finance
monthly
Personal Finance. Money. Investing.
Contribute
Newsletter
Corporate

Millions of risk calculations flow through sophisticated banking software every day, to help the institution build an overall risk profile: Take on too much risk, and the bank could lose its customers’ trust, or worse. Take on too little, and the bank sacrifices growth.

Occasionally, banks face risks that they didn’t anticipate, or adequately plan for--from liquidity challenges, technology glitches and infrastructure failures to natural disasters, supply chain disruptions, and cybercrime. Such incidents unfold quickly and can take jarring twists and turns, requiring constant vigil over every new piece of relevant information that emerges.

Sometimes, instead of managing such risks, banks have found themselves wrestling with an unwieldy issue that grows into a full-fledged crisis, threatening the institution’s people, operations, and reputation.

In a 2019 survey from PwC[1], 7 out of 10 senior leaders said their company had experienced at least one major crisis in the past five years.

In the same survey, PwC identified the 19 most common crisis vectors that companies faced globally in 2019:

23%: Financial/Liquidity

23%: Technology failure

20%: Ops failure

19%: Competitive/Marketplace disruption

16%: Legal/Regulatory

16%: Cybercrime

16%: Natural disaster

15%: Leadership transition

14%: Supply chain

14%: Product failure

12%: Leadership misconduct

11%: Ethical misconduct

9%: Viral social media

9%: Geopolitical disruption

9%: Product integrity

8%: Workplace violence

7%: Shareholder activism

7%: Humanitarian

5%: Terrorism

Recent examples of banking crises abound.

In late 2019, Lloyds Banking Group told investors[2], its losses related to the ongoing payment protection insurance crisis had grown to nearly £22 billion. Its Chairman, Lord Blackwell, has agreed to step down[3] by mid-2021.

In 2016, American regulators levied tens of millions of dollars in fines against banking giant Wells Fargo, which admitted its employees had systematically opened fake accounts to hit aggressive sales targets. Then-CEO John Stumpf resigned, and in 2018, the institution agreed to pay $575 million[4] to settle state consumer protection lawsuits. The fallout, and related legal costs, continue to dog the bank.

Similarly, there are numerous recent examples of financial institutions facing technological failures, risks from new regulations, cybercrime and shareholder activism. On a routine, day-to-day basis, risk and crisis management teams at financial institutions monitor the safety of the bank’s physical assets, employees, executives and brand.

Customers, shareholders, and employees of banks increasingly expect that financial institutions will keep pace with the speed of the world and adjust to new demands promptly.

Increasingly, banks are turning to artificial intelligence to help them parse through billions of data points in public data sources to identify emerging operational risks. Artificial intelligence is capable of looking for patterns in unstructured data to detect risk faster than traditional sources of information, like news organisations or social media topic lists.

For example, in early January, the US Federal Aviation Administration announced it was halting commercial airline traffic over Baghdad, and portions of the Middle East, amid increasing tensions in the region following the targeted killing of a senior Iranian military commander. AI-powered software from Dataminr surfaced that alert to its commercial clients within seconds, prompting a large American bank to order an immediate halt to all employee travel to the region. Similarly, Dataminr’s platform quickly alerted its clients to the downing of Ukraine International Airlines flight 752, prompting that bank to immediately check if any of its employees or partners were on board.

Customers, shareholders, and employees of banks increasingly expect that financial institutions will keep pace with the speed of the world and adjust to new demands promptly. This speed is increasingly dictated by the rate at which public information breaks -- in real-time, every second, across thousands of data sources, in multiple languages and formats. The institutions that can extract value quickly from troves of public information will be best positioned to outpace competitors and deliver measurable value to all their stakeholders.

 

[1] https://www.pwc.com/gx/en/forensics/global-crisis-survey/pdf/pwc-global-crisis-survey-2019.pdf

[2]https://www.lloydsbankinggroup.com/globalassets/documents/investors/2019/2019_lbg_q3_ims_transcript.pdf

[3]https://www.bbc.com/news/business-50246479

[4]https://www.attorneygeneral.gov/taking-action/press-releases/attorney-general-shapiro-announces-575-million-50-state-settlement-with-wells-fargo-bank-for-opening-unauthorized-accounts-and-charging-consumers-for-unnecessary-auto-insurance-mortgage-fees/

As a mechanism for fostering growth and increasing shareholder value, M&A is an important tool. In particular, cross-border mergers and acquisitions (M&A) can be a useful springboard for those eyeing expansion and future prosperity. Cross-border M&A​ has emerged to quickly gain access to new markets and customers. Cross-border deal activity continues and companies will need to weigh the risks and rewards of engaging in these ventures against making greenfield investments.

Advantages of cross-border M&A include expediting time to market, gaining access, scale, brand recognition and mitigating competitive moves. At the same time, companies are acknowledging the challenges posed by cross-border deals in terms of market assessment, regulatory evaluation, cultural fit and deal structure evaluation.

M&A market development and forecast

Based on international data*, global M&A activity in 2019 was down 6.9% compared with 2018 (which was a historical high), but still above 2016 and 2017 levels. Cross-border transactions have been reduced in the same time period by 6.2%. Taking a deeper look in the different regions of the world, transactions developed in different ways. While APAC and Europe report a significant downturn, MEA, Japan and Latin America report an increase. Also, Inbound and Outbound transactions evolve in different ways.

Figure 1 - M&A Market Datasource*: Baker McKenzie, Mergermarket, Deloitte - own illustration

M&A professionals expect that global deal-making will experience a continued hangover in 2020 due to ongoing worldwide economic uncertainty and the risk of a global recession. The deal flow in the next years will be mainly driven by technology, market consolidation, investor activism and private equity.

However, acquisitions do remain an important growth strategy for companies worldwide. It’s expected that economic conditions will improve by sometime in 2021 and the forecast predicts a subsequent uptick in transaction activity – especially in cross-border transactions.

The rewards of cross-border M&A

Several drivers create a considerable business case for cross-border M&A transactions. Saturation or slowdown in core markets and the need for diversification are the primary drivers. But regulatory uncertainty in home markets and high repatriation costs of overseas earnings, technology and productivity enhancement synergies are important drivers as well.

Based on these general considerations, companies take the extra effort of cross-border M&A transactions only if they can achieve substantial rewards from the specific target. Historically, the most important reward was to diversify the revenue streams of companies; either in product diversification or geographic diversification (portfolio diversification). At the same time, a regulatory environment which ensures investment protection or generates substantial tax benefits is a meaningful reward which can be realised (favourable regulatory environment).

By entering a new market through acquisition, companies can aid cost efficiencies if it increases sales (cost synergies). Besides costs, new markets create access to new customers and allow to scale fast (scale efficiencies), whilst besides these key rewards, companies can realise other rewards like access to new talents, adding new distribution networks or securing new product technologies.

The risks of cross-border M&A

Like with every strategic decision, rewards come with some specific risks. Due to the fact that every country has different tax laws, tax is a considerable risk. At first glance, getting tax security seems tedious, but getting blindsided by tax regulations can be very costly (tax). Besides tax regulations, other countries have different regulations for products, operational management, human resources, etc. This risk enforces a detailed analysis of the regulatory landscape of the target. A country’s political stability can also begin to totter, especially in the case of a change in Government; not only for developing countries but also for mature states (political landscape). In addition to “hard” facts, differences in culture and talent should not be forgotten.

Due to these risks, acquiring companies may have to recalibrate their perceptions of risk and their traditional due diligence process to address both common and unique risk factors that accompany cross-border M&A transactions. The deal team will need to focus on common risk factors such as national and regional tax laws, availability, accuracy and reliability of the target, company’s financial information, the country’s political stability and the target’s compliance with the required regulations.

Integrated M&A Maturity Model for efficient cross-border M&A deals

The complexity of cross-border M&A forces companies to establish efficient structures and processes. With integrated M&A transaction management, all necessary components for a successful transaction can be bundled. This approach ensures that all necessary experiences in merger & acquisition projects in terms of integrated control tools, project management tools and more are in place. With M&A 4.0 oriented platforms and tools it´s possible to increase process and cost efficiency, transaction security and the speed of the transaction.

Executive summary for cross-border M&A

Companies can generate significant rewards in cross-border M&A and increase their corporate value. Executives should plan ahead, conduct thorough due diligence and closely manage pre- and post-deal execution.

Below are some leading practices, based on the experiences of several M&A deals:

 

About ARTEMIS Group and the Author

ARTEMIS Group is an international and cross-sector corporate finance and M&A consulting boutique for start-ups and medium-sized companies, active in the market since 2001. The core services cover mergers & acquisitions, corporate finance and advisory services. Based on a wide strategic partner network, ARTEMIS Group has a footprint in all relevant markets.

Torsten Adam, Managing Partner at ARTEMIS Group, has more than 25 years of work experience in mergers & acquisitions, corporate finance and advisory services. His core competencies are in the M&A transaction management, cross-border projects, structured and project finance as well as advisory services. He has been involved in numerous projects in the fields of automation & digitalisation, renewable energies & cleantech, agriculture & food and FinTech/financial services. Adam has overseen various cross-border M&A transactions with involvement from Asia, Africa, the Americas and Europe.

Complaint handling regulation has been in force in UK financial services for as long as I can remember – which is quite some time! During that time the complaint handling rules (DISP), have been amended several times by the incumbent regulator, with the most recent change being made in 2016. All these iterations have been designed to make the process more effective by improving the process of registering a complaint and ensuring that each and every issue raised is carefully and fairly evaluated.

From 2009, the regulator instigated a change which has seen them publishing details of all firms receiving over 500 complaints in the previous six-month period, in an attempt to name and (dare I say it) shame firms into taking appropriate action to reduce their volumes.

All of this is well known and even when taking the spike in complaints caused by the PPI deadline into account, the most recent published set of data (for the first half of 2019) revealed some interesting headline figures as the table below shows:

FCA Aggregate Complaint Data (minus PPI)  

2019 – H1

 

2018 – H2

Total Complaints 2.175m 2.231m
Complaints Upheld 57% 56%
Redress Paid £284.3m £267.7m

 

A non-complaint specialist could look at these figures in a number of ways. An optimist would no doubt point to the fact that, with the exception of the total redress, the figures show a decline, albeit modest, so therefore, cause for good news.

A more critical eye however, would argue that despite firms being well educated on the need to reduce both complaint volumes and the inconvenience and distress to customers, the figures are stubbornly high. Indeed, looking at the figures for the first half of 2018 and 2017, the total complaint figures mirror the very gradual decline shown on the table above. Compounding this is the telling statistic that over half of the complaints registered were upheld. In other words, in over a million cases the firm agreed that the complainant was justified in their complaint and had been mistreated. Yes, the financial services industry is large with around 50,000 or so regulated firms operating in the sector. However, the vast majority of these firms are small and to illustrate this point, several major high-street banks opened over 200,000 non-PPI related complaints in 2019 H1.

Therefore, given the number of complaints and the percentage that are upheld, the more critical observer might begin to wonder whether there is something more deep-rooted about the way firms treat their customers. From a regulatory point of view, these figures must continue to be depressing reading. If we look back in time to 2006 when the Treating Customer Fairly (TCF) initiative was introduced, it asked firms “to put consumers at the heart of their business”. Given that was over ten years ago, it doesn’t look like we are making much progress as an industry does it? For some time now the topic of complaints is likely to have been a standing item on any Board’s agenda, however, are firms making the progress one would expect? These figures suggest not.

“Poor culture is one of the fundamental root causes of financial misconduct and harm to market integrity, alongside firms' own business models and strategies”.

To provide some perspective, we must bear in mind that the rise of “consumer champions” such as Martin Lewis and all the consumer-focused programmes that urge consumers to complain is no doubt fuelling some of what we seeing in the financial services market place. However, surely these stubbornly high figures cannot be attributed to that alone.

For some time, the regulator has talked about the importance of developing a customer-centric culture, with limited success it appears. However, two things have changed and will likely make complaint handling a priority, not just an agenda item, for main boards.

  1. SM&CR and Culture

The FCA have made it clear, certainly to those banking and insurance firms that have been subject to SM&CR since 2016, that they expect to see the regime as a major driver for culture change in firms. Jonathon Davies, the FCA’s Executive Director of Supervision, Retail and Authorisations said in a recent podcast [1]: “Poor culture is one of the fundamental root causes of financial misconduct and harm to market integrity, alongside firms' own business models and strategies”.

For this reason, tackling firm culture is a "huge priority" for the regulator. In the same podcast, he also said: “SM&CR is about cultural change, not just compliance, and real personal and regulatory expectations are being put on senior managers to lead and do the right thing".

Separately, in a recent survey by the FCA of firms who implemented SM&CR in 2016 [2], questions were asked about how well SM&CR has been embedded. The survey cited many positive signs. However, the FCA concluded; “It is not clear to what extent the regime has been linked to culture”.  In the same survey, the FCA cited that firms said that whilst SM&CR had changed senior managers’ thinking: “there is some room for further progress at the Certification level and potentially more significant weaknesses in the implementation of the Conduct Rules for other staff”.

  1. Evaluating Culture Change

In the FCA’s latest Business Plan[3], culture change was cited as a key cross-sector priority; “Culture plays a critical role, a healthy culture, focused on delivering consumer outcomes, helps individuals in firms to make the right judgements that do not result in consumer or market harm. Conversely, weak governance or poor culture increase the likelihood that harm will occur”.

The FCA went on to say: “There are significant challenges in both measuring culture objectively and in establishing the causal link between cultural change and consumer, market and business outcomes”. However, the FCA go on to say: “…we can measure this (culture change) through upheld complaints levels, consumer redress levels and feedback from consumers”.

Culture is complex and notoriously difficult to change, and if change is to be achieved, action is required on a number of levels.

Bringing these various strands together, we have in the FCA, a regulator that expects the industry to ‘do the right thing’ for consumers. It sees poor culture as a key root cause of financial misconduct and sees complaint levels as a key indicator of culture change. Finally, the fact that complaint levels are in the millions and, whilst reducing, are doing so very slowly suggests there is much work still to do.

So, if culture change is the key to reducing complaints, how might we go about tackling this?

Culture is complex and notoriously difficult to change, and if change is to be achieved, action is required on a number of levels. Using recent messages from the FCA’s executives and its SM&CR survey, a programme designed to address the underlying causes of complaint levels could look like this:

  1. Senior Management

It’s clear that the FCA expects senior managers in firms to take the lead and set the tone and direction for making the firm more responsive to customers. Whilst the FCA have stated that their research indicates that the Senior Manager’s Regime (SMR) is being embedded with some success in firms, they do not appear to have the same level of confidence around the effective training and implementation of the new Conduct Rules. In his recent podcast, Jonathan Davidson talked about conduct rules being 'almost a pledge' where employees uphold the four fundamental behaviours, i.e. acting with integrity, due skill, care and diligence; treating customers fairly; being open with regulators; and keeping to proper standards of market conduct, can and should ‘push back’ against any behaviour going against these fundamentals.

Therefore, in addition to setting the tone through their own behaviour, the second focus for senior managers is to focus on training individuals in what the Conduct Rules mean in the context of their own roles.

  1. Conduct Rules

The second area is to focus on embedding the newly implemented Conduct Rules regime to the same degree as has been achieved with the SMR. Using the results of its own survey, the FCA points to different priorities for each regime, however, a key finding focuses on role relevant training.

Secondly, staff should feel able to use this increased awareness and capability to speak up if they see or are being asked to do things that contravene this conduct rule ‘pledge’. Of course, the other side of this is that management at all levels should work to create an atmosphere where staff feel empowered to speak out. The banks and insurers, who have been live with SM&CR since 2016, have seen a Prescribed Responsibility introduced that seeks to ensure that the firm’s internal whistleblowing procedures are known and provide protection of staff who raise concerns. Although there is no whistleblowing Prescribed Responsibility for Solo Regulated firms, given the links between whistleblowing and a healthy culture, there is every reason to believe the FCA still expects whistleblowing to be ‘front of mind’ for executives.

  1. Re-review Complaints

If the first two actions are ‘top-down’, the final action is more ‘bottom-up’. An expectation of the DISP rules is that firms conduct root cause analysis (RCA) of their complaints as part of their overall complaints process management.  Where systemic and/or recurring issues are identified, then the firm should expect to put plans in place.

However, with the new and increased focus on complaints in the context of culture change, it would be prudent to re-view them with a particular focus on root causes that are borne out of culture. Difficult as it may be the results of this analysis should be taken on board by senior management and specific actions put in place to address the common causes of complaints that are rooted in ‘poor culture’.

There are many research studies that have found that focusing on complaints and their root causes turn complainants into brand advocates [4]. Positioning a case for a re-review of complaints to senior management as good business sense would make it far easier to get ‘buy-in’.  And, given the complaint figures at the beginning of the article, really addressing these root causes could deliver significant business advantage for the firm.

Whilst the concept of ‘zero complaints’ is an impossibility, taking action in these areas could have a major impact in reducing the number of complaints and amounts paid out in redress each year. Finally, it would demonstrate to both the regulator and consumers alike that it is serious about culture change and putting consumers at the heart of what it does.

 

[1] https://www.fca.org.uk/media/podcast/inside-fca-podcast-interview-jonathan-davidson-and-jayne-anne-gadhia-culture-and-smcr

[2] https://www.fca.org.uk/publications/multi-firm-reviews/senior-managers-and-certification-regime-banking-stocktake-report

[3] https://www.fca.org.uk/publication/business-plans/business-plan-2019-20.pdf#chapter-5

[4] https://hbr.org/2018/01/how-customer-service-can-turn-angry-customers-into-loyal-ones

Tell us more about the services that Caunce O’Hara offers? What are the most common issues that freelancers approach you with?

Caunce O’Hara offers insurance to freelance contractors including Professional Indemnity, Business Combined (including Liabilities) and Tax Enquiry & Legal Expenses. In addition to these policies, we offer many other types of insurance, all tailored specifically to the freelance sector.

The most common issues that we are approached with are clients being requested to hold insurance, at set levels of cover, for their contract.  A lot of freelancers are unaware of what these insurances are, and our award-winning team are on hand to help them. In reality, freelance contractors are busy individuals who don’t want to waste time completing reams of paperwork to get a quotation and they need their certificates immediately. With Caunce O’Hara, we have a very short online application form, which we can also do over the phone if preferred, and certificates are sent instantly by email. You can apply, purchase cover and access your certificates within five minutes.

What are the most common challenges that freelancers and contractors face when it comes to insurance?

Currently contractors are facing an uncertain period due to the changes in IR35 legislation, come April 2020, whereby they are required to prove that they fall outside of IR35 rather than inside.

A large number of freelancers are simply opting not to do anything at this stage and see if the onus is passed onto others, i.e. their agency, but we, at Caunce O’Hara, are being proactive and are offering a number of ways to assist freelancers in proving they fall outside of IR35.  For example, we have a Tax Enquiry & Legal Expenses Insurance, which covers the cost of defending an IR35 investigation. In addition, as an extension to this, we are offering a Contract Review service which will assist you by letting you know if your contract will pass or fail an IR35 investigation. If your contract fails, we will guide you towards the areas you need to get your client to amend to protect you.

Currently contractors are facing an uncertain period due to the changes in IR35 legislation, come April 2020, whereby they are required to prove that they fall outside of IR35 rather than inside.

What are the particular challenges that insurers in the UK have been facing over the past year in relation to changes in what customers expect in terms of products and services?

The main challenge we have seen is competition and customers expecting price reductions. The insurance sector is very competitive and we pride ourselves on not only our extremely competitive rates but also excellent policy wording. Our products are of the highest standard which is matched by the customer service we provide. We have a great number of clients return to us year on year because we are excellent on price and quality.

Looking forward, what’s on Caunce O’Hara’s agenda for 2020?

Growth!  Whilst it is naturally what all businesses wish for we have a huge appetite for growth and are excited to be going into 2020. With the challenges of IR35, we realise the difficulty facing freelancers over the coming months and our aim is to be there and support our clients. The next few months will be challenging but we are ready to meet them head-on!

With its five offices in Turkey (in Istanbul, Ankara, Izmir, Bursa and Denizli) and newly opened offices in Russia and Morocco, the full-service law firm provides a broad spectrum of consultancy services in the fields of social security, customs, legal, and tax with experts from different disciplines to both local and multinational clients.

With many foreign investors attracted to Turkey’s strong economic performance and outlook, can you outline the key considerations for foreign corporate entities wanting to establish business operations in Turkey?

With its large domestic and regional markets, Turkey is one of the fastest-growing economies in the world. Its strategic location provides global connectivity for MNEs. Moreover, the country’s young population is seen as a cost-competitive labour force for many international corporations. The legal environment in Turkey has become extremely investor-friendly thanks to developments in the tax and judiciary system. Pursuant to the Foreign Direct Investment (FDI) Law No. 4875 in Turkey, international investors have gained equal rights and obligations with local investors.

Is Turkey’s tax regime more suited to particular types of business? If so, what are they and what makes them suited to Turkey?

Turkey offers a range of opportunities for a wide variety of sectors by offering generous tax exemptions or deductions. Some of the main contents of incentives are:

Incentives provided for investments can be listed as general investment incentives, regional investment incentives, strategic investment incentives, and project-based investment incentives. Reduced corporate tax, allocation of free investment site, compensating employers’ share of social security premium, interest support, customs and VAT exemption are some of the incentives provided to all investors including foreign ones.

International companies which move their regional management centres to Turkey are also offered special tax advantages.

In Turkey, income tax incentives are provided for newly hired employees. Moreover, the Turkish Employment Agency (“İŞKUR”) offers cash support for employment and personnel training. The Government grants a significant incentive for R&D activities and supports firms within the framework of the Law on Supporting Research and Development Activities No. 5746 and the Law on Technology Development Zones No. 4691. Additionally, TUBITAK supports the research, technology development, and innovation activities of companies with different support mechanisms. International companies which move their regional management centres to Turkey are also offered special tax advantages. On the other hand, special regimes, and tax advantages are provided in the scope of export incentives. Pursuant to Article 11/1-a of the VAT Law No. 3065, export deliveries and services are exempt from VAT.

Overall, there are numerous favourable mechanisms for companies who invest in production, technology and exportation in the country.

Tell us more about the tax services you offer?

At Nazali Tax & Legal we combine expertise and experience with an innovative and dynamic business approach which understands the needs of our clients. We offer truly comprehensive services to our clients and the fact that we have experts from both legal and financial backgrounds means that we’re able to look at a specific case from numerous different points of views. We develop and apply rational tax planning and strategies by virtue of interdepartmental communication. Our services cover not only compliance with tax laws and regimes but also dispute resolution.

What’s on Nazali Tax & Legal Services’ agenda for 2020?

Our goal is to be an international legal consultancy firm and we’re trying to achieve this by broadening our interdependence among countries. We’ve recently opened offices in Russia and Morocco, we’ve set up operations in The Netherlands and we plan to open offices in New York, London and The Netherlands in the near future. Our plan is to offer legal consultancy on a wide range of cases, including cross-border investment projects and multi-jurisdictional M&A projects, and we also aim to offer litigation services to Turkish companies doing business in countries where we have offices. Our core objective is to establish a long-term and trust-based relationship with our clients and to provide the most convenient service in the most accurate and fastest way. We believe that our globalised approach and knowledge-based services will help us to achieve these objectives.

Previously, he’s served as the President of SPP Hambro, the US subsidiary of Hambros Bank plc. Prior to his tenure at SPP, Mr Shaffer was Vice President in the Private Placement Group at Bankers Trust Company. He began his professional career as an attorney with the White & Case law firm. We caught up with Mr Shaffer to discuss raising debt and equity in the private capital markets.

Tell us a bit more about SPP Capital Partners and the typical transactions you work on.

For over 28 years, SPP Capital Partners has maintained a consistent and active practice structuring and raising private debt and equity for our corporate and equity sponsor relationships.

Over the course of our history, we have completed approximately 500 transactions, representing more than $23.6 billion of capital. During the last twelve months alone, we have been mandated on and/or closed more than $1 billion of capital.

We maintain extensive relationships with more than 700 institutions that span every major lending and investing constituency in the private capital markets and source capital through professionally managed, competitive auctions that are tailored to achieve the client’s particular capital objectives.

We believe the consistency of our deal flow and our extensive relationships with a wide variety of capital providers offers our clients:

Since 2010, we have tracked each bid we’ve received on every deal the firm has marketed. Today, the SPP analytics database is comprised of approximately $15 billion of bid data. The strong reliance on empirical data has resulted in an average oversubscription rate in excess of 6.0x for SPP led transactions, which provides our clients with both certainty of closing and an extensive menu of options on any given capital raise.

Over the course of our history, we have completed approximately 500 transactions, representing more than $23.6 billion of capital.

In addition to our Investment Banking practice, we have a direct lending platform, SPP Mezzanine Partners. SPP Mezzanine Partners is a privately-held investment management firm founded in 2003 to provide subordinated, second lien, and unitranche debt, along with equity co-investments, for established lower middle market companies with proven business models, stable cash flows and strong management teams.

What business sectors have you worked with in 2019?

SPP’s practice covers consumer goods, restaurants and retail, business services, industrial goods, basic materials, financials, healthcare, manufacturing, conglomerates, technology and utilities.

Our practice over the course of the last decade has become increasingly equity sponsor centric. To date, we have raised debt and equity capital for more than 60 leading private equity firms and their portfolio companies. Our successful transaction history and demonstrated value proposition have often led to multiple transactions with these clients. In some cases, equity sponsors have executed “Omnibus Agreements” with SPP to manage 100% of their financing needs ranging from existing portfolio companies to acquisition candidates.

Most of the deals we worked on in 2019 included restaurant groups, aeronautics component manufacturing, commercial flooring, charter schools, medical products, industrial transportation and staffing.

What projects is SPP Capital Partners working on in 2020?

We are starting the new year with transactions in cellular services, and healthcare transportation services.

This strategic acquisition will enable Upfield to enter a new segment, presenting an additional growth opportunity for the company. VIOLIFE will become part of the iconic Upfield brand family, that includes household names such as Flora, Rama, Country Crock, Blue Brand and Proactiv.

The plant-based cheese market is growing at an increasing pace and on a global scale. VIOLIFE is already the number one plant-based cheese brand in the United Kingdom and Arivia has also built a strong and fast-growing presence in the United States.

The combination of Arivia's brand and product proposition, and Upfield's brand-marketing expertise, infrastructure and worldwide distribution network – including in the foodservice channel – will create a unique opportunity to accelerate the growth of the plant-based cheese segment globally. Arivia is headquartered in Thessaloniki, Greece with a factory located in the north-east of the country.

Commenting on the transactionDavid Haines, CEO of Upfield Group B.V. said: "This acquisition is aligned with our growth strategy and mission to be the global authority in plant-based foods. Consumers are increasingly demanding quality, natural and tasty alternatives to dairy products, and welcoming Arivia products into the Upfield family, will enable us to go further in meeting those demands, whilst growing our plant-based offering."

Koutalidis Law Office acted as legal advisers to Arivia, with Partner Katia Protopapa and Senior Associate Yiannis Loizos leading the transaction.

 

Based in Ladenburg/Baden-Württemberg, BK Giulini specialises in producing and selling additives such as food additives and more. Part of the ICL Phosphate Solutions division, ICL Ludwigshafen Fertilizers produces fertilizers for the ICL Phosphate Commodities division. Both companies owned properties at Ludwigshafen site with a total land area of ​​over 100,000 square meters.

Founded in Trier in 1972, TRIWO AG is a real estate company which works on asset management, property development, construction and project management, commercial property management and technical property management.

"We are pleased that we were able to bring this complex real estate transaction to a successful conclusion for our clients and that we have found such a competent partner for the Ludwigshafen site in TRIWO", commented Kirsten Girnth.

BK Giulini GmbH and ICL Fertilizers Germany GmbH were advised by Ritterhaus Lawyers, with Dr Kirsten Girnth, (lead, M&A, Corporate), Dr Eva Schwittek, (Real Estate Law), Dr Ing. Jörg Döhrer (Labor Law), Sebastian Koch, LL.M. (M&A, Corporate) (all Frankfurt) and Dr Christoph Rung, (Public Law, Mannheim).

TRIWO was advised by König Rechtsanwälte, with Gerrit Strotmann leading the transaction.

Peter Kühn from Doerr Kühn Plück + Partner (Wiesbaden) acted as a notary.

 

London is just as beautiful in the winter, as it is in any other season and all 30 million tourists that flock to the UK’s capital every year will probably agree that it is one of those cities which offer something for everyone. Pack a warm coat and an umbrella and book your trip to this ever-changing metropolis which promises to make you fall in love with its beautiful, bustling streets – even in January!

London is one of the most visited cities in the world and as such, its hospitality industry is brimming with everything from small boutique stays to a myriad of luxury hotels. So when we think of where to stay in London, it’s safe to say we’d want something unique – something that you’d be hard pushed to find in any of the other hundreds of options. With its ridiculously convenient location -  directly opposite St James’ Park tube station, less than a 10-minute stroll from the Houses of Parliament, and a short walk to Trafalgar Square – choosing to stay at Conrad London St James is definitely a decision you won’t regret. A luxury brand of the Hilton chain, with hotels in 35 different cities across the world, Conrad Hotels provide their guests with everything they could possibly desire. The rooms and suites at Conrad London St James are just what you’d expect of a five-star luxury hotel: big King-sized beds, comfortable living areas and spacious brown-marble bathrooms. If you stay at one of the executive rooms, a suite or if you’re a Diamond Tier Hilton Honours member, you’ll be granted access to Conrad London St James’ executive lounge where you can enjoy complimentary drinks during the day, as well as a private breakfast buffet, afternoon treats, afternoon tea, as well as evening canapés and alcoholic drinks. Soak up tranquil vibes, whilst sipping a coffee or stop by for a quick aperitivo before dashing to dinner.

London is one of the most exciting and diverse restaurant capitals in the world and Conrad London St James’ ideal locations means that you’ll be in close proximity to an impressive array of exceptional restaurants and bars. However, make sure you leave time for a meal at Blue Boar Restaurant in the hotel, too. It focusses predominantly on staples like steaks and burgers, but there’s plenty of other options too like a selection of seafood dishes (the pan-roasted halibut with Jerusalem artichoke, toasted hazelnut, truffle, herb crust, baby leeks, wild mushrooms & red wine jus is to die for), as well as a selection of fresh salads. And after dinner, pop into Blue Boar Bar for a politically-themed cocktail; how about a gin-based ‘Corbyn’s Reign’ or a ‘Theresa’s Kitten Heels’ which comes with vodka, blue curaçao, lime, sugar syrup and prosecco?

Breakfast is served at Blue Boar Restaurant too – it comprises an extensive continental buffet which offers all the classics, as well as an à la carte menu. For another taste of British culture, head to Emmeline’s Lounge (named after British political activist Emmeline Pankhurst), where you can indulge in a quintessentially British afternoon tea or a Champagne brunch.

If you’re travelling to London for work, Conrad London St James also offers an impressive business centre and numerous function rooms.

 

For more information and to book your stay, please go to www.conradhotels.com/london

There was once a time that investors were only interested in one thing, profit and achieving a return on investment. In the past, this has seen many investors making money from unscrupulous means. Investing, even unwittingly, in companies or stocks linked to arms, tobacco, big pharma or similar questionable operations seemed just another way to make money but as the world wakes up to a sea change in terms of environmental and ethical investing, there has been a rise in the past few years of ethical, or what some are dubbing ‘sustainable’ finance.

Whilst it would not be prudent to try and compare the returns from the ‘old stock’, such as tobacco, alcohol and arms, with the new green kids on the block, many experts are suggesting that ethical investing is on the brink of something big. The suggestion across the board is that investors are finding that if they are good to the planet and to people, they also end up, on average, benefiting themselves.

There is mounting evidence that funds which observe environmental, social and governance standards in their strategies tend to outperform those that don’t by a significant margin.

Could 2020 be the year we see this kind of thinking take ahold? Only time will tell, but what has been happening so far?

 What is sustainable finance?

According to the Global Sustainable Investment Alliance (GSIA), an umbrella group, around $23trn, or 26% of all assets under management in 2016, were in ‘socially responsible investments’ that take account of environmental, social and governance (ESG) issues.

The actual definition of sustainable finance differs on who you ask. For some, it simply comes down to what most would term routine or ‘normal’ investments. There exists a certain group of companies and investments that are separated into what the GSIA term ‘negative screening’ which are considered unethical or untrusted.

The other definition is, of course, those that actively create a positive change in the world. These have been referred to in recent times as ‘impact investments’ meaning that in these situations, a precise impact can be quantified and measured.

The International Energy Agency[1] estimates that $75 trillion in cumulative investment directed mostly towards renewable and other low carbon energy technologies, as well as energy efficiency measures, is required to keep global temperature rise to below 2C and avoid the worst effects of global warming.

[1] https://www.iea.org/

This all adds up to a long-term strategy that matches the hopes that the global industry has for such finance initiatives to make a real difference.

An immediate example of this could be the reduction in the amount of carbon dioxide emitted by a production facility or manufacturing plant or the amount of education delivered to underfunded or poverty-stricken schools in a developing country as a result of a particular project. Although quite different from traditional ways of measuring investment success, this presumes that financial return does not need to be sacrificed to also enjoy non-financial goals.

The likes of the WWF[1] are working on ways to encourage more ethical investments, leading to sustainable finance being exactly that, sustainable.

For example, The International Energy Agency[2] estimates that $75 trillion in cumulative investment directed mostly towards renewable and other low carbon energy technologies, as well as energy efficiency measures, is required to keep global temperature rise to below 2C and avoid the worst effects of global warming.

The sheer scale of capital required for this shift is beyond the scope of public finance alone, meaning that private finance will be essential to the low carbon transition.

 What kind of options are there?

Before we jump headlong into 2020, it is important to note that sustainable finance can increase investment risk, and can potentially reduce the investment returns. By limiting investments to only ethically-focused companies, investors are limiting the pool of investments that can be selected from.

That said, since the UN Principles for Responsible Investment were introduced in 2006, investors have started to see the likes of the Vanguard Group and Fidelity Investments increasingly offering ethical investing; a trend which doesn’t show signs of slowing. Guido Fürer, the Chief Investment Officer for Swiss Re, has also said that it is ‘doing good’, and that it ‘makes economic sense’.

Investment Managers, PortfolioMetrix, have also added a selection of Ethical Portfolios as part of their offering. This means that investors can maintain the same risk level as they do with their portfolios, the only difference being that the underlying holdings will then meet the criteria for an ethical portfolio.

Where some may be mistaken though, is that this isn’t an all or nothing choice. Moving entire portfolios over to ethical ones might be rather risky, but you could, for example, move your ISAs to a more ethical approach, whilst leaving your pension in the more traditional investments. However, this is an area that is important to research and know well before committing.

In terms of where people might invest, the choice here is huge and is improving all the time. As the world becomes more socially-aware and green movements such as Extinction Rebellion and the work of green activists such as Greta Thunberg are recognised, more investors care about where their capital is sunk into.

Sustainable finance takes many forms, but here are a few examples that 2020 might see heralded as the norm from now on:

Social Business: While this is nothing new, this kind of sustainable finance refers to businesses who not only turn a profit but also have social issues at their heart. Profits are invested back into the business in order to combat exclusion, protect the environment or promote development and solidarity. They can take many forms, all of which you can expect to see more of throughout 2020, namely:

Green Finance: Sometimes regarded as an arm of SRI, it combines those financial transactions that favour the energy transition and fight against climate change. A relatively new phenomenon, the market is expected to exceed a value of $100 billion dollars a year by next year. One of its main tools is green bonds, issued with the aim of financing ecological initiatives. Decarbonising investor portfolios by financing companies that limit their ecological footprint is also proving popular within this sphere.

Social Finance: This option has already seen savings and assets invested in valuable social finance products. Representing €10 billion in France in 2016, the sector offers funding to projects that do not fit into classic financing circuits, such as businesses tied to employment, social and housing, international solidarity and the environment. In France, the specialised organisation Finansol certifies certain social finance products (including SRI products) and monitors trends in social finance.

[1] https://www.wwf.org.uk/what-we-do/projects/why-were-working-sustainable-finance

[2] https://www.iea.org/

  1. Technology innovation will transform international payments.

In today’s connected world, consumers are no longer willing to put up with delays and hefty fees for processing cross-border payments. As customer demand for frictionless on-demand payments grows, payment providers and banks will be competing to offer ever faster cross-border payment services to their customers. This will drive the wider adoption of blockchain and distributed ledger technologies, enabling financial institutions to transfer low-value payments in real-time at a fraction of the cost incumbent processes are taking. This technology can enable financial institutions to move money around the world in the same way that we exchange information over the internet, so 2020 will be a tipping point for driving efficiency and innovation in cross-border payments.

  1. The rise of banking-as-a-service will drive stronger competition in the market.

With banks having to juggle the relentless pressure of faster innovation while keeping down technology costs, we’ll see more financial institutions turning to cloud providers to help radically reduce IT costs.

Cloud-based solutions are ideally placed to easily and cost-effectively plug into emerging blockchain networks, AI engines and other developing FinTech innovations. As such, using cloud-based technologies will create a strong competitive advantage for agile, forward-looking financial services providers that embrace digital innovation - intensifying market competition around the globe. Cloud-platform companies like 10X and Thought Machine are great examples of this new paradigm that is being adopted by banks, and we’re likely to see more similar players entering the market in 2020 and beyond. As a result, on-premise “museum” banking technology will be increasingly displaced by more agile, affordable cloud-based fintech solutions.

With banks having to juggle the relentless pressure of faster innovation while keeping down technology costs, we’ll see more financial institutions turning to cloud providers to help radically reduce IT costs.

  1. This will be the year of new cross-currency consumer payment solutions:

In 2020, we’ll see a rise in new consumer purchase solutions for tourists and travellers that enable cross-currency payments, without requiring cards or card rails. For example, such solutions could enable a Japanese tourist visiting Thailand to make purchases using a mobile app or QR code, triggering an immediate cross-border payment from their Japanese yen account to a Thai baht merchant’s account. Blockchain technology, combined with digital assets, will be a key driver in this innovation. Such payment services could have a huge impact on the payments market, bringing untapped opportunities for payment providers in the new year

  1. In-app micro and wallet payments will become mainstream.

As technological innovation helps bring down the cost for processing cross-border payments, the business case for micropayments is becoming more viable. Traditionally, micropayments have been confined to messaging apps like Telegram and Line, but with big tech companies introducing payment services of their own, the case for micropayments will soon expand far beyond that. In 2020 we can expect to see a surge of developers flocking to blockchain and digital assets do develop solutions to satisfy demand for in-app, real-time micropayments. For example, micropayments can be applied across multiple use cases and industries: from incentivising players in the gaming industry to creating new payment models for the streaming of online content or paying for energy/electricity bills.

  1. The shift toward low-value, high-volume payments will help SMEs break into new markets much faster.

The cross-border payments market today is not set up for small businesses. In fact, international payments are often slow, prone to errors and accrue extremely high costs. Moreover, international payments are not even readily available in some emerging markets. This is a huge setback for small businesses looking to expand operations and scale internationally. The good news is that new blockchain technologies can address all these challenges and enable SMEs to invoice and receive international payments immediately, in small amounts, and with 100% certainty.

The adoption of blockchain technologies has the potential to be a game-changer for SMEs globally - enabling them to improve cash flow and reduce the cost of running a business while freeing up precious capital for reinvestment. As a result, 2020 will see a rise in international payment services for SMEs across emerging markets, helping them to expand and process immediate payments around the world and improve access to new markets.

Generation Z growing concerns

Having grown up around the threat of cybercrime, those in Generation Z appear to be more aware of the risks of fraud than millennials (born between 1981 and 1994). Our research found that nearly three-quarters (74%) of 16-24-year olds believe it is too easy to find someone’s personal information online nowadays. On top of that, more than half (52%) of Generation Z are worried about someone stealing their identity.

While observing a focus group of 18-24-year olds held to support our research, I noticed a high level of awareness about banking and online security from the respondents. Many of the young consumers showed that they don’t just install the latest banking apps simply because they are new or cool. They are considered with their consumer decisions and assess how well services or technologies fit their security and financial needs, prior to acting.

One respondent, Nikki, who is 24 and from London, stood out for rejecting mobile payment apps, the opposite of the perceived image of someone in Gen Z: “I only use my bank card to pay for things,” she said. “I deliberately keep my phone separate because I don’t want spending money to be too convenient.”

Do banks still have our trust?

Like Nikki, many Generation Z consumers are more cautious while banking or shopping than retailers and banks may realise. Our research shows that, far from being over-sharers of their personal information, more than three-quarters (76%) of Generation Z accept that it’s their responsibility to look after their data and keep their identity safe. In return, these consumers expect their banks and service providers to work just as hard to deliver a high level of protection for them.

Although new challenger banks, such as Monzo and Starling, are growing rapidly among young consumers, that doesn’t mean Generation Z trust them more when it comes to security than the high street giants.

Although new challenger banks, such as Monzo and Starling, are growing rapidly among young consumers, that doesn’t mean Generation Z trust them more when it comes to security than the high street giants. Michael, a 19-year-old student from London also in the focus group, summed up the care with which Generation Z approach digital banks: “I feel the online banks have to push up their security because there’s no physical presence”, he said. “So they’ve got to be more secure to be on top of their game.”

Our study also reveals a wider lack of confidence in all banks, as only half of Generation Z shoppers (54%) are certain that their bank would refund them any losses if someone fraudulently accessed their bank account and stole any amount of money. The new generation of banking customers want to see even greater security and responsibility from high street banks, which in turn is driving their consumer choices.

 A modern solution for a digital world

The findings also show that Generation Z wants to see banks adopting new technology to combat card and online fraud. Nearly two-thirds of them (62%) think all banks should offer biometric payment cards to help reduce fraud.

Additionally, nearly half (45%) of Generation Z can’t believe credit and debit cards don’t already use biometrics for payment and ID security. Again, this is even higher among 16-17-year olds, with nearly two-thirds (63%) of them expecting banks to already use biometrics for payment card security. As high street banks often thrive on signing-up new customers while they are young, appealing to this new generation of consumers is vital for the industry.

Therefore, financial institutions must now add biometric technology to the payment card market to attract young customers and grow loyalty with them. In fact, nearly half of those in Generation Z (46%) would choose a bank that offered biometric payment cards over one that didn’t.

Most importantly, Generation Z consumers are willing to pay for added security as two-in-five (43%) would expect to pay a little more for a biometric payment card, with a third (33%) willing to pay between £3-5 per month for it.

The time to act is now

As Generation Z will soon create a large proportion of banks’ customer bases, it is imperative for the prosperity of the banking industry that these security needs are not ignored. If high street banks remain slow to respond to the demands of Generation Z and fail to address its security concerns, they will soon be surpassed by digital challengers who are able to revolutionise the system faster.

It has become increasingly clear that under 24-year-olds are now expecting to be using innovative and secure biometric technology for improved payment security and convenience. Banks now hold the responsibility to make this change as soon as possible. The introduction of new biometric payment cards will entice younger customers, protect users from fraud and encourage continued faith in consumer banking.

About Finance Monthly

Universal Media logo
Finance Monthly is a comprehensive website tailored for individuals seeking insights into the world of consumer finance and money management. It offers news, commentary, and in-depth analysis on topics crucial to personal financial management and decision-making. Whether you're interested in budgeting, investing, or understanding market trends, Finance Monthly provides valuable information to help you navigate the financial aspects of everyday life.
© 2024 Finance Monthly - All Rights Reserved.
News Illustration

Get our free monthly FM email

Subscribe to Finance Monthly and Get the Latest Finance News, Opinion and Insight Direct to you every month.
chevron-right-circle linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram