Rise of the robots

BY Richard Summerfield

Robotic process automation (RPA) and artificial intelligence (AI) are being increasing harnessed by organisations across a number of different sectors, according to a new report from PEX Network.

The report, which was produced following a survey of over 150 banking, financial services and insurance executives, sets out the key challenges, priorities and strategies for AI and RPA utilisation in 2017.

For the financial services, banking and insurance industries in particular, AI and RPA could have a truly transformative effect over the coming decade. Accordingly, it is imperative that companies embrace automation and robotics as quickly as possible.

Some companies have begun their implementation process with respect to RPA. Thirty-five percent of respondents have set about integrating RPA and are looking to expand their usage of automation where possible.

However, the firms that have invested thus far have typically only dipped their toe in the water. Around 80 percent of firms have invested less than $1m into RPA thus far. AI investment also remains on the low end of the spectrum, with 60 percent of respondents investing less than £100,000. Just 11 percent of firms have invested £1m and above.

The relative immaturity of RPA may have served as a roadblock to implementation to date. Twenty-six percent of survey respondents cited a lack of process standardisaton before RPA implementation as the main obstacle in implementing an RPA solution, 16 percent of executives cited a lack of resources to allocate to RPA implementation and 13 percent cited a lack of available budget as primary reasons that their firm had not yet implemented an RPA solution.

For those firms looking to automate their services in the future, they must begin by considering which of their processes would be suitable. Also, they must evaluate the forms of AI and FinTech technologies available to them. Fifty-seven percent of firms are considering cognitive RPA, while 53 percent are evaluating machine learning and 50 percent are exploring Big Data.

In the coming decade, technology solutions, including RPA, AI, Big Data and the blockchain, will have a transformative effect on the financial services, banking and insurance sectors. Companies would be wise to embrace these technologies early, when the price points are low and the potential returns are much higher.

Report: 2017 Benchmarking Report: The future of robotic process automation and artificial intelligence

Consulting sector M&A deals peak amid global turbulence

BY Fraser Tennant

Mergers & acquisitions (M&A) activity in the consulting sector has reached a nine-year high (up 1 percent) despite the impact of ongoing geopolitical turbulence, according to Equiteq’s ‘Global Consulting Mergers & Acquisitions Report 2017’. 

Now in its 10th year, the Equiteq report provides data such as deal sizes and structures, valuation multiples, equity share price performance, regional activity and strategic and private equity buyer trends. For example, it reveals that 44 percent of all consulting sector deals took place in North America (which enjoyed the highest M&A value), although Europe, with 38 percent of deals, and Asia-Pacific, with 9 percent, enjoyed stronger M&A growth. The report also notes that deal activity was particularly robust in the UK, with the number of completed transactions increasing by 20 percent over the course of the year.

Additional findings include: (i) the top consulting segments for deal activity were the rapidly evolving management consulting, IT services and media segments, with management consulting seeing a 2 percent growth in deal volumes and a 32 percent increase in the share-price index; and (ii) traditional boundaries between consulting segments continue to blur, leading to a strong convergence at the intersection of management consulting, media & marketing and technology.

Furthermore, highlighting the global nature of M&A activity in the consulting sector, the report confirms that despite some major political upheavals, cross-border deal activity remained strong – accounting for 28 percent of all deal volumes (up 27 percent from the year before).

“We are seeing unprecedented diversification amongst acquirers of knowledge-led businesses such as management consultants, media agencies, engineering consultants and HR consulting,” said David Jorgenson, chief executive of Equiteq. “As a result this is driving convergence between consulting sectors and creating hybrid business models with creative, technology consulting and managed services. This convergence trend – driven by digital disruption, changing client demands and the search for growth – is blurring traditional boundaries.”

Commenting on the prospects for the consulting sector in the second half of 2017 and beyond, Mr Jorgenson concluded: “Having already seen high-profile deals across segments of the consulting market, as well as strong deal activity amongst high-profile PE investors, we expect that this robust demand for M&A will continue over the next twelve months.”

Report: Global Consulting M&A Report

Greek austerity bill approved as eurozone fails to reach bailout agreement

BY Fraser Tennant

In the latest instalment of the saga that is the Greece austerity programme, the country’s parliament has approved a new austerity bill that is intended to assist in the release of the latest tranche of bailout funds from the country’s creditors.

The new austerity bill is worth €4.9bn and is designed to cover the period 2019 to 2021. The Greek parliament has also voted for a simultaneous relief package worth €7.5bn over the same period – to counterbalance the negative effect of pension cuts and a lower non-taxed threshold.

Unsurprisingly, the announcement of the proposed cuts was met with an angry response, with thousands of protesters clashing with police outside parliament.

The relief package also includes: (i) a decrease of tax and income rate, electricity and household grant for vulnerable social groups; (ii) broadening of public investment projects to combat unemployment and support small and medium size enterprises (SMEs); (iii) , opting-out from health coverage cost for weak income groups; and (iv) free access to primary healthcare services. Furthermore, Greece’s Syriza government is committed to implementing the package under the condition that creditors will proceed to the specification of mid-term debt relief measures.

However, following the announcement of the austerity bill and relief package, eurozone finance ministers failed to agree a debt relief plan for Greece – a breakdown in talks which has been blamed on an inability to agree on whether the country will be able to repay its debts in the long run. The failure also raises the possibility of a crisis for the single currency should Greece miss a loan repayment.

“The Greek government has been putting all efforts to drag the country outside the Memoranda in 2018,” says Dim Rapidis, a political and communications adviser. "Creditors share the same view, but the problem is that Germany's minister of finance, Wolfgang Schaeuble, seems reluctant to abide by the creditors commitment to provide debt relief.

"A possible deadlock in agreeing concrete mid-term debt relief for Greece could blow the entire deal. The Greek government, the European Commission and the European Stability Mechanism are pushing the German government to accept debt relief, but the latter wants to delay such decision and discuss it after domestic elections in September 2018," he adds.

Should a decision on debt relief be reached, the European Central Bank may then include Greece in its quantitative easing programme – a move which would give Greece the green light to seek funds from the markets and begin the process of rebuilding its shattered economy.

News: Greece tranche not contingent on IMF in bailout - Greek spokesman

Clariant and Huntsman clinch merger of equals

BY Richard Summerfield

Clariant and Huntsman Corporation have announced a merger of equals which will create a leading global speciality chemical company with an enterprise value of approximately $20bn, including debt.

Under the terms of the all-stock deal, Huntsman holders will get 1.2196 shares in the new company for each share they own. Clariant shareholders will have a 52 percent stake in the combined company, which will be known as HuntsmanClariant.

According to a statement announcing the deal, the two companies expect the merger to generate more than $400m in annual cost savings, leading to $3.5bn in value creation.

"This is the perfect deal at the right time. Clariant and Huntsman are joining forces to gain much broader global reach, create more sustained innovation power and achieve new growth opportunities,” said Hariolf Kottmann, CEO of Clariant. “This is in the best interest of all of our stakeholders. Peter Huntsman and I share the same strategic vision and I look forward to working with him.”

Peter R. Huntsman, president and CEO of Huntsman, who is expected to hold the same title at the combined group, said: “I could not be more enthusiastic about this merger and look forward to working closely with Hariolf Kottmann, a man I have admired and trusted for the past decade. We also look forward to a close association with his immensely talented colleagues around the world. Together, we will create a global leader in specialty chemicals with a combined balance sheet providing substantial financial strength and flexibility.”

Dr Kottmann will serve as HuntsmanClariant’s chairman. The firm, once merged, will operate in more than 100 countries and employ around 32,000 people. HuntsmanClariant will have a global headquarters in Pratteln, Switzerland, and an operational headquarters in The Woodlands, Texas.

Rumours of a merger between the two companies have circulated for some time. Indeed, Clariant and Huntsman are believed to have ended merger talks in late 2016 over a disagreement about which firm would play the lead role. The two companies have been on friendly terms for a while, and their respective CEOs are said to have had a professional and personal friendship for around the last eight years.

The deal is expected to close by the end of 2017, pending shareholder and regulatory approval.

News: Clariant to Buy Huntsman for $6.4 Billion as M&A Surges

Hedge fund inflows reach $20bn

BY Richard Summerfield

Following five consecutive quarters of net outflows, Q1 2017 saw hedge funds attract net capital inflows of $19.7bn, according to a new report from Preqin. This pushed total assets held by hedge funds up 3.2 percent, and took assets under management (AUM)  to a record $3.35 trillion.

Further, all leading hedge fund strategies experienced a percentage increase in total assets during Q1. Further, macro strategies funds attracted $11.1bn of net inflows to expand beyond $1 trillion in AUM for the first time.

“Five successive quarters of net outflows have been reversed in Q1 2017, as the industry recorded the largest quarterly influx of capital since Q2 2015. Along with the continued run of positive returns being made by most leading strategies, this has helped propel the industry to a record size,” said Amy Bensted, head of hedge fund products for Preqin

She continued:  “2016 was undeniably a difficult year for the hedge fund industry, with net outflows reflecting a reduced appetite for the asset class from institutions following a sustained period of low returns to investors since 2014. However, following an extended run of improved performance since March 2016 – the 12-month return of hedge funds is 10.67 percent – investor sentiment seems to be improving in 2017, which is reflected by inflows over the start of the year.”

North America-based hedge fund managers attracted the greatest amount of capital over Q1 2017, with net inflows of $19.9bn. Europe was the only region to lose assets over Q1 with net outflows of $8.5bn. Asia-Pacific had inflows of $2.2bn

Q1 was a successful period for all fund sizes, which were able to attract new capital . Fifty-three percent of funds between $500m and $999m saw inflows, however smaller funds were also successful. Forty-seven percent of funds with less than $100m saw inflows, while just 36 percent of funds endured outflows.

Forty-six percent of outflows in 2016 were from equity strategies, a trend that continued in Q1 2017 due to $10bn worth of investor redemptions.

Report: Q1 2017 Hedge fund asset flows