Corruption hit biggest companies hardest in 2020, reveals new report

BY Fraser Tennant

More than half of the world’s biggest companies reported “very significant” impacts as a result of the impact of corruption and illicit activity in 2020, reveals a report published this week by Kroll.

According to the ‘Global Fraud and Risk Report 2021Bribery and Corruption: The Winds of Change’, 57 percent of respondents at companies with a turnover of more than $15bn reported a very significant impact of illicit activity, such as fraud, corruption and money laundering.

Kroll also found that global organisations were feeling vulnerable to both internal and external threats, with 46 percent of respondents citing lack of visibility over third parties as the number one threat relating to bribery and corruption risk. Weaknesses in internal record-keeping was second on the list, followed by employees’ actions. 

To combat this, companies were placing an increased focus on proactive measures to manage bribery and corruption risk, including enterprise-wide risk assessments and the use of proactive data analytics. However, despite these defences, 82 percent overall still felt corruption and illicit activity were having a significant impact on their organisation. 

“It has been an unprecedented year for corporate risk,” said Zoe Newman, managing director of forensic investigations and intelligence at Kroll. “Firms have faced threats from all angles, including increasingly complex supply chains and the impact of COVID-19 measures.

“The findings from our report leave us with an important question,” she continued. “Why are bribery and corruption threats persisting and still having such a big impact? Poor record-keeping or the inability to adequately monitor frontline teams and regional offices are typical vulnerabilities that are often overlooked. Then there is the human factor.”

More encouragingly, the report found that many companies are bolstering their defences with proactive measures such as data analytics, and that bribery and corruption risk is on the boardroom agenda. 

Ms Newman concluded: “An organisation can have the best possible compliance programme in place on paper, but if the human elements of the chain are not well managed, educated or equipped to act, non-compliance or illicit behaviour will continue to prevail and go undetected.”

Report: Global Fraud and Risk Report 2021Bribery and Corruption: The Winds of Change

Packable strikes $1.55bn SPAC deal

BY Richard Summerfield

Ecommerce marketplace enablement platform Packable has entered into a definitive agreement to merge with Highland Transcend Partners Corp, a special purpose acquisition company (SPAC), in a deal worth $1.55bn.

Packable, which is backed by private equity firm The Carlyle Group, was valued at around $1.1bn in November 2020 when Carlyle invested $250m to acquire its stake in the company.

Under the terms of the deal, Packable’s existing shareholders will receive 71 percent of the combined company, Highland Transcend SPAC founders and investors will own 19 percent, while private investment in public equity (PIPE) investors, including Fidelity Management & Research Company, Lugard Road Capital, Luxor Capital, Park West Asset Management and Morningside, will receive the remaining 11 percent.

“This is an incredibly exciting time for our team, and we are thrilled to partner with Highland Transcend as we plan to enter our next chapter as a public company,” said Packable co-founder and chief executive Andrew Vagenas. “While we’ve become a market leader in our industry, there is significant runway ahead of us in multiple avenues: from the continued proliferation of online marketplaces and geographic opportunities to our ability to invest in and grow Digitally Native Brands, while providing new data and technology services, as well as marketing options for our brand partners.”

“While we believe that third-party marketplaces will contribute more than 40 percent of all ecommerce revenues by 2025, brands find themselves challenged to manage the complexity of executing across these platforms,” said Ian Friedman, chief executive of Highland Transcend. “Packable has a leading software-driven offering enabling brands to grow their businesses across multiple online marketplaces. Andrew and the entire team have built an incredibly strong competitive platform; with approximately 75 million customer transactions to-date, we believe that Packable has one of the largest sets of third-party marketplace transaction data, outside of the marketplaces themselves. This data enables Packable’s competitive pricing, merchandising, and marketing decisions and will allow the company to launch a Software-as-a-Service offerings in the future.”

News: Carlyle-backed Packable agrees $1.55 billion SPAC merger

PayPal to acquire Paidly for $2.7bn

BY Richard Summerfield

Payment behemoth PayPal Holdings Inc has agreed to acquire Japanese ‘buy now, pay later’ firm Paidy in a deal worth $2.7bn.

Completion of the transaction, following regulatory approval, is expected in the fourth quarter of 2021. Under the terms of the agreement, Paidly will continue to operate its existing business and maintain the brand while the company’s leaders, Riku Sugie, president and chief executive, and Russel Cummer, founder and executive chairman, will keep their respective positions.

The ‘buy now, pay later’ market has grown significantly of late – likely as a result of the coronavirus (COVID-19) pandemic – with companies including Paidly, Klarna and Afterpay all increasing in prominence. The industry has also begun to see some consolidation, with Square Inc announcing in August that it was to acquire Afterpay Ltd for $29bn.

Paidly has more than 6 million registered users. It plans to integrate PayPal and other digital and QR wallets with Paidy Link – a service it launched in April 2021 which allows customers to link digital wallets to their Paidly account – to connect further online and offline merchants.

While Paidly has a considerably smaller customer base, Japanese consumers are beginning to move away from cash payments, which at present account for 70 percent of payments in the country. As such, there is considerable room for growth in the ‘buy now, pay later’ segment of the Japanese e-commerce space. The acquisition will see PayPal increase it’s foothold in Japan - the world’s third-largest e-commerce market - where it currently has around 4.3 million active users.

“Combining Paidy’s brand, capabilities, and talented team with PayPal’s expertise, resources, and global scale will create a strong foundation to accelerate our momentum in this strategically important market,” said Peter Kenevan, vice president and head of Japan at PayPal.

“There is no better home for Paidy to continue to grow and innovate than PayPal, which has been removing friction from online shopping for more than 20 years,” said Mr Cummer.

PayPal is already active in the buy now, pay later space. In August 2020, the company introduced a new instalment credit option for PayPal users called ‘Pay in 4’.

News: PayPal's $2.7 bln Japan deal heats up buy now, pay later race 

“Business as usual” says PAL following Chapter 11 filing

BY Fraser Tennant

A victim of prolonged travel restrictions and a decline in tourism, Philippine Airlines Inc. (PAL) has filed for Chapter 11 bankruptcy in order to restructure and reorganise its finances to navigate the COVID-19 crisis and emerge as a leaner and better-capitalised airline.

As part of the Chapter 11 process, PAL has filed a restructuring plan, which is subject to court approval, which provides over $2bn in permanent balance sheet reductions from existing creditors and allows the airline to consensually contract fleet capacity by 25 percent.

Also included in the plan is $505m in long-term equity and debt financing from PAL’s majority shareholder and $150m of additional debt financing from new investors. PAL will also complete a parallel filing for recognition in the Philippines under the Financial Insolvency and Rehabilitation (FRIA) Act of 2010.

The flag carrier of the Philippines and the country’s only full-service network airline, PAL was the first commercial airline in Asia and marked its 80th anniversary in March 2021. It was also ranked the 30th best airline in the world in 2019.

PAL has stated that business operations will continue as usual during restructuring. PAL Holdings Inc., the holding company of PAL, and Air Philippines Corporation, known as PAL Express, are not included in the Chapter 11 filing.

“We welcome this major breakthrough,” said Dr Lucio C. Tan, chairman and chief executive of PAL. “This is an overall agreement that enables PAL to remain the flag carrier of the Philippines and the premier global airline of the country, one that is better equipped to execute strategic initiatives and sustain the Philippines’ vital global air links to the world.”

The company expects to emerge from the Chapter 11 bankruptcy process before the end of 2021.

Mr Tan concluded: “We are grateful to our lenders, aviation partners and other creditors for supporting the plan, which empowers PAL to overcome the unprecedented impact of the global pandemic that has significantly disrupted businesses in all sectors, especially aviation, and emerge stronger for the long-term.”

News: Philippine Airlines files for Chapter 11 in U.S. after COVID-19 crisis

Global CEO confidence returns to pre-pandemic levels, claims new report

BY Fraser Tennant

Confidence among global chief executives is returning to pre-pandemic levels, with eight out of 10 stating a willingness to launch aggressive M&A plans in the next three years, according to a new KPMG report.

In its ‘KPMG 2021 CEO Outlook’, which asked more than 1300 global chief executives about their strategies and outlook over a three-year period, KPMG found that 60 percent of leaders are confident about the global economy's growth prospects – up from 42 percent in January/February 2021.

Moreover, the prospect of a stronger global economy is leading chief executives to invest in expansion and business transformation, with 69 percent of senior executives identifying inorganic methods, such as  joint ventures, M&A and strategic alliances, as their organisation’s main strategy for growth.

In terms of M&A, KPMG reveals that a majority (87 percent) of global leaders stated that they are looking to make acquisitions in the next three years to help grow and transform their businesses.

“Despite the continued uncertainty around the pandemic, chief executives are increasingly confident that the global economy is coming back strong,” said Bill Thomas, global chairman and chief executive of KPMG. “This confidence has put leadership in an aggressive growth stance. While inorganic growth strategies are a priority, chief executives are also looking to expand organically and continue to assess the future of work to ensure they can attract top talent.”

Another positive noted by the KPMG report is a greater focus on environmental, social and governance (ESG) among leaders. “If there is a positive to come out of the past 18 months, it is that chief executives are increasingly putting ESG at the heart of their recovery and long-term growth strategies. The unfolding climate and societal crises have made it clear that we need to change our ways and work together.”

To this end, the report highlights that 30 percent of chief executives plan to invest more than 10 percent of their revenues into sustainability measures and programmes over the next three years.

Mr Thomas concluded: “I am encouraged about what the future holds because business leaders are acknowledging that they need to be the drivers of positive change, supporting measures to tackle environmental dangers, as well as societal challenges – from gender and race to equity and social mobility.”

News: CEOs back to pre-pandemic levels of confidence, KPMG survey shows