commercial awareness

Question 1

huawei

Answer 1

○ Innovation vs. cyber security
○ International relations and trade
○ UK decides to remove partnership with Huawei in July - fear of US sanctions
○ 31st October: dedicated chip plant to not use US tech and thus avoid sanctions
§ But might be more expensive and less efficient
○ BT signs deal with Ericsson for 5G radio antenna to upgrade EE network
§ Response to gov ban of Huawei in July

Question 2

walmart and asda

Answer 2

○ Walmart sold majority share in Asda to EG group funders (Issa brothers)
○ Regulators rejected attempt to sell Asda to Sainburys - CMA said it held competition concerns

Question 3

google

Answer 3

○ Dep of Justice = investigation google’s dominance
○ Monopoly charges
○ Google pays companies to prioritise their search network
○ Opportunity to level playing field with Microsoft, Bing

Question 4

tiffany

Answer 4

○ Link to a&o advising LVMH’s bid
○ LVMH said Tiffany was no longer same business as in November
§ LVMH said it could no longer finalise transaction by 24 Nov
§ Also cited trade tensions between Paris and Washington
○ Tiffany sued LVMH to try and get them to go through with deal
○ LVMH counter-sued using bad performance during rona as excuse
○ Managed to secure takeover, lowered price
○ Will settle pending litigation
○ LVMH sees value in watches and jewellery presence of Tiffany’s
§ Also strong in China

Question 5

furlough

Answer 5

○ Impact on business model 
		○ Redundancy 
		○ 80% of wages 
		○ Grants for businesses
		○ But no new help for self-employed who are not eligible for standard furlough

Question 6

biden vs. trump

Answer 6

○ Free trade > combative protectionism
○ The re-election of U.S. President Donald Trump would likely benefit U.S. stocks (tax hikes averted, more protectionism) but a victory by Democratic presidential candidate Joe Biden would benefit non-U.S. shares (more harmonious foreign and trade relations).

Question 7

banks

Answer 7

• Banks - low interest rates
  ○ Bank of England helping economy and encouraging spending
  ○ Banks suffering from lack of interest
  ○ Also clients may not want to invest if there is no interest
  
  • Banks are also threatening to start charging for people to have bank accounts - HSBC
    ○ Practiced in france already
    ○ But they need to make money
  • Banks lend companies/individuals lots of money. They are not able to pay it back and so go bankrupt
    ○ Forecast debt for banks = very high
  • Possible sale of banking branch of Sainsbury’s
    ○ Low interest rates are threatening profitability

Question 8

apple

Answer 8

• Apple admits financial hit to App Store commissions due to new legal challenges
  ○ Percentage Apple takes for downloads may be reduced, will have financial impact
  ○ Difficult to measure this as transactions are in data, which Apple themselves control
  ○ Means that Apple can charge different customers different amounts for same product - illegal for physical stores
  
  • Apple lawsuit from Fortnite
    ○ EU commission antitrust investigation into App Store rules
  • Spotify and other apps formed Coalition for App Fairness - said that Apple had advantage
    ○ Apple insists the app store promotes competition
  • Tech companies have benefited from decline in gov bond yields

Question 9

a&o 21st cent fox

Answer 9

• 21st century fox on its USD71bn acquisition by The Walt Disney Company and on its subsequent GBP11.6bn sale of its 39% stake in Sky to Comcast.

Question 10

a&o lvmh

Answer 10

• Nov 2019 - Paris/New York: Allen & Overy has advised the banks on one of the largest deals ever in the luxury sector. A EUR15 billion equivalent loan facility is being used to finance the agreed acquisition by LVMH Moët Hennessy Louis Vuitton SE (“LVMH”), the world’s leading luxury group, of Tiffany & Co. (NYSE: TIF) (“Tiffany”), the global luxury jeweller, making it one of this year’s flagship deals in the European loan market.

Question 11

brexit relocations

Answer 11

• Companies are relocating
  ○ Sony moved HQ from London to Amsterdam
  ○ Tesla moved EU base to Berlin from UK

Question 12

brexit eu law

Answer 12

• EU law - change to legislation itself
  ○ Lots of British employment law comes from EU
  ○ Will we join the EEA?
  ○ Unlikely we completely rewrite the law

Question 13

brexit gdpr

Answer 13

• GDPR to UK GDPR
  ○ Intellectual property - UK can be part of EU Patent Office but not Unified Patent Court
  ○ Pan-EU patents are granted through the EU Patent Office. UK patents come through UK IP office
  ○ Even if your firm is outside the EU, GDPR will still apply if you deal with personal data belonging to EU citizens

Question 14

brexit clients

Answer 14

○ Need legal advice 
		○ Increased costs
		○ Administrative issues 
		○ Customs duties, tariffs, taxes 
			§ No longer guaranteed free trade 
		○ Increased costs 
		○ But might be beneficial for businesses abroad - can trade with UK for less. Hence why FTSE didn't do horrendously

Question 15

brexit mergers

Answer 15

○ Do we ask EC to check them or check each one through UK Law
○ Would have more power to check competition law

Question 16

brexit tax

Answer 16

○ UK will no longer be part of single market and customs union
○ Companies will have to restructure and change supply chain
○ Change of locations will have tax implications
○ Indirect taxes are harmonised at EU level e.g. VAT
○ Direct taxes = governed by member states under EU directives – could lead to more taxes for post-brexit UK
○ Indirect taxes
§ Reassess supply chain, be conscious of costs of international carriage of goods, comply with Customs complains obligations
§ Even if UK entered Customs Union with EU, there would be more friction than there is now
§ Higher rate of VAT recovery for UK based companies supplying EU customers
○ Direct taxes (UK taxes)
§ Corporate/income – will likely rely on Double Tax Treaties between Uk and each individual member state

Question 17

rona summary

Answer 17

• Technological developments
  
  • Furlough and redundancy issues
  • Balance of democracy (i.e. freedom) vs. curbing virus
  • NHS Track and Trace - GDPR
  • Wealth inequalities
  • Project birch - bailout plan
    Key industries: hospitality, retail, aviation, insurance

Question 18

legal sector and technology

Answer 18

○ Modern technology
○ Could increase business efficiency and create new jobs
○ But there is a pressure to adopt AI to work faster – saves time and does repetitive tasks
○ Makes lawyer’s work more interesting – don’t need to do mundane tasks and can focus on analysis
○ But need humans for analytical part of finding solutions for clients – AI is case by case tool
○ Video conferencing, unified collaboration re. data/documents etc. (important for M&As)
§ Technology can help people work together to advise clients

Question 19

climate change

Answer 19

• Failure to tackle global warming requires firms to change the nature of their work
  
  • Climate change litigation will affect law
  • Shift towards sustainable energy sources, my affect oil/gas industries
  • New structures in place to combat climate change and help refugees who may be affected by its effects
  • Globalisation means that firms must become increasingly aware of how they are affecting the environment
  • They have environmental strategy - carbon footprint etc.

Question 20

anatomy of deal

Answer 20

o Private equity firms think they can improve companies and sell on for more
o Example = leveraged acquisition
○ Company does not have money needed to buy completely
○ So buys it through investing 1/3 in shares or other equity
○ Borrow rest from banks
○ This is debt finance
o Revenue from investment will be used to pay interest on loans
o Then can be sold for higher price, they can pay off bank and make more money on their initial investment of a 1/3
o Private equity will need to make company to run business as it grows
○ Need lawyers to know how to structure company
o Tax implications - different companies taxed differently
o Difference across jurisdictions in terms of private equity possibility - need international banking lawyers
o Need to know what initial company has in assets, litigation, liabilities - this process is called due diligence and needs to be done by lawyers
○ Seeing what acquisition target is made of
○ Make sure whether they own brand etc.
o In buying company, you also buy their staff
○ Need employment packages
○ Labour laws = important
o Anti-trust
○ Other businesses involved in sector - does their need to be evaluation of competition
○ CMA might say they need to sacrifice assets to level playing field - is it worth it?
o Execution phase
○ Both parties = focused on sale & purchase agreement (SPA)
○ Key contract
○ Lawyers draft and negotiate it
○ Price adjustment = likely
○ Need documents to be signed - share certificates, loan agreement, employment contract etc.
o Finalising includes negotiation, amendments and signing of deal
o Lawyers involved at every point
○ Business need to then implement strategy