Fighting a losing battle on cyber crime

BY Richard Summerfield

The war on cyber crime in the UK is going badly, according to a new report from the National Crime Agency. In its 'Cyber Crime Assessment 2016', released in collaboration with a number of industry partners, the The NCA acknowledges that it is falling behind cyber-criminals in many respects.

Cyber criminality is not only becoming more prevalent, but also increasingly sophisticated. The capabilities of cyber criminals are rapidly outstripping both law enforcement agencies and companies operating in the private sector. Techniques including DDoS attacks and ransomware increased significantly in 2015, and the majority of these attacks can be traced back to a few hundred international cyber criminals. The NCA tracked 2.46 million ‘cyber incidents’ in 2015, including 700,000 cases of fraud.

The report highlights that cyber criminals of all kinds, from "international serious organised crime groups" to hacktivists, have been targeting both UK businesses and individuals, emboldened by "the growing online criminal marketplace, which provides easy access to sophisticated and bespoke tools and expertise, allowing these less skilled cyber criminals to exploit a wide range of vulnerabilities".

In light of the heightened security risk posed by cyber criminals, the NCA has called on organisations to step up their defences and to work more closely with law enforcement agencies, the government, industry regulators and business leaders to fight back against attackers. If cyber criminals are to be defeated,  it will require companies to overcome the stigma attached with reporting cyber attacks. The UK government has pledged £1.9bn to help develop and deliver a national defence response and strategy over the next five years.

However, these efforts may be hindered by the chronic under-reporting of cyber breaches by UK firms. According to the NCA, under-reporting is a major issue, particularly given that companies are not required to notify regulators if they have been subject to a data breach or a cyber attack.

Under reporting has, according to the report, obscured the full impact of cyber crime in the UK, and impaired the efforts of law enforcement agencies that have been struggling to understand the operating methods of cyber criminals and are attempting to respond to the threats they pose. Only by working together will the public and private sectors in the UK be able to turn the tide.

Report: http://www.nationalcrimeagency.gov.uk/publications/709-cyber-crime-assessment-2016/file

Global IPOs on the up but rocky road ahead

BY Richard Summerfield

For the global IPO industry, the first quarter of 2016 was disappointing period, recording the weakest activity since the first quarter of 2009, according to EY's Global IPO Trends 2016 report. Although the second quarter of the year saw the IPO space enjoy a marked recovery, at the mid-year point activity remains significantly below the first half of 2015.

The second quarter of 2016 saw a 120 percent jump in capital raised, climbing to $29.6bn from 246 deals – up almost 29 percent on the first three months of the year. US capital raised was up 755 percent, Asia-Pacific was up 20 percent, and Europe, the Middle East and Africa saw an uptick of 187 percent. The UK and Greater China were the only major IPO destinations that failed to see an increase in capital raised. The most significant gains were made by Australia and New Zealand, which saw proceeds increase by 820 percent.

The report suggests that though things improved significantly in the second quarter, there is more to be done if 2016 is to match IPO activity seen in recent years. Worryingly, the market will remain at the mercy of a febrile global economy which looks set to remain in a period of uncertainty.

Given this  economic and political volatility, the IPO industry will experience an uncertain second half of the year. Speaking of the report, Jackie Kelley, EY Americas IPO leader, said: "Despite the substantial uplift in global IPO activity in the second quarter, there are still a large number of IPO-ready companies sheltering from continued volatility and waiting for much needed clarity on the global economic and political landscape. In the meantime, activity is slow but improving."

If the outlook improves, a number of IPO-ready companies are waiting to enter the market. However, concerns surrounding the UK’s EU referendum result, the impending US presidential election and persistent worries about the direction of interest rates are all likely to impact on IPO activity moving forward. There is, however, an impressive pipeline of technology IPOs developing in the US, which may encourage activity after the November election.

Report: EY Global IPO Trends 2016 2Q

Global M&A value in 1H 2016 hits $1.71 trillion

BY Fraser Tennant

In its ‘Global M&A Review: First Half 2016’, Dealogic reveals that the total M&A value seen in the first half (1H) of 2016 was $1.71 trillion – an impressive figure in itself, although it represents an 18 percent year-on-year drop, from $2.09 trillion.

In terms of the key regional headline data, US targeted M&A volume was $748.5bn – down 18 percent year-on-year. Looking to Europe, the Middle East and Africa (EMEA), targeted M&A volume was $428.4bn, down 14 percent year-on-year and the lowest 1H total since 2011 ($67.1bn).

As far as global cross-border M&A volume is concerned, the review found that cross-border activity in 1H 2016 is valued at $580.9bn, down 6.6 percent year-on-year from $616.4bn. Furthermore, the US was the leading target accounting for 35 percent of volume ($205.8bn), up 39 percent year-on-year ($148.4bn) and the highest 1H volume on record.

In terms of Asia Pacific M&A, China accounted for 54 percent of targeted volume with $243.9bn – its highest 1H share on record and a record 21 percent share as an acquiring nation.

Leading the M&A adviser rankings is Goldman Sachs with transactions totalling $438.7bn, followed by Morgan Stanley on $330.0bn and Bank of America Merrill Lynch on $299.1bn.

Technology was the top sector with a total of $294.8bn, which was the second highest 1H volume on record (trailing the $304.6bn 1H volume seen in 2000). Conversely, the Telecom sector saw the biggest year-on-year drop among the top 10 sectors in 1H M&A deal volume – down some 70 percent from the $200.5bn seen in 1H 2015 to $60.7bn.

The Dealogic review also showcases the ‘Top 10 Announced M&A Transactions 1H 2016’ with Bayer’s $62.0bn bid for Monsanto in May 2016 top of the list.

Second on the list is the $48bn acquisition of Syngenta by China National Chemical Corp (ChemChina) in February 2016, the largest ever cross-border transaction by a Chinese acquirer. In third place is the April 2016 deal which saw Abbot Laboratories acquire St Jude Medical for $30.6bn.

Finally, the Dealogic data confirms that the total value of withdrawn M&A in 1H 2016, at $606.4bn, was more than double the same period in 2015 at $233.3bn. These withdrawn deals include the aborted transactions involving Energy Transfer Equity/Williams Companies in June 2016 and Pfizer/Allergan in April 2016.

Report: Dealogic - Global M&A Review: First Half 2016

US diesel emissions scandal results in Volkswagen making $15.3bn settlement

BY Fraser Tennant

In a settlement which it undoubtedly hopes will draw a substantial line under the matter, German carmaker Volkswagen AG has agreed to pay $15.3bn to settle the charge that it cheated on its diesel emissions tests in the US – a scandal which has rocked the automotive industry to its very core.

Volkswagen’s settlement agreement – reached this week in conjunction with the United States Department of Justice (DOJ), the State of California and the US Federal Trade Commission (FTC) – also resolves the civil claims regarding Volkswagen and Audi 2.0L TDI diesel engine vehicles in the US made by private plaintiffs (represented by the Plaintiffs’ Steering Committee (PSC)).

The diesel emissions scandal first became public in September 2015 when Volkswagen acknowledged that it had deliberately misled officials by installing secret software (the so-called ‘defeat device’) to circumvent US emissions tests (thus allowing US vehicles to emit up to 40 times the legal limit for safe levels of pollution).

Also part of the Volkswagen settlement is an agreement by the carmaker to buy back vehicles from affected consumers, as well as to provide funding that could profoundly benefit the creators of cleaner technologies (this includes a $2.7bn environmental remediation fund and the investment of $2bn to promote the use of zero emissions).

Furthermore, Volkswagen has also agreed with the attorneys general of 44 US states, the District of Columbia and Puerto Rico to resolve existing and potential state consumer protection claims in a settlement valued at approximately $603m.

“We take our commitment to make things right very seriously and believe these agreements are a significant step forward,” said Matthias Müller, chief executive officer of Volkswagen AG. “We appreciate the constructive engagement of all the parties, and are very grateful to our customers for their continued patience as the settlement approval process moves ahead.

“We know that we still have a great deal of work to do to earn back the trust of the American people. We are focused on resolving the outstanding issues and building a better company that can shape the future of integrated, sustainable mobility for our customers.”

Despite the settlement, the process represents only a partial resolution for Volkswagen, as the carmaker continues to face a criminal investigation which may result in company executives being held accountable for the wrongdoing related to its diesel emissions testing.

News: Volkswagen Agrees to $15 Billion Diesel-Cheating Settlement

Marriott and Starwood deal finally wins European approval

BY Richard Summerfield

The European Commission has finally acquiesced and granted unconditional antitrust approval to US hotel chain Marriott International’s $12.1bn cash and share purchase of Starwood Hotels and Resorts Worldwide Inc. Under the terms of the original Marriott/Starwood merger, Starwood shareholders will receive 0.8 shares of Marriott common stock plus $21.00 in cash.

Marriot had initially moved to acquire Starwood in March after the Chinese insurance company Anbang unexpectedly decided to abandon is $14bn all-cash offer for Starwood. Marriott and Anbang had been embroiled in a three week bidding war for Starwood, however the US firm is inching closer to being able complete the deal and combine its brands – which include the Ritz-Carlton – with Starwood’s own Sheraton and Westin properties.

Marriott currently operates more than 4500 hotels in 85 countries. Starwood, by comparison, manages around 1300 hotels in nearly 100 countries. As a result of the merger, Marriott will become the largest hotel company in the world. It is also believed that the firm will benefit from synergies of around $200m a year across the combined firm’s 29 hotel chains.

In a statement announcing the Commission’s decision, EU Competition Commissioner Margrethe Vestager said: “This is an important merger for the hotel industry and its customers. Our investigation confirmed that the hotel sector will remain competitive for customers in Europe following the merger.”

The Commission investigated the impact of the planned takeover in Barcelona, Milan, Venice, Vienna and Warsaw, where both brands have a strong presence. The investigation indicated that the merger would have little impact in any of these cities, given the strong offering from competing hotels in each location.

Though the deal has won European approval, the transaction is not yet confirmed. Chinese antitrust clearance is still required before the merger can be completed. Both parties have confirmed that they expect final clearance to arrive in the next month or so, meaning the deal will close in July at the earliest.

However, like much of the global economy, the threat posed by Brexit may yet have an impact on the completion of the deal. Immediately following the 'Leave' vote by the UK, stock prices for many hotel companies, including Marriott, fell dramatically. Though the decline has no direct impact on the relationship of the merger agreement, it could potentially impact the amount of money owed to Starwood’s shareholders.

News: EU clears Marriott's purchase of Starwood Hotels