (the Ordinance) will be fully implemented during the course of 2014, marking the end of a long nascence and bringing Hong Kong into line with other advanced economies. Once fully in effect, the Ordinance will act to restrain anti-competitive conduct and abuse of market power across the economy for the first time but, notably, will not apply to mergers – other than in the telecommunications sector. This article aims to provide guidance on the key provisions of the Ordinance and how businesses ought to be preparing now for the new regime."

 

SECTOR ANALYSIS

Jochen Terpitz

Simmons & Simmons LLP

"Germany is looking forward to a challenging 2014 in respect of policy making for its ongoing energy transition. The German government’s message to investors is very firm: they are committed to the grandfathering principle and to quickly removing current uncertainties. An amended law shall be introduced, to go into force in August 2014. Investing into certain types of new power plants will remain attractive, however investors and lenders will have to familiarise themselves with an increasingly complicated and volatile regulatory environment which will integrate more with the European markets."

 

Ziad G. El-Khoury

Squire Sanders

"There is, undoubtedly, an intense political situation underpinning the Middle East region and Saudi Arabia is surrounded by a civil war in Syria, violence in Iraq and Egypt, and tensions between Sunni and Shia groups, and Iran and Hezbollah are far reaching. While 2014 may see increased expenditure on social infrastructure to appease the unrest, solutions must be sought in order to provide the required stability to attract further global business activity. The region will be under the spotlight in years to come: Dubai will host the World Expo in 2020, Qatar, the Football World Cup in 2022, and the effects of these will be felt throughout the region."


CONTRIBUTORS

1stWEST Financial Corporation

Clayton Utz

Davies Ward Phillips & Vineberg LLP

Dentons

Fangda Partners

KPMG LLP

Liquidity Services, Inc.

Livingstone Partners LLP

Morgan Lewis

Morrison & Foerster LLP

Reed Smith LLP

Simmons & Simmons LLP

Travers Smith LLP

Squire Sanders


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