Fraud hits almost two thirds of UK firms, reveals new report

BY Fraser Tennant

Almost two thirds of UK firms have been the victim of fraud or economic crime over the past two years, according to research published this week.

PwC’s ‘2022 Global Economic Crime Survey’ found that the number of UK companies targeted by fraudsters was above the global average for this year (46 percent), as well as being higher than the last time the survey was conducted in 2020 (56 percent).

Moreover, of the types of fraud reported, cyber crime was the most frequent, with almost a third (32 percent) experiencing a cyber breach, although this is less than the number that fell victim to cyber crime in the 2020 survey (42 percent). Supply chain fraud, included for the first time in the survey, accounted for almost a fifth of respondents (19 percent).

“With increased levels of disruption being experienced, and the fact that more UK organisations have experienced fraud than in our last survey, it is surprising to see a decline in some types of fraud and economic crime, such as cyber crime, bribery and financial statement fraud,” said Fran Marwood, partner and head of digital & forensic investigations at PwC. “However, from what we are seeing in the market, I believe these trends are temporary.”

As far as who is committing fraud is concerned, just over half of UK respondents (51 percent) said fraud was committed by external fraudsters, compared to 43 percent globally. The top three external perpetrators according to those surveyed in the UK were customers, hackers, and vendors and suppliers.

Additional findings reveal that the most serious fraud was initially detected most frequently by companies monitoring suspicious activity using forensic technology and by internal audit, followed by corporate security and whistleblowing or tip-off. In terms of money lost through fraud, almost a quarter of survey respondents reported the figure to be between $1m and $5m.

“The message to organisations is clear,” concludes Mr Marwood. “With fraud now a greater and more costly threat than we have seen before, and the risk landscape continuing to undergo rapid change, it is important that organisations invest in prevention, and take the time to make sure their defences are match-fit for any attacks.”

Report: 2022 Global Economic Crime Survey

Broadcom strikes $61bn VMware deal

BY Richard Summerfield

Broadcom Inc, a global leader in semiconductor production, has agreed to acquire cloud computing company VMware Inc in a $61bn cash-and stock deal.

Under the terms of the deal, Broadcom will pay $142.50 in cash or 0.2520 of a Broadcom share for each VMware share – a price which represents a premium of nearly 49 percent to the stock’s last close before talks of the deal were first reported on 22 May. Broadcom will also assume $8bn of VMware’s net debt.

Broadcom has already got commitments from a consortium of banks for $32bn in debt funding for the deal. VMware will be allowed to solicit offers from rival bidders for 40 days as part of the agreement. Should VMware opt for an alternative bidder during this period it will be required to pay a termination fee of $750m.

The transaction, which is expected to complete in Broadcom’s fiscal year 2023, is subject to the receipt of regulatory approvals and other customary closing conditions, including approval by VMware shareholders.

“Building upon our proven track record of successful M&A, this transaction combines our leading semiconductor and infrastructure software businesses with an iconic pioneer and innovator in enterprise software as we reimagine what we can deliver to customers as a leading infrastructure technology company,” said Hock Tan, president and chief executive of Broadcom. “We look forward to VMware’s talented team joining Broadcom, further cultivating a shared culture of innovation and driving even greater value for our combined stakeholders, including both sets of shareholders.”

“VMware has been reshaping the IT landscape for the past 24 years, helping our customers become digital businesses,” said Raghu Raghuram, chief executive of VMware. “We stand for innovation and unwavering support of our customers and their most important business operations and now we are extending our commitment to exceptional service and innovation by becoming the new software platform for Broadcom. Combining our assets and talented team with Broadcom’s existing enterprise software portfolio, all housed under the VMware brand, creates a remarkable enterprise software player. Collectively, we will deliver even more choice, value and innovation to customers, enabling them to thrive in this increasingly complex multi-cloud era.”

“VMware has long been recognized for its enterprise software leadership, and through this transaction we will provide customers worldwide with the next generation of infrastructure software,” said Tom Krause, president of the Broadcom Software Group. “VMware’s platform and Broadcom’s infrastructure software solutions address different but important enterprise needs, and the combined company will be able to serve them more effectively and securely. We have deep respect for VMware’s customer focus and innovation track record, and look forward to bringing together our two organizations.”

News: Chipmaker Broadcom to buy VMware in $61 bln deal

Rise of ransomware threats – Verizon

BY Richard Summerfield

The risk posed by ransomware attacks has increased significantly over the last year, according to the 15th annual Verizon 2022 Data Breach Investigations Report.

The report, which aims to increase awareness among organisations of what tactics threat actors are likely to use in data incidents and breaches, analysed 23,986 security incidents from 1 November 2020 to 31 October 2021, and found that ransomware attacks had increased by 13 percent in a single year in 2021, a jump greater than the past five years combined.

According to the report, organised crime continues to be a pervasive force in the world of cyber security, with four out of every five breaches attributed to it over the last 12 months. External actors were approximately four times more likely to cause breaches in an organisation than internal actors, the report notes. Furthermore, the coronavirus (COVID-19) pandemic, as well as ongoing and increasingly fraught geopolitical tensions, have also impacted cyber security, driving increased sophistication, visibility and awareness around nation-state affiliated cyber attacks.

“Over the past few years, the pandemic has exposed a number of critical issues that businesses have been forced to navigate in real-time,” said Hans Vestberg, chief executive and chairman of Verizon. “But nowhere is the need to adapt more compelling than in the world of cybersecurity. As we continue to accelerate toward an increasingly digitized world, effective technological solutions, strong security frameworks, and an increased focus on education will all play their part in ensuring that businesses remain secure, and customers protected.”

Verizon also pinpointed the risk faced by supply chains. Supply chain issues have come to dominate the international economic landscape over the past year, and the cyber security space is no different. According to the report, 62 percent of system intrusion incidents came through a supply chain partner of the target organisation.

Twenty-five percent of total breaches were the result of social engineering attacks. The human element accounts for 82 percent of analysed breaches over the past year, including human errors and misuse of privilege. Specifically, human error is responsible for 13 percent of breaches according to the report. ‘Misconfigured cloud storage’ was reported to have been a key driver behind this increase. Stolen credentials and phishing were also dominant among the attacks involving human elements.

“Assess your exposure, mitigate your risk, and take appropriate action,” suggested Dave Hylender, lead author of the report. “As is often the case, getting the basics right is the single most important factor in determining success.”

News: Ransomware threat rises: Verizon 2022 Data Breach Investigations Report

Centennial and Colgate Energy to combine in $7bn deal

BY Fraser Tennant

In a major merger of equals transaction, US oil and gas company Centennial Resource Development, Inc. and oil exploration and production company Colgate Energy Partners III, LLC are to combine in a deal valued at $7bn.

The merger values Colgate at approximately $3.9bn and is comprised of 269.3 million shares of Centennial stock, $525m of cash and the assumption of approximately $1.4bn of Colgate’s outstanding net debt.

The cash consideration and the repayment of Colgate’s outstanding credit facility borrowings at closing are expected to be funded with cash on hand and borrowings under an upsized revolving credit facility.

“This transformative combination significantly increases scale and drives accretion across all our key financial and operating metrics,” said Sean Smith, chief executive of Centennial. “Importantly, the combined company is expected to provide shareholders with an accelerated capital return programme through a fixed dividend coupled with a share repurchase plan.”

Moreover, the combined company will be the largest pure-play exploration and production (E&P) company in the Delaware Basin with approximately 180,000 net leasehold acres, 40,000 net royalty acres and total current production of approximately 135,000 barrels of oil per day.

“The merger of Colgate and Centennial is compelling from a financial, operational and strategic standpoint, establishing a leading Permian Basin independent,” said James Walter, co-chief executive of Colgate. “We believe the pro forma company is positioned to maximise returns for our new investor base, with our combined management team bringing a track record of operational excellence and strategic value creation.”

The transaction has been unanimously approved by the boards of directors of both companies and is expected to close in the second half of 2022.

Upon closing, Sean Smith will serve as executive chair of the board of directors of the newly combined business, and James Walter and Will Hickey, co-chief executives of Colgate, will lead the company as co-chief executives and serve on the board of directors.

The combined company will operate under a new name which is expected to be announced prior to closing.

Mr Hickey concluded: “We expect the combined company will be a top-tier, low-cost operator that is able to deliver better margins and shareholder returns.”

News: Centennial, Colgate Energy combine to create $7-bln Permian basin producer

Tech company Pareteum files for Chapter 11

BY Fraser Tennant

In order to facilitate an efficient sale process and position itself for long-term success, communications technology company Pareteum Corporation and certain affiliates has filed for Chapter 11 bankruptcy protection.

Prior to the Chapter 11 filing, the board and management of New York-based Pareteum evaluated a wide range of strategic alternatives and implemented a strategic asset sale strategy.

After a thorough marketing process to obtain a ‘stalking horse bidder’ for a court-supervised sale process, and as a result of arm's length negotiations, Circles MVNE Pte. Ltd has combined with Channel Ventures Group, LLC to execute a stalking horse asset purchase agreement for substantially all of Pareteum’s assets.

Pareteum expects to continue operations as usual during the Chapter 11 process and complete the process swiftly. To help fund and protect its operations, the company has received a commitment from Circles for up to $6m in debtor-in-possession (DIP) financing.

Upon approval from the bankruptcy court, the DIP financing, along with normal operating cash flows and the consensual use of cash collateral, will fund post-petition operations and costs under normal terms.

“Pareteum has faced numerous challenges in the last few years, especially in light of an increased cost of capital and the coronavirus (COVID-19) pandemic and has been working towards resolving legacy corporate issues while making progress to lay a foundation for future growth,” said Bart Weijermars, interim chief executive of Pareteum. “Despite our business challenges, our products and services that we provide to customers remain strong and relevant in this competitive industry.”

These challenges include accusations of fraud, as well as a number of shareholder lawsuits filed in the wake of a Securities and Exchange Commission (SEC) investigation into inflated revenue reports.

“We look forward to using the Chapter 11 process to position our business for sustained future success across our business lines,” continued Mr Weijermars. “By taking today's decisive and positive step, we are confident that under new ownership, the business can be best positioned for growth and to reach necessary scale and its full potential.”

News: Communications tech company Pareteum approved to tap bankruptcy loan