Global AUM set to soar - PwC

BY Richard Summerfield

Global assets under management are expected to climb to around $102 trillion by 2020 according to a new report from PwC.

The report – Asset Management 2020 and beyond: Transforming your business for a new global tax world – notes that the boom in AUM is due to be caused by significant changes to global tax structures in the coming years. Furthermore, global tax functions, according to PwC, will be critical in determining those players in the market who will be best positioned to win a greater share of business over the next five years.

"In-house asset management tax teams will need to evolve to deal with perpetual audits and to engage with tax authorities on a frequent basis to influence policy and help guide the implementation of tax rules," PwC's William Taggart, Global Tax Leader, Asset Management said. "Asset managers will need to ensure highly-skilled tax people are brought into the heart of the business. The tone needs to be set at the top. The tax function is critical to the entire operation and senior management will need to make sure this is well understood," Mr Taggart added.

Asset managers, according to PwC will play a considerably different and significant role in investment businesses moving forward, this increased emphasis on asset managers will likely be caused by the retreat of banks and insurers from the investing space. Accordingly, PwC believe that a “new breed of global mega-managers will attract huge focus from tax authorities, which will have specialist teams with the capabilities to carry out much more detailed enquiries than in the past and the powers to request real-time investor-related information.”

Equally, tax transparency will be a key consideration by 2020 given that both the Common Reporting Standard (CRS) and global tax reporting will have become a reality.

By 2020, tax authorities would have specialist teams with the capabilities to carry out much more detailed enquiries than in the past, and the powers to request real-time investor-related information. To that end, in-house asset management tax teams will be required to evolve to deal with an expanded auditing program, they will also have to engage more regularly with tax authorities in order to influence policy.

Report: Asset Management 2020 and beyond: Transforming your business for a new global tax world

Q3 2015 sees US corporate bankruptcies plateau

BY Fraser Tennant

The prevalence of corporate bankruptcies in the US – which has been declining steadily over the past seven years – has now largely levelled off according to new figures released this week by BankruptcyData.com.

The ‘Q3 2015 Business Bankruptcy Filing Report’ – which provides a snapshot of the most recent quarter's business bankruptcy landscape – reveals that there were 22,680 corporate bankruptcy filings in the first three quarters of 2015, a 16 percent drop in comparison to Q3 2014 (26,992 filings).

Furthermore, the BankruptcyData.com report highlights the fact that there has been an average of 120 filings per business day so far in 2015, with March proving to be a particularly busy month for bankruptcies among public and private companies.

Drilling-down, the filings in the report are broken down into elements such as industry, sales volume and company size, so that insight into the most recent activity in the business bankruptcy sector can be drawn.

In terms of industry, key findings in the report include the disclosure that: (i) the service industry (the US economy's biggest employer) generated the largest percentage of overall bankruptcies in Q3 2015 with 34.78 percent; and (ii) the service industry's 2015 year-to-date bankruptcy figure of 35.95 percent is down 10 percent from the same time period in 2013, reflecting the relative health of the industry compared to other sectors like manufacturing and finance/insurance/real estate – the bankruptcy percentage figures of which have grown over the past year.  

The report’s figures also highlight the recent surge in mining and energy–related bankruptcies, with the mining sector recognised as having generated 10 percent of overall bankruptcies in Q3 2015 (typically this figure is 1 to 2 percent).

Elsewhere in the report, the small business sector, often considered the ‘backbone of the economy’ in the US, is revealed as having seen the most bankruptcies in Q3 2015, with 75 percent of all business bankruptcies filed by companies with $2.5m in sales or less. Likewise, businesses with less than 50 employees generated 84 percent of all bankruptcies in Q3 2015.

Additional key findings include that for the first time in several quarters, New York has surpassed California as the state that contributes the largest percentage of overall bankruptcies, generating 14.53 percent in Q3 2015. The state of Virginia also experienced a large jump in their percentage of overall bankruptcies: moving from 1.76 percent of all bankruptcies in Q1 2015 to 7.59 percent in Q3 2015.

Whilst forecasting that the downward spiral of bankruptcies seen in recent years is likely to continue, the BankruptcyData.com report does provides a word of warning for sectors and industries: “Other factors could lead to an eventual increase in bankruptcies across all sectors: interest rates will eventually rise and reach a point at which they will prevent the small to mid-sized business owner from taking on more debt and bankruptcy will have to be considered. The number of over-leveraged balance sheets continues to grow, which means a distressed cycle may not be too far off.”

Report: BankruptcyData.com – QUARTERLY REPORT of Business Bankruptcy Filings

Biggest tech acquisition in history: Dell to buy EMC for $67bn

BY Fraser Tennant

In the biggest deal ever seen in tech history, Dell Inc. has announced that it is to acquire EMC Corporation in a transaction valued at approximately $67bn.

The combination of Dell and EMC will create a technology giant with leadership positions in servers, storage, virtualisation and PCs, as well as bringing together strong capabilities in the fastest growing areas of the $2 trillion information technology market.

Additionally, the transaction is expected to unite Dell’s expertise with small business and mid-market customers with the strength EMC demonstrates in dealing with large enterprises.

“Our new company will be exceptionally well-positioned for growth in the most strategic areas of next generation IT including digital transformation, software-defined data centre, converged infrastructure, hybrid cloud, mobile and security,” said Michael S. Dell, founder, chairman and chief executive officer of Dell. “Our investments in R&D and innovation along with our privately-controlled structure will give us unmatched scale, strength and flexibility, deepening our relationships with customers of all sizes. I am incredibly excited to partner with EMC and am personally committed to the success of our new company, our customers and partners.”

Under the terms of the definitive agreement, which has been approved by the EMC board of directors, Mr Dell and related stockholders will own approximately 70 percent of the combined company’s common equity, excluding the tracking stock, similar to their pre-transaction ownership.

“I’m tremendously proud of everything we’ve built at EMC – from humble beginnings as a Boston-based start-up to a global, world-class technology company with an unyielding dedication to our customers,” said Joe Tucci, chairman and chief executive officer of EMC. “But the waves of change we now see in our industry are unprecedented and, to navigate this change, we must create a new company for a new era. I truly believe that the combination of EMC and Dell will prove to be a winning combination for our customers, employees, partners and shareholders.”

Following the completion of the acquisition, Mr Dell will lead the combined entity as chairman and chief executive officer. Mr Tucci will continue as chairman and chief executive officer of EMC until the ultimate closure of the transaction.

The transaction is subject to customary conditions, including receipt of required regulatory and EMC stockholder approvals, and is expected to close in the second or third quarter of Dell’s fiscal year ending 3 February 2017.

News: Dell agrees $67bn EMC takeover

Lessons not learned as cyber crime still rife

BY Richard Summerfield

Companies operating in the current business climate face myriad difficulties and obstacles. One of the most potent and potentially damaging of these challenges is the scourge of cyber crime and cyber terrorism.

One need only look at the attacks on Ashley Madison, Sony and Target to see the extent of the financial, personal and reputational damage that cyber crime can inflict on companies and individuals.

Given the size and scale of some the most recent cyber attacks, it is difficult to imagine companies neglecting their cyber security obligations. However, according to a new report from PwC, nearly 10 percent of UK companies do not know how many cyber attacks they have suffered in recent years.

Furthermore, 14 percent of companies do not know how the attacks occurred. This is particularly disturbing as detected breaches in workplace security systems increased by 38 percent in the past year, according to PwC.

Cyber attacks via mobile phones in particular are becoming much more common. Thirty-six percent of respondents reported an increase in mobile attacks, up considerably from the 24 percent recoded last year. The average cost of those attacks is around £1.7m, the report notes.

PwC’s annual survey took in the opinions of more than 10,000 executives in more than 127 different countries. Much of the damage caused by cyber crime, according to the report, results from the actions of current staff members. Former employees were also a major source of cyber criminality.

But attitudes toward cyber security are changing. According to Dave Burg, global and US cyber security leader at PwC, the survey demonstrated a burgeoning awareness among corporates, many of whom are starting to act and think seriously about cyber security.

“We are seeing an increase in awareness of the risk and opportunities, and more boards are becoming more actively engaged in cyber security preparedness," said Mr Burg.

Despite the increase in boardroom awareness, more can and should be done at board level. The survey noted that 55 percent of boards do not participate in the overall security strategy. Furthermore, 42 percent of companies do not have an overall information strategy.

Report: The Global State of Information Security Survey 2016

IMF slashes growth forecast again

BY Richard Summerfield

In light of increasing gloom in the commodities space, the International Monetary Fund has once again downgraded its forecast for global economic growth.

In its latest half yearly report, the IMF reduced its prediction of global growth to 3.1 percent from the 3.3 percent predicted in July. This marks the weakest global performance since the nadir of the financial crisis in 2009. The IMF also reduced its growth figure for 2016 from 3.8 to 3.6 percent, a further indication of the gathering gloom. It expects growth in China to slow to 6.8 percent this year and 6.3 percent in 2016.

"We see that in the near-term global growth will remain moderate and uneven, and we see higher downside risks than in July," IMF Economic Counsellor Maurice Obstfeld said at a news conference at the commencement of the IMF’s program of autumn meetings in Lima, Peru. "The holy grail of robust and synchronised global expansion remains elusive."

The IMF’s World Economic Outlook report predicts that the US will have the strongest growth of the leading G7 industrial nations in both 2015 and 2016, with 2.6 percent and 2.8 percent respectively. The UK is likely to be the second fastest growing G7 nation, although it will slow from 2.5 to 2.2 percent according to the IMF.

These adjustments have been largely predicated on volatility in the commodities market. With commodity prices weakening – especially over the last month or so – the global economy has suffered, primarily in the emerging markets. China has endured a particularly turbulent few months.

Going forward, the emerging economies will continue to be the hardest hit areas, according to the IMF. They are set to grow by just 4 percent in 2015. "Downside risks to growth for emerging market and developing economies have increased, given the risks to China's growth transition, more protracted commodity market rebalancing, increased foreign exposure of corporate balance sheets and capital flow reversals associated with disruptive asset price shifts", notes the report.

Report: IMF World Economic Outlook