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Financier Worldwide gathers the opinions of the corporate advisory and dealmaking community to explore insights into current and emerging trends for the year ahead.

MERGERS & ACQUISITIONS

Rick van Dommelen

PwC

“After years of recession and a slow deals market, a steep increase in M&A activity was noted in many European markets in 2014. Although it’s fair to say that the increase in activity has not yet led to a large increase in closed transactions as many deals were aborted, the increase in value terms was significant. Driven by a number of large deals, the average deal size grew, which gives comfort that the trend is poised to continue in 2015. The main drivers of this acceleration in M&A activity were the positive economic outlook and market conditions, which led to a growth in consumer confidence. At the same time, M&A picked up as companies were realising the fruits of their cost-cutting initiatives and started investing the cash on their balance sheets, supported by the low interest rates.”

BANKRUPTCY & RESTRUCTURING

Ignacio Buil Aldana

Cuatrecasas, Gonçalves Pereira LLP

“The March 2014 insolvency reform, implemented by means of the Royal Decree-Law 4/2014, dated 7 March, of urgent measures on refinancing and corporate debt restructuring, which was ratified by Act 17/2014, of 30 September, introduced several key amendments to the Spanish Insolvency Act (SIA). These amendments were aimed at enhancing the deleveraging of viable Spanish companies, and facilitating prepetition restructuring deals. Among the changes to the SIA, certain measures were introduced to facilitate debt-for-equity swaps as a mechanism to refinance debtors under financial distress.”

BANKING & FINANCE

Neil Kinson

Redwood Software

“All too often, finance and accounting professionals find themselves passing around spreadsheets and looking for answers. In fact, these individuals hold a great number of untapped insights and business analytics that can be unlocked if less time was spent on the manual challenges and repetitive tasks that compromise the effectiveness of finance and accounting teams. No single activity hijacks more time and effort from finance teams than financial closures. This process is demanding, labour-intensive and typically requires large amounts of scrutiny and time from senior finance professionals across the business. This is because most companies still rely on sheer manual effort to get the numbers right, before they validate and explain them, making the financial close process far more laborious than it needs to be.”

Oleh Zahnitko

Gide Loyrette Nouel

“The Ukrainian banking regulatory framework experienced a number of shocks in 2014 following the deterioration of the country’s political situation. Structural changes in the financial sector were long overdue, with the system boasting too many players, with dispersed resources and low capitalisation. The Bill on Measures Directed to Facilitation of the Capitalization and Restructuring of the Banks was voted in on 28 December 2014, enacting a regulatory initiative of the National Bank of Ukraine (NBU) which concerned a moratorium on banks paying dividends in 2015 to 2016. Profitable banks will only be able to re-capitalise and replenish their reserves.”

FINANCE & INVESTMENT

Armineh Gharibian

Mayer Brown LLP

“Since the collapse of Lehman Brothers in September 2008, Lehman certificates have formed the subject of several litigations around the world. In Germany alone, the number of Lehman investors who have lost their investments as a consequence of the insolvency of Lehman Brothers is estimated to range between 30,000 and 50,000, with their losses believed to be more than €700m. Accordingly, a number of those affected investors have been trying to recover their losses from financial institutions that are alleged to have provided insufficient advice about the risks when recommending Lehman certificates to them.”

Corwin Zass

Actuarial Risk Management, Ltd. (ARM)

“We define risk as an event that causes a negative financial impact to the party exposed to such event. An example of longevity risk is an entity providing a payment contingent on a person remaining alive and ceasing when the person dies. The entity is negatively impacted by a person living longer than the anticipated life expectancy which was used to set the payment schedule. Mortality risk is the opposite, with an entity paying at the point of death. A good example of this would be life insurers who are negatively impacted if they end up paying death benefits earlier than originally assumed in the life insurance contract premiums.”

CORPORATE TAX

Georg Edelmann

Noerr LLP

“The German finance minister repeatedly announces increased receipts from corporation tax, income tax, VAT, real estate transfer tax and inheritance tax. The increased tax receipts are obviously the result of improved economic performance brought about by ambitious reforms during the past decade. Public opinion too, as indicated in media reaction to prominent cases of tax evasion and structures regarded as being too aggressive, is also more favourable to tax enforcement with consequent support for legislative and administrative efforts to increase tax receipts.”

Chris Woo

PricewaterhouseCoopers Services LLP

“On 16 September 2014, the Organisation for Economic Cooperation and Development (OECD) published its recommendations on seven out of the 15 areas of the Base Erosion and Profit Shifting (BEPS) Action Plan. With the mid-point of this project now passed, multinational enterprises (MNEs) must ensure that they remain abreast of these developments, and monitor their business and tax practices vigilantly in order to guarantee the consistency and sustainability of their business and tax models.”

RISK MANAGEMENT

Dr Richard Piggin

Atkins

“The most significant hack since Stuxnet targeted Iran’s uranium enrichment program in 2010 caused massive damage to a German manufacturer, according to a report published by the Federal Office for Information Security (BSI) in December. The significance has been lost to many in the media as major attacks against Sony and Microsoft stole the limelight. This is probably the only publicly known incident where physical damage to a plant has been deliberately caused by malware since Stuxnet. The devastating attack demonstrates security cuts across entire organisations and highlights the very real need for companies to think more broadly about how they protect themselves against cyber attack.”

Katie Cooper

Nabarro

“A cyber security breach is an incident involving the loss of or unauthorised access to data or IT systems. Common causes include theft or error by employees, malware such as viruses and attacks by hackers. It is the latter that has been the subject of recent high profile breaches, such as those affecting US retailer Target and the operator of South Korea’s nuclear plant. The Department for Business Innovation and Skills (BIS) 2014 survey on cyber security breaches indicated that, of its respondents, 81 percent of large organisations and 60 percent of small organisations had experienced a security breach in 2014. These statistics are a reminder that all businesses are at risk.”

SECTOR ANALYSIS

Mary Russell

Marsh USA Inc.

“After experiencing little growth last year, chemical firms could be in for a revival in 2015 as shale gas production is poised to provide a boost to the sector. One result of the growth in the space could be an increase in mergers and acquisitions (M&A). And that, in turn, can bring a number of risks, not the least of which relates to environmental liability. Already the largest producer of shale gas in the world, having tripled production since 2009, US shale gas production is slated for another increase in 2015. The US Energy Information Administration (EIA) anticipated in its 2014 annual energy outlook that shale gas will provide the largest source of growth in the US natural gas supply from 2012 to 2040, having previously noted that by 2035 shale gas production will account for 49 percent of all gas produced.”

INTELLECTUAL PROPERTY

Naoki Yoshida

Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P.

“The statute on patent eligibility in its present form was codified in 1952. Section 101 of the US Patent Law states, “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefore,...” 35 U.S.C. § 101 (1952). Courts in the US have interpreted this provision broadly. The US Supreme Court, at one time, proclaimed Congress intended statutory subject matters to include “anything under the sun that is made by man”. This was the beginning of biotechnology patents. The Federal Circuit also interpreted 35 U.S.C. § 101 broadly and categorised “methods of doing business” as another patentable subject matter. State Street Bank & Trust Co. vs. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998). Subsequently, a flood of applications directed to business models were filed and many business method patents were granted by the US Patent and Trademark Office (PTO). Those were good old days for inventors in the US.”

Fabrizio Cugia di Sant’Orsola

Cugia Cuomo & Associati

“The EU Court of Justice is due to issue a much-awaited landmark decision on the question of standard essential patents (SEPs), dealing with whether an owner of an SEP may legitimately file for injunction relief against violators of its intellectual property (IP) rights. In his clarifying, and non-binding, opinion on a dispute regarding an essential patent for 4G LTE standards in mobile communications, issued on 25 November 2014, Advocate General Wathelet (AG) clarified a number of fundamental points. Given the fundamental importance of SEPs to general technological development, an owner of SEP patents must commit and propose to the involved parties a licence on fair, reasonable and non-discriminatory (FRAND) terms. Failure to do so may trigger an abuse of dominance behaviour, given a general presumption that SEP owners are market dominant.”

EMPLOYMENT LAW

Poorvi Chothani

LawQuest

“In recent months, the government of India has introduced certain significant changes to Indian immigration law. These modifications are aimed at sustaining India’s economic development, protecting the interest of Indian nationals working overseas and maintaining reciprocity with foreign countries. Certain states within India are also changing their labour laws to attract new business and investment in their regions. Foreign nationals changing employers within India: Any foreign national who needs to change his or her employer within India requires the implicit approval of the Ministry of Home Affairs (MHA). The change of employer is permitted no more than once during the five year tenure of the original employment visa.”

CONTRIBUTORS

Actuarial Risk Management, Ltd. (ARM)

Atkins

Cuatrecasas, Gonçalves Pereira LLP

Cugia Cuomo & Associati

Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P.

Gide Loyrette Nouel

LawQuest

Marsh USA Inc.

Mayer Brown LLP

Nabarro

Noerr LLP

PricewaterhouseCoopers Services LLP

PwC

Redwood Software