Cyber jobs boom

BY Richard Summerfield

Thanks to the increasing sophistication of cyber criminals and the technological weapons available to them, instances of cyber crime and terrorism have increased exponentially in recent years.

Though firms have been aware of the nascent threat of cyber crime for some time, many of them are largely unprepared to tackle the problem. However, with more and more high profile cyber breaches occurring, firms are beginning to fight back.

Organisations worldwide are looking to bolster their cyber security defences, and though the demand for competent and effective cyber security professionals is high, there is still a serious skill shortage. In the US alone, more than 209,000 cyber security jobs are currently unfilled, and job postings for cyber professionals are up 74 percent over the past five years, according to a 2015 analysis from the Bureau of Labour Statistics by Peninsula Press.

Globally, the figure for cyber security job openings is believed to be around one million, according to a new report from Cisco.

Cisco’s report notes, however, that the hiring of a raft of new cyber security officials should form just part of a wider cyber response plan. The report recommends that all organisations establish a separate security incident response team. The importance of this response team is likely to increase as organisations become more reliant on technology.

The Internet of Things (IoT) will also have a profound impact on the way companies conduct business. With the IoT security market expected to grow from $6.89bn in 2015 to nearly $29bn by 2020, the opportunities for cyber security professionals in the near future will be plentiful. As more connected or smart devices find their way into our personal and professional lives, the size of the market will grow exponentially.

However, the growth of IoT will present a number of challenges in the years to come. Organisations will need to marry IT and operational technology, in turn giving adversaries new targets such as vehicles, buildings and manufacturing plants, according to Cisco.

Moving forward, the report recommends that companies look to appoint a varied and diverse number of cyber security professionals. The modern chief information security officer should have at her disposal skilled security professionals covering a range of areas. This is particularly important given consumers' growing awareness of cyber and data security issues.

Report: Mitigating the Cybersecurity Skills Shortage

Biopharma M&A expansion to continue in 2016 claims new report

BY Fraser Tennant

Following a record-breaking 2015 which saw deals total $300bn, mergers and acquisitions (M&A) activity within the biopharmaceutical industry is set to continue at a “brisk” pace in 2016, according to the new EY ‘Firepower Index and Growth Gap Report’ published this week.

The EY Index, which measures the ability of biopharma companies to fund M&A transactions based on the strength of their balance sheets and their market capitalisation, reveals that the drivers of biopharma M&A last year included payer consolidation, rising healthcare costs and the intensification of companies’ growth imperatives throughout the industry.  

Among the key findings highlighted in the Index are that: (i) deal activity in early 2015 was driven by specialty pharma companies with a majority of deals by total valuation in the specialty or generics sector (big pharma grabbed the limelight later in 2015 while biotech experienced more modest deals); (ii) big pharma’s aggregate growth gap – the revenue shortfall below global biopharmaceutical sales growth – remained stuck at near $100bn due in part to foreign exchange headwinds; and (iii) specialty pharma’s firepower, has decreased by nearly 50 percent following a recent series of debt-fuelled acquisitions and falling equity valuations.

“While we can’t predict more large transformational deals over $100bn in 2016, we do expect a continued brisk pace for acquisitions and a continuation of the robust divestiture environment, as companies seek to focus on and gain scale in their chosen therapeutic areas,” said Glen Giovannetti, EY’s Global Life Sciences leader. “Three times as many companies now possess at least $3bn in firepower than a year ago, meaning more competition for targets as well as a longer list of potential acquirers for divestitures.”

However, while the Index makes it very clear that biopharma companies continue to benefit from an era of increased drug approvals and healthy pipelines, there are a number of challenges and considerations likely to drive M&A in 2016. These include a renewed focus on value-based drug pricing, staunch competition across key therapeutic battlegrounds and consolidated payer clout, which may exacerbate existing growth gaps and result in a continued feverish deal environment.

“These pressures may make the lofty heights of $200bn in annual M&A the new normal for the foreseeable future,” concluded Jeffrey Greene, EY’s Global Life Sciences Transaction Advisory Services leader.

Report: EY’s Firepower Index and Growth Gap Report 2016

Telecoms giants Orange and Bouygues in $10bn merger talks

BY Fraser Tennant

Following months of speculation, France-based telecommunications giants Orange and Bouygues Telecom have confirmed discussions surrounding a potential merger – a combination that, if it goes ahead, would account for approximately 50 percent of the French mobile and fixed telecoms market.

Although there has been no official statement made as to what a deal may be worth, according reports by MarketWatch earlier this week, Orange has made an offer totalling €10bn ($10.9bn), a submission comprising €8bn in shares and €2bn in cash.

A confidentiality agreement between Orange and Bouygues means that detailed comment from either party has thus far been thin on the ground, but in a statement an Orange spokesperson said that “discussions are not limited by any particular calendar and hold no commitment to any particular predefined outcome".

Furthermore, Orange indicated that it was “exploring the opportunities available within the French telecoms market, while keeping in mind that its investments and its solid position afford it a total independence in its approach".

In an equally sparse statement, Bouygues related that it was “interested in opportunities that would enable it to bolster its long-term presence in the telecoms sector” and would “invest momentum” within a sector which it believes must remain strong to serve the best interests of the consumer.

Much of the merger talk is believed to be due to the disruptive effects of a price war sparked by the entry of a fourth mobile operator – Free Mobile (owned by Iliad SA) – into the French market in 2012. Orange, by way of acquiring Bouygues, hopes to reduce competition, allowing it to invest in high-speed mobile and cable networks and compete with their counterparts in the US and Japan.

However, within a highly fragmented European cellphone market, any attempt at a merger by Orange (the biggest operator in France with 28 million customers) and Bouygues (the third biggest operator with 14 million customers) will require the approval of antitrust authorities and involve the disposal of significant assets.

Should the move by Orange to acquire Bouygues come to pass, analysts believe that the combined company’s market capitalisation could reach €50bn – around 20 percent more than the current value of Orange.

Keeping its cards close to its chest, Orange also stated that it will act solely in the interests of its shareholders, its employees and its customers and be particularly vigilant with regards to the value created through any resulting project.

News: Orange in Talks to Acquire Bouygues Telecom

CFOs adopting mood of caution in early 2016

BY Fraser Tennant

A cautious mood currently pervades the chief financial officers (CFOs) of the UK’s largest companies, according to Deloitte’s new Q4 2015 CFO Survey - widely accepted as a key barometer of the sentiment and strategies of the UK’s corporate world.

The survey, the 34th focusing on the views of CFOs and group finance directors of major UK companies, features three key findings: (i) risk appetite has shrunk and business confidence has fallen back to 2012 levels; (ii) support among CFOs for UK membership of the EU has narrowed, although a majority still favour UK membership; and (iii) CFOs’ balance sheet strategies are more defensive now than at any time in the last three years.

When quizzed about their company’s prospects for growth in 2016 compared to three months ago, 30 percent of CFOs said they were less optimistic (up from 20 percent in Q2), while 12 percent said they were more optimistic (down from 36 percent six months ago).

“UK corporate sector risk appetite has fallen to a three and a half year low mirroring the loss aversion and caution being seen in financial markets," said Ian Stewart, a chief economist at Deloitte. “With a much sharper focus on cost control and less emphasis on growth through acquisitions and capital spending, CFOs’ strategies are more defensive than at any time in the past three years.

“The surge in business confidence that started in late 2012 went into reverse in 2015. CFOs are reacting to uncertainties abroad by cutting back on risk taking and sharpening their focus on cost reduction. The more defensive stance by CFOs points to a softening in the growth of corporate hiring and capital spending in coming months.”

In terms of whether it is in the interests of UK businesses for the UK to remain a member of the EU, 62 percent of CFOs said they were in favour of the UK remaining in the EU (down from 74 percent in Q2). Furthermore, 28 percent made it clear that their decision will depend on the outcome of the prime minister’s renegotiation of UK membership.

“A clear majority of CFOs continue to favour the UK remaining in the EU, but the proportion of those expressing unqualified support has fallen," said David Sproul, senior partner and chief executive of Deloitte. “This mirrors what we have seen from the broader public in opinion polls in the last six months."

The 2015 Q4 survey involved 137 CFOs, including the CFOs of 24 FTSE 100 and 62 FTSE 250 companies, and took place between 11 November and 2 December 2015.

Report: The Deloitte CFO Survey – the year ahead: A cautious start to 2016

Mega deals dominate in 2015

BY Richard Summerfield

2015 was the year of the mega deal. Last year there were more than 67 announced deals valued at $10bn and above for a combined total in excess of $1.86 trillion, according to Dealogic.

2015’s mega deal volume more than doubled 2014's $803.4bn total. Furthermore, the number of such deals surpassed the previous record of 48 set in 2006. Transactions valued at $50bn or more in 2015 totalled around $730bn.

Many of the mega deals completed last year were the largest ever deals in their particular sector, including the tie up between Dow Chemical and DuPont. Pfizer's $160bn merger with Allergan is the largest healthcare deal in history, and the second-largest deal of any type on record.

The revival of the mega deal was part of a larger resurgence in general M&A activity over the last 12 months. Indeed, 2015 was a bumper year for deal making, with more than $4 trillion worth of announced deals.

The Americas was the most fertile region for mega deal activity, with around 50 deals announced in the region for a total value of $1.40 trillion. This is even more remarkable considering the region's previous record, set in 2014, of 19 mega deals for a total value of $512.1bn. Elsewhere EMEA and the Asia Pacific regions saw nine and eight deals respectively, for combined totals of $301.2bn and $171.8bn.

Global M&A volume has been on an upward trajectory since 2012, however the increase seen between 2014 and 2015 was remarkable.

It is not just the firms involved that have benefitted from the resurgence in mega deals; investment banks also enjoyed a bumper 2015. Fees from completed M&A advisory increased globally. According to Dealogic, Goldman Sachs led the global M&A advisor ranking in 2015 with $1.76 trillion. Morgan Stanley and JPMorgan also enjoyed a successful year with $1.50 trillion and $1.49 trillion respectively.

Report: Dealogic – M&A Statshot