New report highlights lack of gender diversity in ASX 201-500 companies

BY Fraser Tennant

Women account for only 15.8 percent of board roles in ASX 201-500 companies, according to a new report – the first of its kind examining the state of gender diversity within small-cap companies – by the Australian Institute of Company Directors (AICD) and Heidrick & Struggles.

The ‘Beyond 200: A Study of Gender Diversity in ASX 201-500 companies’ report also reveals that there are signs that boards of newer companies and those chaired by individuals who also chair larger listed boards are leading the way towards greater gender diversity.

The report’s key findings include: (i) female representation on boards greatly declines beyond the ASX 200, falling from 27.9 percent across the ASX 200 to 15.8 percent across ASX 201-500 companies; (ii) newer companies are more likely to have greater gender diversity, with women accounting for 25.3 percent of directorships for companies listed in the last five years; and (iii) female representation rises to 22.9 percent on ASX 201-500 boards chaired by an ASX200 chair.

“This report indicates that there are larger obstacles to achieving greater gender diversity among companies outside the ASX200, given small board sizes and greater presence of founders and investors,” said Elizabeth Proust, chairman of the AICD. “However, it also shows chairs of larger companies are exerting their influence and newer companies have heard the message about the importance of diversity.”

In 2015, the AICD set a target for all boards to achieve gender diversity based on a strong body of evidence showing that diverse boards lead to better outcomes for shareholders and stakeholders alike. Further research showed that 30 percent is where ‘critical mass’ is reached in a group setting and the full benefits of diversity are realised.

The report also states that while the AICD has been tracking progress towards the 30 percent gender diversity target as far as ASX 200 boards are concerned for several years, it felt it was now time to “shine the spotlight” on small-cap companies.

Ms Proust concluded: “Greater gender diversity on boards of all sizes is fundamental to the future of good governance in this country. Continued advocacy, engagement and education is needed to see all boards reap the benefits of diversity.”

Report: Beyond 200: A Study of Gender Diversity in ASX 201-500 companies

Data scientists top UK CEO recruitment wishlist, claims new survey

BY Fraser Tennant

Illustrating their increasing role in supporting future business growth, data scientists have been named the most important workforce capability by UK chief executives, according to a new survey by KPMG.

In its ‘Growing pains: 2018 Global CEO Outlook’ report, KPMG states that more than two thirds of survey respondents (69 percent) named the data scientist role as important in supporting future growth plans, followed by emerging markets experts (57 percent) and emerging technology specialists (55 percent ), such as artificial intelligence professionals.

The KPMG analysis also suggests that firms should focus on the impact of technological disruption as well as considering business opportunities beyond domestic markets.

“UK CEOs are encouragingly bullish on their resourcing requirements and evidently more so than their counterparts elsewhere in the world,” said Mark Williamson, partner and head of the people consulting practice at KPMG in the UK. “This sends a powerful message to the world that UK business leaders can see past market uncertainty and are focused on future-proofing their operations.”

In order to respond to technological disruption, the report also notes that UK businesses need to treat technology disruption as part of an integral part of business strategy, and respond by looking at ways in which their workforce can change its size, shape and composition to meet the strategic demands of the next decade.

“Fundamentally, the nature of digital disruption is potentially transformative if approached with the right mindset,” continued Mr Williamson. “Technology disruption is becoming such an integral part of business strategy that we expect business leaders to increasingly establish their own training programmes and invest in external support.”

The KPMG report showcases the views of 150 UK leaders and a further 1150 chief executives across the globe.

Mr Williamson concluded: “UK business leaders are embracing digital disruption and are confident in the potential for automation to create jobs in the near future. The rise of the data scientist is clear evidence of this sentiment and shift in priorities within UK boardrooms.”

Report: ‘Growing pains: 2018 Global CEO Outlook’

M&A market booms

BY Richard Summerfield

The global M&A market is booming with average deal sizes climbing in the first half of the year, according to Pitchbook’s ‘2Q 2018 Global M&A Report’.

“The M&A market is inexorably linked with business sentiment, corporate fundamentals and macroeconomic forces,” said Wylie Fernyhough, an analyst at PitchBook. “With all these indicators continuing to trend positively, the global M&A boom shows no signs of stopping and the announced deals should ensure M&A activity continues to flourish throughout the rest of the year.”

In Q2, across the US and Europe there were 4735 completed deals totalling $987.8bn in value, a decline of 2 percent and an increase of 24 percent respectively, over the first quarter of 2018. Q1 saw 4823 deals worth $799.7bn. The mega-merger market remained strong in H1, with 31 deals recorded worth in excess of $5bn. Vodafone's $21.8bn purchase of UPC Czech was one of five deals above $10bn which closed in Q2 and which caused a rise in average deal value.

In total, across Europe, there were 3424 transactions completed totalling $569.7bn, compared to 5336 deals valued at $797.8bn achieved in the same period last year. Despite this decline, European M&A has not yet suffered the prophesised negative effects of Brexit.

Thirteen mega-deals were closed in 2018, five of which were in the UK, including announced deals such as Takeda’s bid for Shire worth $62bn and the ongoing $34bn tug of war between Fox and Comcast for Sky. North America saw 5213 deals completed, worth $1 trillion.

The financial services sector saw deal value fall in H1 2018, however, as fewer large deals closed. The sector saw 790 completed transactions with a total value of $161.5bn, down from 960 deals with a value of $227.6bn in the first half of 2017. Regardless of the slow start to 2018, the sector did see two notable deals in Q2, including the $3bn acquisition of Pure Industrial by Blackstone and Ivanhoé Cambridge.

One of the key deal drivers going forward may be the ongoing shift in global interest rates. In North America rates have risen, whereas in the eurozone rate rises may still be a year away. As a result, many companies may be pushing through acquisitions in the short term in order to secure more attractive financing before rates rises potentially derail transactions, making them financially unattractive.

Report: 2Q 2018 Global M&A Report

Starwood clinches GE asset deal

BY Richard Summerfield

GE Capital has agreed to sell its GE Energy Financial Services’ Project Finance Debt Business to Starwood Property Trust for $2.56bn, including $400m of unfunded loan commitments.

The business includes a platform and leadership team, along with 21 full-time employees working on loan origination, underwriting, capital markets and asset management. The transaction, which is expected to close in Q3 2018, will, Starwood believes, boost the company’s core earnings.

The deal will see Starwood expand beyond the real estate industry after seven years of unsuccessfully attempting to diversify. GE, by contrast, is in the midst of an effort to divest its assets and refocusing its efforts on power plants and renewable energy. Thus far, the company has raised billions of dollars through asset sales. In June, GE also said it would separate its healthcare unit and sell a stake in Baker Hughes. The company has also agreed to merge its locomotive unit with Wabtec Corp and its industrial gas-engine business to Advent International Corp.

“The sale of the Project Finance Debt Business is aligned to GE Capital’s overall balance sheet reduction efforts and reflects progress against our strategy announced in January 2018,” said Alec Burger, president of GE Capital. “The business is highly complementary to the Starwood Property Trust platform, which has deployed over $44bn of capital since its inception in 2009 and has vast lending experience across diversified assets and geographies.”

“It has been our intention since we began Starwood Property Trust to build a multi-cylinder finance company, with the thought that we should never overstay our welcome in any one business line and always have opportunities to deploy capital into only those verticals where reward clearly outweighs risk,” said Barry Sternlicht, chairman and chief executive of Starwood Property Trust.

He added: “From our basic and still most important business as one of the nation's largest commercial real estate lenders, we have successfully diversified the company. We have built a world-class conduit lending and CMBS trading platform, bought in excess of $3.5 billion of property assets to yield double digit current returns on equity deployed, and created, from a standing start, a very successful single family lending platform. Today we are pleased to announce we are adding a new cylinder to our Company, with the return on investment profile and ability to scale to be material to our $14 billion enterprise.”

News: Starwood Property to buy part of GE Capital's energy finance unit for $2.56 billion

Leo Pharma acquires Bayer’s prescription dermatology portfolio

BY Fraser Tennant

In a deal intended to bolster its role as a leading global dermatology company and achieve its goal of helping 125 million patients by 2025, multinational Danish pharmaceutical company Leo Pharma has acquired German multinational pharmaceutical and life sciences company Bayer AG’s global prescription dermatology portfolio.

Bayer’s portfolio includes branded topical prescription treatments for acne, fungal skin infections and rosacea, as well as a range of topical steroids with an annual turnover in 2017 of more than €280m. The definitive agreement will enable Leo Pharma to expand significantly in key markets worldwide and broaden its therapeutic areas.

The transaction does not include Bayer's over-the-counter dermatology portfolio of brands.

“We are very excited about this agreement,” said Gitte P. Aabo, president and chief executive of Leo Pharma. “With the strong prescription dermatology brands and new colleagues from Bayer, we will broaden our treatment range and considerably enhance our size in key markets around the world – underlining our ambition to be a preferred partner in medical dermatology.” Approximately 450 people will join Leo Pharma as part of the transaction.

“We are very pleased to have found a good partner in Leo Pharma, which has a long history as a leader in scientific advancement and a culture that values discovery and innovation,” said Heiko Schipper, a member of Bayer’s board of management and president of consumer health. “With the dedicated support of many employees to whom we are grateful, our prescription dermatology business has grown well since becoming part of Bayer AG in 2006.”

The acquisition is expected to close in two steps. First, during 2018 for the US, and second, during the second half of 2019 for all other markets. The transaction is subject to the satisfaction of customary closing conditions, including approval by the competition authorities.

The financial details of the deal have not been disclosed.

Mr Schipper concluded: “Moving forward, we believe that Leo Pharma is the right owner to grow and further the prescription dermatology business, while enabling Bayer to focus on building its core over-the counter brands”.

News: Bayer sells prescription dermatology brands to Denmark's Leo Pharma