Countering complacency key to defeating cyber criminals

BY Richard Summerfield

Despite an increase in the number of cyber attacks and data breaches over the last 12 months, including a number of high profile cyber events, there has been a decline in how seriously C-suite executives view cyber risk, according to a report from Zurich and Advisen Ltd.

In ‘The Seventh Annual Survey on the Current State of and Trends in Information Security and Cyber Risk Management’, 60 percent of the risk professionals surveyed said executive management view cyber risk as a significant threat to their organisation. However, this is down significantly from the 85 percent recorded in 2016.

The eroding of the importance of cyber security issues among senior management is a worrying trend, particularly in light of the number of cyber incidents recorded over the last 12 months, as well as the volume and value of the data stolen.

According to the report, only 53 percent of respondents knew of any changes to their companies’ cyber security systems in response to the high-profile attacks that took place in early 2017. Furthermore, growth in the purchase of cyber insurance has gone stagnant after a steady six-year increase from 35 percent to 65 percent.

“These findings may indicate that businesses are not up to speed on the magnitude of impact that business interruption losses are beginning to have on businesses,” said Erica Davis, head of Specialty E&O for Zurich North America. “Businesses must adopt a mindset of resilience that extends beyond the four walls of their organization. As cyber security breaches persist, it is more critical than ever to engage in an ongoing, comprehensive review of all business partner relationships including how those vendors and business partners approach their own exposures and controls and how the vendors’ supplier approach fits into their overall resilience plan.”

A total of 315 respondents, across a spectrum of businesses of all sizes, contributed to the report. Fifty-six percent of respondent were from companies with revenue of $1bn or less.

Report: The seventh annual survey on the current state of and trends in information security and cyber risk management

GIP makes $5bn renewables bet on Equis

BY Richard Summerfield

US investment fund Global Infrastructure Partners (GIP) and a number of partners, including Canada's Public Sector Pension Investment Board and the Chinese sovereign fund China Investment Corp, have agreed to acquire Equis Energy in a $5bn deal, including $1.3bn in debt. The deal is expected to close in the first quarter of 2018.

Equis is the largest renewable energy independent power producer operator in the Asia‐Pacific region, with over 180 assets in operation, construction and development across Australia, Japan, India, Indonesia, the Philippines and Thailand with a capacity in excess of 11 gigawatts.

The deal is the largest ever transaction in the renewable energy space, an industry which has begun to see increased activity in recent years. As governments, particularly in Asia, continue to seek out alternatives to fossil fuels to meet rising energy demand and combat pollution, the renewables industry will likely see increased dealmaking activity.

David Russell, chief executive of Equis and chairman of Equis Energy, said: “The investment by GIP and its partners is exciting news for the development of renewable energy in the Asia‐Pacific. GIP has a strong track record of managing and growing utility‐scale infrastructure businesses, and the combination of experience and knowledge across GIP and the existing management team will allow Equis Energy to continue expanding competitively across its target markets.”

Adebayo Ogunlesi, chairman and managing partner of GIP, said: “We are excited by the new investment in Equis Energy, which is a strong fit with GIP’s global renewable investment strategy. Equis Energy is a unique success story in the APAC region as it has systematically executed its growth strategy since its founding 5 years ago. In that period, Equis Energy has become one of the leading renewable energy platforms in the region, with a best‐in‐class business model, a high‐ quality asset portfolio and an outstanding management team. We look forward to continuing the Equis Energy success story in the years to come and to supporting new growth opportunities in one of the most promising renewable energy markets in the world.”

There was reportedly considerable interest in Equis. GIP and partners are believed to have beaten a number of rivals, including global pension funds and several buyout firms, in order to acquire the company.

News: U.S. fund, CIC snap up Equis Energy for $3.7 billion in bet on renewables

Global consulting sector M&A rises 1 percent in Q3 2017, reveals new report

BY Fraser Tennant

Mergers & acquisitions (M&A) activity in the global consulting sector in Q3 2017 rose 1 percent year-on-year (YoY), with large variations across market segments, according to a new report by Equiteq.

In ‘Q3 2017 Marketing Update – The Global Consulting M&A Report’, Equiteq notes that the media & marketing and management consulting segments experienced the strongest M&A activity during the quarter.  Elsewhere, despite notable deals occurring in human resources and IT services, deal activity fell in these segments. In engineering consulting, deal activity rose strongly in comparison with the previous quarter.

Among the report’s key findings: (i) there were 609 M&A deals in total in the consulting sector in Q3 2017; (ii) North America saw strong deal flow, with 288 deals (up 7 percent (YoY) and with a median deal size of $20m); (iii) Europe saw 228 deals (flat YoY and a median deal size of $7.5m); (iv) Asia-Pacific and Australia saw 63 deals (down 21 percent YoY and a median deal size of $3.5m). Furthermore, despite continuing tensions between the US and parts of Asia, cross-border deal flow fell only slightly compared to Q2 2017.

“We are seeing strong and accelerating activity across our global platform in North America, Europe and Asia,” said David Jorgenson, chief executive of Equiteq. “Current market conditions are favorable for owners of knowledge-led businesses who are investigating their strategic and liquidity opportunities.”

In addition, the report found that private equity activity continues to remain strong despite fierce competition and strong pricing from cash rich strategic buyers. Notable financial buyer investments in Q3 2017 included Apax Partners’ acquisition of ThoughtWorks and Vista Equity Partners’ acquisition of The Advisory Board Company’s education business.

The Boston Consulting Group’s acquisition of digital design and innovation consulting lab MAYA represented another high-profile example of a move by a leading management consulting firm to capitalise on the huge opportunity for providing advisory services around digital transformation initiatives. In terms of technology M&A, global professional services company Accenture continued to be the most acquisitive buyer, acquiring seven businesses, with notable deals in spaces like communications strategy, creative media, asset management consulting, agile software-development, cloud-based mobile, and big data and analytics.

Mr Jorgenson concluded: “We are experiencing strong deal flow across our global business, which has accelerated over the last two months. The current market conditions are favourable for sellers of sale ready consulting businesses.”

Report: Q3 2017 Marketing Update – The Global Consulting M&A Report

AI could add £630bn to UK economy, suggests new review

BY Fraser Tennant

An increase in the use of artificial intelligence (AI) could bring major social and economic benefits to the UK and add £630bn to the UK economy, according to a review published this week.

In ‘Growing the Artificial Intelligence Industry in the UK’ – an industry-led independent review carried out on behalf of the Department for Digital, Culture, Media & Sport and the Department for Business, Energy & Industrial Strategy – the case is made for the UK to “become the best place in the world for businesses developing and deploying AI to start, grow and thrive, and realise all the benefits the technology offers”.

Among the key factors which have combined to increase the capability of AI in recent years include: (i) new and larger volumes of data; (ii) a supply of experts with specific high level skills; (iii) the availability of increasingly powerful computing capacity; and (iv) a continuing fall in the barriers to achieving performance.

“The UK possesses an enviable reputation for excellence in AI with cutting-edge innovation, world-class universities, a thriving start-up scene and significant investment growth,” said Jon Andrews, head of technology and investment at PwC. “But in order for the UK to realise the potential gains from AI and keep up in an increasingly competitive landscape, we need to ensure that AI systems are adopted in a responsible way so that every part of society can reap the benefits. We also need to create the right environment for existing and new businesses to innovate and make the most of the product, productivity and wage benefits that this technology can bring.”

The review makes a number of recommendations (18 in all), including: developing data trusts to improve trust and ease around sharing data; making more research data machine readable; supporting text and data mining as a standard and essential tool for research; increasing computing capacity for AI research; recruiting skilled experts to develop AI; and establishing an AI Council to promote growth and coordination in the sector.

Overall, the review recommends that government, industry and academia needs to work together to keep the UK among the world leaders in AI.

Mr Andrews concluded: “It is great to see the review address practical actions the government can adopt in order to support companies in confidently implementing AI, providing secure and safe access to data, developing the research sector, and significantly bolstering the number of people being trained to work in the field.”

Report: Growing the artificial intelligence industry in the UK

BASF sows seeds with $7bn Bayer deal

by Richard Summerfield

German chemicals giant Bayer is to sell parts of its crop science business to BASF for about $7bn, the companies have announced. The deal has been designed to assuage the concerns of the EU competition authority over Bayer’s planned $66bn acquisition of US agrochemical and agricultural biotechnology corporation Monsanto Company.

The deal will see BASF pay in cash for “significant parts” of Bayer’s seed and herbicide businesses. BASF is paying 15 times earnings before interest, taxes, depreciation and amortisation. BASF said the deal will be earnings per share accretive in the first year.

For BASF, the deal is a surprising one. To date, the company has avoided seed assets and instead pursued research into plant characteristics such as drought tolerance, which it sells or licences to seed developers. However, Bayer’s Monsanto acquisition has opened up opportunities for rival firms. Bayer has confirmed that proceeds from the seed unit sale will help finance the Monsanto acquisition.

“With this acquisition, we are seizing the opportunity to purchase highly attractive assets in key row crops and markets. We look forward to growing these innovative and profitable businesses and to welcoming the experienced and dedicated team in crop protection, seeds and traits. These businesses are an excellent match for BASF Group’s portfolio,” said Dr Kurt Bock, chairman of the board of executive directors of BASF SE, in a statement.

“I am very pleased that, in BASF, Bayer has selected an acquirer that, like our company, attaches a great deal of importance to social partnership and values its employees. I welcome the fact that BASF has committed to offering comparable employment conditions for our colleagues,” said Oliver Zühlke, chairman of the Bayer Central Works Council.

In August, the European Commission opened an investigation to assess the proposed acquisition of Monsanto by Bayer under the EU Merger Regulation. Bayer had offered to sell assets worth around $2.5 bn. The European Commission said in August that the divestments offered by Bayer so far did not go far enough and opened an in-depth review of the deal.

News: BASF to buy Bayer units for $7bn