GAMECHANGERS MAGAZINE EIGHT / SIXTEEN

EIGHT / SIXTEEN

WEALTH MANAGEMENT - MORE THAN JUST INVESTMENT ADVICE P-36 BIGGEST CORPORATE MEGA-DEALS OF ALL-TIME P-50 WHAT DOES BREXIT MEAN FOR THE WORLD OF M&A, FINANCE AND BUSINESS? P-54 THE RISE OF CONSTRUCTION P-70 THE FUTURE OF PAYMENTS P-82

THE MAN AT THE FOREFRONT OF FINTECH

CRAIG PEARSON CHANGING THE WORLD OF WEALTH MANAGEMENT Â Revolutionising The Way Private Wealth Is Analysed P30

CyberspaCe 2025 Today’s deCisions, Tomorrow’s Terrain

Authors David Burt Aaron Kleiner J. Paul Nicholas Kevin Sullivan

N Avig AtiNg the Fut ur e oF Cyberse Curit y P ol iC y

June 2014

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ATKINS LAUNCHES NEW ADVISORY BUSINESS TO HELP CLIENTS MANAGE UNCERTAINTY AND COMPLEXITY IN INFRASTRUCTURE DELIVERY Atkins today announces the launch of a new end-to-end advisory consulting business - Atkins Acuity - that will combine the company’s extensive engineering and master planning capability with new structuring, financing and project preparation expertise. This combination will support international finance institutions, governments, and large corporations through the delivery of engineering-led advisory solutions to target infrastructure development and funding opportunities around the world.

This is the first new business to be launched by Atkins, with an aspirational goal of generating approximately £200 million in revenues in around a four to five year period.

Atkins Acuity will initially focus on the Middle East, South East Asia and Africa markets across the core Atkins’ sectors of transportation, energy and infrastructure. Senior new hires have been made from organisations including McKinsey, KPMG, Arthur D Little, World Economic Forum, Standard Chartered Bank and the former executive director of the Philippines PPP Unit, adding structuring and financing skills to the deep technical engineering knowledge across the Atkins Group.

Uwe Krueger, Atkins’ chief executive officer, said: “Atkins Acuity is a direct response to our client’s needs to deliver more rewarding and higher-value partnerships for infrastructure and energy investments.

We believe Governments, corporates and financial institutions alike are frustrated at bottle-necks in programmes and a lack of delivery – the Atkins Acuity end-to-end advisory service is designed to help change that.”

The Atkins Acuity team combine skills such as financial structuring, economic and strategy consultancy, organisational development, operations improvement, programme management,

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and due diligence, with Atkins’ technical engineering expertise.

Dominic Harvey, chief executive officer of Atkins Acuity, said: “By combining our engineering heritage with this broader offering of skill sets, our aim is to ensure upfront that projects are technically sound, properly structured and bankable in the international market.

We’ll support our clients for the long term, building legacy capability to make sure their teams are fully functional and fit for the future.”

The new business will work with a range of clients including governmental institutions, civil authorities, IFIs, private investors, large corporates and funds.

It has already secured new mandates in Turkey, Sri Lanka, Malawi, Kenya, Tanzania, Saudi Arabia and United Arab Emirates.

In Sri Lanka the business is providing consultancy for the development of flood and drought risk mitigation investment plans and in east and southern Africa helping deliver sustainable energy for all through sector reform.

BRITISH BUSINESS BANK OPENS UP ENTERPRISE FINANCE GUARANTEE PROGRAMME TO NEW LENDERS • The British Business Bank aims to increase the number and diversity of lenders offering EFG-supported facilities to smaller businesses by opening up the lender accreditation process • Re-opening of EFG lender accreditation process was a key recommendation from the April 2016 EFG Review Sheffield & London: The British Business Bank announced that its Enterprise Finance Guarantee (EFG) accreditation process for new lenders is now open.

Lenders, including asset finance providers, are invited to apply to the programme, with the aim of increasing the number and diversity of lenders offering EFG-supported borrowing facilities to smaller businesses.

This re-opening of EFG lender accreditation is in response to one of the recommendations from the Enterprise Finance Guarantee Strategic and Operational Design Review 2015/6, published in April this year. The objective

of the review was to maximise the support that EFG offers small businesses.

The review highlighted the need for an increase in the number and diversity of EFG accredited lenders and a broadening of the range of products EFG could support (page 29, Action 10). This is in line with two of the British Business Bank’s four corporate objectives, to create a more diverse market for smaller businesses’ finance, with greater choice of options and providers, and to increase the supply of finance to smaller businesses.

The review made several other recommendations, including engaging further with the asset finance sector (and asset finance providers) – a sector which could potentially be supported

by EFG, to enable smaller businesses to grow (see p29, Action 11). The British Business Bank is working with the Finance & Leasing Association to widen the scope of EFG to include support for asset finance lending.

Overall, the review found that EFG is still highly valued by both customers and partners. It concluded that the programme continues to enable smaller businesses to obtain finance they would not otherwise be able to access.

The Enterprise Finance Guarantee currently supports £200m-£300m of finance per annum, delivered to the market via more than 40 accredited lending partners, including all the main high street banks, smaller specialist lenders, invoice finance and community lenders.

Judith Ozcan, Managing Director, Lending Solutions at British Business Bank, said: “We look forward to welcoming new lenders onto the already-successful Enterprise Finance Guarantee programme. EFG has, since its launch in 2009, supported the provision of more than £2.7bn of finance to more than 25,000 smaller businesses in the UK. “The expansion of the programme is in response to a key recommendation from the recent review and will help in delivering BBB’s corporate objectives to increase the supply of finance to smaller businesses and to create a more diverse and vibrant finance market.”

The Enterprise Finance Guarantee is open to qualifying smaller businesses with turnover of up to £41 million. EFG can be used to facilitate new lending

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or, to a limited extent, to refinance existing debt. It can be used to support term loans (including asset financing), and revolving credit facilities (including overdrafts and invoice financing).

The EFG guarantee is to the lender and not the smaller business borrower.

Decision-making on borrower eligibility is fully devolved to the accredited EFG lenders.

Lenders interested in being accredited to use EFG can find more details here or contact the British Business Bank.

Uwe Krueger, Atkins’ chief executive officer, said: “Atkins Acuity is a direct response to our client’s needs to deliver more rewarding and higher-value partnerships for infrastructure and energy investments.

We believe Governments, corporates and financial institutions alike are frustrated at bottle-necks in programmes and a lack of delivery – the Atkins Acuity end-to-end advisory service is designed to help change that.”

The Atkins Acuity team combine skills such as financial structuring, economic and strategy consultancy, organisational development, operations improvement, programme management, and due diligence, with Atkins’ technical engineering expertise.

Dominic Harvey, chief executive officer of Atkins Acuity, said:

CINVEN RAISES 7 BILLION FOR THE SIXTH CINVEN FUND European private equity firm Cinven announces the final close of the Sixth Cinven Fund at its hard cap of 7 billion (approximately US$8 billion).

Key highlights: • Strong support from longstanding investors with a re-up rate in excess of 90%; • Fundraise builds on the successful momentum of €5.7 billion realised value since December 2014; • Cinven has achieved a smooth management succession, consistent investment strategy, and aligned terms with investors; and • The Fund reached the hard cap within four months and was oversubscribed by two times its target.

Despite the strong level of demand, Cinven has closed a right-sized fund to invest primarily in Europe in line with its investment strategy focused on high quality businesses with market leading positions and strong cash flows. Cinven will continue to use its long established matrix of sector expertise and local country experience to target companies where it can strategically drive revenue growth both in Europe and globally. Its Portfolio Team, operating across Europe, the US and Asia, will continue to assist its portfolio companies to capitalise on value creation opportunities.

Stuart McAlpine, Managing Partner of Cinven, said: “We are delighted to announce another successful fundraise, completed rapidly.

Cinven’s €7 billion Sixth fund is well positioned to provide an important source of committed, long term capital to businesses in order to achieve sustainable growth and generate attractive returns for investors and their beneficiaries.”

Alexandra Hess, Partner of Cinven with responsibility for fundraising and investor relations, added: “Cinven’s investors from around the world have demonstrated their commitment to Cinven’s team, strategy and ability to invest successfully the Sixth Cinven Fund. We believe their confidence is attributable to Cinven’s excellent track record of investing across Europe through different economic cycles, industry and market conditions; our sector focus; and the ability to accelerate the growth of our companies both in Europe and globally.”

Cinven has been successfully investing in European buyouts for more than 25 years. The Fifth Cinven Fund, raised in 2013, has invested in a total of 17 companies and has made a total of more than 40 acquisitions reflecting the successful buy and build strategies of several of its portfolio companies including Synlab (Healthcare), Heidelberger Leben (Financial Services), and HEG (TMT).

Since January 2015, Cinven has achieved six successful exits including the sales of Guardian Financial Services, the UK life insurance consolidation business, to Admin Re® (4.2x); and Numericable, the French media and telecoms group, to Altice (4.7x). The Fifth Cinven fund has grown by 45% in value during this period and is valued at a net multiple of 1.4x original cost at 31 March.

TCA FUND MANAGEMENT GROUP SEEKS NEW OPPORTUNITY AMONG UNDER-SERVED SMALL AND MIDDLE MARKET DEVELOPING COMPANIES Specialist finance and advisory firm TCA Fund Management Group Corp. (‘TCA’) announced its intention to launch a small-cap private equity fund to invest in under-served growth stage companies, primarily in the US and UK. TCA Opportunities Fund I, LP, registered with the Guernsey Financial Services Commission will seek just to target 15 to 20 companies, using a US Dollar based vehicle as well as having a US based feeder.

According to the US census, there are more than 28 million small businesses with revenues between $25-$150 million who fall short of capital requirements from banks, peer to-peer lending, traditional private equity and crowd funding.

TCA will leverage its experienced origination platform, as well as synergies with their existing TCA Global Credit Master Fund, to make strategic and controlling investments in the $5 to $15 million range. Its team of 30 around the globe has a deep background in the small-cap universe providing companies access to capital to pursue growth objectives otherwise out of reach.

“There have been tremendous developments in small business financing for growth companies at the level of $1 million and below, but access declines greatly once the need for capital rises beyond that threshold,” said Bob Press, Founding Partner and CEO of TCA. “TCA has the team and existing platform in place to facilitate expanded opportunities for the under-served end of the spectrum which is a natural extension of our current business model.”

TCA has a long track record of sourcing high-quality public and private companies, that possess clear and attainable growth plans, and can maximise capital deployment under the guidance of TCA’s management team.

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COMATCH ACCELERATES GROWTH: ONLINE MARKETPLACE FOR CONSULTANTS COMPLETES FOUR MILLION EURO FINANCING ROUND

consultants for varied projects in a quick and easy manner. COMATCH has proven to be able to solve this problem efficiently for its clients, both medium sized companies and major corporations. As a result COMATCH has also established itself as an attractive channel for independent consultants for acquiring new clients and projects. We are looking forward to further supporting the team on the course pursued so far.”

• Acton Capital Partners as well as existing investors Atlantic Labs and B-to-V invest as part of a Series A round •COMATCH will use the funds to expand its position as a leading online marketplace for independent management consultants and focus on growth and internationalisation

As of today COMATCH has 15 employees in its Berlin office. Since the launch in March 2015 over 850 top management consultants have been admitted into the network and more than 120 consultancy projects have been placed. COMATCH receives an excellent rating from its clients with 9.2 out of 10 points on average.

Since the website comatch.com is available in five languages with local sales teams for the Benelux countries and also for Scandinavia the share of international consultants and clients cooperating with COMATCH has increased steadily.

COMATCH, the marketplace for independent top management consultants and industry experts, completed its second round of financing successfully. Acton Capital Partners led a four million Euro investment into COMATCH with existing investors Atlantic Labs (with lead seed investor Christophe Maire) and b-to-v joining in as well.

COMATCH will use the new funds primarily to expand its position as the market leader in the DACH countries and to take further steps towards internationalisation.

Christoph Hardt, who founded COMATCH together with Jan Schächtele at the end of 2014, said: “Thanks to the new funding we will be able to continue on our ambitious growth trajectory in the next two to three years. We are planning to expand our first mover position in Germany and at the same time aim at becoming the biggest European platform for independent management consultants.

We want COMATCH to be first in mind with companies seeking management consulting services and with every consultant who leaves a renowned consulting firm. We are pleased that Acton and our existing investors share this vision.”

Sebastian Wossagk, Managing Partner at Acton, added: “For companies it is often difficult to find highly qualified management

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F2G LTD ANNOUNCES $60 MILLION FINANCING TO PROGRESS DEVELOPMENT OF NOVEL ANTIFUNGAL AGENTS Funding to take lead compound through to product approval and development of pipeline assets F2G Ltd, the UK-based antifungal drug discovery and development company, announced that it has raised $60 million in financing to develop its pipeline of novel therapies to treat life threatening invasive fungal infections. The round was led by Sectoral Asset Management, with participation from Novo A/S, Aisling Capital and Brace Pharma Capital. Existing investors Advent Life Sciences LLP, Novartis

Venture Fund, Sunstone Capital and Merifin Capital each participated in the round.

F2G has discovered and developed a completely new class of antifungal agents called the orotomides. The orotomides are active against Aspergillus and other rare and resistant moulds and act via a completely different mechanism than currently marketed antifungal agents. Existing antifungal therapies have known safety limitations and between 10-30% of patients cannot tolerate any initial given therapy. Due to their new mechanism of action, orotomides are active against infections resistant to current therapies, a growing problem globally.

F2G plans to advance its lead compound, F901318, a novel clinical stage candidate for the treatment of invasive aspergillosis and other serious rare mould infections, to completion of a pivotal registration study, and to further develop earlier stage assets in its pipeline. Aspergillosis is a serious pulmonary infection caused by Aspergillus, a common fungus that affects people with weakened immune systems or lung diseases.

Ian Nicholson, Chief Executive Officer, F2G Ltd commented: “F2G has made significant progress in the last 12 months and this financing, achieved in a tough funding environment, demonstrates investor confidence in our novel class of therapies and outstanding team. We welcome our new investors to the company and thank our existing investors for their continuing support and confidence in our team and strategy. We are now well positioned to achieve our goal of product approval in an area with significant unmet medical need and look forward to conducting our pivotal registration study.”

Dr Maha Katabi, Private Equity Partner, Sectoral Asset Management added: “We look forward to working with the F2G team and a high quality venture capital syndicate to bring an important medicine to patients with lifethreatening fungal infections. We have been impressed by the progress that F2G has made to date and are pleased to support its next phase of growth.”

Dr Maha Katabi, Private Equity Partner at Sectoral Asset Management and Dr Martin Edwards, Senior Partner at Novo A/S will join the F2G Board of Directors.

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IN A SEA OF LISTED COMPETITORS, ONE LEADING IP FIRM IS CHARTING ITS OWN COURSE In the midst of an increasingly corporatised IP market, one leading IP firm has chosen to remain independent and privately owned, and announced a new leadership team to drive the firm forward.

Phillips Ormonde Fitzpatrick (POF) is one of Australia’s leading intellectual property firms, working for some of the biggest Australian and international innovators.

Over the past two years, two of POF’s major competitors have incorporated and listed on the ASX, acquiring multiple smaller IP firms along the way. In a recent announcement, another two IP firms are set to join them, as the number of traditional IP firms in Australia continues to shrink at a rapid rate.

As we have seen elsewhere in the professional service sector, globalisation and digital disruption are reshaping the IP profession. Many firms are responding to these forces, and to a more relaxed legal environment, by becoming involved in “liquidity events” (trade sale, IPO, etc.).

Some firms have been involved in a race to get bigger by aggregation, while for others the liquidity event appears to be a pure exit strategy. For those firms aiming to achieve growth, equity financing can be a good source of capital, but a listed entity will also be saddled with far greater levels of governance, and hence cost, than the traditional partnership model.

The former partners and their corporate owners will now be answerable to their shareholders and the market. The reality of life beneath the new corporate surface in merged or restructured firms is rarely smooth or untroubled. Difficulties

can occur in maintaining an engaged workforce and client satisfaction.

POF is taking a different approach, and has put in place a new leadership team that will adopt a collaborative leadership style to drive employee engagement and support client success.

POF’s new leadership team consists of a part-time Managing Partner and a General Manager. The General Manager implements a multitude of tactics and coordinates the administrative functions required to ensure the smooth day-today operation of the firm, thus creating the capacity for the Managing Partner to provide strategic leadership and direction for the firm.

Ross McFarlane will take the helm as Managing Partner on 1 July 2016. Ross has been a Partner since 2006, and is a member of the POF Group Board. He was recently a finalist in the Lawyers Weekly Partner of the Year Awards 2016 and leads the firm’s ICT practice.

Ross says “I am looking forward to embarking on this new opportunity at POF. With the changing landscape of the IP profession in Australia, it is now more crucial than ever to maintain the client-first focus that has made our firm successful. We believe that remaining independent and privately owned best enables us to truly partner with our clients.

The business success of our clients is at the heart of everything we do. In this era of increasingly corporatised service providers, we see a tremendous opportunity in taking a “IP business partner” approach with our clients. Employee engagement is critical to the success of our firm in the current business climate.

Engagement drives productivity, profitability, staff retention and customer satisfaction, which all lead to good financial outcomes for our firm.”

Ross will be supported by a new General Manager, Philippa Salmon. Philippa has held senior management roles in professional services firms for more than 25 years, including six years as the Practice Manager of an IP firm. In her ten years at Freehills/Herbert Smith Freehills, Philippa was responsible for delivering a range of business services transformation initiatives. As a Prosci accredited change management practitioner, Philippa most recently held the role of global Head of Integration Change and Communication at Herbert Smith Freehills.

LIVINGSTONE SECURES FUNDING FOR THE WORLD’S LEADING NEGOTIATION TRAINING SPECIALIST, THE GAP PARTNERSHIP, FROM PRICOA CAPITAL GROUP Livingstone’s Business Services and Debt Advisory teams have advised The Gap Partnership Group (“TGP”) on securing a one-stop funding solution from Pricoa Capital Group.

Founded in 1997, TGP is recognised internationally as the leading provider of negotiation behavioural change development programmes and client-specific negotiation consulting services. TGP has a global presence served by four regional hubs in the UK, USA, Germany and Hong Kong, working with over 500 of the world’s largest blue-chip corporations.

The funding package from Pricoa has provided shareholder liquidity, whilst also enabling an ownership transition, putting greater ownership in the hands of the extended leadership group who will drive the business forward.

Steve Gates, founder and CEO at TGP, said: “We are delighted to have attracted funding from Pricoa, which is part of the global investment management business of Prudential Financial Inc. Their approach to providing a single, long-term bespoke solution to meet our capital requirements will allow TGP to fulfil the next stage of its growth trajectory, enabling management to maintain control and incentivising the team towards our objectives. The partnership and relationship with Pricoa is strong and we are excited about their participation in our future journey.

“We would like to thank Livingstone for their hands-on guidance and support throughout the process – their expertise and experience, as well as their in-depth understanding of TGP and our culture, meant they were able to add real value across every aspect of the deal as they guided us towards the successful conclusion of a transaction that we are all

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delighted with.”

Simon Cope-Thompson, Partner at Livingstone, added: “Through its unrivalled global position and its long term partnership relationships with its clients, TGP has already built a highly differentiated and scalable position. With Pricoa’s support we are confident that the team will go on to achieve great things.”

Bill Troup, Managing Director, Debt Advisory at Livingstone added: “This was a complex transaction and we are delighted to have secured a package of funding that meets the requirements of all the stakeholders.”

This is the sixth deal completed by Livingstone London’s Business Services team in the last six months: Up Group’s investment from Livingbridge; Panther Logistics’ buy-out backed by LDC; the Global Reach Partners buy-out backed

by Inflexion; the acquisition of Quadron Services by idverde; the sale of Westway to ABM; and the sale of Tessella to Altran.

MENU NEXT DOOR RAISES A 1.75 MILLION SEED ROUND AND IS NOW LIVE IN LONDON

nient anti-junk food and new social bonds in urban areas.

Individuals order their meals online, having them cooked by passionate amateur chefs right in their neighbourhood. Geolocation lets people find out who has been cooking, what they’re offering (including an exhaustive list of ingredients), what postal code they’re in, and what price they’re asking.

Once the order is placed, the customer • Can decide whether to pay online or cash payment upon meeting their chef • Receives a confirmation with the pick-up address (where the ‘chef’ is actually liv ing and cooking) by text and email • Just has to show-up at the timeslot she/ he selected when placing their order on www.menunextdoor.co.uk • Is welcomed by the chef, leaving space for a chat and a drink before she/he • Heads home with the portions ordered, and enjoy their dinner in the comfort of their home.

Menu Next Door is bringing authenticity at the heart of food consumption to change Londoners’ daily eating habits.

Thanks to the enthusiasm found in Brussels, Paris and now London, Menu Next Door’s development is supported by leading international investors including: o Index Ventures o Local Globe o Kima Ventures

The platform that’s bringing neighbours together through home cooking and social bonds has raised a €1.75 million seed round to support its European expansion

o TheFamily

After Brussels and Paris, the start-up that’s letting urban dwellers cook for their neighbours is newly arrived in London, with meals being enjoyed since May 20th.

PATH SOLUTIONS LEADS TECHNOLOGY MODERNIZATION AT GULF AFRICAN BANK

Menu Next Door lets people who love to cook share their passion together with people who enjoy good homemade food, generating a collective, face-toface experience.

A rising star of the sharing economy, Menu Next Door is built on two inseparable pillars: healthy, homemade food and a sense of community. By giving people more healthy meal options, Menu Next Door promotes fast, conve-

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Gulf African Bank successfully upgrades to the latest version of iMAL Path Solutions, the first Islamic IT provider,

announced the successful upgrade of iMAL core banking system at Gulf African Bank in Kenya. The Islamic core banking system was upgraded to R14 on 30th April 2016.

Gulf African Bank has scaled up its investment, upgrading to the latest Java version of iMAL as part of a major modernization project across its retail and corporate banking business.

By upgrading to iMAL R14 across all areas of the bank, Gulf African Bank will benefit from the open architecture and componentized approach that underpins the bank’s resilient operational performance. With a more efficient branch network, a feature-rich banking experience and the ability to add on new functionalities quickly and easily, Gulf African Bank will be able grow its business and meet changing customer and market requirements.

Gulf African Bank Managing Director, Abdalla Abdulkhalik commented on the success of the system upgrade saying: “We took up the opportunity to upgrade our core banking system as a result of business growth coupled with a need to meet rapidly evolving market requirements”. And he continued, “The transition to the latest version of iMAL fits perfectly with our aim of modernization and will help Gulf African Bank deliver on its strategy. In doing so, we can realize our clients’ expectations of being the central hub for all of their Islamic banking needs. We remain confident that iMAL R14 will enable us to differentiate ourselves in a highly competitive market and achieve our goal of being the number one Islamic bank in Kenya”.

Path Solutions’ team executed the project upgrade according to agreed timelines, within budget and to a quality that exceeded Gulf African Bank’s high expectations, with improvement in system performance as a result of a major architectural change and technology enhancements. The success of this upgrade is the outcome of excellent cooperation amongst all stakeholders including Gulf African Bank’s management and project team.

The relationship between Path Solutions and Gulf African Bank began in 2007, and has seen great milestones over the years. This successful upgrade is set to further support Gulf African Bank’s growth aspirations of achieving new heights in the Islamic banking sector.

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SEVEN FIGURE FUNDING DEAL SECURES NEW PREMISES FOR LONDON TV AND ONLINE VIDEO PRODUCTION COMPANY

timeframe.

Husband and wife team, James and Michelle Vellacott, founded Cherryduck in 2011 and have continued to organically grow the revenue of this £1.6million turnover business by £250,000 each year. The new premises will assist further growth but mainly it will enhance their proposition as it helps to attract new clients that are looking for video strategy and creative, production, post-production for TV, online advertising and visual effects all under one location; a unique selling point for Cherryduck.

• New premises in Wapping secured with seven figure bank funding

James Vellacott, Director of Cherryduck Productions Ltd, said: “Acquiring the additional premises is a real turning point in our business as we look to push the Cherryduck brand further and build on what we do well. The rebuild is underway and we are confident the finished look will meet the approval of our new and existing clients and will allow us to proudly market ourselves to the world.

• Expansion continues to prevail for this rapidly growing business as it reports year on year growth • Development due to complete at the end of 2016 providing high end facilities London Visual Content Agency Cherryduck Productions Ltd has acquired new premises on Sampson Street, near Tower Bridge, after securing funds from Royal Bank of Scotland in a deal worth £1.36million.

The 8,000 square feet premises require a complete rebuild and internal fit-out to mirror the services already offered at Cherryduck’s established studios, just next door. The development is expected to complete at the end of 2016 revealing video editing suites, a sound studio, meeting rooms, a cinema to showcase Cherryduck’s work to clients, a Shoreditch themed bar and creative spaces for like-minded individuals to hire on a hot desking basis. Cherryduck visualise working in collaboration with these creative individuals to utilise their talent.

The new premises will house some of the 23 local staff employed from Tower Hamlets and local London boroughs, as well as 11 freelancers that are responsible for working with household names in the high street fashion and beauty industry to produce visual content production from their in-house studios.

The experienced team at Cherryduck comprise, creative directors, producers, visual effects artists, photographers and editors. Combined, they are responsible for delivering high end film production within their client’s budget and

“Michelle has held a Royal Bank of Scotland bank account since she was ten years old and has received great support over the years so it was no surprise we decided to choose them as our banker when we set up the business five years ago. Apart from bank funding we have no investors or shareholders; something we are quite proud of.”

Tom Meggison, Senior Relationship Manager at Royal Bank of Scotland, added: “We have enjoyed working with the Cherryduck team since it was founded and continue to share in their vision of building on their reputable brand across London.

“We wish James and Michelle all the very best as they bring the new premises to fruition, which we have no doubt will prove a sound investment in the longterm.”

SILVERFLEET INVESTS IN LIFETIME Silverfleet Capital, the European private equity firm specialised in buyto-build, has entered into a binding contract to invest alongside the existing management team in the acquisition of Lifetime Training, one of the UK’s

leading training providers. Completion is subject to regulatory approval and the terms of the transaction were not disclosed.

Founded in 1995, Lifetime Training offers high quality apprenticeship, recruitment services, self-funded training courses and bespoke courses across a range of different sectors to employers of all sizes in the public and private sectors.

By enabling individuals and businesses to perform better through the delivery of market leading training programmes, Lifetime Training has become one of the UK’s largest training providers, with a strong presence in the fitness and active leisure, healthcare, hospitality, retail and ‘early years’ sectors. It has developed long-standing relationships with many well-known organisations including Greene King, David Lloyd Leisure, Fitness First, Mitchells & Butlers, Pizza Express, Marstons, Bupa, and a number of NHS trusts. Lifetime Training has won numerous awards both within and across their various sectors and has developed a strong reputation for the quality of its training programmes.

Silverfleet Capital’s investment will enable Lifetime Training to accelerate its organic growth and pursue selected bolt-on acquisitions to expand its service offering to new and existing clients. The introduction of the apprenticeship levy in April 2017, which targets the creation of three million apprenticeships by 2020, will provide significant growth opportunities for Lifetime as a leading provider.

To support its growth strategy, Lifetime Training has appointed Simon Withey as non-Executive Chairman who will work closely with existing CEO Alex Khan.

Simon is the former Chief Executive of Survitec and in a career spanning over thirty years, he has held senior positions at organisations including VT Group, Babcock International Group and GEC. Adrian Yurkwich, Partner at Silverfleet Capital said: “Lifetime Training is a market leader with a strong management team led

by Alex Khan and a first class reputation for quality and professionalism. We are excited by the prospect of working with Simon, Alex and the wider management team to take Lifetime Training to the next level.”

Alex Khan, CEO of Lifetime Training added: “As the market continues to evolve there are exciting opportunities ahead for

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Lifetime Training. With the experience, strategic direction and active support of the Silverfleet Capital team, we look forward to entering a new phase, which will see us growing our proposition and extending our services and the value we offer to our clients.”

TRAININGLIVINGSTONE SECURES FUNDING FOR THE WORLD’S LEADING NEGOTIATION TRAINING SPECIALIST, THE GAP PARTNERSHIP, FROM PRICOA CAPITAL GROUP Livingstone’s Business Services and Debt Advisory teams have advised The Gap Partnership Group (“TGP”) on securing a one-stop funding solution from Pricoa Capital Group.

Founded in 1997, TGP is recognised internationally as the leading provider of negotiation behavioural change development programmes and client-specific negotiation consulting services. TGP has a global presence served by four regional hubs in the UK, USA, Germany and Hong Kong, working with over 500 of the world’s largest blue-chip corporations.

The funding package from Pricoa has provided shareholder liquidity, whilst also enabling an ownership transition, putting greater ownership in the hands of the extended leadership group who will drive the business forward.

Steve Gates, founder and CEO at TGP, said: “We are delighted to have attracted funding from Pricoa, which is part of the global investment management business of Prudential Financial Inc. Their approach to providing a single, long-term bespoke solution to meet our capital requirements will allow TGP to fulfil the next stage of its growth trajectory, enabling management to maintain control and incentivising the team towards our objectives. The partnership and relationship with Pricoa is strong and we are excited about their participation in our future journey.

“We would like to thank Livingstone for their hands-on guidance and support throughout the process – their expertise and experience, as well as their in-depth understanding of TGP and our culture, meant they were able to add real value across every aspect of the deal as they guided us towards the successful conclusion of a transaction that we are all delighted with.”

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Simon Cope-Thompson, Partner at Livingstone, added: “Through its unrivalled global position and its long term partnership relationships with its clients, TGP has already built a highly differentiated and scalable position. With Pricoa’s support we are confident that the team will go on to achieve great things.”

Bill Troup, Managing Director, Debt Advisory at Livingstone added: “This was a complex transaction and we are delighted to have secured a package of funding that meets the requirements of all the stakeholders.”

This is the sixth deal completed by Livingstone London’s Business Services team in the last six months: Up Group’s investment from Livingbridge; Panther Logistics’ buy-out backed by LDC; the Global Reach Partners buy-out backed by Inflexion; the acquisition of Quadron Services by idverde; the sale of Westway to ABM; and the sale of Tessella to Altran.

UK SMES GET GAME, SET & MATCH FOR AN EVENT-FUL SUMMER UK exporters are planning to place a bigger focus on international sales this summer with opportunities created by cultural and sporting events, research from Barclays Business Abroad reveals¹.

With two months to go until the official opening ceremony on 5 August, the Rio Olympics tops the list of events2 that UK SMEs plan to use to focus on international sales, while the Rio Paralympics also appears in the top ten. In second place is the upcoming UEFA Championships.While the country will be cheering on UKteams and athletes competing overseas, SME owners will be counting on the profile of the UK brand to score success for their business trade.

Furthermore, over two thirds (70%) of the top ten shortlisted events2 take place on home soil, with the Formula 1 British Grand Prix (second place), Wimbledon and Royal Ascot (fifth and sixth place respectively) amongst the most popular with SME owners. The UK events economy has witnessed significant growth from overseas tourism: according to the ONS, there were over 36.53million visits from overseas to the UK in the twelve months to March

2016, up 6%, while the value of the UK events sector is currently £39.1billion3.

Steve Childs, Head of International at Barclays Business, said: “With an upcoming season packed full of cultural and sporting events, it is a great time for SMEs to make the most of global audiences, whether that be abroad or closer to home. Events such as Wimbledon and Royal Ascot help to put Brand Britain firmly on the map - attracting international custom on your doorstep is an excellent way to increase sales and future growth, supporting not just UK businesses but the economy as a whole.”

Halloween, which is now the UK’s second biggest party night4, and the on-going celebrations for HRH Queen Elizabeth II’s 90th birthday also appear the top ten list of events that business owners hope will boost their international sales this year.

Male-owned SMEs are more likely to use events to boost overseas trade this summer compared to female counterparts- at least 53% say they will take advantage of events to export compared to at least 41%. The top three events male-run businesses believe will boost their exports are: UEFA 2016 championships, the Olympics and the F1 British Grand Prix, while women owners are relying on the Olympics, Wimbledon and horse racing events such as Ascot.

Steve Childs continued: “We would welcome any business that wants to discuss their export journey to come and speak to us; we can offer free access to expert guidance, advice, workshops and tools, as well as discounts on international products and services through our Barclays Business Abroad service. Our partnership with UKTI means we are committed to helping more businesses access new markets and expand overseas with confidence.”

12016 research conducted by OnePoll on behalf of Barclays, 500 online interviews with UK SME owners, defined as companies with 250 employees or less, between 19th-26th February 2016.

2 Barclays asked business owners “Do you plan to maximise the opportunities presented by any of these forthcoming events in 2016 by placing a bigger focus on international sales?”

Shortlist: Top 10 events to maximise international sales:

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Rank Event 1 Rio Olympics 2 UEFA Championships 3 Formula 1 British Grand Prix 3 Grand National 5 Wimbledon 6 Royal Ascot 7 RHS Chelsea Flower Show 8 Halloween 9 Rio Paralympics 10 Queen Elizabeth’s 90th birthday

ULTIMATE FINANCE PROVIDES £225K FUNDING FOR INNOVATIVE PRODUCT WHICH PROVIDES SIGNIFICANT SAVINGS ON ENERGY COSTS An innovative product, which can save up to 35 per cent on energy bills, is proving to be so successful that Welsh company Energy Effective has agreed a £225k funding facility through Ultimate Finance so it can keep up with demand.

Eighteen months ago Energy Effective Ltd, which is based near Caerphilly, was appointed to promote and sell Hydromx Energy Saving Solution, a fluid which replaces water in heating and cooling systems.

It has since supplied a national facilities management company, an NHS Trust, and a major Welsh Housing Association and has a number of large contracts in the pipeline.

It also beat more than 100 companies to win a UK-wide competition to reduce energy consumption at the Royal Bank of Scotland’s headquarters.

To help ease the strain on cash flow caused by the success, Ultimate Finance has provided a £100k trade finance facility to buy a large quantity of additional stock of Hydromx plus a £125k invoice finance deal to free up cash in outstanding invoices.

Speaking about the success, Managing Director of Energy Effective, Mark McGavin, said, “It has certainly not been achieved overnight as the British are not keen on change.

However, as soon as we started to receive testimonials from a number of high profile companies, people started to believe that

Hydromx really could save them a significant amount on their energy costs.

“When we won the RBS national energy saving challenge it was the icing on the cake and we are currently looking to negotiate a roll out contract across all its branches.”

As with all good ideas, application of the technology is straight forward. Hydromx is a heat transfer fluid designed to replace water in both commercial and domestic heating and cooling systems. The fluid heats up quicker, carries more heat as it circulates through the system, then releases it quicker. In concert with the thermostats this changes the whole dynamics of a heating system saving energy. In ground source heat extraction Hydromx dramatically increases efficiency.

“It would have been extremely difficult, if not impossible, to fulfil the orders without the help of Ultimate Finance,” continued Mark.

“Mark Bennett and his team were quick to respond, having seen the potential of the product. He identified that we needed a facility to purchase the stock, as well as enabling us to receive cash for our invoices as soon as they are issued rather than having to wait up to 45 days for them to be settled.”

Mark Bennett, regional director of Ultimate Finance commented, “Mark and his fellow directors have worked tirelessly to communicate the energy saving properties of Hydromx”.

“It is a great product which is now being used by leading companies. They have a tremendous success story on their hands and we are delighted to provide the funding to help them build on that success.”

YFM EQUITY PARTNERS ANNOUNCES INITIAL £22M FUNDRAISING FOR YFMEP 2016 YFM Equity Partners (“YFM”), the specialist private equity fund manager has announced its new YFM Equity Partners 2016 Fund (“YFMEP 2016”), which will provide investors with the opportunity to

participate in YFM’s future private equity investments which no longer qualify for VCT investment.

YFM has already secured £22m from existing pension funds and new family office backers in the last three months and following this early success are now focussing on the next stage of fundraising. The team is looking to raise an additional £10-15m of private equity capital to be invested over YFMEP 2016’s twoyear investment period. YFMEP 2016 complements YFM’s established VCT funds, increasing the firm’s combined investment capacity to £100m.

Following recent changes to VCT legislation, VCTs can no longer deploy investment in the private equity buyout market. YFMEP 2016 has been created to address the gap this has left in the market, capitalising on YFM’s successful long-term track record of SME investment and allowing both retail and institutional investors continued access to later stage smaller private equity opportunities.

YFMEP 2016 aims to invest across a range of established, growing profitable businesses. Investors will benefit from a shortened cash-drag as fees will only be applied upon drawdown of their capital stake.

David Hall, Managing Director of YFM said: “Changing UK legislation is likely to reduce the pool of private equity investment opportunities eligible for access through VCTs, thereby creating a potential funding gap for growing SMEs. With YFM’s strong track record of supporting small, ambitious UK businesses looking for private equity investment, we are well-placed to address this shift in the market dynamics and are proud to have successfully launched YFMEP 2016.

“Having already secured these cornerstone commitments, we are looking forward to the next phase of fundraising and providing both our existing and new investors with an attractive private equity alternative alongside our traditional VCT offerings. With our established investment team I am confident YFMEP 2016 will deliver strong returns.”

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BAIRD AND BR PARTNERS ANNOUNCE INVESTMENT BANKING ALLIANCE Baird, an employee-owned, international financial services firm, and BR Partners, a leading independent investment bank in Brazil, announced a strategic alliance for investment banking services, with an initial focus on cross-border mergers & acquisitions (M&A) between Brazil and Europe, and Brazil and the U.S. Through the alliance, the two leading investment banks will enhance their respective M&A offerings by leveraging each bank’s strong knowledge and deep corporate relationships within each’s respective regions.

Baird and BR Partners have had a strong working relationship for the past several years. Most notably, last year the two firms co-advised Affinia Group Inc. on the sale of its Affinia South America business. This new investment banking alliance formalizes the strong, existing working relationship the two firms have.

Brian McDonagh, Co-Head of Global Investment Banking and CoHead of Global M&A at Baird said: “We are delighted to be partnering with BR Partners, a firm that shares our partnership and clients-first approach to running the business.

This strategic alliance broadens Baird’s global footprint, further expands our international reach and enhances our overall M&A franchise by strengthening our ability to serve clients around the world. Along with our existing partnerships with firms in India and Australia, as well as our growing global network of Baird bankers on three continents, this alliance is another example of how Baird continues to invest in its global investment banking platform.”

Commenting on the alliance, Ricardo Lacerda, CEO and Founding Partner at BR Partners, said: “It is a pleasure to extend our relationship with Baird to an alliance between two firms that share the same values and are both recognized by being a trusted advisor to their clients. We look forward to better serve our clients through this alliance and help them take advantage of the growing opportunities for cross-border transactions.”

Baird is a leading global investment

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bank focused on the middle market.

Approximately 260 investment banking professionals in the U.S., Europe and Asia provide corporations, entrepreneurs, private equity and venture capital firms with in-depth market knowledge and extensive experience in merger and acquisition, debt advisory and equity financing transactions. The firm has established alliances and partnerships with investment banks in India, Australia, and now with BR Partners in Brazil, enhancing its global platform. Since 2011, Baird has completed nearly 400 advisory transactions representing more than $94 billion in transaction value and 530 financings raising $151 billion.

Baird’s clients in the UK/Europe increasingly need a truly global universe of buyers and sellers when it comes to M&A processes.

Most cross border M&A with UK/Europe has been with US, and while it still is, other regions of the world are becoming increasingly important. For example, the recent surge of Asia Pacific buyers – most notably from China and Japan – for European businesses illustrates this growing global diversity.

Since its formation in 2009, BR Partners has established itself as a leading investment bank in Brazil, advising on more than 60 transactions worth over R$60 billion. The firm offers a large variety of financial services and focuses on long term relationships with its clients.

Established by Ricardo Lacerda, BR Partners serves the needs of entrepreneurs and companies, without any conflict of interest. Based on a meritocratic partnership model, BR Partners relies on a solid capital base, through the investments of our managing partners and financial investors – entrepreneurs and families from different sectors of the economy.

BIRKETTS COMPLETES MOTOR SECTOR SALE Top 100 Law Firm Birketts has advised the shareholders of the Lifestyle Europe motor dealer group on its sale to Hendy Gr oup for an undisclosed sum.

The Lifestyle Europe motor dealer group operates Ford, Mazda, Kia, Renault, Dacia, Seat, Suzuki and Isuzu in the South East and is now part of newly formed company Hendy Automotive Limited.

The new combined group has a projected annual turnover of £600m, employs around 1,000 staff and is set to sell in excess of 40,000 cars, vans and trucks each year from its dealerships across the South of England.

Birketts advised on all legal matters with Corporate Partner Adam Jones and Corporate Solicitor Alex Forwood leading the team, which also consisted of Matthew Grindley (Commercial Property), Lynette Lawrence (Commercial Property), Karl Pocock (Tax), Jessie Basra (Employment) and Stephanie Ayre (Corporate).

Marc Matthew, Chairman of Lifestyle Europe, which was formed in 2001, said: “Birketts has represented us for 15 years and has a proven track record in the motor sector, with a dedicated Motor Industry Group. The client service and project management that we received was of the highest calibre, the team impressed us with their responsiveness and attention to detail over a prolonged period. Our relationship with them was seamless and we were provided with the professional and immediate communication we needed to ensure speedy solutions to aid completion. The Birketts team has been phenomenal.”

Adam Jones, Corporate Partner at Birketts, added: “This transaction demonstrates once again Birketts’ expertise in the motor sector as it continues to see increased levels of consolidation. We have had the great pleasure of working with Marc, Peter and the team at Lifestyle Europe for a long time, and the business will no doubt prove to be a good fit with the Hendy Group. I am therefore delighted with the way our multi-disciplinary team helped achieve a successful exit for the owners, with direct input on solving the issues that arose on a challenging transaction. The team is very busy in the sector at the moment, and we look forward with great interest to being involved in more motor industry activity.”

The Atkins Acuity team combine skills such as financial structuring, economic and strategy consultancy, organisational development, operations improvement, programme management, and due diligence, with Atkins’ technical engineering expertise.

Dominic Harvey, chief executive officer of Atkins Acuity, said:

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BLACKBERRY AND EMTEK FORGE PARTNERSHIP TO ACCELERATE AND ADVANCE BBM’S CONSUMER BUSINESS GLOBALLY Alliance to transform BBM’s cross-platform offerings through new content-rich features and innovative BBM services BlackBerry Limited (NASDAQ: BBRY; TSX: BB), a global leader in secure mobile communications, announced a strategic alliance with PT Elang Mahkota Teknologi Tbk. (Emtek, IDX:EMTK) that will provide cross-platform BBM users with access to enriched content and services. This landmark partnership accelerates BlackBerry’s vision to advance BBM for the consumer market through a licensing agreement with Emtek Group that enables the company to develop new BBM applications and services for Android, iOS and Windows Phones.

To strengthen the alliance, Emtek’s digital content arm KMK Online will establish an office in the Toronto area to work closely with BlackBerry. KMK Online has a wide breadth of media assets that will be combined with more than 20 of Emtek’s businesses and investments to bring significant value and services to BBM. These investments span across broadcast television, Web properties, content production and artists. This means, in the coming months, users will have access to a plethora of content such as national free-to-air (FTA) television stations, one of the leading online video platforms, three exclusive production houses and a library of more than 100,000 hours of TV and premium content, just to name a few.

BlackBerry will also extend its open mobility ecosystem by making the BBM application program interface (API) available to Emtek in order to accelerate the growth of partners and service providers. Integrating BBM’s social, chat, commerce and content capabilities with Emtek’s substantial portfolio of assets and ecosystem will help maximize the potential of BBM to give customers access to new: • Content – music and video streaming, games, sports and news channels, celebrity blogs and more • Commerce – shopping, gifting and coupons/vouchers

• Online to Offline Commerce – booking movies, travel, health services or job postings • Finance – payment processing, money transfer, mobile phone re-charge, and utilities billing As one of the leading messaging services, BBM cross-platform has seen significant popularity in Indonesia, growing to nearly 60 million monthly active users.

Emtek, as Indonesia’s leading media content company, is an ideal partner to advance the innovation and capabilities of the BBM platform.

Licensing BlackBerry software and IP is part of the company’s strategy to increase revenue and improve margins.

Not only does the alliance with Emtek facilitate this goal, it achieves operational and cost efficiencies while driving growth in the BBM business as Emtek will invest in people, infrastructure, technology development and the ecosystem.

“Emtek’s impressive background and pedigree in entertainment, content and technology makes them the perfect partner to maximize the potential of BlackBerry’s messaging platform while meeting our financial and operational goals,” said John Chen, Executive Chairman and CEO, BlackBerry. “Our BBM users are passionate people that truly value BBM as the best way to share and connect with each other. We wanted to continue to offer our users even more with the most content-rich media and new services such as e-commerce, video, music and games.”

“Our partnership with BlackBerry will allow BBM users to access exclusive content from some of Emtek’s most sought-after entertainment, technology and digital products and services,” said Alvin Sariaatmadja, CEO of Emtek. “We see significant opportunity to grow the consumer BBM business globally and are excited to invest in research and development to further advance BBM.” Partnering with Emtek enables the growth of both consumer and enterprise BBM. As Emtek advances the platform for the consumer market, BlackBerry will continue to advance the platform for enterprise with BBM Protected, the world’s most secure cross-platform messaging service. BBM Protected provides enterprise-grade messaging for Android, iOS, BB10 and BBOS, and enables users to stay connected and engaged with each other through real time messaging, voice and video communications.

CAVENDISH ADVISES TRISTAR WORLDWIDE ON ITS ACQUISITION

BY ADDISON LEE TO CREATE EUROPE’S LARGEST LUXURY EXECUTIVE CAR SERVICE Transaction showcases the strength of Cavendish’s Consumer Group and highlights its expertise in advising on the sale of luxury services operators Cavendish Corporate Finance, the UK’s leading sell-side mid-market M&A firm, has advised Tristar Worldwide, a luxury travel service operator on its acquisition

by Addison Lee, Europe’s largest private hire company.

Founded in 1978, Tristar pioneered airline door-to-door luxury chauffeur services for global airline companies such as Virgin Atlantic. Today, the company is an international business, with global revenues of £50m, more than 200 staff, over 450 drivers and a reputation for being one of the most trusted names in the business. Tristar has headquarters on three different continents and a multitude of regional centres across Europe, North America and Asia.

The Tristar brand will continue, bolstered by Addison Lee’s substantial fleet, 15,000 business customers and market leading technology. Addison Lee already operates the largest executive car fleet in the UK and together with Tristar’s fleet the two business will have almost 1000 premier cars around the world, becoming the undisputed market leader in the executive car market.

Strong customer demand for executive car services, particularly on a transAtlantic basis, means the combined business is well positioned for growth and will create Europe’s largest car service operator with over 5000 cars and drivers, and a team of over 800 dedicated to delivering the best possible customer service.

Cavendish Corporate Finance, which ad-

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vised Tristar on the deal has considerable experience in advising luxury brands and premium travel businesses. Recent high profile transactions include advising on the sale of luxury travel group Scott Dunn and Cavendish has also advised on a wide range of other luxury and classic brands as New & Lingwood, Liberty, Raleigh Bicycles, Mappin & Webb and Princess Yachts. The success of this transaction demonstrates that there is continuing strong interest in UK mid-market businesses from both domestic and international purchasers.

CAVENDISH LEADS ON ACQUISITION OF RADLEY

BY BREGEL FRESHSTREAM

Jonathan Buxton, Partner and Head of the Consumer Group at Cavendish Corporate Finance, commented:

Cavendish Corporate Finance, the UK’s leading sell-side mid-market M&A firm, has advised Radley, the well-known British handbag and accessories brand, on its acquisition by Bregal Freshstream, a global private equity investment firm.

“Appetite for luxury car services is expanding around the world, as increasingly high net worth individuals and business professionals expect to be able to access a truly premium service wherever they travel. China outbound alone is a huge opportunity, with significant increases forecast in both business and independent leisure travel.

I am delighted that we were able to create a competitive process for the sale of Tristar, drawing, in particular, on the local expertise of our partner firms across the Far East and in the USA, culminating in the sale to Addison Lee. Addison Lee and Tristar have the potential to create a truly global luxury car operator, able to offer a seamless international service across markets and geographies. With demand growing strongly, we expect to see further transactions in both luxury services and travel.”

Andy Boland, CEO, Addison Lee, commented: “There will be significant growth in the executive car market following the 15% jump in volumes we saw in 2015.

With Tristar, we will be able to take our service to the next level and into new markets around the world. For the customers of both companies this means a better and more efficient experience and a global service.”

Dean de Beer, CEO, Tristar Worldwide commented: “Both Addison Lee and Tristar are market leaders in their respective sectors with long standing reputations for service quality and reliability. When we set out to look for a partner with whom we can grow and take our business to the next level, Addison Lee was the obvious choice. I am proud of what we have achieved so far and excited about the next chapter for Tristar.”

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TDeal underlines Cavendish’s strength and capability in the affordable luxury retail sector

Founded in 1998, Radley is now the leading British handbag and accessories brand in the rapidly growing affordable luxury market with a multi-channel business and established distribution network covering the UK, Europe and Asia. Since 2007, the business has been majority owned by Exponent Private Equity.

Following the deal, veteran retailer Don McCarthy will join the business as Chairman. Don is an entrepreneur with over 40 years investing, operating and controlling many high street names.

He has previously held the position of Executive Chairman at House of Fraser and Chairman of Aurum Holdings which includes Watches of Switzerland, Mappin & Webb and Goldsmiths. As CEO and Chairman of Rubicon Retail Ltd, he established a multi-branded footwear and fashion organisation before selling the whole company in 2006.

Don will work with CEO Justin Stead who has a proven and very successful track record of building shareholder value for businesses on a global basis. The Group’s recent progress which has seen Radley establish a significant presence in the UK with 33 stores and eight concessions in key cities and retail centres alongside a presence in 33 John Lewis stores, 58 branches of House of Fraser and over 200 other department stores and independent shops nationwide. The Group also has a strong eCommerce offering with dedicated websites for the UK, German and Japanese markets.

The business generates just over 10% of its total sales outside of the UK, predominantly via distributors in Germany

and Japan and, of the c90% UK sales, some 10-15% are to non-British customers visiting its UK stores.

Radley is ideally positioned in the affordable luxury segment of the global luxury goods market, which was worth £161bn in 2014, with a major presence in the handbag segment, the fastest growing segment of this market. The UK handbag market was worth £1.6bn in 2015 and has grown at a CAGR of 7% since 2011.

This investment from Bregal Freshstream will look to further grow Radley’s business both in the UK and overseas, with significant potential to build upon the brand’s international appeal.

The deal marks the third investment

by Bregal Freshstream following its successful investments in infrastructure contractor Taziker Industrial in March 2016 and Belgian self-service restaurant chain Lunch Garden in December 2015.

Cavendish Corporate Finance has a wealth of experience in the affordable luxury sector. High profile transactions include advising brands such as New & Lingwood, Smythson, Liberty, Mappin&Webb and Silver Cross.

Jonathan Buxton, Partner and Head of Consumer at Cavendish, commented: “This transaction will take the transformation of Radley into a global brand to the next stage. It also illustrates the appeal of UK brands with genuine heritage and the potential for international scale to a wide range of overseas buyers. Such businesses continue to attract strong interest from family funds, private equity houses and trade buyers from around the world.

Commenting on the investment, Freshstream’s Managing Partner Patrick Smulders said: “Radley is a wellknown and cherished British brand with beautiful products, an excellent management team and a strong financial track record. We see significant opportunity for the Group to build on its international appeal and are delighted to have the combination of Don and Justin working together again – they have an outstanding track record of success.

Alongside the existing Radley team, we see this as an exciting new stage of the company’s development.”

CEO of Radley, Justin Stead commented “We have enjoyed a strong period of growth in recent years and see huge potential for the business to build on the

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momentum we have generated to date.

We have a loyal, and growing, customer base plus a very clear vision and strategic plan to grow the business that will see us pursue further UK expansion and international growth. The Freshstream team really understands our brand, our culture and our plans for the future so I am really looking forward to working with both them and Don to make these plans a reality.”

Don McCarthy, incoming Chairman, added “I am delighted to be joining such a well-known brand at such an exciting stage of its development. Justin and his team have worked hard to build Radley into a brand that is synonymous with high quality design and workmanship so, with Freshstream’s backing, I am confident that we can all help the Group to capitalise on its enormous potential.”

CONDECO ACQUIRES MYVRM TO ENHANCE USER EXPERIENCE TAcquisition enhances Condeco’s award-winning offering with unified communications platform International workplace technology specialist Condeco Software announced the acquisition of myVRM, a New York-based software company with workflow automation expertise in video collaboration, content sharing, unified communications, virtual meetings and analytics. The move will greatly enhance the end user experience, and cement Condeco’s position as a dominant global force in workplace software.

Condeco, the world’s only provider of integrated hardware and software solutions which are designed to give companies all the tools they need to make the most of their workplaces, will now offer a combined platform which simplifies the process of video collaboration.

Delivering added value to Condeco’s blue chip customers by providing seamless connectivity with other technologies, the myVRM platform streamlines the whole process of setting up audio, video, content sharing and virtual meetings, which are increasingly important features of international business. myVRM’s platform currently integrates with Microsoft, Google, IBM, Cisco, Polycom, Pexip, Vidyo and others systems, creating a simplified solution which will accellerate Condeco’s speed to market and

drive greater adoption among users.

Paul Statham, founder and CEO of Condeco, said: “For over ten years Condeco has continually strived to be a people centric company, developing advanced workplace technology which makes a difference to people’s working life.This new combined offering will offer real business value to our clients and be a great addition to Condeco’s enterprise solution.

“This move will provide the scale to underpin our continued global expansion, which has seen us achieve over 40% growth in 2015. Adding scale to our already global business will help as we respond to the appetite for workplace utilization tools – demand which is increasing exponentially as companies strive for effeciency, competitiveness and productivity.”

Ken Scaturro, president of myVRM, said: “The combined platform will enable users to engage in much more complex scenarios, and will give organizations simple and intuitive end-to-end management of people, processes, real estate and technology. We share Condeco’s vision of the workplace of the future and are excited to join their team.”

Condeco’s technology provides the solutions that business leaders around the world need as they seek to make the most of their two most expensive assets – their people and their property – and customers rely on Condeco solutions to navgiate an increasingly globalised economy. myVRM’s platform paves Condeco’s path to continued success by providing the capability to integrate their solutions with other systems in this space, providing a single interface for users.

The myVRM acquisition provides the added benefits of a strong loyal channel, high end customer set, and an innovative product and development team. The myVRM platform will become a module within the Condeco software suite as part of a broader workspace management solution. Initial integration of the software platform is expected by end of the calendar year. The acquisition closed on June 2nd, 2016.

Condeco will be showcasing both platforms at InfoComm in Las Vegas on June 8-10, 2016. established a multi-branded footwear and fashion organisation before selling the whole company in 2006.

Don will work with CEO Justin Stead who has a proven and very successful track record of building shareholder value for businesses on a global basis. The Group’s recent progress which has seen Radley establish a significant presence in the UK with 33 stores and eight concessions in key cities and retail centres alongside a presence in 33 John Lewis stores, 58 branches of House of Fraser and over 200 other department stores and independent shops nationwide. The Group also has a strong eCommerce offering with dedicated websites for the UK, German and Japanese markets.

The business generates just over 10% of its total sales outside of the UK, predominantly via distributors in Germany

ELASTIFILE ANNOUNCES FUNDING FROM CISCO INVESTMENTS FOR ITS SERIES B FUNDING ROUND Marks Elastifile’s Seventh Corporate Investor, Elastifile, a cutting-edge, all-flash software defined storage (SDS) solution, announced a strategic investment by Cisco Investments. The new capital builds on previous Series B investments by other leaders in the data center and storage industries.

Elastifile brings a new level of flexibility to enterprise-grade storage, contradicting the traditionally accepted tradeoff between resiliency and agility. Elastifile helps large and mid-size enterprises to scale through the cloud, to hundreds and thousands of nodes, providing millions of Input/output Operations per Second (IOPS).The solution delivers flash performance to any and all enterprise applications while reducing the CAPEX and OPEX of virtualized data centers and simplifies the adoption of hybrid cloud by seamlessly extending file systems across on premise and cloud deployments.

“It used to be that all-flash arrays were essentially block storage applications, not capable of providing enterprise-grade performance at cloud scale,” said Amir Aharoni, Elastifile’s CEO and co-founder.

“We’ve redefined this by designing an elastically expandable distributed file, all-flash software-centric storage solution.

Cisco Investments’ funding underscores the value of our approach.”

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€2 billion new fund closed €1.9 billion exit proceeds €612 million invested Demonstrating why we’re one of Europe’s most active lower mid-market investors In 2015, Equistone closed a new €2bn fund, returned €1.9bn to investors as a result of 11 successful exits and committed €612m in eight new investments across France, Germany and the UK. Equistone will continue to source deals and build value with management teams in 2016. www.equistonepe.com Birmingham | London | Manchester | Munich | Paris | Zurich

© 2016 Equistone Partners Europe Limited. Authorised and regulated by the Financial Conduct Authority.

“A Gamechanger changes the way that something is done, thought of or made; they transform the accepted rules, processes, strategies and management of business functions. They shift behaviour, shape culture and make clever happen.�

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BRITISH BUSINESS BANK INVESTMENTS LTD NAMES CATHERINE LEWIS LA TORRE AS CHIEF EXECUTIVE OFFICER ABritish Business Bank Investments Ltd, the commercial arm of the British Business Bank, announced the appointment of Catherine Lewis La Torre as Chief Executive Officer, effective from 1 September 2016. Ms Lewis La Torre joins British Business Bank Investments from Cardano, where she is Head of Private Equity and responsible for managing a portfolio of private capital fund investments with over £1bn of client commitments.

This appointment follows the announcement that Peter Wilson was stepping down as CEO in March 2016.

Ms Lewis La Torre has over thirty years’ experience in the private equity industry focused on investing in the European mid-market. Before joining Cardano – a provider of advisory and investment services to UK corporate pension plans - Catherine was co-founder of Proventure Private Equity, a fund management company in the Nordic Region, and later established her own private capital consulting business. Catherine has lived and worked in several European countries and has engaged with both public and private providers of capital for small and medium-sized businesses in Europe, the US and Asia.

Keith Morgan, Chairman of British Business Bank Investments said, “We are very excited to have Catherine join our team and lead British Business Bank Investments into the next phase of its development. Catherine is a highly respected industry leader and her wealth of knowledge, experience and expertise makes her an excellent fit for the Bank. With a strong pipeline of new investment opportunities and a business plan that envisages £700m of new commitments over the next five years, Catherine will provide the leadership and vision to realise the company’s potential.

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Catherine Lewis La Torre said, “I am delighted to be joining an organisation with such an important mission. Small and medium-sized businesses form the backbone of the UK economy, although many companies continue to experience challenges in identifying the right financing options as well as in accessing capital. British Business Bank Investments’ role as a facilitator of funding for smaller businesses can make a real difference for thousands of British businesses. I am looking forward to working alongside an experienced and dynamic team that has been charged with this important task.”

Together with the appointment of a new CEO, British Business Bank Investments Ltd also announced two new Non-Executive Directors, Sara Halbard and Francis Small. Sara is the former Head of Credit Fund Management at Intermediate Capital Group and Francis is a former Senior Partner at Ernst & Young. Both positions are effective from 16 June 2016. Pat Butler stood down as a Non-Executive Director at the end of May.

HANNAM & PARTNERS ANNOUNCE THE PROMOTION OF TWO NEW PARTNERS IInternational resource and emerging markets focused advisory firm bolsters the partnership after a period of strong growth Hannam & Partners announced the promotion of two new partners: Ingo Hofmaier to “Head of Mining” and Andrew Chubb to “Head of Corporate Finance”, following the company’s continued success.

Both Ingo Hofmaier and Andrew Chubb were previously directors at Hannam & Partners. Their new titles, Head of Mining and Head of Corporate Finance respectively, represent their new positions as partners in the firm. The pair are joining forces

moves

with current partners: Ian Hannam, Neil Passmore, Timothy Hoare, Giles Fitzpatrick, and Rupert Fane.

Ingo Hofmaier, the new Head of Mining, has 16 years of experience in corporate finance, corporate M&A and general management in Europe, Africa and Asia. Ingo joined from Rio Tinto’s business development team 3 years ago, has an MA in Business (University of Eisenstadt – Austria) and is an INSEAD (Asian International Executive Programme – Shanghai) graduate. He is a CFA charter holder since 2004, attended the Imperial College “Mining Valuation” course and holds an Austrian engineering degree.

Andrew Chubb, the new Head of Corporate Finance, was previously a Managing Director at Canaccord Genuity where he worked for almost eight years in the natural resources team. He has a broad range of international corporate finance, capital markets and M&A experience focussing on the metals, mining and natural resources sector.

He has a first class law degree from Manchester University.

Neil Passmore, CEO of Hannam & Partners, said: “These promotions mark a milestone for our company following a period of continued success.

Both Ingo and Andrew are first class bankers and bring outstanding skills to the partnership.

The promotions further strengthen our position as a leading independent corporate finance advisory firm with a focus on mining, resources and emerging markets, known for our consistent quality of advice and execution.”

partners, Bernard Beerens, Ayzo van Eysinga and Rutger Zaal, and their respective teams, AKD’s office in Luxembourg will immediately start with a dedicated team of six tax specialists and six lawyers. Until the formal approval from the Luxembourg Bar Association, the services will be rendered in collaboration with the Luxembourg law firm Beerens & Avocats.

Erwin Rademakers, Managing Partner AKD, says the move is responding to a clear client trend: “Businesses have become more international and there is an ever-increasing demand for solid international legal support for business transactions. Now, our clients are seeking ways to avoid the potentially difficult and costly fallout of the Brexit vote. The Netherlands and Luxembourg are two EU member states with very stable political, economic and tax climates. By adding an office in Luxembourg, we can offer our clients even more integrated international advice in the areas of company law, tax law and financing.

Luxembourg is one of the most important international centers for these kind of services.”

All three partners have extensive experience in Luxembourg and are well known in the international legal market.

LAW FIRM AKD TO OPEN OFFICE IN LUXEMBOURG Leading Benelux law firm AKD has announced its intention to open an office in Luxembourg to meet growing demand for integrated, international legal services in stable jurisdictions. AKD’s new office in Luxembourg will expand its corporate, tax, banking and finance, and investment funds practices. This step is part of AKD’s international growth strategy and allows the firm to support its clients with local offices throughout the Benelux region. With over 220 lawyers, civil-law notaries and tax advisors, AKD is the internationally focused legal and tax firm for any business dealing with the Benelux countries.

With the hire of three experienced and renowned

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Steinman & Rodgers LLP U.S. FCPA Law Firm of the Year 2015 & 2016

U.S. Boutique Law Firm of the Year

Defense & Aerospace

U.S. Niche Law Firm of the Year U.S. International Anti-Corruption Law Firm of the Year U.S. Customer Service Law Firm of the Year

We are the FCPA boutique law firm Highly specialized and internationally recognized with five decades of combined experience in anti-corruption work. We are nimble, responsive, creative, efficient, cost effective, and focused on your business objectives. We specialize in: •

Conducting risk assessments.

•

Developing, implementing, and improving anti-corruption compliance programs.

•

Evaluating relationships with third parties, including sales agents, consultants, joint venture partners, customs brokers, offset advisors, and acquisition targets.

Our core strength and focus is compliance.

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Anti-corruption compliance isn’t an academic exercise for our clients. Companies must balance their compliance obligations with the need to get business done.

Compliance doesn’t mean saying ‘no’ to all risks. We consider ourselves business lawyers — that means helping our clients navigate through compliance challenges to fulfill their business goals.”

Bill Steinman

2015 & 2016

U.S. Regulatory Lawyer of the Year Brooke D. Rodgers

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kwm.com Europe | Asia Pacific | North America | Middle East

Destination Private Equity @kwm_pe From fund formation to buyouts, investments, exits and secondaries, King & Wood Mallesons is at the heart of the private equity industry, with one of the largest integrated private equity teams in the world.

We are delighted to have been recognised by the voters of Private Equity International in its annual awards for our private equity work in Europe and in Asia for fund formation and transactions.

We are grateful to our clients for their continued support.

Inspired by SJ Berwin Gamechangers 24

“Gamechanger: A visionary strategist bringing fresh and unique ideas to the table, an individual or business that stands out from the crowd with ideas that inventively change the way a situation develops.�

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Gamechangers Gamechangers 25 25

PARADE

SAMSUNG NOTEBOOK 9 Samsung is known for copying every one of Apple’s steps—and the Notebook 9 is no different. However, what Samsung has done here is take the whole “thin and light” laptop mentality and really run with it. Not only is the Notebook 9 incredibly thin, it also packs a punch, maxing out with an Intel Core i7 processor, 8GB of RAM, and 256GB of SSD storage. The only real disappointment is the 1080p display, which will have a hard time comparing to laptops like the MacBook Pro or Dell XPS. At the right price though (which is currently TBD), the Notebook 9 could be one of the big laptop standouts of 2016.

DIETSENSOR SCIO FOOD SCANNER Trying to track what you’re eating for dieters is important, but it’s even more important for those with conditions like Diabetes.

What this little gadget does is scan the chemical makeup of the food or drink at hand, analyzing whether or not it’s something you should eat given your dietary conditions. It can only do one piece of the food at a time and has to use a multi-step app to do the job, but it’s kind of astounding that it even works in the first place.

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PARADE

SAMSUNG MODULAR TV This one is more a tech concept than anything else, but the idea of a modular television is admittedly an interesting one.

Essentially, each of these pieces of the screens can be used independently, as well as move together and form screens in different aspect ratios. The really cool thing is that when they form together, it’s totally seamless—meaning you can’t see the lines between the individual pieces.

SEGWAY ADVANCED PERSONAL ROBOT Segways were already a little ridiculous, but now they have a robotic face on them—but hey, no CES is complete without some old fashioned robotics. This new product from Segway is somewhere between a personal assistant and a mode of transportation, which isn’t the craziest thing in the world when you think about it. Much of the potential behind such a product lies behind what developers will do with its open SDK. Here’s to hoping for a robot that isn’t a vacuum cleaner that could actually be useful around the house!

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PARADE

PARROT DISCO Drones made a huge splash at CES this year, but the biggest standout was the Parrot Disco. Parrot has already been made famous for its entry level drones, but the Disco looks and feels like something else entirely. The Parrot Disco has two wings that let take off more like a kite than a traditional drone. With just a toss in the air, the Disco can pick up enough momentum to stay afloat. This thing can also fly at speeds up to 50mph, stay up for as long as 45 minutes, comes with a 1080p camera at the nose, and has a number of assisted flying modes.

FARADAY FUTURE FFZERO1 CONCEPT Making its big premiere at the show was a new company called Faraday Future. It showed off its new high-performance concept car, the FFZero1, which looks as close to the Batmobile in an actual car. It’s fully electric, claims a 0-60 speed in less than three seconds, and can travel over 200mph. Even though the FFZero1 is just a concept car.

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PARADE

RAZER BLADE STEALTH Razer has been trying to build the ultimate gaming Ultrabook for the last few years, but 2016 might be the year it’s actually succeeded. The Blade Stealth is everything you’d expect to see in a new ultrabook-type machine from Apple or Dell—it’s slim, fast, and fairly inexpensive. The kicker though is that the Blade Stealth also comes with an integrated graphics card that can supplemented by an exterior graphics card called Razer Core, which will deliver those desktop-level graphics that it was never able to power by a laptop before.

LIVESTREAM MOVI Action cams are everywhere you look these days, but what Livestream has done with its new product Movi feels incredibly intuitive. This little 4K camera is meant to be used to capture live events as they happen, which is something people are wanting to do more and more these days. The Movi connects right to your iPhone and uses the corresponding app to let you edit up to 9 virtual cameras all on the fly. You can zoom, pan, cut, and even let the camera follow faces—all within the app. At just $399, the Movi feels like the next big step in livestreaming capabilities.

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THE MAN AT THE FOREFRONT OF FINTECH

CRAIG PEARSON CHANGING THE WORLD OF WEALTH MANAGEMENT

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Introducing Craig Pearson, wealth management innovator and CEO at Private Wealth Systems. Based in Charlotte, North Carolina, Private Wealth Systems is a financial technology company that is revolutionising the way private wealth is analysed, reported and most importantly, managed. Empowering high and ultra-high net worth investors, and their advisors, they continue to ensure individuals achieve meaning through informed investing, year after year.

Gamechangers sat down to dig deeper into their history, the world of FinTech and discover what Private Wealth Systems are exactly doing, that others aren’t.

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Q. We’d love to hear more about Private Wealth Systems and your role as co-founder and CEO? Private Wealth Systems is a global financial technology company that is focused on transforming how high net worth investors, and their trusted advisors, engage in the management of their wealth. High net worth investors control over $56 trillion in wealth, yet they lack the basic ability to have a single consolidated view of their total wealth - limiting their ability to make informed financial decisions. By blending decades of unique domain expertise with modern digital technologies Private Wealth Systems is the only digital platform that provides global high net worth and ultra-high net worth investors with consolidated, summary-to-transaction level transparency across their total wealth; capturing, consolidating, cleansing, calculating, and presenting actionable and personalized insight across every account, asset class, custodian, currency, and complex entity structures to drive informed and empowered decision making.

For individuals with sophisticated wealth our proprietary platform serves as a mobile personal financial management (PFM) application that empowers individuals with the information they need to engage and gain active oversight over the preservation and growth of their personal wealth. For wealth managers and advisors our cloud-based consolidated investment-reporting platform reduces the operational burden and regulatory costs of omni-channel client reporting while providing a total 360-degree view of their clients’ global portfolios that elevates and differentiates the symbiotic investor-advisor relationship.

You can think of us as a technology platform that provides the personalized precision of a family office solution with the scalability and security of a global enterprise-banking platform. My co-founder and I started the company in January 2015, we launched our first release in January 2016, and over the past few months we have attracted over $3 billion in individual high net worth assets across 3 continents.

As CEO and Co-Founder of the company I am committed to fulfilling the industry’s promise of a software platform that democratizes the data stored across disparate silo legacy systems in order to provide true transparency and actionable insight across a complex investor’s total wealth. We are committed to providing information that is tax-level accurate, comprehensive enough to support every financial instrument and investment vehicle, timely enough to be relevant and actionable, and personalized to reflect the unique sophisticated views of each individual…. and in my spare time I remain focused on helping reshape how financial services will be delivered and managed in the decades ahead.

Q. What motivated you to launch Private Wealth Systems?

The answer is deeply personal. My father inherited multigenerational wealth, and like many third generation family members, he never engaged in the management of his wealth. He entrusted his wealth, blindly, to his advisors. Like many advisors my father’s bankers took concentrated risk chasing the hope of generating excess returns. Sadly, without having a tool to provide centralized oversight my father and his bankers did not understand the extent of the collective risk and ultimately his wealth was lost. I am a living example of the proverb shirtsleeves-to-shirtsleeves in three generations. My father is a proud man from a strong successful family, but his failing was a lack of engagement in his wealth. I don’t want anyone to experience what I experienced as a teenager. I built this platform for people like my father, his advisors, and candidly even for younger generations to engage in the conversation around their family’s wealth Q. As an industry-defining financial technology (FinTech) company, can you shed a little light on the philosophies of your company and how you’re making such an impact in the industry?

Our philosophy is that the individual wealth owner, and their trusted advisors, should have total transparency regardless of financial complexity. A twenty year old with ten thousand in savings has plenty of FinTech tools available to gain oversight over their money.

Yet someone with $10 million to $10 billion has literally no means of actionable oversight over their wealth – it’s crazy. High net worth investors should have the information they want, when they want, in the format they want, on the device they want, in order to be an active participant in managing their wealth. Where the majority of other software platforms focus on the institution, Private Wealth Systems focuses on the high net worth individual who remains unserved by other systems because of their level of financial complexity. By providing digital, personalized, one touch access to all of the financial information within a complex global portfolio, we believe we can fundamentally shift greater control back into the hands of the high net worth individual enabling them to have a better understanding of their wealth and how it’s managed. In turn,

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access to this level of data will also give advisors the ability to provide better guidance to their clients, further cementing the investoradvisor relationship.

Q. What are the key elements to achieving this?

I think the most important element to achieving our objective is clarity of purpose. Because of my personal experience, as well as my experience in this industry, I have had a very clear, precise vision of the ‘problem’ I was seeking to solve and the market/client I was seeking to serve. In turn, I have worked with my entire team to ensure that there is complete alignment around this vision. In order to realize our objectives and build a lasting organization the vision cannot be mine alone – it must be understood, shared, and embraced by everyone across our entire company. The other key element is building the best team possible. My team is incredibly talented with unique and diverse domain expertise from across this industry. We have the experience to know what has worked and what has caused other systems to fail, and we are building our platform fully from the ground up based on lessons learned, collectively, across two decades of serving the most complex but vital segment of the financial market.

Q. What are the most common risks involved at Private Wealth Systems and what is implemented to reduce these?

The risk is the same for any young, fast growing company; vision and execution. It’s easy to get distracted and chase new opportunities that unexpectedly present themselves or react to timeline pressures or resource constraints. But the difference between success and failure is based on our ability to maintain focus on the vision and steadfast dedication to daily execution. I am very grateful to have the industry’s best team because we have been able to design, develop, and deploy arguably the most sophisticated and powerful platform in the world within eighteen months from inception. Clients are constantly telling me that Private Wealth Systems has done more in less time with fewer resources than any other company in this industry. That is real validation and it’s a testament to our belief in vision and dedication to execution.

Q. Providing a total wealth dashboard, what are you doing that other private wealth advisors aren’t?

It’s important to note that we are not an advisor. We don’t provide advice or take possession of any assets. Our software platform is completely unbiased and independent of any manager, advisor or custodian. Individuals need an independent view to analyze and judge manager performance. Now if you asked what we are doing that other FinTech platforms aren’t I would say ‘Everything’ including market segment, platform capabilities, and strategic vision. Unlike the vast majority of FinTech platforms that are focused on the mass affluent, we are focused on the high net worth and ultra-high net worth segments on a global scale. The level of financial complexity within this market is so high it has created organic barriers to entry.

These barriers have prevented HNWI/UHNWI from enjoying the benefits of financial empowerment from today’s modern digital financial applications. In order to succeed in this market you need a platform that was born from this market, and you need a team that possesses demonstrable and dominant domain expertise in capturing, consolidating, cleansing, calculating, and presenting multi-asset, multi-custodial, multi-currency investment data that is purposely designed to be consumed by the individual high net worth investor, and not just their advisors. Our experience and expertise has enabled us develop a unique data architecture that no other system has been able to replicate and offer a platform that has capabilities far greater than any legacy platform or service provider. Our proprietary technology can take the most complex financial portfolios in the world and transform the data into simple, clear, and highly personalized actionable insight. Other points of differentiation include; - Comprehensiveness: Our platform supports every asset type – from standard marketable securities to structured products, alternative assets including private equity, hedge funds, real estate, direct investments, as well as physical assets such as art and collectibles.

We also support ownership complexity from partnerships and pooled investment vehicles, to nested structures.

- Design: We continue to invest heavily in designing customized, interactive graphics that enable highly complex calculations to be displayed in the most engaging and intuitive manner. Being purposeful with the use of color, white space, and relevant iconography as a language to help drive understanding, we are able to depict the drivers of risk and return across complex global portfolios in a simplified yet sophisticated manner.

Extreme personalization: Our platform empowers individuals to classify their data based on their own unique perspectives, and view

the information they want, when they want, in the format they want, on the device they want. Is Amazon a retail company or technology company? Is Apple socially responsible? Is Bridgewater’s All Weather Fund a US fixed income fund? The answer is unique to each individual, and impacts asset allocation, planning, and how an individual’s wealth is managed. Our platform is the only platform that enables a personalized security master on a mass scale.

- Dual Support Model: Private Wealth Systems offers a dual support model that allows a client to either manage the platform and data entirely on their own or fully-outsource all aspects of the data management to Private Wealth Systems’ data management team.

- Global extensibility: Our system natively supports all aspects of multi-currency and multi-jurisdictional wealth. Not only can we accurately track the local, base account and reporting currency, but also we can show the impact of currency movements on performance.

Q. Will you share some success stories with us?

From a company standpoint we are very proud of designing, developing, and deploying what many are calling the most powerful consolidated wealth reporting platform on the market in under 18 months from inception. We are also excited to have successfully undergone the due diligence process of our lead investor, who ran the technology investment group for one of the world’s largest private equity firms – validating our vision and team’s execution. We are equally excited by the material impact our platform is already having in helping clients organize and understand what and who is driving their risk and return across very complex global portfolios. Most recently, we had the CIO of a family office tell us that our platform has helped the family begin to communicate and engage one another about the family’s wealth, across several generations, in a way they haven’t done before due to the limitations of their previous system.

Separately, we had a rapidly-growing wealth management firm tells us that our platform will enable them to scale more effectively because of the significant operational and regulatory efficiencies gained from not having to use Excel for manual reporting.

Q. How will we see Private Wealth Systems develop over the course of the year?

2016 is our second year of operation and from a development perspective our focus is on continuing to aggressively build out a broad range of new features and functionality within four core areas.

First, we remain committed to empowering individuals and their advisors to manage and control their data themselves. Although we are unique in our ability to offer a dual-service model and can provide HNWI/UHNWIs, family offices and institutions a fully-outsourced option, we are seeing a growing trend for individuals to enter and manage their own data. To that end, we are launching our self-administration module later this summer which will provide users the ability to fully control every aspect of the platform themselves – from adding new securities and creating new accounts or entity/ownership structures through to customizing data models and classification schemas, and designing customized reports on demand.

The second major area of development this year is around the enrichment of our report library. While clients want the ability to personalize reports, they also want to be able to quickly generate standard depictions of data without having to design a new report each time. Therefore, we are adding report templates for asset allocation, target and ranges with investment policy drift, performance, holdings, balance sheet, alternative assets, and a consolidated dashboard report. With these reports users can analyze exposure and returns at the security, account and entity level, industry or sector level, manager and country level, asset class, and across custom groups, as well as view their direct and indirect exposures to a given security, asset class or country by looking through their partnership structures and pooled investment vehicles.

Expanding our analytics capabilities is the third area of focus, with interactive on screen drill downs and report-based views to enable users to quickly understand the drivers of risk and return. These capabilities include a range of standard risk metrics and performance analytics, as well several instrument and market-specific analytics such as currency contribution to return.

Finally, we are investing heavily in the development of data integrations with custodians as well as other systems. The ability to get high quality data into the platform is integral to the value of our platform. As a result, we are aggressively investing in building out

our direct data connections to financial institutions as well as other premier, third-party data providers. We also believe that the ability to work seamlessly with other systems and software is essential and we built our system to interoperate with other platforms from financial planning and compliance systems to CRM and general ledger platforms.

Q. Voted ‘Best Investment Reporting Platform’, Private Wealth Systems is seen as a Gamechanger in the market. What defines a Gamechanger in your eyes?

From my perspective a Gamechanger is a sustainable innovator – an individual, company and/or technology that fundamentally transforms the industry by challenging current orthodoxy or frameworks and reimagining how to solve the “problem� or even recasting the problem itself. One of my favorite quotes is from Henry Ford who said, ‘if I asked people what they wanted they would have said a faster horse’. Reimagining the problem helps to create a game-changing solution.

At Private Wealth Systems, our aim is not just to offer the single best investment reporting platform, but also to design truly transformative technologies and tools that will reshape the dynamics of the market and change how financial services are delivered, consumed, and managed. One of the top global private banks recently said that Private Wealth Systems is in the best position to become the Amazon.com of financial services to the global high net worth community. What we are building is much more than just a consolidated wealth reporting platform.

Q. What are the 5 key attributes to fit the “Gamechanger� title?

A Gamechanger is about more than just a great, innovative idea. It is also about an attitude and an ethos that permeates every dimension of the company - its strategy, its leadership, its culture, and its people. These are the factors that turn a compelling concept into concrete reality. While I believe there are many attributes that can be associated with Gamechangers, from my perspective the most essential are: originality, passion, audacity, focus, and tenacity. t 0SJHJOBMJUZ (SFBU MFBEFST BOE HSFBU DPNQBOJFT BSF OFWFS DPQZDBUT Instead of copying they create, challenging the status quo with fresh ideas and finding innovative ways to transform how business is done. t 1BTTJPO 5IF CFTU DPNQBOJFT BOE QSPEVDUT SFRVJSF QBTTJPOBUF ‘believers’ that are able to generate enthusiasm internally and externally. The experience my family had losing their wealth gave me incredible passion to overcome all challenges associated with starting a new company and making a lasting impact. t "VEBDJUZ 0SJHJOBMJUZ BOE QBTTJPO BMPOF BSF OPU TVGGJDJFOU o Gamechangers need bold, audacious leaders willing to take exceptional personal and strategic risks to translate the concept into reality. t 'PDVT "DUJWJUZ BMPOF EPFT OPU SFTVMU JO QSPHSFTT 5IF BCJMJUZ UP clearly define and relentlessly maintain focus despite inevitable “noise� and potential distractions is critical to successful execution on every front – from product design to company strategy. t 5FOBDJUZ "NFMJB &BSIBSU PODF TBJE i5IF NPTU EJGGJDVMU UIJOH JT UIF decision to act, the rest is merely tenacity.� Companies that seek to change the game inevitably do so in the face of considerable resistance, doubt and even setbacks. The successful ones are led and built by persistent, tenacious individuals who refuse to give up or back down regardless of the obstacle.

Q. What have been some of the memorable and more challenging events since launching?

There have certainly been many memorable moments since launching our company, but the day our first client went ‘live’ on our platform certainly stands out as the most memorable single moment to date. Taking a broad vision, turning it into a defined plan, and then bringing that plan to successful fruition has to be one of the most incredibly satisfying events for any new business. After working so hard and sacrificing so much it is so exciting for our design and development team to have that initial concept become a tangible reality through dedication and teamwork.

Businesses of all sizes experience so many challenges, but I think one of the most difficult challenges to navigate for any company is building the right team. As a startup it is incredibly hard to find exceptional talent. Keep in mind the first few hires will have a profound and lasting impact on the development of the firm itself: its product as well as its identity and culture. We have been very fortunate to have assembled at the very start what one client called the

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reporting industry’s “dream team”. But as the growth of the firm accelerates, it is my responsibility to ensure that we continue to expand the team by adding the right individuals from an experience, expertise and cultural fit perspective. We need diverse views and brilliant minds coming together as a team to solve a problem that plagues such an vital market segment.

Q. What is key to a successful FinTech platform?

There are several key characteristics essential to building a successful FinTech platform: 1) domain expertise, 2) scalability, 3) extensibility, 4) flexibility, 5) accessibility, and 6) security. First in order to solve a problem you need to understand the root causes of the problem, and this takes decades of direct industry experience to know what works and what doesn’t. Domain expertise also drives capital efficiency, which provides the highest returns on invested capital.

Second, ensuring the ability to support growth requires that the technology be designed to quickly scale to support new users and data as required. As the financial services industry continues to rapidly evolve, it is also essential that the platform is extensible, enabling new features and functionality to be integrated efficiently to meet ever-changing requirements. Particularly within the high wealth segment, flexibility is also a critical attribute as clients demand highly-personalized views of their data. Furthermore, the long-term trend toward mobile engagement also means that the platforms must support on-demand data accessibility from any device. And finally, given both the nature of the information on the platform, and the profile of the clients, the platform must support and adhere to the collective security protocols of the top private banks.

Q. Who do you see as your direct competitors within FinTech, and what do you implement to stay one step ahead?

Our single biggest competitor in the private wealth space is Excel. While inherently inefficient and error-prone, spreadsheets afford investors and their advisors the flexibility to intuitively personalize their information in a way that legacy technology platforms – and even newer ones – simply cannot. This is why we built our platform to provide clients the near limitless flexibility and customization capabilities of Excel, but on a secure, scalable, and compliant technology foundation.

Beyond Excel, there are a few niche providers in the industry that remain challenged by their own legacy platforms. The cost and time for legacy platforms to upgrade and respond to modern demands remains prohibitive which is why we are seeing consolidation among the older technology providers.

By contrast, there are also newer Silicon Valley start-ups that have spent tens of millions of dollars attempting, but failing, to succeed in this industry because they lack the underlying domain expertise to truly understand the requirements of the market, and they have proven not to be a lasting competitor.

It is my core belief that you need to come from this industry in order to succeed in this industry. Understanding the nuances of capturing, consolidating, cleansing, calculating and presenting multi-asset, multi-currency, multi-custodial investment data is not just a technical challenge – it requires deep, direct experience and understanding of best practices.

While we have built the most technically-advanced platform on the market, it is our collective decades of domain expertise that has created a revolutionary solution that will transform the private wealth industry. Keeping ahead of the competition over time will require that we continue to invest heavily not only in our technology but in attracting the best and brightest subject matter experts from around the world.

Q. Which markets have seen huge growth and development over the past 12 months, and which are showing potential for the coming months?

Candidly I have been surprised by the level of demand for our platform across all major markets. We had our initial launch in January 2016 and we already have over $3 billion in individual assets across three continents. We continue to see strong demand from the Americas as well as Northern Europe, and Switzerland in particular. As individual wealth becomes more complex and market volatility increases, the demand for faster, more comprehensive, and personalized actionable information will grow exponentially. We are the perfect hedge against market volatility because the more challenging the economic environment the more demanding and emotional HNWI/UHNWI become about understanding, accessing, preserving, and growing their wealth.

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We are starting to see increasing interest from Asia-Pacific as well as larger institutions that need to provide a better solution to their advisors and clients.

Q. It has been reported that large unbanked populations in countries such as India and the emergence of tech-savvy middle classes in countries such as China, Indonesia and the Philippines, will offer significant growth opportunities for financial technology (FinTech) companies. What is your opinion on their role within Asia-Pacific’s financial services industry?

In 2014, for the first time ever, the number of high net worth investors in Asia-Pac outnumbered those in the United States, with 4.69 million individuals controlling $15.8 trillion in private wealth.

The explosive growth in wealth and the number of wealth owners across the region has created enormous opportunities for FinTech and FinServ companies to meet this demand for omni-channel access to financial services. The lack of existing infrastructure allows a fresh start in re-imaging how these wealth owners can be supported, and done so on their terms eliminating the information and transaction friction that exists with legacy infrastructures – it’s incredibly exciting.

Q. It is believed that the barriers to entry for FinTech platform firms are greatest where banking markets are more concentrated. Do you agree that for emerging markets, financial systems with fragmented banking systems that have seen limited innovation will be the most exposed?

I would argue concentrated banking markets do not increase the barriers to entry but rather increases the barriers to longevity.

Concentrated banking markets are burdened with regulatory restrictions that prevent large FinServ companies from innovating and quickly responding to ever-changing client demands. These vrestrictions create enormous opportunities for financial technology companies to create new technologies that reduce or eliminate the cost and friction associated with concentrated banking markets.

Just look at the remarkable success of the digital/robo-advice market or peer to peer lending. Their successes were achieved in the most concentrated banking markets in the world. Yet the barriers to entry for robo, P2P, and other point solutions is near zero. This is why the challenge these platforms now face is one of longevity as the largest FinServ companies enter their market, eliminating platform differentiation while leveraging their enormous distribution, brand, and pricing power to dominate those market segments.

In markets with low barriers to entry FinServ will force FinTech platform to consolidate or close.

Longevity in concentrated markets requires true sustainable differentiation and high barriers to entry that prevent even large FinServ companies from entering the market. In our industry HNWI/UHNWI demand an independent platform that is completely agnostic to any custodian, advisor or financial services provider.

Several large global banks spent $75 million to $125 million trying to build and offer a consolidated reporting platform like Private Wealth Systems. But the large banks realized the barrier to entry included the requirement of independence and objective analysis, and the banks ultimately chose to collaborate rather than compete in our industry. Our market segment has organic barriers to entry that prevent other FinTech companies (because of lack of domain expertise) and FinServ companies (because of lack of independence) from entering our market. The higher the barrier to entry the greater the probably of long term self-sustaining success.

I do agree that emerging markets offer unique opportunities for FinTech and FinServ to collaborate and work in partnership to bring truly transformative solutions to market, for the benefit of consumers and providers alike.

Q. What does the future hold for your industry?

The future will be marked by three key drivers; 1) increasing disintermediation of advice, 2) globalization of products and services, and 3) an increase in financial complexities across investment instruments and ownership structures. According to CapGemini’s 2015 Financial Services Analysis Report 43.2% of high net worth investors under 40 years of age have relationships with 5 or more financial services firms, that compares to 14.7% of investors over 40. The same report shows HNW investors are allocating 35.8% of their wealth outside of their home countries, up from 25% two years prior. As more investors begin to work with multiple advisors, and they increase their exposure to outside countries, their level of complexity will be prolific. The need for consolidated reporting will become a necessity for high net worth individuals as well as their advisors.

Q. Where do you see Private Wealth Systems in ten years’ time?

Because our platform captures every financial transaction a high net worth individual makes across their entire financial life – across both assets and liabilitis, and since we are completely agnostic to product, advisor, and custodian, we will become the foundational infrastructure to a single integrated frictionless digital ecosystem that will be at the center of every financial interaction between financial consumers and financial services/product providers.

Imagine the year is 2026 and Byrnes Hafelfinger, a US-based high net worth individual, is on a business trip to Chennai. He receives a Private Wealth Systems alert on his mobile device showing that he just received a $1.2 million distribution from Carlyle. Leveraging predictive analytics that reviews Byrnes’ profile and portfolio, our platform will instantly offer several points of action Byrnes can take to reinvest or spend his funds. He will be alerted to the fact that he is below his target allocation for high yield fixed income in Brazil, below his target for socially responsible investing in healthcare, and under exposed to global real estate. Based on his subscription preferences, which allows financial services providers to send product information based on Byrnes’ specific requests, he can view the list of products that meet his criteria. From his device Byrnes calls his trusted advisors at UBS in Switzerland and JP Morgan in the U.S., which he has entitled to see all of his investments.

Following the advice of his advisors Byrnes decides to invest 855,387 Brazilian Real in a local high yield product offered

by J Safra Sarasin, invest 16,741,237 Indian Rupee in a special purpose investment vehicle, created by Citi in Singapore to build private healthcare clinics throughout India’s most impoverished regions, and invest 175,370 British Pounds in Blackstone’s real estate fund through a new relationship at Morgan Stanley which provided the analysis and information on Blackstone through Private Wealth Systems. Byrnes then invests $200,000 across four start-ups he viewed in his Private Wealth Systems’ venture capital marketplace, and takes the remaining balance to purchase a new boat that he has been researching just in time for summer vacation . He then updates his Private Wealth Systems’ social peer network profile, through his avatar to ensure personal privacy, announcing that he just invested in building healthcare clinics across India, challenging others across the global HNW/UHNW community to increase their allocation to investments that make a personal impact. What would have taken days or weeks is now completed in a matter of minutes on a single platform – Private Wealth Systems. We are removing the friction of information and action.

Q. What is your best advice for aspiring entrepreneurs and businesses in the private wealth and FinTech industries?

My first piece of advice is to learn your business better than anyone else and build a team that no one else can replicate. If you have the best team you can overcome any challenge. A competitor can replicate your platform and processes but the one thing they can’t replicate is your team. Attract, retain, and motivate your industry’s ‘dream-team’, and you will be successful.

Second, FinTech entrepreneurs should view large financial services companies as a friend not an enemy. Too many entrepreneurs want to romanticize the cowboy culture of a startup and create a David vs. Goliath battle blaming all of the industry’s problems on the large banks. They need to understand banks have been around for hundreds of years for a reason. Banks have regulated restrictions that prevent them from innovating and quickly adapting to changing client demands. This creates enormous opportunities for new companies to create new solutions. But sustainable success is predicated on collaborating with the large global banks and creating a solution that works for all participants; consumers and providers.

More about the man behind the brand…

Q. What motivates you?

I am motivated by my children and a deep desire to make a lasting positive impact on people’s lives. Individual wealth can have such a profound impact on improving our world. Whether you want to fund a school in Ghana, build a health clinic in Guizhou or finance a new startup that will become the next Apple or Amazon, you need to engage and be an active participant in how your wealth is managed. I hope our platform can help individuals engage at an elevated level of knowledge, align their wealth with their personal values, and make an impact that they can be proud of in order to create their own unique legacy.

Q. What does success mean to you?

Success, for me, is having the ability to shape my own destiny. Whether it is spending time with family or pursuing an idea that shapes the evolution of the financial services industry, being successful is less a destination point than it is an ongoing journey. I consider myself having achieved success with each day that I am able to wake up and do what I love, surrounded by the people I love.

Q. Which three people would you most like to invite to a dinner party?

The first dinner invitation would go to George Washington.

I am fascinated by the American Revolution and the relentless persistence of the Founding Fathers in the face of seemingly insurmountable circumstances. I would love to understand his mindset and the roots of his resilience during the early years of the war when he continued to fight for what he believed in despite losing every major battle. I would also like to know, in the wake of winning the war, how he so effectively transitioned from wartime military commander to nation-builder.

Second, it would be extraordinary to share a table with Leonardo da Vinci given the expansiveness of his profound genius across so many areas of thought and creativity.

Perhaps the ultimate game changer, da Vinci’s explorations and contributions across art and science fundamentally transformed the trajectory of modern civilization and continues to have a lasting impact on our society today.

Regardless of the topic discussed, watching his mind at work would be awe-inspiring.

Finally, as someone who has always been intrigued by those who view the world through a different lens, I would invite Pablo Picasso. Picasso used his art as a communication medium that compelled the viewer to think beyond traditional frameworks. The impact of his disruptive thinking extended well beyond the art itself, shaping the trajectories of other artists as well as the politics and thinkers of his day.

Q. What is your most used phrase in both work and play?

“When the odds are one in a million. Be that one.”

Q. What animal do you take the most inspiration from?

The Tundra Wolf because it continues to evolve and survive even in the most challenging environment on Earth. In my own experience, the ability to adapt has consistently proven to be the single greatest contributor to success and long-term survival. Building a strong, stable business is about continual improvement and evolution in the face of unpredictable events that invariably force you to pivot and create new paths and opportunities. No one knows what the market conditions will be in 3, 5, or 50 years from now, so building a team and organizational culture that not only embraces change but invites it, and most importantly can adapt accordingly, is a core guiding principle.

Q. Most common thought when you first wake?

New product ideas Q. And the last before you sleep?

New product ideas Q. What song, film or piece of literature best describes your life?

To Kill a Mockingbird had a strong impact on me. The central theme of staying true to your core values regardless of the pressure to conform to others’ ideals has been a core principle of mine throughout my life. Staying true to yourself is not always easy, but in the long run you will be happy to never have sacrificed what you believe is right.

Q. What makes you howl with laughter?

Negotiating anything with my kids. As any parent can attest, the reasoning skills of an eight-year-old are hilariously funny. Needless to say, once you begin laughing your negotiating power is effectively gone.

Q. What brings a tear to your eye?

Watching my kids grow up and become independent – tears of joy and sadness.

Q. Have you ever stolen a pen from work?

Too many times to count.

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WEALTH MANAGEMENT: TODAY “Wealth management is a people driven business built on establishing trust. As long as these key attributes are preserved then stay with the devil you know.”

Providing a high-level professional service and form of private banking, wealth management is more than just investment advice; it often encompasses all parts of a person’s financial life. The idea is that rather than trying to make sense of advice from a series of professionals, high net worth individuals benefit from a holistic approach in which a single manager coordinates all the services needed to manage their money and plan for their own and/ or their family’s current and future needs.

It is very clear that wealth management or the role of a wealth manager has assumed maximum importance and being considered a crucial and responsible role in modern day.

Private wealth management involves highly customised investment management and financial planning strategies designed for specific individuals depending on the nature of business.

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60% OF WEALTH MANAGERS UNDER THREAT FROM SUPERIOR TECHNOLOGY, REVEALS DELPHIX Asset managers need to develop their use of technology to continue attracting and retaining clients Delphix, the market leader in data virtualisation, released new research signalling that wealth managers need to digitise their operations to continue gaining and retaining clients.

The survey of the UK’s biggest wealth management firms, carried out by ComPeer, highlighted that 60 per cent of wealth managers admitted there is a threat from superior technology in appealing to generation Y, with all respondents either planning or implementing modernisation programmes. In particular, the front office and web portals were cited as a priority, with 80 per cent responding that digital is becoming an important hygiene factor as the technology involved in points of contact becomes a differentiator in attracting and retaining clients.

Parallel to these findings, 56 per cent of respondents are planning to increase their digital footprint to attract nextgeneration investors that have grown up with an inherent understanding of technology.

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“Sophisticated investors are still willing to pay for expert knowledge and advice, so the human adviser will never be completely replaced. However, the rise of new distribution models and players – for example, robo-advisors such as Nutmeg – means the wealth management industry is on the cusp of change,” said Iain Chidgey, vice president, international sales, Delphix.

“In the near future, we are likely to witness a new generation of customers that want the flexibility of accessing and managing their portfolios online, in addition to the option of meeting advisers face-to-face.”

Driven by a desire to increase business efficiency (60 per cent), improve the customer experience (50 per cent) and increase client acquisition (20 per cent), all wealth management firms surveyed are prioritising modernisation programmes. Yet only half believe they have sufficient in-house skills to deliver planned transformations, with all respondents admitting that the sector is lagging behind in terms of the IT and systems driving innovation.

Currently, only one in five wealth management firms are using cloud technology while 80 per cent of respondents claim to be researching, implementing or using the cloud. When questioned about constraints to cloud migration, 60 per cent of firms cited cloud security and data protection fears and believe hosted or cloud services increase business risk.

Firms feel that improving data quality could speed up modernisation programmes with 60 per cent citing it as a hindrance to growth. A reliance on old technology (56 per cent) and internal culture (33 per cent) were also seen as factors slowing down automation projects, as the challenge of legacy systems and resource impacts the ability of wealth managers to support development.

“Typically, modernisation projects are data intensive in nature. For

each application to be modernised, development, integration, QA and training all need access to data in their own environment. Yet, moving large datasets across application landscapes can take days or even weeks of coordinated effort,” added Chidgey. “To support modernisation initiatives, wealth managers need to rethink existing architectures and insert a new layer that can deliver secure data on demand to increase the pace of transformation while reducing risk.”

Increasingly, the survey indicates wealth managers need to find efficiencies by using automation to make changes more quickly and drive agility. The front office is the area where 67 per cent of firms are planning to increase automation, in addition to areas including capital gains tax, broker confirmation and reporting.

“By moving admin tasks to the middle or back office where they can be automated, investors can increase efficiency by spending their time managing money and gathering assets,” concluded Chidgey. “With upcoming regulatory changes, like MiFID II, automation also has the potential to provide greater transparency for clients. For example, enabling them to access costs and charges online, view valuations or portfolios in a dedicated portal and gain better access to research. Alternatively, automation can be used to integrate legacy systems, extract clean and accurate data or link with CRM systems to make the reporting process more efficient.”

Delphix commissioned ComPeer to investigate how UK wealth management firms are using innovation and transformation to attract and retain clients. ComPeer conducted interviews with C-level executives in firms offering wealth management services to private clients. In total, these firms represent approximately 24 per cent of the total wealth management industry assets under management in the UK.

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ANGEL GROUPS CREATING OPPORTUNITIES FOR NEW GENERATION OF FAMILY OFFICES Angel investment has arguably become the most significant form of investment for start up and early stage businesses seeking equity. The patience and understanding that angels offer is precisely what many early stage companies are require and recognise as more beneficial than a simple cash injection from a venture capitalist, many of whom are focusing more exclusively on later-stage investments.

However, given how lucrative it can be (with seed stage investments generating around 27% ROI according to Right Side Capital’s analysis of historical angel investing returns in the US and UK), it’s unsurprising that high-net worth individuals and family offices want in on the action.

According to statistics, angel investment has challenged venture capital cross Europe with a total of around €5.5billion invested by business angels, representing around 73% of European early stage investments.

Nesta’s figures suggest the total market size of potential deals in 2015 was £1.26billion of venture stage investments with an average investment size of £3.1m. In addition, another £215m of seed stage investments with an average size of £648,000. Altogether, this makes early-stage investments particularly attractive to the new generation of family offices whose younger billionaires are looking to invest more diversely and more directly.

However, various issues exist that may hold them back from making the move into early stage investment.

For one, single-family and multifamily offices are responsible for tens of millions or even billions. Managers have consequently allocated assets into venture capital, real estate, assets, public stocks and bonds rather than specific startups. This has meant less investment in early-stage ventures because it takes as much effort on the part of what is usually a small team to manage a £10m

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relationship with a hedge fund as it does to seek out a £100k start-up deals, handle the due diligence, and manage that relationship.

As new kids on the block, many family offices also do not have the tools to do the correct due diligence for startup investment. They often lack the key relationships that help ascertain and manage viable companies for direct investment.

Fact is, unlike mid- or late-stage investments, every start-up opportunity is unique. Solving unmet needs across the full range of industries – sometimes even industries that don’t yet exist - there are often no registries, no directories, no associations to join, and absolutely no data points to crunch. To handle this unsteady, fast-moving opportunity, family offices and high-net worths thusly need far more insight and experience than most will have when they first look to invest in start-ups. They need to work with the angels that inspired them to get involved in the first place.

The answer is therefore to work with an angel syndicate. There are several ways this can work, sometimes there is a Lead Investor who acts for the syndicate and will receive a fee. Alternatively, you can work with lead investors who have committed their own money and are looking for likeminded investors to finish the round. This is what we do at QVentures; the lead investors return will come from the successful monetisation of their investment and not the rest of the syndicate. In turn, this keeps everyone’s interests aligned and will often create a cap table that know each other and always work in the best interest of the company.

Looked at from the angle of the syndicate, we can see why family offices and high-net worth individuals would find this of interest.

Upending the traditional, labour-intensive means by which entrepreneurs used to raise funds, the right syndicate can provide access to more contacts, more connections, and in turn have made the relationship between those seeking funding and those looking to invest a more fluid and efficient experience.

This means family offices and high-net worth individuals can directly invest in smaller value deals. As part of a syndicate they are able to invest directly

into private companies but can also ask other members their opinion if they have relevant experience or ask to be put in touch with other members in the club who are evaluating the transaction.

Syndicates have also increased the level of diversity within the types of investor involved in the private investment landscape. Whilst the classic angel investor remains prominent, completing around four to six transactions a year with a typical size between £50-300k – no mean amount – now successful entrepreneurs, professional individuals and early stage investors are likewise involved in the same scene. These kinds of investors bring with them fresh opportunities, ideas and values.

A tech entrepreneur, for example, will understand the risks associated with technology start-up deals therefore as an investor, he brings specialist knowledge and can act as a lead. For this reason he is useful to angel groups, offering insights on a startup’s viability, facilitating relationships with relevant outside experts, and managing the due diligence required. However, if this same entrepreneur was new to a particular start-up investment market - say luxury – but still wanted to invest in that area, as part of an angel group he can build up his experience base whilst learning from the lead investor. He is able to invest directly in the company and gain an invaluable, practical education.

The same principle applies to family offices for direct investing. After spending the first few cycles learning the ropes and making connections, they will gain in confidence and be able to eventually take a more active role in the process.

It is clear why angel syndicates, which stress the value of collaboration, are gaining in popularity. Whilst they don’t compete with venture capital per se, they certainly open the market to new investors who may have a particular interest or niche.

Moreover, it is because of the syndicate structure that many more family offices are investing directly in a way that is educated, efficient and lucrative for all sides including start-ups. Direct investing in startups through angel networks is a way for family offices to invest in the businesses of tomorrow, today.

Robert Walsh, Managing Partner of QVentures

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COULD UK ROBO-ADVISERS LEAPFROG THEIR US COUNTERPARTS? On both sides of the Atlantic, our collective desire for instant access to information and a DIY attitude has shaped the digital landscape. Transforming the way we interact and transact, automation is affecting all areas of modern life.

Moving far beyond the convenience of day-to-day banking and payment apps, the fintech industry is growing rapidly with robo-advice at its core.

The term used to describe automated services for investment, asset, pensions and insurance management, robo-advice allows individuals to tailor their financial products via online tools and mobile apps.

Barriers of traditional advice in the UK Robo-advice is a convenient and lower-cost way of accessing advice and investment expertise for the masses, who have been largely priced out of the UK advice market.

In 2013 the Financial Services Authority (FSA) banned financial advisors from offering free advice to customers while earning commission from the providers of the products they recommended. Since then fees have steadily risen, pricing out many with smaller savings pots.

A poll from Unbiased.co.uk found that financial advisers increased their fees by as much as 16% in 2015 alone, with the average cost for pensions advice now totalling around £1,490. Resulting from this the Financial Conduct Authority (FCA) and Treasury claim that up to 16 million people could be trapped in a “financial advice gap”.

The FCA’s Project Innovate is helping the wave of Fintech innovation to navigate the way to providing regulated services. There are a range of robo-advice services in the UK including those offering help and guidance, investment management or personalised recommendations, with more expected to enter the market imminently.

The US market

large investment portfolios.

Platforms from Wealthfront, FutureAdviser, Charles Schwab, Vanguard and Betterment have proved hugely popular in the US, and now major institutions such as Morgan Stanley and Bank of America are looking to enter the marketplace.

The UK market New entrants such as Nutmeg, Wealth Horizon and Money Farm are focused on helping people make and manage their investments in a similar way to many of the US robo-advisers.

Among the high street banks, Royal Bank of Scotland (RBS), made headlines earlier this year when it cut the jobs of 220 face-to-face advisers in favour of the future introduction an online service. RBS’s claims its new online investment platform will enable the bank to help a new group of customers with as little as £500 to invest. Customers with more than £250,000 to invest will still receive personalised face-to-face advice.

Following RBS’s announcement, speculation has been building that Barclays, Lloyds and Santander UK are also developing online services.

Large insurers are also interested in robo advice and one – LV= has already launched a service offering automated personalised at-retirement advice, using Wealth Wizards robo advice platform technology.

Wealth Wizards, which aims to make financial advice affordable and accessible to everyone, has pioneered the development of robo-advice in the UK. Founded in 2009, Wealth Wizards offers the leading robo advice platform in the UK. Combining three key competencies; investment expertise, chartered financial planning and software engineering, Wealth Wizards platform can support multiple advice services.

The potential of robo-advice A 2015 US market report from research firm Cerulli Associates claims robo-advice platforms are expected to reach $489bn (£323bn) in assets under management by 2020, up from $18.7bn.

Changing the advice landscape in the US since the mid-late 2000s, consultancy firm Deloitte found that robo advisers currently cover less than a billion pounds of assets in the UK, compared with $19 billion in the US.

While the UK is undoubtedly a smaller market, the UK robo advisers are arguably catching up in terms of capability and in some cases further advanced.

According to research from consulting firm A.T. Kearney, the robo-advice industry is flourishing in the US, where there are now more than 200 platforms.

It’s estimated that 1 in 5 customers that use banking services in the US are aware of automated online investment services, and research suggests engagement is high among those with small and

And with the regulator supportive of fostering innovation and development in the UK, it may be that UK robo-advisers develop leading technology platforms that become the global winners.

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Andrew Firth, CEO, Wealth Wizards

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5 KEY REASONS WHY INTERNATIONAL EXPANSION DRIVES UP M&A INTEREST AND VALUATIONS International expansion should be a no-brainer for SMEs that have achieved critical mass in their home market. But although I’ve never seen it cited as a reason, perhaps it should be a key consideration for those anticipating eventual exit routes via M&A. Stating the obvious, increased sales has immediate impact on revenues and profits.

Every country tries to encourage its businesses to export more, but most rely on finding agents and distributors to sell their products and services. Companies that set up their own international subsidiaries deliver far better results.

But there’s a lot more to international expansion than just increasing sales. For example, it offers insurance against localised recessions and currency volatility. As a rule, countries that are resilient when others are suffering recession not only maintain their local markets, but their currency increases in value. US and UK companies that had operations in Australia benefited massively during the 2008-2010 recession – purchasing power was maintained, and the Australian dollar rose dramatically. As a result, sales volume increases of 10% translated to revenue increases (when expressed in USD or GBP) of over 50%. Many companies that had expanded internationally survived when they might otherwise have sunk, and some even grew their global revenues and profits.

Even companies that have nothing to export,

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but a reasonably sized headcount, can expand abroad. Setting up Shared Service Centres in lower cost economies – typically to process accounts or manage HR or IT - reduces business costs and increases profitability. Many companies think they are too small, or have unfounded fears of complications, and may dabble in the water by going to Outsourcing.

However, if it’s big enough to outsource, it’s probably big enough to set up one’s own subsidiary to do the job – and doing that will not only give the company proper control, but typically be 30-40% cheaper.

Future expansion of those SSCs to add in more highly skilled R&D operations can then take advantage of skilled labour that can be difficult to recruit and retain in developed countries.

Such staff often prove far more enthusiastic for the company than domestic recruits, and deliver much higher productivity.

But perhaps the biggest reason of all for international expansion is that turning a domestic business into a multi-national, however small, massively increases the valuation of the company for M&A purposes. EBITDA, the common basis of most valuations, will be higher anyway, as a result of the increased sales and reduced costs that derive from the international operations. The fact that a business is international as opposed to being in a single country demonstrates the vision and capabilities of the owners. Further, it also opens up interest from new potential purchasers who may be attracted by exploiting the company as a fast track route to expansion to new markets that they do not already have covered – pushing up multiples of EBITDA. So why are there so many companies that remain obstinately insular? Some think the costs will be too high, some doubt they have resources to cope, some still are even scared by different languages and cultures. All of those beliefs are wrong. Businesses should grasp the nettle – expansion can be easy.

Oliver Dowson (pictured), International Corporate Creations

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IT DEPARTMENTS: DO THEY STUNT OR STIMULATE INNOVATION IN ASSET MANAGEMENT ORGANISATIONS?

similar large projects and applications. The next generation of technology will stem from different asset management firms, some with radically new business models.

These smaller, more nimble firms will require entirely different development approaches to be assessed and managed, as they will increasingly be using technology models that are very different from those being deployed today. The innovators and management of these firms will predominantly be new to our industry.

COO? The IT Director? Fiefdoms still prevail within asset management firms, often to the detriment of the business. The rise of the CDO role (Chief Data Officer) has been hampered by the same political chicanery.

Oustsourcing

The economic downturn and the sheer volume of regualtions, has forced most firms There was a time when the IT department to assess where they should, and should not, was the one place that innovation was build and invest in competitive competency. found and actively encouraged. As the IT is one area of this focus. Firms now see asset management industry looked to utilise In my view what firms need to quickly develop many of the past IT roles as far more of a software to transform its business model, is the ability to embrace new technologies and commodity, and outsourcing of infrastructure IT was tasked with finding and designing different business models in order to adapt and core IT processes is common in most the infrastructure to encourage and enable to the developing market needs. In order firms. With the advent of the cloud and SaaS change and innovation across the business. Is to keep pace with the changes, especially models, business functions are increasingly this as true today as it was 25 years ago? in the more analytical areas, firms will need delivered from external suppliers and the IT to deploy constantly evolving technologies. footprint is far lighter. All these have often I believe that the asset management industry IT departments will need to adopt a more resulted in IT being far more protective of is on the cusp of significant change. The design-orientated approach and be able to their diminishing empire. Implementing a utilisation of smarter technology will be take, manage and mitigate the risks involved modern and agile technology infrastructure increasingly critical for those firms that will in this new way of working. is clearly in the best interests of the asset emerge as the winners in this new world. management firm holistically, but it is not in Technology will begin to disrupt and transform The agile approach the interests of the IT professionals within the almost every element of the business, from firm, who are increasingly threatened by this the front office, where investment decisions There has been much written recently about new world. and client interactions will be increasingly the term ‘DevOps’, a software development digital, through to the back office where approach that advocates a hybrid role In the future it is entirely feasible that the IT processing and storage will need to be far between that of the established developer silo will disappear. I already see a future where more nimble to support the fast changing and operations staff. My question whenever all key managers will need to IT literate and market and regulatory needs.

I hear these terms is always the same: is it capable , and the use of IT will be an integral another buzzword or will it drive forward part of almost all roles. It is from these hybrid Another change has been in the growing tangible change within the traditional asset roles and skills where innovation will find influence of the business in the selection management industry? sponsorship and requirements. A few firms process of applications and services. Now will take this as an opportunity to use IT as a most vendors realise that it is impossible to While development methods (such as competitive advantage, by building specialised complete a successful sale without the full agile software development), encourage skills to deliver ground breaking solutions to support of the business sponsors, and much collaboration among the analysis, design, the market. Many of these will be niche or of the focus has shifted to engaging and development, and QA functions, in leading edge suppliers, and these skills are not satisfying their needs, It is hard not to see this traditional organisations there is rarely crosshugely prevalent today. I do see firms starting as a positive step. As applications and services departmental integration of these functions to acquire some of this capability, for example move to cloud and SaaS models, the need for with IT operations. DevOps acknowledges the in the robe-advisor space, the early adoptors IT input is being significantly minimised. interdependence of software development, see this capability as a competitive position quality assurance (QA), and IT operations. The and are acquiring or building the technology, Risk averse aim is to help an organisation rapidly produce and associated skill sets, to provide this edge. and deploy software systems to improve Almost all asset management IT and change operational performance.

Conclusion management departments have spent the last decade delivering large and complex From the perspective of the business (which I suspect that this ‘new world’ is actually projects, in parallel with maintaining the should always be the driving force behind any closer than many people believe. In my view current status quo (or ‘keeping the show on technological development), DevOps sounds the successful firms will already be acquiring the road’). As a result, skill sets and attitudes like a dream come true for asset managers. and developing new talent to manage this, have evolved accordingly, often within an Rather than jockeying for position (and IT rather than trying to change and develop their increasingly conservative nature. Many IT and budget) along with all the other parts of current resources. Asset management firms change professionals have been burnt by the the business in the development of a single need to consider how best to stay close to challenge of delivering these projects within IT infrastructure that may take years to the market whilst simultaneously maintaining an acceptable timeframe and budget and as complete, distinct parts of the business (e.g. their existing infrastructure. It may be that a consequence most are now very risk averse OTC clearing) can lobby for rapidly developed these two tasks are not compatible and firms (although not all would accept this is the niche software as part of the business as usual will need to reorganise and supplement the case).

(BAU) budget. DevOps staff can therefore IT department. IT skills as they are today are rapidly turn an opportunity for competitive quickly becoming redundant, in the future Many executives involved in taking key IT advantage into a reality.

IT competence will be part of a wider more decisions continue to work in the same way, integrated function. Here is where the using traditional methods and known contacts Of course, the question of whom the DevOps innovation will grow. to slowly upgrade their IT infrastructure with staff report to arises. Is it the CTO? The Steve Young, Principal, Citisoft

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TOP 3 TRENDS AFFECTING PRIVATE WEALTH MANAGEMENT Family offices are private wealth management advisory firms that serve ultra-high-net-worth clients. According to the Family Office Exchange, there are more than 3,500 family offices based in the United States. By offering a complete outsourced solution to managing finances and investments, including budgeting, insurance, charitable giving, family-owned business, and wealth transfer and tax services, these offices set themselves apart from traditional wealth management firms. Although they vary in their level of service, most typically invest heavily in consultants, databases and analytical tools that help them conduct due diligence on money managers or optimize a portfolio of investments for tax purposes.

In this article, we’ll review the top three trends affecting family offices, including the rapid growth of the family office industry, the types of family office services provided, and the increasingly sophisticated use of hedge funds and alternative investments by both single and multifamily offices.

Family Office Facts There are two types of family offices: single-family offices (SFOs) and multifamily offices (MFOs). Single family offices serve one wealthy family, while multifamily offices operate more like traditional private wealth management practices with multiple clients. Multifamily offices are much more common because they can spread heavy investments in technology and consultants among several highnet-worth clients instead of a single individual or family. According to the Greycourt White Paper “Establishing A Family Office: A Few Basics”, the minimum size for a family office can vary, because “If the goal is simply to

provide family-wide accounting and bookkeeping, a family with as little as $50 million will find it economical to establish an office. On the other hand, a fully integrated family office is probably accessible only to very large families, typically those with more than $1 billion.” (Want to attract this type of clientèle? Read Targeting Ideal Customers.)

These high net worth clients can run into a gamut of issues that you need to be prepared to deal with. There are three trends in particular that may change the way you do business with these individuals.

Tackling the Trends Prominent trends fueling the growth of family offices include: 1. There is a growing number of highnet-worth and ultra-high-net-worth classes around the world.

In most developed nations, the wealthy are accumulating assets more rapidly than the middle class. At the same time, many emerging economies are thriving, with annual growth rates of 4-8%.

Many experts have noted that by 20152020, China’s upper class will be larger than America’s middle class. Growth in countries such as China, Brazil, India and Russia will ensure that the family office format of wealth management services continues to grow in popularity over the next five to seven years. (To learn more about emerging economies, see What Is An Emerging Market Economy? and Demographic Trends And The Implications For Investment.)

2. Profitability is a growing challenge for family offices.

As populations amass greater wealth, large wealth management firms are competing on a cost basis and moving a larger portion of their core services online. While the average person might appreciate saving hundreds or even thousands of dollars in fees each year, many affluent individuals would much rather spend $20,000 to $100,000 a year to ensure that experienced professionals are managing their investments and taxes to fit their specific

financial goals and risk tolerances. (Keep reading about risk tolerance in Risk Tolerance Only Tells Half The Story.)

Many of these individuals run businesses or have complex wealth management or tax-related needs, and they require a team of experts to help manage their finances. Family offices are becoming the common answer to that demand, remaining highly profitable while also serving the unique needs of the ultraaffluent.

3. Ultra-affluent clients are demanding highly professional financial services.

While there are no set rules on what services a family office can or cannot offer, there are common investment and finance-related services that most of them provide for their clients. Many of these advanced services are not available within a private banking or traditional wealth management setting, simply because they are affordable only for the most affluent clientèle.

Some of these typical services include: • Investment portfolio management • Tax management and advisory • Cash flow management and budgeting • Multigenerational wealth transfers • Family business and financial advisory • Donations to nonprofits and major gift plans • Political donations • Family offices also offer superior expertise on constructing or selecting alternative investment portfolios and products. Many have invested heavily in systems, reporting and institutional consultants to help select the most appropriate alternative investment managers and products for their highnet-worth clients.

A complete, well-developed alternative investment platform at a family office is a competitive advantage, and as competition increases among multifamily offices these platforms will be more global, transparent and diverse in their offerings. Knowing these trends and changing your offices to accommodate them can set your firm on solid ground with these often demanding and rewarding families.

Richard Wilson, Investopedia

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THE 15 BIGGEST CORPORATE MEGA-DEALS OF ALL-TIME

Last year saw a host of takeover efforts between some of the world’s largest companies. After an arduous courtship, Anheuser Busch Inbev SA (NYSE: BUD) agreed to buy rival SABMiller plc (OTC: SBMRY) for $104 billion in principle; a deal that will represent the largest ever in the beer industry.

This isn’t the first time that companies have been willing to spend to acquire rivals and expand their market-share – Anheuser Busch’s mega deal will only just break the top three largest mergers in market history once approved.

1. VODAFONE ACQUIRES MANNESMAN The largest M&A deal in history, UK-based Vodafone AirTouch PLC, now known as Vodafone Group Plc (NASDAQ: VOD), acquired Germany’s Mannesmann in February 2000. The deal, $180.95 billion was resisted by the majority of Germans who worried that takeovers like this one would spell the end for German businesses. Vodafone’s acquisition made the firm the world’s largest mobile operator and set the tone for future mergers and price-wars within the telecom space.

2. AOL PURCHASES TIME WARNER This year marked the 15th anniversary of the AOL/Time Warner merger, the second largest deal in history. The $164 billion deal may have fallen short of being the most valuable, but AOL’s acquisition of Time Warner in January 2000 tops the list of the most mergers ever carried out. The tumultuous union lasted just 9 years with Time Warner Inc. (NYSE: TWX) spinning off the rapidly deteriorating AOL, Inc. as an independent company on December 9, 2009.

3. VERIZON TAKES CONTROL OF WIRELESS UNIT Coming in at third is Verizon Communications Inc. ‘s (NYSE: VZ) much sought after of Verizon Wireless from Vodafone Group plc. (NASDAQ: VOD). For nearly a decade, Verizon worked to acquire Vodafone’s 45 percent stake in Verizon Wireless and the firm’s efforts were finally successful in September 2013. The US telecom agreed to pay $130 billion in order to take full control of its wireless unit, which was bringing in around $21.8 billion each year. The deal gave Verizon the financial strength it needed in order to up investment in better infrastructure and increase its competitiveness in US markets.

4. PFIZER’S HOSTILE WARNER-LAMBERT TAKEOVER Pharmaceutical giant Pfizer Inc. (NYSE: PFE) made history in the year 2000 by sealing a $90 billion with Warner-Lambert Co. The sum of Pfizer’s purchase was overshadowed by the three months of drama that preceded the deal, which led many to consider the takeover to be one of the most hostile in history. Warner-Lambert was initially set to be purchased by American Home Products Corp, but the consumer goods firm walked away from the deal with $1.8 billion worth of break-up fees, one of the largest ever payouts for a failed deal.

5. AT&T BUYS BELLSOUTH In March of 2006, AT&T Inc. (NYSE: T) announced plans to acquire BellSouth in a deal that was slated to give the firm even more dominance in the wireless arena. Worth $86 billion, the deal was in December. The new company was able to expand AT&T’s coverage into rural parts of the US at a time when the mobile phone market was still expanding. The firm used its new position to create bundled services that included mobile services along with television and internet connections in an effort to gain new subscribers and dissuade customers from switching to new providers.

6. EXXON COMPLETES ONE OF THE BEST DEALS IN HISTORY In 1999 with persistently low oil prices weighing on the industry, Exxon Corp and Mobil Corp in an $81 billion merger that created energy superpower Exxon Mobil Corporation (NYSE: XOM). The deal placed Exxon Mobil at the head of the industry as the largest “supermajor.” At the time, many criticized Exxon saying that the firm paid too much, but now the deal is heralded as one of the most successful in M&A history.

7. GLAXO WELLCOME PLC COMBINES WITH SMITHKLINE BEECHAM IN SURPRISING DEAL In September of 2000, Glaxo Wellcome PLC and SmithKline Beecham surprised investors by plans to merge in a $75.7 billion deal. The two had previous discussed joining forces back in 1998, but those talks fell apart as the two rival firms remained locked in a power struggle. However, the deal in 2000 went off without a hitch to create the world’s largest drugmaker at the time, GlaxoSmithKline plc (NYSE: GSK).

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8. ROYAL DUTCH PETROLEUM CORPORATION AND SHELL TRANSPORT & TRADING FINALLY GET TOGETHER British Royal Dutch Petroleum Corporation and Dutch Shell Transport & Trading had been working closely together for decades when they finally moved forward with the two businesses in 2005. The deal, worth $74.5 billion, faced pushback from shareholders who worried about the way the firm would be managed. However, it was eventually approved to make Royal Dutch Shell plc (NYSE: RDS) the second largest publicly traded oil firm in the world.

9. COMCAST BUYS AT&T BROADBAND In 2001, Comcast inked a landmark deal in which the firm AT&T Broadband in an agreement worth $72 billion. The purchase catapulted Comcast to become the largest cable company in the US by expanding the firm’s subscriber base exponentially. The two initially agreed that the new firm would be dubbed AT&T Comcast Corporation, but once the deal was complete the two companies agreed to keep only the Comcast Corporation (NYSE: CMCSA) name.

10. CITICORP AND TRAVELERS GROUP INC. FORM LARGEST FINANCIAL SERVICES COMPANY IN THE WORLD On April 6, 1998, Travelers Group Inc and Citicorp announced plans to complete a worth $70 billion. The two firms combined to create a $140 billion company called Citigroup Inc (NYSE: C), which was the largest financial services company in the world at the time. When the merger took place, the Glass-Steagall Act required Citigroup to divest its insurance assets within 5 years. However, the new firm was able to maintain both banking and insurance services under one umbrella when new legislation that did away with the Depression-era rules was passed in 1999.

11. PFIZER PROVES BANKS HAVE TURNED A CORNER WITH WYETH ACQUISITION At a time when desperate banking mergers dominated the headlines, Pfizer broke the mold with a to acquire rival drug-maker Wyeth for $68 billion. In the wake of the financial crisis in 2009, Pfizer Inc. (NYSE: PFE) announced plans to buy Wyeth with the caveat that the firm could back out of the purchase if the economy continued to worsen. The deal eventually went through in what some say became the first clear sign that the worst of banks’ financial troubles were over.

12. VERIZON IS BORN In June 2000, the FCC Bell Atlantic Corp.’s proposal to buy GTE Corp in a deal worth $64.7 billion. While the monetary value of the deal ranks just 12th on the list of largest mergers, the deal had far reaching implications for the telecom industry as the purchase formed the largest US’ local telephone company. Following the deal’s approval, Bell Atlantic changed its name to an amalgamation of the Latin word for truth, veritas, and horizon, to become Verizon Communications Inc. (NYSE: VZ).

13. SBC COMMUNICATIONS ACQUIRES AMERITECH Before Verizon took over as the US’ largest telephone company, SBC Communications Ameritech Corp in a $62 billion stock swap, the largest ever telecommunications merger at the time. The 1998 deal allowed SBC to take control of nearly 60 million phone lines across the US and sparked a debate over whether or not such large-scale mergers were hurting competition in the telecom industry.

14. PFIZER BULKS UP ITS PRODUCT PORTFOLIO WITH PHARMACIA Pfizer finds itself on the list of largest mergers for the third time due to the firm’s $60 billion to buy Pharmacia. In April 2003, the US drug maker increased its global marketshare to 11 percent following the acquisition. The purchase of Pharmacia brought several popular products into Pfizer’s portfolio including hair loss treatment Rogaine, Nicorette nicotine gum and anxiety prescription drug Xanax.

15. JP MORGAN CHASE BUYS BANK ONE Rounding out the top 15 M&A deals in history is JP Morgan Chase & Co.’s (NYSE: JPM) $58 billion of Bank One Corp. In January 2004, the bank became the second largest in the US with 2,300 branches across seventeen different states. The firm’s decision to purchase Chicago’s Bank One gave JP Morgan a better foothold in the Midwest and diversified its offerings outside of just investment banking and trading.

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60% OF BRITONS WOULD WELCOME AN ANNUAL SUMMER BUSINESS ‘SHUTDOWN’ The study, conducted by leading virtual assistant service providers “ava”, discovered that many Brits felt that by shutting up shop during traditionally quiet periods, businesses would remain more productive and cost-efficient overall.

The key stats: • The 55-64 age demographic were most behind the introduction of annual industrial shutdowns, making up 66% of the ‘yes’ vote.

• In the UK, England (59%) was the most in favour of such a move, whereas 68% of Northern Ireland were against a change.

• In the battle of the sexes, it appears that women are more likely to support this new productivity method – with 63% backing the system. Men were less inclined to throw their weight behind a proposed change, with 44% voting against.

Should we introduce a universal shutdown?

All industries suffer downturns of productivity and profits. And whilst many simply put it down to ‘that time of year’ and do whatever they can to prepare for it, others have honed their schedules and working practices in order to capitalise on traditional lulls.

The annual summer shutdown concept has been adopted by many businesses – most notably construction equipment giants JCB. The Staffordshire-based company closes its main Rocester factory each summer for up to three weeks, not only cutting back on expenditure and outgoings – but giving all staff a designated period to enjoy the summer – fully paid of course.

They are not only ones to adopt this method. TED, a series of global conference providers, also closes for two weeks in August. Former media executive June Cohen, explained that the annual shutdown was to give hard-working staff a chance to fully recharge. She wrote on the company’s Blog:

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“By taking the same two weeks off, it makes sure everyone takes vacation.

Planning a vacation is hard – most of us would feel a little guilty to take two weeks off if it weren’t pre-planned for us, and we’d be likely to cancel when something inevitably came up. This creates an enforced rest period, which is so important for productivity and happiness.”

Her theory behind this was purely driven by caring about staff, not necessarily profit margins. However, if you take care of your staff and make it easy for them to recharge their batteries, it stands to reason that they’ll be more productive whilst in work, which can only have a positive effect on your bottom line.

The 2016 Summer of sport It’s no secret that many businesses come under real pressure in the summer months. As this Financial Times article from 2015 alluded to, the best way to boost the nation’s productivity would be to “cancel August”.

The summer of 2016 is an eagerly anticipated one. The Olympics are taking place in Rio de Janeiro, with Team GB hotly tipped to win big as they did in London four years ago. Meanwhile, the great British hope, Andy Murray, will be looking to reclaim the Wimbledon title he famously won back in 2013.

Although both are very popular events on the sporting calendar, no other competition will have the UK (probably not Scotland) glued to television sets like the upcoming Euro 2016.

It is the first time that England, Northern Ireland, Wales and the Republic of Ireland have all participated at a football tournament at the same time, so UK audiences are expected to be at an alltime high. The most eagerly-anticipated game in the opening stages – England vs. Wales – is to be played at 2pm on Thursday 16th June, with many ‘sick days’ expected across the two nations.

The 2014 World Cup was expected to cost UK businesses an eye-watering £4 billion in lost productivity. No wonder business owners are more than a little concerned.

Now more than ever, it’s essential that companies reassess their operations and figure out if there’s a way to make a compromise with staff so that things keep

ticking over nicely. If you know that orders start to dry up in August, it makes sense to introduce a shutdown – just make sure that your employees are on board.

You may find that a large chunk of your workforce books in a week or two of annual leave in June, July and August anyway. This is arguably an even greater challenge, as you need to cope with disruptions over a longer period than you would if you sanctioned a full shutdown for two or three weeks.

Lucie Greenwood, Sales Manager at ava, feels taking the time to delve into how your business performs when trading is slow, you’re more likely to be successful during busy periods.

“Regardless of a company’s size or profit margins, a decrease in performance and income can be a very stressful time.

“However, it’s these periods in which you have the most time on your hands to take a step back and really look at how you work as a business. When you’re flat out and the money is pouring in, it’s very easy to assume everything is fine – when in fact there may be many aspects of your operations that can be improved.

“At ava, we tend to see a spike in clients contacting us for extra help during the summer months because a lot of their staff take annual holidays, leaving them short-handed. Turning to a third party for assistance is a good idea. Just make sure you’ve got everything planned out well in advance so you’re not in a panic when the popular employee leave periods roll around.”

How can my business stay productive during the summer?

Whilst adopting a shutdown this summer may not be feasible for your business, there are many things you can do to combat potential disruptions: Plan ahead By planning ahead and assessing which areas of the business will be affected by those taking time off, you can identify where and when you need to strengthen.

Providing cover with agency staff or offering temporary contracts may be one solution. For a more cost-effective method, ask staff to put in their holiday requests early. Not only will you be able to prepare for their absence, but they are less likely to have their holiday request denied.

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Be flexible Since 2014, all employees have had the statutory right to request flexible working hours, as long as they have been employed for at least 26 weeks.

Whilst it may only usually apply to staff with children, with the European Championships looming large, offering flexible working hours could considerably increase team morale and productivity.

Work closely with your workforce to create a flexible working plan that not only fits their needs, but the company’s too.

Use downtime wisely If your business usually experiences a lull during the summer months, and resources are not as stretched as usual, use this free time to fully prepare for your next busy period.

Taking care of recruitment, forecasting for the next year, replenishing stock or assessing your outgoings are just some of the many things your business could do to stay productive during this down period.

While building your business, you’ll have to fill an insane variety of roles.

Until you’re in the thick of it, it can be difficult to understand the value and depth of those roles in the success of your company. There is no way you can learn this until you get started. One stark example for us was the value of design.

They admit now that they took user experience design for granted because of our analytical background and thought that building a great app was all about the actual app development. They quickly learned that there are many aspects to design—from visual to digital to user experience—and that all of them are integral to the long-term success of any business. You have to design everything, from all of your email communications to ads to event banners, as well as your website and app.

A key component to success is to “know enough to be dangerous” about all aspects of your business, be able to have meaningful conversations, and make quick decisions with everyone who works for you. That being said, you shouldn’t always try to get things perfect or underappreciate the value of a good specialist.

So don’t wait for perfection. Commit and the world will rise up to support you.

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What does BREXIT mean for the world of M&A, finance and business?

What do we know? What is the impact on UK business and M&A? The referendum result created a cloud of shock as uncertainty descended over the UK. Now, a week on, as the dust settles, we are absorbing the facts and making strategic plans to succeed. Let’s take a look at what we know.

• We are in a period of ambiguity whilst the economy adjusts and new trading relationships (both country and corporate) are formed. If Article 50 of the Lisbon treaty is invoked, it is likely to be in September this year, under a new Conservative Prime Minister, meaning that we will seek to finalise our exit by September 2018. Uncertainty is the new certainty but this has been the case since globalisation. Rapid market change has long since been the norm and business leaders create new techniques, skills and strategies to succeed.

• Whoever replaces David Cameron will be seeking access to the EU single market whilst reducing freedom of movement. To secure a deal on these lines relies on two elements; firstly, that we are a significant and material trading partner and secondly, that others in Europe with similar thinking on restricting free movement gain political momentum and force a softening of the EU mindset.

• The Bank of England (BoE) and the Treasury engaged in extensive contingency planning and were fully prepared for an out vote. Mark Carney, BoE, stated “Brexit will not cause financial crisis”. As a result, UK banks have raised over £130bn of capital, and now have more than £600bn of high quality liquid assets. Moreover, as a backstop, and to support the functioning of markets, the BoE stands ready to provide more than £250bn of additional funds through its normal facilities.

• The markets are picking up following the initial shock of the exit vote: • Having dropped 5% on Monday, the FTSE 100 share index has now climbed to the highest it has been in this year.

• The FTSE 250 is slowly but surely creeping back, closing 3.2% higher, recovering nearly half of the post Brexit drop.

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• The pound climbed 1.2% against the dollar having tumbled 11% two days after Brexit and 0.8% up against the euro to €1.2159, prior to the referendum it was trading at €1.30.

• The pound is still higher than it was three years ago against the Euro • Global markets steadied as a result of the BoE pumping in £3.1b into British banks Richard Gnodde, Co-Chief Executive of Goldman Sachs International, told The Times CEO Summit that markets had functioned well since Friday but were likely to drop further. “There is no panic.

Markets are functioning normally. We need to find new levels. The period of price discovery is going to go on for some time,” he said.

Overall we need to look at how people behave and what they do, and not guess, or speculate. For example, if new car sales continue and the supply and demand issues hold value in the housing market, consumers will remain robust which along with exports and financial services are key drivers for our economy. Many economists predict, at worst, slowdown in growth but not a recession, ie two consecutive quarters of negative growth.

Against this backdrop, what is the impact on M&A? • It is likely that on a macro basis, if we include larger transactions, volumes will drop until the landscape becomes more clearly defined.

• On a micro basis, in the small and mid-cap markets, transactions are likely to continue. Corporate restructuring is essential in a slow growth economy, and M&A is the main route to shareholder value.

• With investment yields poor and interest rates low, the world is awash with capital.

Nine private equity firms have called Avondale over the last few days as they have funding in place that still needs a home. It is possible that deal structures become more creative as banks tighten their ‘credit belts’ but this does not stop the fundamental drivers behind deals.

• Profits will soften in some sectors which actually creates opportunity for those with capital, and a lower value pound will potentially reassure foreign investors.

We need measured, pro-business

leadership from the Government in the coming months. Combined with careful negotiation in the EU and calm minds, this should and could enable us to adopt a ‘business as usual’ approach. Indeed, quality assets with sustainable cashflow and high growth potential become more desirable, not less, in any market slowdown. Over the coming months, this will hopefully create an increase in demand in the smaller capital M&A market.

As we’ve said before, UK business in robust, agile and resilient. This time we have the benefit of over two years to adjust to our new environment, which is plenty of time to implement strategies for success and to thrive rather than just survive in our non-EU status. This can only be a good thing for M&A. Gamechangers spoke with 4 leading companies who gave us their opinion…

Avondale Britain votes to leave the EU – what is the impact on M&A? Business as Usual?

So after weeks and months of debate and controversy, although we have been discussing this since we entered the Common Market in 1973, we finally know – the UK public has voted OUT. Britain has taken the first, pioneering step out.

Many EU member countries have long struggled with the EU’s sclerotic nature and this step will undoubtedly pose the same question for others. We need to support the decision and move forward.

Business leaders need to analyse this new environment, hold their nerve and set aligned strategies for success.

News is emerging by the second. At time of writing, Cameron is planning to resign and appoint a new PM by October this year. He intends to invoke Article 50 of the Lisbon treaty which sets out the rules of negotiating a member state’s departure. This provides at least 2 years to finalise the deal between the 2 parties.

If we are out-out, we will fall under World Trade Organisation rules, or like Norway or Switzerland, we could become part of the European Economic Area. This would mean Britain would remain part of the EU’s single market, without having to comply with free labour movement or all of the other EU regulations (although in practice it would be the majority). Having been a key player in the EU economy, it is likely that we will, after hard negotiation,

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be offered favourable terms creating new opportunities.

Before we take a look at the detail of the impact of the decision and react instinctively, we need to remember Black Wednesday in 1992. The UK entered the European Exchange Rate Mechanism (ERM) in 1990 as a pre-requisite for adopting the Euro but was forced to exit following pressure from currency speculators. The UK then secured an optout from the Euro under the Maastricht Treaty. This was seen initially by many business leaders as catastrophic and the demise of the British Economy. With the benefit of hindsight, we now know that not adopting the Euro was a good thing for Britain. This morning sterling dropped by 7% but this is still higher than it was on 11th February this year. The stock market dropped this morning but not as drastically as anticipated and there has already been a bounce, all signs the market is ready for this decision.

So, what does this mean for M&A, for business sellers, buyers and investors?

The power that enabled the Conservatives to renegotiate our EU agreement is largely attributed to the fact that whilst we trade within Europe we also trade extensively in non-EU territories, predominately the US, Asia and South America – more so than any other country in the EU. UK exports to non-EU territories accounts for approximately 67% of all of our exports.

This means we are not, by any means wholly dependent on the EU for exports; Germany in particular will still want us to buy their cars.

Acquirers have long since known that the referendum was coming. M&A statistics show that whilst there has been an 8% drop on last year’s deal volumes this has by no means put the vast majority of buyers off. Britain may be leaving the EU but it cannot leave Europe – trade will continue; we just need to define how that will be done.

Businesses do not invest in the UK purely because of our EU membership.

They also invest because of our stable financial, regulatory and legal systems not to mention having one of the lowest corporation tax rates in the G20. The number of international acquirers of UK companies continues to increase, accounting for 44% of all announced transactions in the past year. A temporary devaluation of the pound may in fact increase the attractiveness of acquisitions and remember that acquisitions are always an attractive route to expansion in

a slow growth economy.

UK business is robust. It has battled through the global recession and has come out agile and resilient. We are used to operating in a fast-changing and volatile world – think collapsing oil prices, Chinese instability and the Eurozone and Middle East crisis. UK business and will analyse the effects of the EU exit, plan, adapt, invest wisely, survive and more than likely thrive which can only be a good thing for M&A. Paul Hastings From a legal perspective, private mergers and acquisitions (“M&A”) are unlikely to be affected by Brexit because, firstly, any EU Directives or regulations directly affecting this area of law require implementation into UK law in order to have effect and secondly, the documentation relating to M&A are reliant on English law and the exclusive jurisdictions of the English court. Brexit does, however, result in some practical and commercial implications on existing and potential deals.

Clients are advised to commence due diligence of existing contractual arrangements to consider whether any contractual rights arise on a Brexit; for example, is Brexit a material adverse change? Other provisions to review as part of such due diligence exercise include financial covenants, events of default/ termination rights, ratchets and force majeure.

Contracts governed by English law, will be interpreted in accordance with the general principles of English law. The courts will consider the intention of the parties in relation to the terms of the agreement if the meaning of the relevant provision is not clear from the drafting.

For example, if a material adverse change clause is drafted in a broad general nature then it is unlikely that Brexit would enable the bidder or the purchaser to rely on such a clause to terminate the agreement as either (i) the effects of Brexit would not be deemed specific enough in the context of the relevant transaction; or (ii) such a general market risk may have been expressly carved out from a general material adverse effect clause.

On the other hand, if the material adverse change clause is drafted to target a specific business in a specific sector or geographic location, then there is a higher risk of the material adverse effect clause

being invoked by either the bidder or the purchaser. Alternatively, the material adverse effect clause may specifically make reference to Brexit. Under both circumstances, the courts would be more inclined to conclude that it is the intention of the parties that Brexit be deemed as a material adverse change.

Public Mergers and Acquisitions Any proposed acquisition of a UK public company is subject to the UK Takeover Code. Although the UK Code implemented the EU Takeovers Directive, the Directive itself contains a large number of UK specific rules and has over time adapted to both UK and global market conditions. It is, therefore, expected that these rules will continue substantially in the same format. There may be some amendments to the UK Takeover Code to reflect Brexit and adapt to the shift in the market, however, we consider it unlikely that Brexit would prompt dramatic changes to the UK takeover rules.

Company Law Legislation The Companies Act 2006 is the main piece of legislation governing the incorporation and operations of UK companies. Some of the provisions, albeit a minority, derive from EU Directives, such as the Company Law Directives, the Shareholder Rights Directive, the Transparency Directive and the EU Accounting Directives, which could be repealed. These provisions may be reviewed now the UK has voted to leave the EU but we would not expect a radical overhaul to be made. Companies are unlikely to experience a high impact in terms of operative and administrative matters such as the M&A process but over time there may be an increase in divergence between EU and UK company law; indeed the UK Government may seek to further liberalise the law in this area to enhance the UK’s reputation as one of the most attractive jurisdictions to establish a company in.

Cross Border Mergers Assuming that Brexit takes the form of a total exit from the EU and the EU single market, the EU Cross Border Mergers Directive, which has been enacted into UK legislation which allows mergers between companies incorporated in different EEA states provided that the merger consists of companies from different EEA member states will most likely cease to be available in the UK. Under such framework

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following Brexit, such mergers will no longer be possible as the UK would fall outside of the definition of EEA member states.

European Companies The European Company Statute allows a company, a European public limited company (Societas Europaea (“SE”)) subject to EU-wide laws, to be formed in any EU member state. Although such entities have not proved to be that popular, all existing SEs whether incorporated in the UK or not will be affected now the UK has voted in favour of leaving the EU. These entities should consider whether they are currently located in the optimal jurisdiction in light of their medium to long term strategy and to utilise the mechanisms available to them prior to Brexit should they wish to move because the SE Regulations will cease to have effect in the UK. An overview: On 23 June 2016, in public referendum, the British public voted in favour of the UK leaving the EU (“Brexit”). As a result of the uncertainty caused in the run up to the referendum, the financial markets and transactional activity in the UK has been markedly lower this year. This uncertainty will now continue for a number of reasons.

Firstly, the question posed at the referendum decided that the UK should leave the EU, but it did not (and did not have the power to) determine how that exit will occur or the nature of the UK’s relationship with the EU following Brexit.

This will be the first time that a significant member of the EU has left and there is no detailed mechanism in the treaties establishing the European Union for a member to exit.

Article 50 of the Treaty on the European Union requires a member state which wants to withdraw from the EU to notify the European Council of its intention to secede. The referendum result in the UK does not constitute such notice and the timing of service of such notice is likely to be a matter of intense political discussion in the UK in the coming weeks or months.

Following service of an Article 50 notice, a withdrawal agreement between the UK and the EU will then need to be negotiated. Brexit will occur on the earlier of the date of the UK withdrawal agreement or the second anniversary of the notification to the European Council (unless all remaining member states agree to extend this period).

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There is no clarity on the trading arrangements which will apply in respect of the UK after Brexit: as part of the Brexit negotiations, Britain will undoubtedly seek to arrange an appropriate free trade agreement with the EU. However, other European countries which have free trade agreements with the EU have also been required to accept certain fundamental EU principles, such as free movement of workers and, given that immigration into the UK was one of the principal concerns of those in favour of Brexit, it remains to be seen whether a free trade arrangement can be agreed between the UK and the EU. In addition, following Brexit, the UK will be unlikely to benefit from the free trade agreements which the EU has entered into with many countries worldwide and it will need to negotiate new free trade agreements with countries outside the EU. Accordingly, the precise impact of the Brexit decision on the UK as a place to do business and on the UK legal system will likely take at least two years, perhaps longer, to determine which will only become clearer as the negotiations surrounding Brexit progress.

The Share Centre What’s next for personal investors?

The ballot papers have been counted and verified and it is now known that Britons have voted to leave the European Union.

The Share Centre, comments on what this result could mean for personal investors: In the run up to the referendum we surveyed our customers on a number of occasions, most recently in mid-May when 56% indicated they would vote to leave*.

It might be assumed that the majority of personal investors would therefore welcome this result as being in line with their wishes. However, our survey also highlighted that a substantial majority (66%) felt that a vote to leave would have a negative impact on the economy and on the market.

The market has been subject to significant volatility and uncertainty in recent times.

The vote to leave will not help in this regard as there will now be a process of negotiation which the UK government must go through to agree the exit process and format of trade deals with the EU and other countries. That uncertainty will be exacerbated by the likely political fallout within the UK, which will most likely result in substantial changes in personnel

within the UK Government.

The market will likely respond unfavourably to this potential increased short-term uncertainty. While the market may be expected to decline in the short term, a fall in the value of sterling relative to the Euro and/or Dollar will actually make UK exports more competitive and will boost the sterling equivalent of overseas earnings for many of the large corporates in the FTSE 100. As such, after an initial dip, the market may return to a focus on those underlying fundamentals which may be more favourable than the initial reaction might suggest.

Personal investors should also note that while the market may be driven by sentiment in the short term, not all companies will be affected in the same way by the vote to leave. Even within the same sector different companies will be impacted in different ways. In time the market will differentiate between those companies and this may serve to demonstrate that any initial blanket market reaction will in fact have provided buying opportunities for discerning investors able to differentiate between the impacts on different companies.

Commenting on the referendum result, Richard Stone, Chief Executive of The Share Centre, said: “At a personal level a majority of investors may welcome the result as it meets with the wishes a majority indicated to us in our recent customer surveys.

However, it is likely in the short term to result in increased market volatility amid uncertainty over what a vote to leave will mean for the UK. “That negative short-term outlook may soon be reversed for those companies which will benefit from their exports being more competitive or their overseas earnings being more valuable in Sterling terms. Investors will need to be surefooted in identifying those companies which may benefit from the outcome of the vote and look for opportunities where whole sectors have been written down without any meaningful differentiation between companies to reflect the variation in impact the vote will have. The market will return to valuations based on fundamentals in due course.

“It is vitally important for markets and for personal investors that any changes in Government take place swiftly and that those charged with negotiating our exit from the EU set out as clearly as possible

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how they plan to steer the course for the UK going forward. We would urge the Government not to undertake any kneejerk reactions in terms of an emergency budget, and should such a budget be deemed necessary tax incentives which encourage investment should not be a target for savings. To do so would be short sighted as the UK economy now more than ever before will be reliant on the small businesses, many backed by personal investors, to drive economic growth and future employment.”

The following near-term impacts are shaping our current client strategy:

Brexit, Strabens Hall’s View

· Well diversified portfolio’s should suffer less, as a flight to quality has a positive impact on gilts and high quality corporate debt, therefore pulling back some of the potential losses from equities.

“The decision to vote Britain out of the European Union has caused considerable volatility across the markets but this is not Armageddon” The decision to vote Britain out of the European Union has caused considerable volatility across the markets but this is not Armageddon. In times when sensational headlines are continually being aired, it is often difficult to not be unsettled, however what we are seeing is a normal reaction to a rise in geopolitical risk and uncertainty.

Looking back over the last 15 years, global markets have experienced similar traumas following the Paris attacks in 2015, the invasion of Ukraine in 2014, the London bombings in 2005 and the Iraq invasion of 2003 to name but a few.

Looking further back into the 1990’s some may also remember both Russia and Mexico defaulting on their sovereign debt, causing similar shockwaves.

Clearly BREXIT is different, yet what is clear is that policy makers’ planning for a post BREXIT period was poor and arguably ill-judged. The other side of that argument is that planning for the unknown was never going to be an easy task but; could their messaging have been more positive? On reflection, perhaps the leaders of the two main political parties are now regretting not running more balanced and informative campaigns and the ‘fear’ messaging that trickled through both the in and out camps has not helped the market sentiment post referendum.

· Continued market volatility: if one is a long term investor, short term volatility should matter less. Any attempt to time markets now is highly speculative and often, refraining from action and keeping an agenda shaped by longer-term gains is the most sensible course, borne out by returns from long term market indices.

Additionally, markets have surprised investors in their positive performance post the Brexit vote.

· In terms of equities, the FTSE 100 is now higher than it was at the start of 2016 when it hovered around the 5500 level.

Economic fundamentals have not altered significantly since the start of the year and the effects of the BREXIT, although much hypothesised, are yet to be seen. · Interest rates will likely remain low and may well go lower. Whilst this will have a negative impact on savings rates and annuities, we predict a positive effect on pension transfer values from defined benefit schemes. · The tax environment is likely to remain attractive and indeed may soften as policy makers attempt to both attract capital and boost growth. · Clients may adopt a more defensive position, and those with an appetite for risk may try and buy into weakness, thus adopting a long term view whilst accepting short term volatility.

Adam Benskin, Director, Strabens Hall

Nevertheless, we are advising our clients to not panic, and that volatility is just a simple reaction to uncertainty. We are also recommending that with our help, clients carefully monitor and analyse developments before rushing to take any steps to restructure their portfolios.

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CEO OF THE EMPLOYEE OWNERSHIP ASSOCIATION DEMANDS FUNDAMENTAL CHANGE WITHIN UK ACCOUNTANCY FIRMS Deb Oxley, new CEO of the Employee Ownership Association (EOA), has called for employee ownership specialists to be operational in all UK accountancy practices by 2020, following the release of new research into the uptake of Employee Ownership Trusts (EOTs) amongst UK businesses.

The newly published results of an ongoing survey, launched by the EOA and RM2 last year and supported by the John Lewis Partnership, offer the first definitive insight into the impact of recent tax incentives introduced as part of the 2014 Finance Act to stimulate demand for employee ownership. The results have also highlighted the burgeoning need for professional advice on employee ownership to become more accessible for business owners.

Having surveyed over 50% of the early adopters of the EOT model, results show that over 90% of respondents cite business improvement, succession planning, retaining their independence or engaging staff as the reason for choosing an employee ownership structure. In addition, over 60% of respondents cited Capital Gains Tax (CGT) relief as a factor in deciding to implement the EOT structure. 86% of companies with an EOT are also taking advantage of the ability to grant their employees income tax-free bonuses up to £3,600 annually.

According to Deb, the case for employee ownership has never been stronger: “Statistics consistently demonstrate that employee-owned businesses outperform their non-EO counterparts in terms of higher levels of profitability; display improved business resilience during times of recession; benefit from increased productivity brought about by higher levels of engagement, and enhance employee wellbeing.

“Clearly, the tax incentives are only adding to the appeal of this wellestablished model, with the survey findings perfectly illustrating the growing appetite from businesses, and especially owner-managed SMEs, for more innovative and financially viable succession solutions.”

Yet, despite the obvious benefits for business owners, the majority of

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professional advisers are failing to communicate employee ownership structures as a potential option for clients.

Only 41% of businesses surveyed learnt about the model from a professional adviser, with others relying on the EOA and existing employee-owned companies for direction.

Deb continues: “Trusted professional advisers, in particular accountants, are often a first point of contact for owners considering the long-term future of their company and they are duty bound to ensure they act in the very best interests of their clients. However, in too many practices, it would appear that there is such a fundamental knowledge gap with regards to employee ownership that it could be considered to border on the professionally irresponsible.

“Those advisers are not only failing to offer a choice for owners, but those who choose not to explore the potential of employee ownership are missing out on a valuable opportunity to retain a significant proportion of their own client base. Unlike with a trade sale, where any existing client-adviser relationship typically comes to an immediate end post-transaction, facilitating the transition to employee ownership allows advisers to continue supporting clients for the long-term.”

The research findings have enabled the EOA to confidently assert one of the specific areas preventing employee ownership from being established as a mainstream business model. As a result, the organisation has set itself a new mission – to ensure that an employee ownership specialist is active in every UK accountancy practice by 2020.

“UK employee-owned companies today account for over £30 billion contribution to GDP,” explains Deb. “And at a time when off-shoring is making headlines for all the wrong reasons, it couldn’t be more important for professional advisers to understand and support the growth of a sector which contributes so significantly to the British economy.

“We are delighted that we are already collaborating with the ICAEW around this challenge, however we will also be launching a series of targeted awareness raising events, starting with our eleventh annual conference, that allow advisers to actively engage with the sector and learn more about this strong and economically balanced business model.”

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SURVEY OF UK EMPLOYEE OWNERSHIP

TRUSTS

The initial findings from a major new piece of research by the Employee Ownership Association (EOA) and RM2, providing the first definitive assessment of Employee Ownership Trusts (EOT) in the UK. Contribute to the ongoing survey by going to www.eotsurvey.co.uk

COMPANIES WITH AN EOT

EMPLOY OVER OF BUSINESSES WITH

PEOPLE

TURNOVER

RANGES FROM

£150K TO

£140M

AN EOT HAVE A

SHAREHOLDING

OF 100%

HALF OF EOT

TRANSACTIONS WERE FINANCED

THROUGH A

VENDOR LOAN

AND OVER

85%

OF THE REST HAVE DEFINITE PLANS TO

INCREASE

OF COMPANIES UTILISING AN EOT ARE

SMALL TO MEDIUM BUSINESSES

THE EOT SHAREHOLDING

(0-200 EMPLOYEES)

Data sourced from EOT survey conducted by RM2, in partnership with the EOA. Data as at August 2015. More information at www.eotsurvey.co.uk

EMPLOYEE OWNERSHIP TRUST (EOT) FACT SHEET Background • The EOT model was introduced by the Finance Act 2014 after a government review and consultation on the incentives available for employee ownership • The EOT helps to overcome the tax and legal obstacles identified as preventing many private companies from implementing existing trust models Key features • EOTs currently provide the most generous form of Capital Gains Tax (CGT) relief for business owners.

A sale by one or more shareholders of more than

50% of the ordinary share capital of a company to an EOT will qualify the vendors for complete exemption from CGT relief in the tax year in which the trust first acquires a majority shareholding • An EOT can be used to pay income tax-free cash bonuses of up £3.600 per employee per annum Terms of the Trust • The trust must hold more than 50% of the ordinary share capital and the voting rights, and must be entitled to more than 50% of the company’s profits and assets if the company is wound up • The trust must not benefit 5% participators • The trust must operate for the benefit of all employees on an equitable basis, although qualifying

periods can be established and benefits applied can be based on employees’ pay, length of service and hours worked Key considerations when implementing an EOT • What percentage of the company’s shares is to be sold to the trust and at what cost(s)?

• How will the sale of shares be funded? Donated as a gift from the vendor; via a vendor loan with instant or deferred repayments; externally financed through bank loan, private equity or another source?

• If being funded through a vendor loan, over what period of time will the repayments be made?

• Who should be on the board of directors of the trustee company appointed?

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EOT case study: Saxton Bampfylde Saxton Bampfylde is a global executive search and assessment firm. It advises on senior appointments at board, executive and C-suite level for many of the world’s leading organisations, from FTSE100 and multi-national blue chip companies, through to arts institutions, government, social impact organisations and academia.

Founded in 1986, today, Saxton Bampfylde boasts a team of 70+ partners, and, this year, celebrates both its 30th anniversary and second year of employee ownership.

So, why employee ownership?

Having maintained steady growth through the recent recession, the board’s attention turned towards its long-term future and the need to identify a financially viable succession strategy that not only made economic sense, but that would safeguard the company, its staff and its values.

One of the key considerations was ensuring a way forward which would allow the founder’s legacy to stretch beyond his period of active involvement with the firm. An ideal solution would be one which enabled the firm’s longstanding values and collegiate atmosphere to survive, long into the future.

The paths of trade sales, management buy-outs and mergers were actively considered, but ultimately ruled out when it became clear that the employee ownership model could fulfil all of the usual economic objectives, whilst also ticking the boxes for these key legacy issues.

Why an Employee Ownership Trust?

After much research and various discussions with other organisations, Saxton Bampfylde opted for a 100% Trust ownership model – a structure which aligned well with its objectives and allowed the company to avoid what it considered to be quite complex and confusing share incentive schemes.

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The firm was one of the first businesses to transition to this model following the introduction of the new tax incentive laws, meaning all shareholders paid zero Capital Gains Tax (CGT) on their share sale.

This was not only beneficial for the founder and majority shareholder, who would normally have received entrepreneurs’ tax relief and paid 10% CGT, but it was also good news for the other smaller shareholders who would normally have paid full CGT rates.

In addition, all staff now receive the first £3,600 of their annual partnership bonus income-tax free.

The price set for the sale was similar to that which would have been achieved through a reasonable trade sale. The Trust’s share purchase was funded through the Company and 100% of shares were transferred into its possession.

There will be a number of years during which the firm will be using some of its profits to pay the former shareholders for their share sale. Once this has been fully repaid, the partners will receive a share of all profits, placing Saxton Bampfylde partners very favourably in London’s executive search industry.

The Company established the EOT, appointing seven trustees, three of whom were elected as part of a company-wide election process. Together, they represent the partners, and, in addition to holding obligatory governance powers, act as keepers of the company values.

The results The move to employee ownership offered a gradual and controlled exit strategy that allows the founder to remain involved with the business for the foreseeable future, whilst evolving the next generation of leadership within the company.

For employees, the knowledge that the company will not be sold to a third party, allowing the business’ values-driven ethos to be retained, was warmly welcomed – evidenced by a greater focus on

productivity and profitability.

Far from being simply a ‘nice sentiment’, Saxton Bampfylde cites its colleaguefocused philosophy as a key driver behind its financial successes. In its first year of transitioning to employee owned status, the business enjoyed its most successful year to date, experiencing a 12% growth and its greatest ever profits.

Travel and expenses claims fell dramatically by almost 40% and are continuing to decrease, whilst the firm’s sense of fun and its collegiate atmosphere are as present as ever.

As a firm, its search assignment success rate is amongst the highest in the UK and its client base has grown as a direct result of being part of the employee ownership network.

EOT case study: Alfa Leisureplex Group A first generation family business owned by five siblings comprising a nationwide hotel chain, coach fleet and tour operator arm which runs 100,000 holidays annually, the Alfa Leisureplex Group made the successful transition to employee owned status in July 2015, eight months after commencing the process.

So, why employee ownership?

Since its inception, the Group has enjoyed consistent profitability and growth, expanding its workforce to 670 and turning over £40m annually.

However, with three shareholder directors working in the business, two of whom were approaching retirement, the family sought a controlled exit and stable succession strategy that would enable the company to continue to grow and prosper.

Too large for a trade sale, too small for a flotation and dissatisfied with the short-termism offered by private equity, shareholders began to explore the benefits of employee ownership models, studying in detail the pros and cons of those implemented by various organisations, including the John Lewis Partnership.

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Why an Employee Ownership Trust (EOT)?

After careful consideration and having confirmed their views at the Employee Ownership Association’s (EOA) annual conference, shareholders identified the indirect ownership model as an exciting solution offering the best long-term financial stability for the business.

An EOT was elected as the preferred route, with 75% of shares to be transferred into the Trust and the remaining 25% to be split equally between the five founding shareholders.

Shareholders provided the majority funding to finance the employee buyout, through a combination of surplus business profits and vendor deferred payments which are to be released over a 10-year period. Lloyds Bank also provided funding to facilitate the transition.

The EOT was established with support from EOA member Baxendale, whose Legal Director, Ewan Hall, acts as the Corporate Trustee Board’s independent director. He is supported by two founders, for as long as debt is outstanding, and a senior HR ex officio. As workplace representation was a key goal from the outset, the board also includes three elected members voted for by the workforce and Alfa Leisureplex has solid plans to roll out a more comprehensive structure in the coming months.

The results Whilst still a work in progress, to date, the transition has been welcomed. Significant improvements have already been made to the employee benefit scheme and the Group is in a position to bring forward the payment of its first partnership bonus.

Originally intended for release at the end of year two, employees are set to receive the income tax-free bonus in the next few months.

Most importantly, however, the transition to this new business model has enabled Alfa Leisureplex to retain the independence and ethos of a family business, with the company’s focus remaining, as it always has done, on fulfilling the needs of its customers.

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EMPLOYEES POSE SIGNIFICANT RISK TO COMPANY CYBER SECURITY Research carried out by specialist global executive search and interim management company Norrie Johnston Recruitment (NJR) shows that staff are a significant risk to their employer’s cyber security.

The research, which forms part of NJR’s cyber security report: how real is the threat and how can you reduce your risk, showed that just over 50 per cent of us have experienced a cyber scam in the last twelve months.

From receiving a fake email from Paypal, Apple or a bank (29 per cent) to being targeted by a Facebook scam (12 per cent) to clicking a link that put a virus on a PC (7 per cent), the majority of us can identify and understand the risk of opening something we don’t recognise. Cyber scammers are also wising up to the need to personalise their attacks, with 17 per cent of respondents receiving scam emails that looked like they were sent by a friend and 16 per cent being telephoned by someone about a ‘problem’ with their PC. However, despite being increasingly ‘scam savvy’ in our personal lives, the research also revealed that we’re not so security aware at work. With 23 per cent of respondents using the same password for different applications and 17 per cent writing down their passwords, 16 per cent working while connected to public wifi networks and 15 per cent accessing social media sites on their work PCs, bad habits and a lack of awareness about security mean that employees are inadvertently leaving companies’ cyber doors wide open to attack.

In response to this increasing ‘insider threat’, Norrie Johnston Recruitment has brought together a collection of cyber security insights and advice from fifteen experts in the field.

But, as contributor Benny Czarny of OPSWAT comments: “the good news is that most data breaches can be prevented by taking a common sense approach, coupled with some key IT security adjustments.” He goes on to

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set out ten tips for avoiding a cyber attack from ensuring employees are properly educated about the necessity for good security to the importance of storing sensitive data in different locations.

Another contributor to the report, Simon Heron of Redscan, suggests employing “a team of ethical hackers to attempt to breach a company’s cyber defences and test the incident response processes” as a powerful way to understand where vulnerabilities lie and the associated risks.

Other contributors provide practical tips on how to manage the immediate aftermath of a cyber breach and examine the differing impacts an attack can have on various industries and sectors including retailers and financial service providers.

Graham Oates, Chief Executive of Norrie Johnston Recruitment, comments: “There is no doubt that cyber security is a hot topic and businesses are fast waking up to the need to protect their cyber presence.

But as our research shows, the biggest threat could be the one right under your nose – your employees.

“There appears to be a real disconnect between the way we behave at home and at work with many of our research respondents inadvertently taking real risks with their employer’s cyber security.

There’s a clear need to educate staff about the importance of cyber security best practice and how even actions that we all take for granted, like checking our Facebook page at lunchtime, could provide cyber criminals with a way into a business. Cyber security is no longer the territory of the IT team, it’s the responsibility of everyone.”

He continues: “As a result, in-house cyber experts are in huge demand, the salaries they command are increasing and the competition to attract the best talent in the field is fierce. By working with a focused search firm like Norrie Johnston Recruitment, businesses will greatly increase their chances of hiring the

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5 WAYS TECHNOLOGY HAS CHANGED GAMING The video game storm has hit your computer, phone, and living room to the point that it has overtaken pretty much everything. But was it always like this? Nope. Numerous technological advancements have taken place in gaming since the pong days. Here is a list of 5 ways according to Digital Edge in which technology has made huge impact on gaming.

1. Artificial Intelligence has grown by leaps and bounds Even a multiplayer video game where you don’t have anyone to play against is a dull and dreary experience. And that’s where the role of Artificial Intelligence comes into play. Technically, AI has been around from the very beginning of the gaming industry. It is not anything innovative; it was there all the time when you were playing Pong. But what is actually new is the fact that AI is beginning to mimic humans more and more each day now.

In video games today, enemies may go for war tactics like flanking. They may throw a grenade when they are unable to get your clear visual. This is something very similar to real life warfare. AI is getting more intelligent with each passing year. In addition, it’s already gotten to the point where it is training a computer-controlled player to act like a human.

AI can certainly be regarded as the biggest technological advancement in video games, since it’s the one that’s quite responsible for the existence of video games.

2. Online play is an icing on the cake

4. Graphical upgrades are so much enhanced

With the advent of online gaming, multiplayer games received their much deserved recognition. At one point, online play even became a must have element that was responsible for the success of a new release. Thanks to the evolution of MMORPG (Massively Multiplayer Online Role Playing Game), online gaming has become an entirely different experience today.

Let’s be honest here. Pong was not a beautiful game. It didn’t have complicated textures, shaders, or sprites that are found in all modern games today. As time passed, there have been major strides in the way graphics are provided or rendered on gaming platforms.

At present, gamers can engage and play with fellow gamers online irrespective of their geographical locations. Interestingly, the unrivalled champion of this area—World of Warcraft—has more than eight million subscribers. This means that eight million people are connected to each other through an online society. You can also enjoy a game of online pokies with a person sitting in other corner of the world without having the need to go to a casino. However impossible it might have been a few decades back, it is a reality today. Online Play is a separate world of its own presently.

3. The third dimension looks wonderful Two dimensions have their own limitations. You can do only so much with them – top-down, platformers, and views. The possibilities of what you can do are going to be exhausted eventually.

Three-dimensional games were already present in the 1980s, for instance, there were games like Red Racer. However, early platforms didn’t look that appealing and were also convoluted to an extent.

Now, most games are three dimensional games. With the betterment of graphics software, they are even looking better. The stride to the third dimension has changed something fundamental regarding the way games look and feel.

Technology has apparently allowed for enhanced graphics by means of hardware upgrades. The Pong era, on the other hand, had limited processors. As a result there wasn’t much that could be done to do away with choppy performance. Today is the scene of high-speed hardware, which allows for more instructions, pixels, and shading—even on an enormous scale.

5. Portability has made gaming convenient In the obsession of making everything portable, how could we leave gaming behind? Gaming consoles were miniaturized and made easily transportable. The result? People could now game anywhere any time. They just needed to press the on switch, and entertainment took care of the rest.

This meant no more having to tow around TV and consoles to play a game against a friend.

Apparently, the technology behind portable gaming has lagged a bit for a while. But the uniqueness about being able to game any time anywhere is just undeniable. It was actually this innovation that led to cell phones and mp3 players on the bus.

Where is video game technology heading to? 20 years back technology seemed that it was front-line of the one that was about to come. And perhaps the same will happen. While it’s not possible to predict the future, it is fair to say that virtual reality has been a developing topic recently.

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HALF OF MILLENNIALS DON’T TRUST THEIR HIGH STREET BANK The video game storm has hit y0% of 18-24 year olds wouldn’t trust the traditional banking system with transactions, according to new research.

The report entitled ‘Are Banks Losing the Innovation Game?’ by financial regulatory framework compliance experts, Neopay, interviewed 2,000 UK adults on their experiences with high street banks and how they felt they fared up when handling money digitally through e-money channels.

Half of youngsters admitted they wouldn’t trust high street banks, while one in three said they would trust a technology company, such as Google or Apple, with their e-money transactions.

The research shows a difference in perceptions from younger to older generations in trusting their bank with e-money transactions. 41% of 25-34 year olds would not trust their bank with such activity, whilst only 24% of 35-44 year olds, 24% of 45-54 year olds, and only 17% of 55-64 year olds expressed concerns in this regard.

However, people who would trust a technology company (e.g. Google or Apple) with e-money transactions ranged from 32% at the younger end of the scale (18-24 year olds) to just 17.5% at the older end of the scale (55-64 year olds).

With processes becoming more automated, only 47% of customers had actually met someone from their bank in person in the last year. Now, consumers are no longer seeing banks as the only option when it comes to managing their financial needs.

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Scott Dawson, commercial director at Neopay, commented: “Traditionally, banks have been synonymous with dependability and solidity. However, since the banking crisis, the sturdiness of banks has been cast into doubt.

Also, the increasing frequency of scandals, combined with concerns about infrastructure and reliability, and the increase of automated processes have all served to erode trust and undermine the reputation of our banks.

“At the same time, we’ve seen the emergence of new technology companies that are rich with our personal data and are seen to be fueling much of the innovation and growth across the wider economy.

“Young people still trust banks, just to a much lesser extent than in previous generations. Other providers of financial services, such as apple pay or prepaid cards are now very much seen as credible alternatives.”

MORE THAN A THIRD OF M&A PROFESSIONALS BELIEVE ONLINE DEAL SOURCING WILL REVOLUTIONISE THE M&A INDUSTRY Online deal sourcing is becoming the “new normal” as one in three dealmakers use specialised deal networks

Intralinks Holdings, Inc. (NYSE: IL), a global content collaboration company for high-value content and processes, today revealed the results of its latest Intralinks Dealnexus survey of more

than 700 merger and acquisition (M&A) professionals. The “Deal Networks and the Evolution of Getting M&A Deals Done” global survey sheds light on the growing use of social networks and online deal sourcing communities as a way to improve the close rates and volume of deals, while making it easier for more organisations to promote and compete in these transactions.

In 2013, Intralinks conducted a global survey of M&A dealmakers to understand how technology and specialised deal networks influence M&A deal sourcing. Intralinks conducted a follow-up survey to measure how attitudes towards, and adoption of, these technologies have shifted since the last report. Highlights of the follow-up survey include:

• Online Deal Sourcing Is the “New Normal” More than 31 percent of dealmakers currently use an online deal network to support deal sourcing. Of sell-side M&A professionals using online sourcing platforms, nearly 50 percent have marketed at least one deal online in the last 12 months and 28% have marketed more than five deals online in the last 12 months.

• Awareness of the Value of Online Deal Sourcing Is Growing 36 percent of respondents agreed with the statement that online deal sourcing will eventually revolutionise the M&A industry. In 2013, that number was only 23 percent.

• Online Deal Sourcing Leads to Closed Transactions Among users of deal sourcing platforms, 45 percent of buy-side and 39 percent of sell-side professionals have closed a deal that was sourced on an online network.

• Online Deal Sourcing Expands Reach to New and Qualified Counterparties 62 percent of deal-makers agreed that online deal sourcing allows them to identify counterparties they otherwise would not have found.

• Conventional Social Media Platforms Are Losing Favour At least in terms of supporting dealmaking activities, dealmakers are eschewing the larger, conventional social networks in favor of “specialised”

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deal networks with more customised functionalities, with respondents citing lower daily usage of the former, but higher daily usage of the latter.

Their survey shows that dealmakers are realising the importance of incorporating online deal sourcing into their broader dealmaking and social media strategies.

This is especially the case as online deal sourcing networks continue to gain ground while social media businesses continue to soar. On the buy-side, nearly 85 percent of respondents who use deal sourcing networks reported that they source deal opportunities online and 44 percent reported that their firms source between 11% and 50% of their total deal flow online.

“As online deal sourcing continues to go mainstream, it is more critical than ever for M&A professionals to at least gain an understanding of the online deal sourcing landscape,” explained Tony Hill, director of Intralinks Dealnexus. “In an otherwise fragmented industry, online deal sourcing networks offer the only true ‘gated’ communities of any substantive scale where qualified dealmakers can find one another and interact. After surveying members of the largest dealmaker community in the M&A industry, our research proves that the prevalence of social dealmaking within the M&A industry is rising.”

Donald W. Grava, founder and president of Versailles Group, Ltd, a Boston-based investment bank, said: “The most important thing in middle market M&A transactions is to make sure that the buyer or seller receives exposure to as many targets or buyers as possible.

“Digital tools, such as Intralinks Dealnexus, provide an excellent way to expose a transaction to multiple parties virtually instantaneously. The same type of coverage that Intralinks Dealnexus provides would take an enormous amount of time and resources. Intralinks Dealnexus generated exposure to almost 400 possible buyers for a single transaction we posted. That’s the power of a robust tool like Intralinks Dealnexus in the digital age.”

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THE RISE OF CONSTRUCTION – GAMECHANGERS SPEAKS WITH EDWARD HARDY OF CONSIDERATE CONSTRUCTORS SCHEME The value of total construction contracts awarded in the UK reached £74bn in 2015, a year on year increase of 16%, due to an influx of mega projects being commissioned and the average construction project value increasing by 18% to £6.2m for 2015.

With the rise of construction contracts, it was the perfect opportunity for Gamechangers to sit down with Edward Hardy, CEO of Considerate Constructors and find out more about one of the leaders in the construction industry.

Q. Will you tell us more about the Considerate Constructors Scheme, and your role as Chief Executive?

The Considerate Constructors Scheme is a non-profit making independent organisation founded in 1997 by the construction industry to improve its image and encourage best practice beyond statutory requirements.

The Scheme works through the voluntary registration of construction projects, companies, sub-contractors and suppliers who agree to abide by our Code of Considerate Practice. Everyone registered with the Scheme is monitored by industry professionals on their performance against three areas of the Code: consideration towards the general public, the workforce and the environment. Every year, the Scheme registers around 8,000 sites and makes over 15,000 site visits.

There are also around 1000 separately registered companies, sub-contractors and suppliers who are also monitored against the same criteria.

My role as Chief Executive is to run the Scheme and to

represent the Scheme at all levels.

Q. How did you find yourself in the industry?

My father ran a construction company his entire career and as such I was always involved with the industry and had laboured on his sites and also worked in his offices. When he retired, he was still involved within the construction industry and was offered the opportunity of running the Scheme, which he accepted, but he accepted after discussing with me that it would involve me working with him as well. My father retired from the Scheme in 2000 – and I was put forward as the potential replacement Chief Executive and I am delighted to say that this was ratified and I have been Chief Executive ever since.

Q. What is the key to improving the image of the construction industry?

A cultural shift. A cultural change and a change in mentality from where construction used to be; behaviours and practices that were considered years ago as acceptable are now understood to be unacceptable. The change in mentality is for construction to realise that it cannot give itself the excuse of ‘being construction’; it has to adopt the highest standards to ensure that it is just as attractive as any other sector as a possible career option. There are no reasons why the standards in construction should not be as good as, or indeed better, than those in any other sector.

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Q. Where did it all ‘start to go wrong’ for the construction industry and what motivated the Considerate Constructors Scheme to launch?

The question implies that it was right before it went wrong. Construction as an industry has evolved and will continue to evolve. If you look back at the history of construction, particularly in terms of Health and Safety, it is only getting better and has only ever got better.

Not so long ago there was no such thing as Health and Safety. With our involvement, considerate construction will continue to improve forever.

Q. Can you shed a little light on the philosophies of the Considerate Constructors Scheme and how you’re making an impact in the industry?

The construction industry can always be better. It is a markedly better than it was, but the philosophy has to be that it must continue to improve - with the ultimate aim being that construction is seen and recognised by all as a professionally managed, well-run sector that people would aspire to work in. And those who work in the sector are given the respect they deserve for doing what they do.

The Scheme is making an impact in the industry by changing the culture and behaviours on construction sites and in construction companies, reminding them that it is no longer acceptable to be a bad neighbour, a poor employer, or harmful to the environment. And actually, we should relish the challenge (and we do relish it) to forever be a good neighbour, employer, and a green industry.

Q. Will you tell us more about the most detrimental risks that are involved within construction?

From our standpoint, there are many risks, and everyone understands that working in construction contains risks. The greatest risk is that the construction industry does not have or gain the reputation that it should have. Most of us who work in construction realise it is, in the main, a very professional, well run, well managed, safe industry. However, the public perception of the industry and what is constantly being publicised is that the sector is unprofessional, reckless, careless, uncaring, and in some cases, illegal.

Unfortunately, there is very little focus on the positive side of the industry. For us, in terms of the image of the industry, it is the ongoing negative perception the public has because of how it is presented. The Scheme works to continually challenge sites to improve how they appear, because ultimately the construction site is the shop window to the sector, and in some cases these do not appear as professional as they could.

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Q. How do you simplify “image improvement” whilst still reducing risk?

Image is not just about the how something appears, it is also about reputation, and these two things must go hand in hand.

Image is what you present of yourself, whereas reputation is how you are known – and so the Scheme wants to challenge the industry on both.

What we [the Scheme] want to do is to promote the positive image which reflects where the industry is today and that things have moved on a long way. Many sites and companies, especially those who are part of the Scheme, work incredibly hard to achieve ever higher standards each year. In a large number of cases, they do look after their workforce, are very focused on occupational health and health and safety, risk awareness, and are far more caring to the environment that most would realise; no mean achievement for a sector with a negative track record for environmental consideration.

In a large number of cases, construction does a huge amount to be good neighbours, so in terms of simplifying image improvement, what we need to do is change the overall public perception of construction, based on inaccurate historical experience. We need to do this by showcasing a positive image and reputation; showing what it is like now, and challenging the perceptions that construction is full of ‘builders bums’, wolf-whistlers and offensive language. On the vast majority of construction sites, these negative behaviours are things of the past.

Q. Comprising of first-class achievements, Considerate Constructors Scheme has won its fair share of awards.

What do you feel is key to such success?

Hard work and a lot of effort spent convincing those in the sector that it was about time the industry needed to change.

No longer could construction hide behind the fact that it was ‘construction’. Instead of using all of these excuses as to why it was bad, we challenge the sector to be better and to constantly improve. This undertaking has involved thousands of hours of hundreds of meetings with all of the relevant people across the industry, gradually convincing all involved that the idea of a better industry is good for everyone.

Part of the Scheme’s success is also down to timing and a generational change – those that are coming into the sector and have been coming into the sector over the last 10-15 years have vastly different expectations to those who came before them. We would not be as arrogant as to say that the sea change in the industry is solely down to us, although we do believe we play an important part in that by changing the expectations that people should have when they are working in the UK construction sector.

The most important accolades are the National Site Awards and the National Company Awards that we award our topperforming sites and companies. These annual national awards recognise those sites and compaines registered with the Scheme that have raised the bar for considerate construction.

Winning a National Award is an exceptional achievement, and recognises sites and companies that have made the greatest contribution towards improving the image of construction.

Our Awards are only given to the top performing 10% of those registered and monitored by the Scheme so winning one of these shows that the site or company is truly performing at the very highest standard compared to all others in the sector.

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Q. Can you tell us more about the processes you’re applying this year and any potential risks that the Considerate Constructors Scheme may face?

This year, (as we do every year) we have updated our Checklist to change the expectations that our Monitors have when going to sites and companies. We have changed this in two key areas. These are the things sites and companies must be doing to achieve compliance with the Scheme. The other points are to see what sites could be doing to achieve a higher score. Some items that last year would have actually warranted a member achieving a higher score have now been moved into the compliance section, meaning that every site and company must now do these to achieve a basic level of compliance.

We are also now challenging the industry on how it ensures their workforce is legitimate to work. This means that we will be asking every site or company we monitor to prove to they are only using and employing workers and supply chain staff, who are legally allowed to work on their sites. Unfortunately construction has a reputation as a sector that does employ illegal workers and this has to change as in the majority or cases this is untrue.

Cycle safety is also something we take incredibly seriously and this has been reflected in our Checklist expectations.

We have also made healthy lifestyle advice mandatory now as part of compliance section when looking at the workforce.

We have added some new items to the non-compliance section to challenge main contractors. Of particular note is goodwill for local communities - something we have always encouraged of our members.

Generating goodwill is now a necessary compliance for every site and company registered with us, and we would expect goodwill activities in every registration.

The other big challenge we have set through this year’s Checklist is to ask a new question, which is: What is the site doing to improve its image and the overall image of the industry to attract and retain the workforce necessary for the future of construction?

So, all of these are hugely challenging subjects, not to mention all of the other hundreds of items based on our Code of Considerate Practice.

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Q. As of 2016, what recent projects have you embarked on?

We are often asked as a Scheme about individual projects, interesting projects, exciting projects, noteworthy projects that we are involved with and so on. As a Scheme, we register somewhere in the region of 700 sites every month and have several thousand construction companies also registered with us at any time as part of our Company Registration, so most noteworthy sites and projects is the answer. It would be a shame to name only a few.

I think the question should be: Are there any noteworthy sites that are not registered with the Scheme? This would probably be an easier list to compile.

This year, we are very excited to have launched an addition to our monitoring service, meaning that we will now be able to monitor in relation to the Public Services (Social Value) Act, which came in to effect a couple of years ago. The construction industry clients, particularly those in the public sector, are now requiring their construction sites to prove they are achieving the expectations of social value legislation. We are now able to independently monitor what these sites and companies are doing to achieve those expectations, and provide a report, which can then be given to the client.

We have also launched star ratings posters, similar to the familiar hygiene certificate ratings in restaurants or star ratings on hotels. Up until now, registered organisations have displayed our registration posters and banners however have until now not publicly shown how well they are performing. So, from now, sites and companies are able to display star ratings posters to show how well they performed against our Code of Considerate Practice, demonstrating to the public how well they are doing in terms of being a considerate constructor.

We are also in the final stages of developing a female industry cartoon character. We already have one costume character, Ivor Goodsite, whom we launched around 10 years ago. We were asked what a construction site could do when visiting a school, and we introduced Ivor as a focal point to help get children interested and become aware of construction. The idea was to inspire the next generation into construction and inform them about health and safety. Ivor Goodsite is hugely successful, visiting over 30,000 children at schools throughout the UK in the last 12 months. What is also not commonly known is that site and companies registered with the Scheme made over 7000 visits to schools in the last year meaning that over 350,000 children were informed about our sector.

The reason for introducing a new character is that we are constantly challenging the construction sector to do more when looking at future recruitment and encouraging a more diverse workforce.

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Q. How will we see the brand develop over the course of the year?

We are currently reviewing our branding to reflect how Scheme registered sites, companies and suppliers are promoting the image of the industry through their excellence in raising the standards of considerate constructors and we will move away from talking about ‘improving’ the image of construction as in the vast majority of cases our sites and companies are now considerate.

Q. What changes have you seen over the past few years within the industry?

Equality is one of the biggest changes.

However, there is still a huge amount more to do in this area. The Scheme pioneered equality many years ago by including the provision for female facilities in our Checklist very early on, stressing that sites should provide facilities for all, and in particular, females. The industry had for some years been pushing to have more females working on construction sites and we were staggered that no one was making sure that all the necessary facilities were on site to accommodate them. We have seen a huge change in the facilities that are now provided on sites and are delighted to see that the vast majority of sites, and in particular the larger sites have fantastic facilities for all. This is something we are very proud to have made happen.

Occupational health is one of the other areas where there has been great progress, particularly over the last five years.

since we launched it in 2015. The Hub has already been visited over 450,000 times with over 1200 examples of best practice available. It is a free online resource for the industry to share their considerate practice by showcasing examples, innovations, case studies and undertaking e-learning modules.

The Best Practice Hub is proving to be an essential way for the construction industry to achieve this greater collaboration and, by doing so, helps continue to raise standards across the industry as a whole.

Q. What have been some of the memorable and more challenging events for you personally at the Considerate Constructors Scheme?

There are many memorable events, but a few spring immediately to mind. The first is when we had carried out our 100,000th site visit in 2014. It was a fantastic opportunity to bring together all of those who have had the greatest influence in the success of the Scheme over all of the years. In the early days we had never imagined we would ever achieve this number, and the fact that we are now heading towards our 100,000th Site Registration is even more staggering. It only goes to show how the industry has embraced our concept of considerate construction.

Community engagement and being a good neighbour are a central part of being a considerate constructor.

Registered sites and companies have developed fantastic programmes for positive community engagements.

The other event was when we first introduced the industry mascot, Ivor Goodsite. When we got our first costume I thought it was only right that I should be the first person to wear it: how could I expect someone else to wear it, if I had not done it myself? So, I arrived at a school dressed in a costume character and being shouted at and kicked by hundreds of school children who were convinced I was their teacher!

Last year the costume was hired over 500 times and I will admit that it is no longer me in it.

Collaboration across the industry has also improved. The Best Practice Hub is one such example and is proving to be a key resource for the construction world

The biggest challenge I find and continue to find with the Scheme is convincing those that do not necessarily understand the Scheme, that it is a

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good thing and is set up genuinely for the right reasons and genuinely to help the industry to improve itself. There are still many people in many sectors of the industry who may not see the Scheme as a force for good and changing that perception is something I always enjoy.

Q. In your opinion, what defines a Gamechanger?

Someone or something that moves the expected norm in to a different trajectory, for want of an improved outcome.

Q. What motivates you as Chief Executive at the Considerate Constructors Scheme?

The Scheme does make a real difference. For me, to be involved in an organisation whose sole motivation is to make something better, for all the right reasons, is a wonderful thing to get up for every day. Everything we do and everything we make is for the betterment of the industry and the public, and that is hugely satisfying.

Q. What does success mean to you?

Personally, success for me is achieving happiness and balance in life.

Q. What is your greatest weakness?

I can be slightly obsessive about detail, and can be overly critical. It is because I believe that things can always be better.

Q. Where do you see yourself in 2020?

Continuing to lead an even more successful scheme that strives to make even greater changes in the future.

Q. What is your best advice to aspiring entrepreneurs and businesses out there?

Do not give up and do not focus on the negative; never focus on why you cannot do something, because there is no point. There are a million reasons and a million excuses you can give for

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yourself or your business why something would be hard to do or why it should not be done. People often cite the fact that people tried before and it has not worked and so on. Ignore all of that, if you think something is a good idea, and you have belief in it, this is the most important thing. Then it is simply a case of convincing others of why you believe something is the right way, or a successful way of doing it.

Q. What does the future hold for construction?

We are working with a group of likeminded organisations to put together a media campaign to show the population that construction is full of fantastic career opportunities. We are keen to highlight the myriad of different options available to people in construction, and, show that those already working in the industry are, in the main professional, sensible people. I hope to see the future of construction as an industry with a better reputation and image so that everyone working in construction is proud to do so. In the future I hope that when a daughter says “Daddy and Mummy I would like to work in construction”, they are delighted by that choice because their view is that construction is a fantastic sector to work in, with great opportunities.

Q. Can you let us in on what’s to come over the course of the next 5 years for the Considerate Constructors Scheme?

What you will see from the Scheme is a big push to be in the SME sector within construction and a big push to be more involved in the domestic side of the industry where, unfortunately, a lot of negative stories about construction emanate.

There will also be a big drive in terms of promoting a positive image of the industry, moving away from talking about improving the image to promoting a positive image.

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THE FUTURE OF PAYMENTS CASHING IN ON PAYMENT TECHNOLOGY AND THE INNOVATIONS OF TODAY Spurred on by advances in financial technology, the payments industry continues to evolve at pace. Online payments are now faster, cheaper, safer and easier to fulfill for more and more people. This mighty spread of technology is opening up trade and creating new opportunities for business.

As reported by Raconteur, payments technology continues to evolve as businesses cash in on innovative ways of paying to not only improve customer experience, but also boost the bottom line.

The global payments industry is developing fast as go-ahead startups in financial technology develop emerging technologies and investment from big banks filters through.

While the spotlight has been on innovation and technology, businesses are now beginning to realise the benefits of new payment methods to fuel corporate growth and improve the bottom line.

That being said, in a fast-growing world of e-payments, cash refuses to go down without a fight.

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GOING CASHLESS AROUND THE WORLD

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NOTES AND COINS MAKE UP JUST 3.5% OF MONEY IN THE UK The recent revelation from Apple’s CEO Tim Cook that “your kids will not know what money is” might not be so far-fetched.

At the end of last year, the amount of actual cash* in the UK stood at £73.6 billion, whereas electronic money** is now at £2,034 billion. This puts the percentage of electronic money at 96.5% and physical cash at just 3.5%.

Cashless payment methods are also becoming increasingly popular.

Contactless spending increased almost fourfold last year, and since the start of the millennium, debit card ownership by UK adults has increased from 77% to 91%.

Is it a question of whether the UK will become completely cashless? Or a question of when?

To mark this giant leap in cashless payments, MBNA have created a 3-part series of infographics that shows how far we’ve come towards becoming a cashless society and what lies in store.

The next big push towards a cashless society In the series, MBNA’s head of innovation, Gary Watts, casts his view on what will be the driving force in the UK becoming a cashless society.

Watts believes the arrival of Google’s Android Pay and Samsung Pay will increase cashless payments and

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reduce the number of cash payments as a consequence.

technology with apprehension.”

MBNA charts the history of money

“Massive handset coverage in the UK will be the catalyst that accelerates digital wallet uptake and the decline in cash payments.

“When it hits the UK, it’ll impact the majority, 98% in fact, of our customer base.”

MBNA have already seen the impact of Apple Pay on their customers.

Watts believes the capability of these digital wallets could cause take-up to increase across different generations.

“Mobile wallets aren’t just for the young. Since their arrival, we’ve seen a large number of MBNA customers in the over 40s age bracket move towards Apple Pay.” Since a framework for enabling contactless capability on transport around the UK was unveiled last month, contactless looks set to expand in a big way. Watts is confident contactless rail journeys will be with us in the next 8 years.

“Contactless technology on all rail journeys is not going to happen overnight, but it will almost definitely happen before all buses are enabled with contactless technology, which is set out for 2022. Trains will win the race to contactless.”

Watts notes, however, that there will always be a certain level of trepidation when it comes to adopting cashless payments that could lead to the survival of physical cash.

“The majority of the population will use digital wallets as the predominant payment method, but cash will certainly still be an option.

“There will always be a section of the population who will look to the

• Part 1 charts 8000 years of currency from bartering to the debit boom • Part 2 revisits the rapid development of post-millennium money, which saw some of the biggest changes to the way we pay.

• Part 3 uses expert opinion from MBNA’s head of innovation, Gary Watts, to provide insights into some of the biggest developments that are planned and predicted for the future of money and payment methods.

Tracking the decline of cash Physical cash has managed to hold on as the predominant payment method for a surprisingly long time. It wasn’t until 2014 that cash payments fell from 52% to 48%. This was the first time we spent less in cash than we did using non-cash means***.

Contactless has also seen an incredible surge. Since its arrival in 2007, contactless card adoption has grown to 76 million (2015 figures).

According to the UK card association, at the end of last year contactless payments made up 10% of card transactions with some estimates putting the figure as high as 1 in 7 card payments.

Spending on contactless cards also reached a record £1 billion in a single month for the first time last November. *notes and coins in circulation **total money supply or ‘broad money’ excluding notes and coins in circulation. ***card payments, transfers and cheques.

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CASHING IN ON INNOVATION: WHY BRANDS SHOULD CONSIDER A MOVE INTO THE E-MONEY MARKET

funds internationally. These new innovators are working to expose the inefficiencies of the current banking system and bridge a gap in services for customers.

The truth is out and there’s no denying it – traditional banking is lagging behind as innovative e-money and payment businesses race ahead.

In fact, regulators are so positive that they are now in an active pursuit of innovation, running initiatives and working alongside businesses to develop new products and services.

Neopay’s 100% success rate over the past eight years in helping businesses achieve authorisation and compliancy, is testament to this new positive attitude. With the right advice and careful guidance, businesses who innovate can enter this market and forge a successful pathway.

This new breed of financial services is offering consumers better ways to pay – as secure as a bank transfer, yet much quicker, making finances easier to manage.

That’s not to say traditional banking has lost its importance – we will always need banking services, it’s just that the times are changing. With the number of e-money service providers doubling over the past two years, it’s becoming clear that the future of payments will be shaped by e-money and payment services.

There is a growing emphasis on ‘going digital’ and technology has touched upon virtually every element of daily life. Both the retail and media landscapes have been particularly susceptible to the innovations of change, yet it seems financial services aren’t as quick on the uptake.

Regulators, such as the United Kingdom’s Financial Conduct Authority (FCA), are taking a positive attitude which helps – recognising the value of innovation, how it can help create a more customer-centric approach and understanding what it could spell for the financial industry as a whole.

By exploiting the shortfalls of the current system, those who innovate have the opportunity to bring the financial services into the 21st century, with the help of regulators.

And in doing so, will fulfil the wants and needs of an evolving customer base.

Interestingly, it is the consumer brands that are marching forward and currently leading the way with e-money innovation. Brands are centering their focus on building loyalty while also creating a new generation of services for their customers.

Even travel companies are getting in on the act, creating apps on which consumers can purchase their travel passes which can then be inspected on their phone.

In addition, there are some truly forward-thinking innovators who are miles ahead – upping the bar and revolutionising the way we pay. One such innovator is Zwipe, a fingerprint payment card which is signaling the end of pin transactions. Another is Kerv, the world’s first contactless payment ring. These are enhancing user experience beyond the realms of any advancements we have seen previously.

For brands wanting to innovate, there is a wealth of opportunity for them to avail of.

We conducted some research, asking 2,000 adults from the UK about their frustration with the payment methods they are currently offered.

Ways to avoid fees and charges came out on top, with customers keen for more advice and clearer information with regards to this. Customers also cited having more responsive ways of tracking spending i.e. real-time balance updates, as one of their top priorities.

Ultimately, innovation should equate to improvements. With this new digital age, managing finances should become easier for customers.

Financial services need to work hard to ensure this is the case.

This, paired with the fact traditional banking is fraught with timeconsuming processes, means banks are losing out to services that both save time and cut costs for customers.

American coffeehouse chain, Starbucks, is already ahead having created a prepaid mobile app as a way to incentivise loyalty with regular deals and discounts. Customers are encouraged to join the Starbucks ‘club’ – loading money onto the app and paying for their coffee using this method.

For those forward-thinking brands who are jumping onboard the innovation train, it really is full steam ahead to a whole land of opportunity – untapped markets of customers frustrated by cumbersome banking.

It’s clear to see that a change is going to come – the future of payments rests in the hands of e-money and payment services. It’s time brands got in on the act and cashed in on innovation.

E-money innovators are driven by a consumer base who are fed up.

Traditional banks take days to credit accounts with cheque deposits, and consumers are faced with expensive fees when transferring

Similarly, Apple Pay is another innovative new service which allows Apple users to make contactless payments with their phones or via their Apple Watch, through near-field communication (NFC).

Scott Dawson, commercial director at Neopay, the market leading regulatory specialist in e-money and payments, discusses why he thinks the time is now for brands to dip their toes in the pool of financial services.

Consumers are frustrated with the current banking system. Scandal after scandal has befallen the industry, damaging the general public’s trust in the system.

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NEW KIDS ON THE BLOCK ARE SHAKING UP FINANCIAL TRANSACTIONS: ARE YOU READY TO TACKLE EVER-EVOLVING FRAUD? We know that criminals always look for the easiest targets when committing fraud. We also know that as the ‘new kids on the block’ in payments – including chip-enabled and contactless cards – become more popular with merchants and consumers, criminals move to weaker links, such as online fraud, which are perceived as providing the biggest fraud ‘rewards’.

I was at the centre of battling this problem the first time around in the early 2000s, working in UK banking when the UK and Europe moved to Chip-and-PIN. I witnessed the impact this change had on online fraud, and on the merchants who get hit hardest by not having advanced fraud protection systems. We’re seeing it happen again in the US – it was recently reported that online fraud has already increased 11% since Chip-andSignature cards were introduced in October.

So how can financial institutions embrace the ‘new kids’ in payments while reducing friction for their merchants and consumers, and protecting them from increased fraud attacks?

‘New kids’ shaking up financial transactions: Chip-and-Signature and contactless cards – what is the impact on the customer?

Criminals in fraud are always looking for the weakest link in banking and payments systems that can provide the quickest, easiest ‘rewards’ to them for stolen cash, goods, and money laundering potential. It’s already being reported that the US move to Chip-and-Signature has pushed up online fraud – new figures suggest that online fraud transactions will double by 2020.

I experienced the impact of payments changes in the UK while I worked in banking. It’s important for organisations to be tackling these challenges early by deploying new systems which can manage Card Not Present fraud – especially online, where customers can easily choose to move to an alternative provider or merchant if they’re having a bad customer experience.

A frictionless customer experience Similarly, we’re seeing contactless payments start to become the norm over cash, particularly in bigger cities – over 11 million contactless payments were made in March 2016. From working closely with banks and payment providers, I get first-hand knowledge that customers want a frictionless experience – they also want to feel protected from fraud.

This puts pressure on financial institutions to be providing a seamless, secure experience – customers want fast, efficient methods of payment and don’t want to be blocked when making a genuine transaction. Again, organisations need fraud systems that can interpret more complex aspects of customer behaviour, while reducing customer friction with a seamless experience.

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‘New kids’ in software systems: advanced fraud management needed Implementing additional security steps – such as mobile authentication or 3-D Secure – can help limit fraud exposure, but at the cost of added friction to the consumer. On top of this, criminals quickly find ways to work around these extra controls – it’s really tough to stay ahead.

What I’ve learnt from over 20 years battling fraud is that financial institutions need to keep one step ahead by understanding every individual customer – protecting them from fraud, while providing a frictionless experience. It’s no longer enough to rely on pattern-matching known fraud types, or writing business rules based on broad generalisations about human behaviour to block fraud – this is inaccurate and blocks too many genuine customers.

Instead, financial institutions need sophisticated machine learning systems which understand behaviour from multiple channels and devices.

Sophisticated machine learning systems It’s one of the main reasons that I moved to Featurespace, who have a totally unique way of solving this problem with a machine learning engine – enabling organisations to balance robust fraud checks with a frictionless customer experience. By viewing events in context and by building a deep understanding of every single customer, monitoring every event and transaction taking place in real-time and from multiple channels, fraud attacks stand out and genuine customers are easy to recognise.

It’s an approach which we’re implementing for TSYS, the largest payment processor in the United States. TSYS wanted to strengthen its position in faster payments using machine learning to provide clients with actionable insights in real-time.

Featurespace’s ARIC adaptive behavioural analytics engine will protect TSYS’ clients from fraud while providing a seamless customer experience.

Staying one step ahead It is possible to stay ahead of the criminals – financial institutions need to learn from the experience of Europe and take action now to reduce fraud while providing frictionless customer experience and protecting revenue. New methods of payments make customers lives easier, and generate more revenue for the financial institutions providing the service. It’s up to organisations to embrace new fraud systems which give their payment methods the vital competitive edge in protecting their customers and their reputations.

Luke Reynolds, Fraud Director, Featurespace Luke is responsible for Featurespace’s fraud clients in Financial Services and Insurance. Prior to joining Featurespace, Luke worked in the Financial Services Sector for over 20 years. He held a position as Callcredit’s Commercial Director of Fraud and ID for a year, and prior to this he served in a variety of roles in Lloyds Banking Group (Head of Retail Audit, Head of Fraud, and Head of Group Security and Investigation). Before joining Lloyds Banking Group, Luke held fraud prevention roles at the UK Card Association (formerly APACS) and NatWest.

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THREE NEW KIDS DISRUPTING THE TECHNOLOGY BLOCK ‘Disruption’ is a pretty well-worn term these days, the tech blog-favoured buzzword describing the latest and greatest startup that’s set out to completely transform the way we work, rest or play.

When it comes to using disruptive technology to save cold hard cash, a growing stream of enterprising tech firms have moved away from the demands of consumers and focused squarely at servicing the UK’s backbone; SMEs. Smart solutions are coming to the market in ever increasing numbers, targeting costly pain points, some of which have existed for decades, that SMEs face when establishing, scaling and sustaining their businesses. These solutions are offering ways for these businesses to operate more cheaply and efficiently than ever before.

Legal services, accountancy and foreign exchange are a few key areas feeling the heat of disruptive startups. A growing throng of young firms are challenging the way these industries operate and enabling UK firms to access these services in an entirely new way. Here’s a closer look at how technology is shifting the models within these traditional industries and a few examples of the new breed of tech startups fronting the disruption.

Legal Services With an estimated value of over £29bn, according to IRN Research, the UK’s highly-profitable legal services sector makes for an attractive target for innovative firms looking to grab some market share. Providing services that are required, if not always wholly desired, by the majority of new and seasoned UK businesses, the legal industry has largely operated in the same way for decades, charging pedantic, and often eye watering, hourly fees to long standing rosters of clients.

Things are, however, changing. A recent report from top tier City firm, Allen & Overy predicts the global demand for non-traditional legal services is to soar over the next five years. In particular, the demand for online legal services are

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forecast to rise as much as 37%.

As is the case within many industries, technology is driving a shift in expectation and in behaviour. SMEs looking to service their legal requirements without the need for a remortgage are now able to access a whole raft of services able to offer bespoke service at a reduced cost.

Lexoo is one example, an online platform where businesses can compare and receive quotes from high quality, pre-screened solicitors and cut traditional, high street provider costs by up to half.

Accountancy Accountancy is another area that sends shivers down the spine of many small and medium sized enterprises. Essential, yet a service that when used too frequently within a business, has the potential to haemorrhage company profits.

Numerous solutions are coming to market now which are changing the model and in many cases, enabling small businesses to do far more of their accountancy work in house saving endless billable accountancy hours.

Leveraging the power of cloud based processing and advancements in mobile technology, Receipt Bank as an example, works to reduce manual input when paying suppliers and billing clients. Using a mobile phone, users snap pictures of receipts and invoices. Relevant information from each document is extracted and stored securely or transferred directly to accountancy software Foreign Exchange For many businesses, both now and historically, a trusted relationship with a bank can represent a fundamental part of their business. For SMEs dealing overseas, up until recently, most wouldn’t question having their banks process foreign currencies on their behalf.

Technology however is starting a rebellion in this space. Rather than turning to their banks who have been publicly raked over the coals for levying exorbitant (and often hard to detect) charges to exchange foreign currency, small business, such as Charlie Bears - a British manufacturer and prolific exporter of collectable teddy bears - are now taking advantage of online solutions able to exchange currencies direct and at a fraction of the cost.

Using these types of new and disruptive technology-based solutions, businesses are saving a whopping 4+% on every pound

exchanged. To put this into context, as a result of running its forex operations through SettlePay, Charlie Bears saved over £100,000 on the purchasing of US dollars alone. They’re now looking at the platform to buy Australian dollars - a process they’ve calculated will save an additional £90,000.

Starting, scaling and sustaining a profitable business can be challenging, but with the new breed of disruptive enterprises cleverly leveraging advances in both technology hardware and software, businesses are, more than ever, able to take advantage of dramatically shifting business models in many of the most traditional (and expensive) professions.

Jack Horton, CEO, Whites Group

WHAT DOES BLOCKCHAIN MEAN FOR THE PAYMENTS INDUSTRY? Having already gained the attention of many major banking and technology organisations, the potential of blockchain – also known as ‘distributed ledger technologies’ - is now also being investigated in the payments space.

Blockchain has traditionally attracted mixed opinions, due to its early association with bitcoin, the cryptocurrency adopted by techies around the world, and also its use by anonymous markets on the web.

These associations have led to concerns around its credibility and durability.

This innovative technology does, however, have the potential to alter the payments landscape, as some say it can make transactions safer, cheaper to process and faster. In this blog, we gather expert views from EPC’s latest General Assembly meeting and summarise the four key benefits blockchain could bring to the payments market: • Cost reduction While payment systems are undergoing a certain level of technological transformation, there are still a number of intermediary actors that contribute to cost. Blockchain’s distributed process function has the potential to reduce costs considerably.

• Quicker transaction time As people become more adept at technology, they expect financial services to keep pace. Currently, there is room for improvement, especially with the processing time. Blockchain has the

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potential to help the payments market speed up the processing time which is often delayed by third parties, and therefore become more aligned with customer expectations.

• Authentication and security As technology advances, it’s vital that security and authentication are constantly improved to protect information and customers. A benefit of blockchain is its ability to protect data and maximise security. Additionally, it can confirm transactions and prove ownership, which provides security and reduces reliance on third parties.

• Ability to create new products and channels The financial services and banking industries have, at times, come under fire for their lack of innovation in recent years.

There is now a growing expectation that blockchain could help answer this need by presenting a brand new approach for payment providers.

Although the technology has started to win supporters, it does bring with it a few concerns that need to be addressed before it can be crowned a game changer; here are five of them: • Scalability Due to its current small scale network, there is uncertainty around whether blockchain technology can successfully be applied to handle larger transactions. For example, in the EU, above 100 billion electronic payment transactions are processed every year – whether blockchain has the scope and scalability to cope with these large volumes is unknown.

• Hidden costs Upfront, blockchain appears to be a nimble and cost effective solution, but on a larger scale, it could incur further associated costs. For instance, the transaction’s verifications for blockchain are very energy-intensive. On top of that, new intermediaries appear as it is developed.

• Privacy Payment Service Providers (PSPs) are highly bound to Know Your Customers (KYC) requirements. Many see blockchain as a way to pool the KYC fulfilments among all PSPs: one PSP could fulfil the KYC requirements for a given customer, and trace them in the distributed ledger. Other PSPs wouldn’t, therefore, also have to fulfil them. However, this raises several concerns proving that the right balance between privacy and transparency still needs to be found.

• Safety There is still concern that methods such as blockchain aren’t completely safe. As an example, many security issues have surfaced at the fringes of bitcoin as a system, such as in relation to wallets and exchanges. These safety and security needs must be properly addressed before integrating blockchain into payment systems.

• Can it be standardised and regulated?

Without cooperation among PSPs and support by regulators, there cannot be broad usage of interoperable blockchains. In order for them to be successful and applicable to payments on a large scale, regulators will need to weigh in on the status, requirements and standards that should be used.

All benefits and concerns considered, blockchain appears to be more than a passing trend. Granted, there is a question of feasibility and as the payments industry continues to improve its systems (e.g. through the introduction of instant payments) and enhance its technology, further debate is required to determine whether it could be widely adopted in the retail payments space.

Javier Santamaría, The Chair of the European Payments Council (EPC)

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ADVERSE CURRENCY FLUCTUATIONS AFFECT MORE THAN HALF OF UK TRAVEL COMPANIES A survey of UK-based travel companies has revealed that more than half (51%) believe adverse currency fluctuations are affecting their business in one way or another.

More than half (54%) of the firms polled by Equiniti International Payments stated that currency fluctuations as the most frequent problem by far when processing global supplier payments, with a fifth (20%) citing the heavy administration involved in the processing of bulk payments as their second biggest pain point.

Andy Brown, Managing Director of Equiniti International Payments, commented: “As global market volatility continues to differ from region to region, currency fluctuations will remain a major hurdle throughout the travel sector.

“Travel businesses have typically turned to forward contracts to ease potential risks associated with currency fluctuations as these arrangements have protected them by locking in a specific rate agreed by both parties. However, this solution can be inaccurate, complicated and sometimes a costly process as they are based on the currency traders experience and knowledge of the predicted state of the two currencies.

“With this in mind - and even though currency traders are right more often than not - the risks of an unexpected event could result in the spot price being more beneficial at the actual time of the deal as opposed to the forward rate booked sometime earlier.”

The period of time between when a customer purchases a holiday and the date they travel can represent a substantial risk for travel companies.

Even a small exchange rate shift can have a big effect on margins and these risks are realised throughout the sector, with nearly half (49%) of travel companies surveyed viewing this as a concern when displaying prices in local currencies.

Andy Brown continues: “In order to not lose potential customers, travel businesses must make it as easy and

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efficient as possible for people to pay in their local currency, without creating undue exposure to currency fluctuations and risk potential cost implications.

“Recent innovations in the payments sector now allow travel companies to guarantee rates in multiple currencies, with travel companies able to easily, and automatically, source the value of international purchases in relation to its supplier. These technologies remove the need for forward contracts and provides organisations with a tool that can limit the risks on every sale in real-time, leading to greater speed and security.”

Equiniti International Payments offers a Multi-Currency Pricing with Guaranteed Rates (MCP+) solution, which allows travel businesses to sell to their customers in local currency and negates foreign currency risk. MCP+ ensures that an exchange rate is locked in when a customer makes a purchase and is guaranteed through to settlement to suppliers; ensuring that profit margins are locked in for travel companies and agencies selling internationally.

certainly understand the concerns being expressed in the payments and e-money space regarding the result of the recent EU referendum. The UK’s decision to leave the EU has obviously caused a sense of instability. We’ve considered how we can remove the uncertainty for businesses looking to set up within the EU market and that is why we have launched our ‘Brexit Insurance’.”

Craig goes further to state that, after the initial shock of the Brexit vote subsides, to all intents and purposes it will be business as usual for the at least the next few years.

“Following that, it is likely that a trade agreement will be reached which will enable business as usual to continue across the EU and UK under one licence. If an agreement can’t be reached, however, there will still need to be transitioning arrangements for firms who currently operate across the EU and UK to ensure that existing consumers of ‘passported’ financial service products are not put at risk.

‘BREXIT INSURANCE’ TO CALM FEARS FOR UK’S E-MONEY FIRMS

“Although the UK has always been the favourite location for payments and emoney firms looking to enter the EU, we have already seen an increase in the number of firms asking about licensing in other EU states. We want to reassure firms that, wherever they decide to base themselves and whatever the result of this political turmoil, the requirements to gain a licence will remain the same across the UK and the EU.

New entrants and those expanding in e-money and payments sectors will still choose to locate in the UK despite last week’s Brexit vote, according to one of the UK and Europe’s leading regulatory specialists.

‘If the worst happens, and firms do require additional approvals, this process will be straightforward for firms within the market. Our ‘Brexit Insurance’ will also ensure that the impact to firms of this worst case scenario will be minimal.”

Neopay, which has helped more international payments firms set up in Europe than any other specialist consultancy, is helping these businesses with ‘Brexit Insurance’ - a scheme designed to remove the uncertainty for payments and e-money firms establishing themselves in Europe.

“No payments company wants to ignore Europe, the biggest single market in the world, or the UK as one of the world’s largest economies. We hope that the both the European and UK governments will act quickly to clarify what the future will hold for the ‘passporting’ of financial services, but in the meantime we will do everything we can to support our clients by removing the uncertainty faced by firms entering the European market.”

Based on research conducted by Equiniti International Payments in February 2016, with 30 of the UK’s leading ABTAregistered travel companies.

The EU remains the largest single market in the world, and no other single market has a better environment for firms entering the fast growing e-money sector.

However, uncertainty over future licensing arrangements, and in particular the continued ability of firms to operate across the whole EU and UK under one licence, is causing concerns.

Craig James, CEO at Neopay, says: “We

Equiniti International Payments offers a Multi-Currency Pricing with Guaranteed Rates (MCP+) solution, which allows travel businesses to sell to their customers in local currency and negates foreign currency risk. MCP+ ensures that an exchange rate is locked in when a customer makes a purchase and is

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guaranteed through to settlement to suppliers; ensuring that profit margins are locked in for travel companies and agencies selling internationally.

Based on research conducted by Equiniti International Payments in February 2016, with 30 of the UK’s leading ABTAregistered travel companies.

ACQUISITION OF US CARRIER BILLING SERVICE BILLTOMOBILE • App stores and operators gain Bango Boost technology to accelerate End User Spend growth in US • Acquisition adds $80m (£55m) annual US-based End User Spend to the Bango Payment Platform Bango, the mobile payments company, announced that it has acquired BilltoMobile, the US-based carrier billing services of Danal Inc. for an initial consideration of $3.5m (£2.4m), comprising $3m (£2.15m) in cash, to be paid immediately, and $500,000 (£345,000) in Bango shares at an issue price of 60 pence. Deferred consideration, which is expected to be $35,000 (£25,000), may become payable in cash in Q1 2017 depending on the performance of one revenue stream. In addition, Bango will pay certain fees in connection with the acquisition which are expected to be $215,000 (£150,000) and relate to the migration of services from Danal. BilltoMobile services processed approximately $80m (£55m) of End User Spend (EUS) in 2015, making it the largest carrier billed payments processor in the US by volume.

The acquisition enables app stores and major US-based merchants to take full advantage of Bango Boost technology in the high value North American market.

BilltoMobile is currently the only operator service integrated into all four major US Mobile Network Operators (MNOs), covering over 300 million connections.

It processes carrier billing payments for app stores and major merchants including Google Play and Microsoft.

In the past year, MNOs that have adopted Bango Boost technology have gained between 20% and 70% further growth in revenue. Partners previously using BilltoMobile services now have the opportunity to apply this Bango technology to substantially grow their carrier billing revenues in the US.

Bango is the leading supplier of carrier billing for the global app stores, and has achieved significant success growing revenues for its partners worldwide using unique Bango technology. EUS grew by more than 100% over 2015 and is expected to grow more than 100% over 2016, before the added EUS from this acquisition. The migration of BilltoMobile services to the Bango Payment Platform, which is highly scalable and able to support at least 15x current EUS levels, will add substantial additional EUS, with no additional operational cost after migration.

The fees generated from the BilltoMobile services expressed as a percentage of EUS are similar to Bango’s current blended margin on EUS. Customers will be supported by Bango staff in the US and other locations as required. No staff, equipment or premises are being acquired.

The annual loss attributed by Danal to the assets being acquired is approximately $850,000 (£590,000), however as Bango management expects to operate the BilltoMobile services within the current Bango operational cost base and platform, the acquisition is expected to make a significant contribution to the performance of Bango in 2016 and beyond.

Danal and Bango expect to continue collaborating in the future, with a view to enabling Bango partners to benefit from Danal’s world leading position in mobile identity solutions.

Application will be made to the London Stock Exchange plc for 586,095 Ordinary Shares of 20 pence each in the capital of Bango to be admitted to trading on AIM. It is expected that admission to AIM will become effective and that dealings will commence on 13 May 2015.

The assets acquired by Bango include the BilltoMobile service offerings with associated contracts and intellectual property licenses. The services will be transparently and securely migrated from existing datacenters over to the Bango Payment Platform and Bango datacenters.

Key partners have already agreed to assignment of their contracts from Danal to Bango.

Commenting on the announcement, Bango CEO Ray Anderson said: “Bango has worked with BilltoMobile as the leading provider of carrier billing in the US for five years. It is exciting to combine powerful Bango technology with BilltoMobile’s high quality service offerings for US merchants and its trusted operator relationships. This development creates a significant additional growth opportunity for Bango and its app store partners.”

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HOW TO MAKE THE MOST OF CHALLENGER PAYMENTS PLATFORMS John Phillips, VP EMEA at Zuora, explores the world of alternative payments, explaining how to determine which platform will truly work for your subscription business Credit cards have come to be a much-loved staple of the recurring payments world. But with more than 200 alternative payment methods available for businesses, there are now more options available than ever before.

In fact, in the past year alternative payment methods officially overtook traditional card transactions for the first time, with new forms of payment accounting for 51% of the global ecommerce sector’s turnover. The rise of alternative payments including mobile and eWallets has not just shaken up the world of finance, but posed an exciting opportunity for businesses to create a seamless user-experience for customers throughout the purchasing process. But the big question remains: with so many contrasting payments methods available, how do you know which platforms to focus your efforts on?

PayPal is just the beginning Fifty years ago, most people used cash to buy smallerticket products and services and checks for bigger-ticket items. In fact, as late as the 1980s, it was still common practice to go to the bank to get “Traveller’s Checks” for summer holidays, predating of course the advent of the debit card.

Since electronic card payments were introduced, their popularity has continued to grow. In 2012, over 32% of worldwide consumer retail spending was card-based, and by 2023, it’s estimated that global payments revenues will reach $2.1 trillion.

To achieve that type of growth it’s obvious that we’re talking way beyond the industry titans — Visa and MasterCard. This trend in electronic payments has caused leading provider PayPal to process a record $2.54 billion in the last quarter alone, blazing the way for the likes of Klarna and GoCardless to raise funding and rival the traditional market leaders.

But just because there are 200 ways to pay online across the world, it doesn’t mean that the solution to futureproof your subscription business is to provide dozens of options to consumers. Enabling them with a few challenger methods to complement the pre-existing formats allows businesses to target early adopters whilst retaining recurring revenue.

The key is seeing beyond the hype surrounding the latest payments start-up and instead question your new provider’s lead-time and determine the degree of automation that is needed for your business.

Relationships worth working for Figuring out which payment strategy fits your business is key to ensuring that all of these new early-adopter customers that you’ve acquired become retained business. For example, if your existing payment method isn’t effective or is too

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expensive, it may be difficult to migrate existing customers to a new payment method, which can put a kink in the subscriber relationship you’ve built with them.

The most salient factor to keep in mind is that switching suppliers can cause a drop off in users. In the event that you do switch payment methods, you may need to ask your subscribers to resend their account details, causing a possible churn risk, harming the user experience for customers.

Nailing down the right payment strategy is not only critical to doing business globally, but it is also one of the easiest things you can do to grow your business. That’s because as the world rapidly becomes more comfortable with online commerce, the easier it is to boost your revenues. And if you choose a strategy that fits both your finance and operations models, you’ll also lower your costs, too.

The big question to ask yourself before committing to a payment method is around accessibility: do your customers require immediate delivery or fulfilment on a product or service? If the answer’s yes, then the one method to steer clear of is Direct Debit. Taking approximately five days to clear and set up, Direct Debit, whilst reliable lacks the immediacy to give consumers exactly what they want, when they want it.

Let’s get down to business: B2C or B2B Now that we’ve seen what an important role your payment strategy is to your business, we should look at how your business model —B2C or B2B — and your relationships with your customers from a payment standpoint will impact your payment strategy decisions.

For B2Bbusinesses, many customers will have a procurement process you’ll need to navigate so you have to consider how you engage with the purchasing department and what that means from the payment processing side. Another consideration for B2B is that the person subscribing to the service is generally not the person writing the check, so you’ll need to actually interact with two different parties within the organization. How do you make sure both those parties are aligned, that you are fully engaged with them, and that you’re receiving payments?

Whether you are a B2C or B2B business, there are two main things to think about with payment strategies: Offering a seamless customer experience that makes your customer feel like they’re in control of the process and makes it easy for them to pay you; and Maintaining business effectiveness by making sure that your back-end office is efficient, effective and actually achieving its objectives.

Taking the above points into consideration will ensure that you’re actually adopting the right payment method for your business, you’re giving yourself the best chance to take advantage of the benefits inherent in the booming subscription economy. With the process, you can take a customer’s payment information up front, but then give them immediate access or a free trial for your service and charge them later. It’s this type of agility and a “try before you buy” experience that customers crave, and by offering them the right payment method strategy, you’re building a customer for life.

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MINE THAT DATA TO KEEP THAT CUSTOMER During the second half of 2015, Collinson Group collaborated with Future Agenda, the open Foresight programme, to run 12 workshops in 8 countries involving 110 industry leaders and loyalty experts to debate what the future of loyalty holds. In our work with Future Agenda we specifically questioned the role that big data would have on the future of customer loyalty. Below are some key insights we gleaned.

The fervour for big data analytics sweeping through retail bank boardrooms at a global scale is intensifying as corporate strategy prioritises a shift towards true real-time intelligence. This is a marked departure from the ‘batch and queue’ approaches mandated by old legacy IT systems, and will accelerate over the next ten years.

The ability for financial organisations to make the most of data, monitoring and tweaking performance as they go will have a major impact on all areas of business, from the supply chain to marketing. However, the big retail banking institutions sit comfortably behind the fintech start-up challengers whose business models are founded in the cloud, and whose customers are willing to place their trust in this new approach.

Real-time data has a big role to play in engaging with consumers, as it enables organisations to understand their customers’ behaviours and attitudes towards their services, and by extension positively influence customer loyalty.

High street banks are starting to recognise the need to get better at segmenting consumers into more narrowly-defined groups, and realtime data and the contextual relevance of engagement have vital roles to play here.

We will see an increasing number of financial brands promote their ability to penetrate social groups to provide products and services that meet the demand of these newly identified communities, mining large swathes of customer data in order to do so. In marketing terms, this is being referred to as identifying the ‘composite customer’, whereby brands cater to their customers based on shared interests and their involvement in groups and communities. This moves away from the traditional approach that segments customers by income, age and gender demographics that are becoming less and less effective.

Germany’s Fidor bank is following this approach in financial services. When it launched in the UK in late 2015, it focused on social media to build its community announcing the interest it paid on savings would increase in line with likes on its Facebook page. Starting from a

0.25 percent base, the bank announced every 2,000 likes on its Facebook page would lead to a 0.05 percent increase in the rate, up to a maximum of 0.5 percent. Furthermore, the bank also successfully runs a community forum where it shares new product ideas with consumers and rewards them for getting involved. Social media serves as a platform for conversation with the banks’ customers and user base, and helps the boardroom set its future priorities.

Companies are slowly unearthing deeper insight which they can then deploy on their social media channels. In financial services, companies are making sure that their customers can login and use them securely, so that they become more effective customer service channels, while also a tool to track satisfaction levels. Several banks, such as South Africa’s First National Bank, and India’s ICICI Bank have developed applications where they can reach out to customers on the online platforms their customers choose to use.

For financial services companies and credit card providers the process should be relatively straightforward and manageable, given the transactional information to which they have access. However, translating this into a relevant and personal experience for consumers in order to drive emotional engagement will remain the challenge.

Insights gained from interactions through social media channels will help to improve brands’ understanding of customer behaviour, which ultimately should result in fewer consumers switching their bank providers. If shared experiences are what matter most to the customers of the future, brands will need to understand not only the individual customer, but the interests of their nearest and dearest too.

Final thoughts Consumers will be members of different communities using a variety of digital personas.

Building a picture of this composite customer is only possible with strong data analytics capabilities.

Improving customer segmentation through more timely and robust data analytics will require significant investment in the short-term, but it will pay dividends in the not too distant future.

The financial services brands that are able to crunch this data at an individual level stand to gain considerably as cross-selling products and valuable additions will boost their revenues. Mining the data and comprehensive analysis of these online behaviours will add relevance to loyalty initiatives and help banks retain their profitable customers— especially important as retention marketing costs half as much as acquiring new customers.

Christopher Evans, Director at Collinson Group

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TOP SOLUTIONS TO SOLVE PAYMENT PROBLEMS When it comes to ways to pay, businesses and consumers can take advantage of an ever-increasing number of payment options. From traditional cash handling to mobile-to-mobile payments, there are now more avenues for transferring money than ever before.

However businesses are still struggling to get funds into their account from one person to another. While cash may be preferable for some, the pace at which it reaches accounts can be varied, and often too lengthy for businesses that operate in a demanding market – competing with next day delivery and 24 hour stores.

Paym, the easy way to get paid using just a mobile number, has provided its top tips for making sure payment solutions are easier for businesses receiving them, and are convenient for customers.

1. Outline your preferences clearly Explain your preferred payment methods clearly either on websites or business cards. If you only want to use Paypal or only take cash due to lack of a card machine this needs to obvious to your customers early on. This will not only help companies to avoid losing business, it will prevent them from wasting time negotiating alternative payment methods.

2. Get payment details in writing If your business is not able to handle immediate payments, then ensuring that payment details are signed in writing is an important step in making sure money is handled easily and quickly. By setting deadlines that both parties can agree to meet, and having a written contract

regarding payments, businesses can give themselves a safety net of knowing they have written confirmation of payment details.

3. Stay on top of technology Consumer technology is expanding rapidly, and it can be a serious perk for businesses if they’re prepared with the latest technology. With fewer people carrying cash, small businesses can seriously benefit from having alternative payment methods, such as card machines or ability to take mobile payments, such as Paym, which lets you get paid straight to your bank account using just a mobile number. With Paym, your customers make payments through their online/mobile banking or payments app, selecting your mobile number from their mobile phone contacts or by manually entering the mobile phone number. The customer is presented with your business account name – they then just need to press send and the payment is sent straight away.

4. Process payments quickly Small businesses will know that when it comes to cash payments, getting to the bank each day is crucial to ensure a consistent cashflow. Chasing invoices from online payments is also most effective when done quickly after purchase, and stops receipts being forgotten about, in some cases – completely. If you’re not using a method that allows money to land in your account immediately, ensure you’re keeping on top of your accounts.

5. Set automatic reminders With regulars being a hugely reliable users or customers, it’s important that approaching them for money is done tactfully, but efficiently. By sending reminders, most likely automatically to save time, you can prevent customers and consumers forgetting about the service you provide, and encourage them to pay on time, if not early.

Neil Aitken, Senior Communications Officer/ Spokesman at Paym

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SETTLING IN TO HOMELY.AE

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CYBERSECURITY IN M&A: TAKE CARE WITH DUE DILIGENCE STEVENS & BOLTON LLP

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ANTI-BRIBERY AS COMPETITIVE ADVANTAGE EVERSHEDS

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SETTLING IN TO HOMELY.AE Homely.ae is not like any other property portal.

Created by a team that not only understands the needs of ordinary people and the real estate industry but also the online technology space.

They have developed their portal to serve our users – whether that is someone looking for their new home, or the real estate broker who wants to stand out from the crowd and serve their customers better.

Mohammed Ali Syed, Co-Founder & CTO Please tell me a bit about your career background, have you always wanted to be the head of an internet company? How did you get in to this line of work?

Been working in IT industry for over 16 years with expertise in globally distributed systems and Cloud technologies. Recently worked in London as Head of Cloud Solutions for Europe for one of the top IT Consulting firms in the world.

Previously been Technology Director for Enterprise Video streaming company in UK and CTO for propertyfinder.ae.

Internet technologies are like my mother tongue!

I am very hands on person and love technical challenges. Most of my ventures have been out of technical challenges that I would take up. I am founder of couple of other technology companies but homely.ae being the only consumer facing one.

Please tell me the key business drivers for the creation of homely.ae--why was it initially launched?

Just within the top level management team we have over 15 years between us in the real estate portal industry and know exactly what is expected by our end users as well as real estate agencies.

I personally also have extensive insight into the technology arena of the property portals in UAE, specially which was gained during my time with propertyfinder.ae. I designed and migrated it to Cloud and made it the best portal in the region.

But that was over 3 years ago! Since then, Cloud technologies have evolved much further and there were many things that I could do, technically to enhance the performance of the business while adopting new technologies. So I thought why not create a new portal? This was purely out of curiosity of this technical challenge. And now, it is a reality, and I can confidently say that homely. ae is much ahead in its technical achievements by utilising smart Cloud architecture.

Secondly, we wanted homely.ae to be the voice of the agents. Unlike other portals, our focus is providing fair solutions and products for the agents. We listen to them very closely and we are agile enough to be able to very quickly adopt to the feedback we get from our clients. This is in terms of technology, userbility and more importantly the return on investment.

Please tell me who were the key investors at launch and how much has been raised to date?

Over the last 18 months homely.ae has been self-

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funded by the 3 co-founders. However, we have recently closed an initial Seed round of Angel Investment which is from UK based investment house which manages tens of millions dollars of assets specializing in several industry sectors including technology, so they bring a wealth of relevant industry knowledge and contacts.

What are some of the site›s key metrics in terms of listings, visits and user generated content (engagement) We have managed to close around 60 clients over since our official beta launch earlier this year and now growing steadily. Our focus is not on quantity but rather quality of the content. We are the only portal in UAE who publish verified only listings. This process involves manual and to some extent automated sanity checks on the content of the listing. Our engagement-to-visit ratio is just over 10% and we are consistently growing revenue at around 20% month on month and traffic at around 23% month on month. We aim to grow the homely team further this year to help us sustain if not increase these numbers.

How mature is the property portal space in UAE? What are the market›s key features? What changes do you predict in the next 2-3 years The property portal market is maturing and progressing. Up until recent times the market has been dominated by a handful of portals which in turn has taken advantage of real estate agencies, developers and brokers but has the market is now evolving and more options are becoming available to generate leads, consumers, brokerages, individual agents and property owners all seek better and more valued options and services than they have been getting. This has opened up opportunities to the likes of homely.ae. As the real estate market itself becomes more regulated, developed and mature the property portals will have to be more consumer and customer centric by leveraging the latest technology and product offerings.

Consumers and the real estate industry are becoming better informed and more discerning and tired of being forced into a corner with limited choice, poor quality and overpaying.

What have been some of the company›s key challenges along the way since launch last year and how were they solved?

Like other start up businesses getting homely. ae off the ground required a lot of hard work, perseverance and dedication. Some of the challenges included establishing our brand, ensuring that our products and services were exactly as required by the market and kick starting our sales and marketing programs. We have overcome these challenges by having a clear strategy and business plan from the onset, the 3 Founders being completely in sync and not losing focus. We have also hired very skilled and professional help so the overall team we have created has been a key factor. We also created an advisory board consisting of a group of successful entrepreneurs around the world who provide guidance, mentoring and networking opportunities to enable the homely vision to be achieved.

What do you see as Homely.ae›s key differentiator in the market?

We have many USP›s but the main being is that homely is the only current property portal in this market providing «Amenity Search». Not just searching by old fashioned location based only, but also you can search by lifestyle choices. e.g. properties near a specific school, a metro station or your office location etc. Additionally, we are the «verified listing only» property portal and we also provide fully tracked phone calls to the agents in their reporting, so they can use this data to improve their service.

Is Homely.ae planning to expand? If so where and why---what about internationally?

Of course, we already have a growth strategy in place and business plan to expand both in terms of international footprint and our offerings.

Unlike most of the other portals in the UAE who tend to only focus on the surrounding markets, we are looking further afield in terms of international expansion and at larger markets.

This is something already in progress. In terms of product and service offerings, we are also on course in terms of broadening our portfolio. We will develop our core technology in house and also enter core markets ourselves.

Please tell me what is your vision for Homely. ae? Where would you like to be in 2-3 years time? What technology or functionality would you like to see the company adopt?

Homely.ae is already very advanced on technology adoption. We are currently in the process of developing Data Warehouse with Data science implemented, which will give us valuable insight in to the user›s behaviour and choices. We are also utilising Machine Learning in predicting an individual›s journey on the website and hence, pro-actively steer them to the relevant content.

This is again a first in the property portal market, not just in the UAE but around the world too.

Please name some of the company›s key achievements or milestones you are most proud of.

We have already achieved key milestones including: · Launching homely.ae which has the latest and most advanced technology platform - this is unrivaled not just in the market but worldwide. · Only verified only portal in the market · Achieved initial client sign ups and on track for all set KPI›s and Targets · Secured our 1st round of seed funding · Work underway to expand internationally as well as our offerings · We have been contacted by established i nternational brands to do commercial partnerships · Is there anything else you›d like to add about the company or the market? Will you be raising any more capital soon or adding any new products or services?

We will definitely be expanding our product and service offerings. We will also raise additional capital as and when needed. Our initial investor is ready and prepared to do this and we also have a number of ready investors to inject capital as they believe in our vision, the team, the opportunity and our growth plans.

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CYBERSECURITY IN M&A: TAKE CARE WITH DUE DILIGENCE The prospect of a cyber-attack is scary business. So scary in fact, that the government ranks it as a Tier 1 threat; alongside terrorism, war and natural disasters. The constant flow of headline news about cyber-attacks, if nothing else, serves as a stark reminder that the value of any business is fragile and can be significantly compromised by data infringement. It has recently emerged that TalkTalk’s pre-tax profits more than halved in the 12 months to 31 March 2016 due to exceptional items of £83m resulting from the well-publicised cyber-attack it suffered in October 2015. Along with financial losses, a breach of cyber-security can also significantly damage a business’ reputation (TalkTalk lost 101,000 customers in the third quarter of last year) and can put businesses in the firing line for regulatory sanctions.

But in M&A due diligence (DD), are buyers being diligent enough about this fast-evolving “super-risk”?

Cyber-threats come from a wide variety of sources and for buyers, undertaking a comprehensive due diligence process, tailored to this specific high-risk category is key.

Due diligence is key The aim of DD is to really get to know the business; unearthing issues which could give rise to potential liabilities or otherwise undermine the value of the target. While legal DD questionnaires typically contain specific enquiries relating to data protection and computer systems, these questions are not specifically designed around cyber-security and are unlikely to elicit the targeted responses and information required to properly evaluate such a unique and multi-faceted category of risk.

Buyers must bring cyber-security to the table early on in the M&A process. They should appoint the right team (internal and/or external depending on the nature of the target and the types of information it holds) to ask and respond to a bespoke set of well-thought-out cyber-security DD enquiries.

These might include questions such as though included in the box-out.

providers/ advanced technologies such as biometric profiling? Does, or should, the incident response procedure provide for complete data lockdown internally in response to significant threats?

• Commercial – what commercial contracts does the business have in place with third parties? What level of control, privacy and cyber-security is applied to data shared?

Are the contractual responsibilities for preventing and dealing with cyber-attacks clear and sufficient? Are data security risks in the target’s commercial contracts mitigated through the use of indemnities, breach notification and cooperation procedures and/or insurance coverage? Would the disruption caused by a cyber-infringement prevent the target from fulfilling its express or implied contractual obligations to any third party (such as an obligation to maintain adequate and functioning IT services)? Do the contracts include force majeure clauses which specifically contemplate a failure to perform as a consequence of a cyber-security infringement?

• Internal – does the business protect data through employment contracts and training (from top down)?

Are the policies and procedures implemented effectively and consistently across departments and regions? Is data security heightened at ‘pinch-points’ such as during employee notice periods and is proprietary data adequately protected when employees leave? What internal network security measures are in place (for example, website monitoring and blocking, restriction of external data devices such as USB sticks which could introduce viruses / malware)?

• Advisers – what standards of security are applied to data shared between the business and its lawyers, financial advisers, accountants, financial PR etc.? Do they have adequate systems and policies in place?

Buyers can gauge a lot from the standard of the responses received from the sellers. Whilst the inability of a management team to accurately and effectively summarise their cyber-security processes and procedures will not necessarily mean that there are inadequate procedures in place, it will be an indication to buyers that management are not ‘on board’ with the concept of cyber-security as a significant risk. This issue must be a board-room focus, and if it is not, buyers are likely, at the very least, to require specific warranties and/or indemnities in the sale and purchase agreement to help mitigate the risk of any future cyber-infringement costs.

Sellers should be well prepared to respond to enquiries like these and be able to present a sophisticated response, giving cyber-security issues more than just ideological lip-service, highlighting the operational reality of a (hopefully) mature risk management strategy.

Sellers are under no obligation to reveal details of past, current or likely future cyber-infringements, however, if they fail to fully disclose such information against any relevant warranty statements in the sale and purchase agreement, they run the risk of a potentially extortionate claim post completion should details of such infringements emerge.

GO BEYOND TECHNOLOGY

SHORT-CUTS WILL BE COSTLY

Buyers’ further DD enquiries should probe deeper around the key types of information held and used in the target business and (drawing also on the wider set of replies to commercial enquiries) around contracts and business relationships. Only then will it be possible to start quantifying the cyber-risks.

It can help to profile the risk into the following categories and to remember that cyber-governance is not just about technology:

Formulating a comprehensive cyber-risk profile is by no means an easy task, but full and careful analysis of the cyber-security systems, processes and past-history of a target business at the DD stage can, and more often than not will, significantly influence deal terms and negotiations and might conceivably go to price. Given a deal may even be abandoned if cyber-security breaches are identified during deal DD or mid-transaction stages, light-touch DD is no longer an option.

• Technical – does the business protect its data through the use of technologies and software? Does it use malware protection/ data encryption/ firewalls/ third-party security

Claire Miller, Corporate Professional Support Lawyer at Stevens & Bolton LLP

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12 KEY CYBERSECURITY QUESTIONS TO ASK IN DD • What types of data does the business hold? Particular attention should be paid to cardholder data (retail businesses), intellectual property, financial data, personal data (including sensitive personal data), regulated information, and commercially sensitive information • Who / where does the data come from?

• What are the critical data sets for the business?

• How does the company store, protect and exploit the data?

• What are the biggest threat(s) to the business’ data, systems and/or networks?

• Does the business have a breach management plan in place and an incident response and disaster recovery capability? Has this been correlated to business need, taking into account critical recovery points and timescales?

• What budget is assigned to cyber-governance?

• What past cyber-security breaches has the business suffered and what were the lessons learned?

• How can vulnerabilities or irregularities be reported by consumers / customers / employees / members of the public?

• Does the business use cloud-based or software-asa-service solutions (whereby software is licensed on a subscription basis and is centrally hosted)? If so, how are security and compliance risks managed in relation to these in particular?

• Does the business issue mobile devices and permit remote access to data? If so, does the business have specific policies and procedures in place to protect sensitive data in this environment?

• Does the business process, handle or store cardholder payment data? If so how and how is it secured?

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ANTI-BRIBERY AS COMPETITIVE ADVANTAGE At the time, USD 11,000 probably did not seem like a lot of money – it was a bribe, but it was a bribe that would lead to a contract on which their company stood to make ten times that amount. The members of the international sales team of gun company Smith & Wesson, who organised the payment and who were trying to expand sales in Pakistan, might well have seen it as “the cost of doing business”.

As a result of that bribe and breaches in their anti-bribery systems which led to it, in 2014 the SEC made an order against Smith & Wesson which resulted in a USD 1.9 million penalty and the company having to make special compliance reports to the SEC for two years, not to mention the collateral damage to its reputation. That payment of USD 11,000 may not have been for a lot of money for Smith & Wesson, but it did result in a lot of cost to the business.

From the Panama Papers to FIFA to Brazil to Standard Bank to Ukraine, bribery and corruption are big news: corporate reputations have been blackened, executives have been charged with criminal offences, and presidents and governments have fallen. Prosecutors are increasingly assertive and legislators around the world have passed ever more stringent anti-bribery legislation. In other words, we are in an era where seeing bribery in some markets as “the cost of doing business” is going to be a costly attitude for businesses to have.

To explore the real impact of this trend on companies and investors, including on how it impacts M&A, we at Eversheds spoke to 500 business leaders across 12 jurisdictions about current anti-bribery issues. The responses we got were very illuminating – not just for how anti-bribery risk is taken account of in M&A transactions, but also for the possibilities it raises for investors and sellers being able to better price anti-bribery risk and so gain a competitive advantage.

Bribery as a business risk Bribery is a significant part of business leaders’ agendas: 95% of those responding to our survey said their organisations saw bribery as an important issue. That is not because it is primarily a legal or compliance problem (only 9% agreed with this): it is so important to 81% of respondents because it is a risk their organisation’s commercial success and reputation on the market.

Seeing bribery as a business risk is entirely appropriate: while prosecutions of corporates and executives for corruption may make newspaper headlines and carry huge fines, they are still comparatively rare. On the other hand, fraud, bribery and corruption has been estimated to cost the private sector about 5% of its gross revenue, and about £193 billion across the UK economy as a whole per annum.

Our survey underscored the business impact of bribery in practical terms. Many respondents had already identified corruption problems in their business: 39% had had to terminate relationships with certain agents and suppliers, a significant impact on the supply chain. Many other respondents had terminated employees in response to corruption concerns or had dealt with civil and criminal enforcement proceedings. (One of the mitigations that the SEC took into account when making its 2014 order against Smith & Wesson was that it had terminated the employment of its entire international sales team.)

Anti-bribery in M&A For parties on the buy-side, M&A anti-bribery due diligence will look to uncover and quantify risks of future commercial and reputational damage that could result from making an acquisition, as well as the likelihood of future enforcement action against a target. 67% of respondents to our survey note that they incorporate anti-bribery into their pre-transaction due diligence process, and in most cases, such due diligence will be limited to the basics of antibribery protection. These involve a buyer identifying whether the target has the fundamental elements of an anti-bribery system in place: an anti-bribery policy, a bribery risk assessment, and a way for staff to escalate concerns (e.g. a whistleblowing hotline).

However, in Eversheds’ experience of acting for more sophisticated investors, such investors are aware that (especially where actual corruption concerns have been identified) due diligence should be far more intensive: top management and a random selection of staff should be interviewed, training logs should be reviewed, and suppliers/agents audited for compliance.

Investors should want assurance that policies are not merely sitting on a shelf but are genuinely adhered to throughout a target organisation: they should want to see how many issues were successfully identified (a whistleblowing line that doesn’t get any calls probably isn’t working!) and whether policies have been properly reviewed (only 50% of respondents had upgraded their anti-bribery regime in the past five years).

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CHRIS HALLIDAY

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More generally, Eversheds advises investors to take time to understand the corporate culture that a target has with respect to compliance. In our experience, bribery is almost universally accompanied by other types of unethical or problematic activity: fraud, anti-competitive practices and HR problems. A management team that does not see the value in anti-bribery is probably non-compliant in other areas too.

Once an investor is aware of the anti-bribery risk associated with a target, it can look to put in place the type of protection that will allow it to complete the transaction. Where a target company carries a high anti-bribery risk profile (for example, if it sells high risk products in high risk markets and/or has an inadequate anti-bribery system in place), the main types of protection which we typically recommend to investor clients are: 1. reduction in price: if a target’s order pipeline is uncertain because the contracts it is a party to could be tainted, the underlying financial performance of that company could be overstated, making a price reduction justified; 2. price retention/escrow: if there is a risk of future loss of business or enforcement action/penalties because of bribery/corruption, a price hold-back , repayable to the investor in the event of a bribery/corruption liability crystallising, is a useful protective tool; 3. indemnities: if a specific bribery/corruption issue is uncovered by due diligence, an indemnity in the sale agreement can be justified, giving the investor pound-for-pound recovery from the seller on loss suffered from this issue.

4. insurance protection: this can be obtained from certain insurers, depending on the circumstances.

On the sell-side, it is just as important to have a proper understanding of the anti-bribery risks that your asset carries. Sellers need to be able to respond to any due diligence issues raised by a buyer and to appropriately negotiate any investor protection which the buy-side proposes. If there is a difference in knowledge or appreciation of risk on either side, this can be exploited by a savvy party on either side of the table. In terms of the sale process itself, sellers should also act to put in place proper anti-bribery systems for their proposed targets as soon as they can, and long in advance of any potential sale process if possible, to decrease this risk in order to realise full value for their asset.

Anti-bribery as competitive advantage There was a tension in a lot of the responses to our survey when we asked where people expected to be making investments in the future: while almost all respondents expect to do more business in developing markets in the next five years, fully 77% of respondents refused to even consider transactions in certain geographies simply because of the bribery risk associated with them, and 72% had rejected certain business opportunities because of the bribery risk associated with them. This, though, presents an opportunity to investors: if they are able to properly understand bribery risk (and price it accordingly) they will enjoy a powerful competitive advantage over those of their competitors who do not have the same understanding, and will be able to move on opportunities that less sophisticated competitors are unwilling to consider.

The risk profile posed to a specific asset is heavily influenced by the country in which it is located, and the Transparency International Corruption Perceptions Index and the Trace Matrix are useful tools for comparing bribery risk across countries. But an asset’s bribery risk profile is also heavily influenced by the industry in which it operates and the anti-bribery measures taken by the company to mitigate those risks. Considering that 40% of the world’s population lives in developing markets and developing markets are predicted to grow twice as fast as high-income countries in 2016, investors will be increasingly looking to identify underpriced assets in riskier markets.

In the long term, the drive towards limiting bribery and corruption from legislators, enforcement agencies and investors is likely to continue. Research has shown that when investors succeed in raising the governance procedures in the companies they own, this tends to result in an improvement in governance standards across the particular market as a whole. Those who fail to take the lead on governance may well be forced to play catch up thereafter.

By Neill Blundell, partner and head of the Eversheds fraud and investigations group, and Chris Halliday, corporate partner, at Eversheds.

NEILL BLUNDELL

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BENEATH THE SURFACE: THE BUSINESS RESPONSE TO BRIBERY AND CORRUPTION EVERSHEDS

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WHEN IT COMES TO AVIATION RECRUITMENT, THE CANDIDATE NOW HOLDS THE POWER AEROPROFESSIONAL

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INCREASED PUBLIC INTEREST IN HEALTHY LIVING HAS BOOSTED DEMAND FOR VMS PRODUCTS AND NUTRACEUTICALS CLEARWATER INTERNATIONAL

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PROTEST DEBT ON THE RISE AMONGST UK CONSUMERS WHY IS THERE AN ORANGE LINE DOWN THE CENTRE ECHO MANAGED SERVICES

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PRIVATE EQUITY DUE DILIGENCE TRENDS 2016 SURVEY EVESTMENT

BENEATH THE SURFACE: THE BUSINESS RESPONSE TO BRIBERY AND CORRUPTION All around the world, bribery and corruption have never been more topical. Over the last few years, parliaments have passed new anti-bribery laws; prosecutors have increasingly sought to bring bribery charges; citizens have taken to the streets to express their anger about corruption; some heads of state have been forced to resign; and governments around the world have sought multilateral solutions to the truly global problem of bribery. Recent prosecutions of multinational corporations under the US Foreign Corrupt Practices Act and the UK Bribery Act have shown that bribery of foreign public officials remains a problem. Leaked document scandals have shown that bribery and corruption entirely within the private sector (or “B2B bribery”) may be just as big a problem as classic public sector corruption.

It is through these stormy waters that companies operating internationally have needed to sail. Over the past decade, most corporate leaders have responded to changing social and regulatory expectations. For example, there is now widespread recognition among business leaders that bribery and corruption is bad for profits and reputation; there is increased awareness of co-ordination between law enforcement agencies in different countries; and the old maxim that bribery is “just the cost of doing business” is seen by many as an embarrassing anachronism.

Evershed’s think these ethical and legal issues are important, so they asked 500 senior executives across 12 jurisdictions to share their experiences and thoughts. This report describes their responses and analyses the emerging themes around bribery and corruption from the perspective of businesses.

In the most part, respondents described huge progress in fighting bribery: almost all companies consider bribery an important issue; most companies have an anti-bribery policy in place; and many companies have severed links with clients, suppliers and employees that act in a risky manner. Yet against this overall backdrop of progress in fighting bribery and corruption, tough businesses still have difficult questions to ask themselves when operating internationally.

These include: • What happens when we have anti- bribery policies but our employees don’t know or understand them?

• How do we protect ourselves from corruption in jurisdictions where the anti-bribery legislation is archaic?

• What happens when we identify wrongdoing in our organisation and we want to tell the authorities?

• How do we do business lawfully and ethically in new markets where the bribery risks are higher?

None of these questions has an answer that is right for everyone. This is known because they operate across high-risk jurisdictions.

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Contents Introduction

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Foreword

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Executive summary

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Chapter 1: It’s time for a more sophisticated conversation

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Chapter 2: Tone from the top

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Chapter 3: Self-reporting must be considered

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Chapter 4: Growing your business means addressing the issues

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Conclusion

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Beneath the surface The business response to bribery and corruption 2016

Introduction Neill Blundell Partner, Head of Fraud & Investigations Group Eversheds LLP

All around the world, bribery and corruption have never been more topical.

Over the last few years, parliaments have passed new anti-bribery laws; prosecutors have increasingly sought to bring bribery charges; citizens have taken to the streets to express their anger about corruption; some heads of state have been forced to resign; and governments around the world have sought multilateral solutions to the truly global problem of bribery. Recent prosecutions of multinational corporations under the US Foreign Corrupt Practices Act and the UK Bribery Act have shown that bribery of foreign public officials remains a problem. Leaked document scandals have shown that bribery and corruption entirely within the private sector (or “B2B bribery”) may be just as big a problem as classic public sector corruption.

It is through these stormy waters that companies operating internationally have needed to sail. Over the past decade, most corporate leaders have responded to changing social and regulatory expectations. For example, there is now widespread recognition among business leaders that bribery and corruption is bad for profits and reputation; there is increased awareness of co-ordination between law enforcement agencies in different countries; and the old maxim that bribery is “just the cost of doing business” is seen by many as an embarrassing anachronism.

We think these ethical and legal issues are important, so we asked 500 senior executives across 12 jurisdictions to share their experiences and thoughts.

This report describes their responses

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and analyses the emerging themes around bribery and corruption from the perspective of businesses.

In the most part, respondents described huge progress in fighting bribery: almost all companies consider bribery an important issue; most companies have an anti-bribery policy in place; and many companies have severed links with clients, suppliers and employees that act in a risky manner. Yet against this overall backdrop of progress in fighting bribery and corruption, tough businesses still have difficult questions to ask themselves when operating internationally.

These include: – what happens when we have antibribery policies but our employees don’t know or understand them?

– how do we protect ourselves from corruption in jurisdictions where the anti-bribery legislation is archaic?

– what happens when we identify wrongdoing in our organisation and we want to tell the authorities?

– how do we do business lawfully and ethically in new markets where the bribery risks are higher?

None of these questions has an answer that is right for everyone. We know this because we operate across high-risk jurisdictions.

We hope you find Beneath the Surface interesting reading and would encourage you to get in touch with any comments or questions it might provoke.

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Foreword

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Beneath the surface The business response to bribery and corruption 2016

The last few years have seen a dramatic increase in the activity of national regulators in the investigation of corruption. The USA, who for many years was seen as the regulator of international business, has been joined by other nations; all of whom are demonstrating a real interest in investigating corrupt practices and pursuing these issues with new enthusiasm. Stand back and review the number of recent investigations in the UK alone. The upward trend is obvious and the rate of increase remarkable.

This changed landscape has brought significant new challenges for businesses who must guard against the risks of operating in difficult competitive markets.

Eversheds’ close connections with companies around the world has led to the production of this unique report.

Based upon an in-depth survey of the experience and views of 500 senior executives who do business throughout the world, the report provides insight into how things are actually progressing.

The responses to in-depth questioning are both revealing and invaluable. It confirms that the risk of exposure to corrupt practices and the need for active engagement of senior executives is well

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recognised. More surprising perhaps is the fact that only 32% of executives understood their company’s antibribery policy; just one of the significant findings that will assist the reader in an examination of their own position and the urgent action that may be needed.

The report is not theoretical; it provides an invaluable snap-shot of business now.

The inclusion of concise summaries of real problems experienced by companies in many countries and the activity in response by the national authorities in those jurisdictions and the subsequent results, gives the reader a rare insight into issues that have confronted business and what can happen when it goes wrong.

Eversheds’ access to the experience and views of those involved in business, combined with recent international regulatory activity and the identification of enforcement trends, make this report essential reading for all those involved with anti-corruption issues.

Richard Kovalevsky, QC 2 Bedford Row London.

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Executive summary

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Beneath the surface The business response to bribery and corruption 2016

Why bribery and corruption is a serious issue We know that bribery and corruption are key concerns for business – 95% of our senior executive respondents tell us they see bribery and corruption as a ‘serious issue’. For the most part, it’s not the risk of being caught and prosecuted that motivated respondents to worry about corruption: instead, business leaders fundamentally see corruption as a threat to their legitimate business. There are real concerns about the impact bribery and corruption could have on share price, investor confidence, consumer trust and reputation on the market.

Moreover, bribery is generally not a good tool to win business or increase profits. Those who pay bribes may find themselves exposed to extortion as corrupt public officials or business partners demand even more money.

Unsurprisingly, dishonest clients and employees often act in other ways that put a company at risk.

However, even if there is now a consensus that bribery and corruption are real risks to business, it’s not clear that companies are taking effective steps to counter them. Most companies have anti-bribery policies in place but half of all those surveyed didn’t think those policies were any better than they were five years ago.

More worryingly, less than a third actually understand the policies, with many taking the view that their antibribery training is insufficient.

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Tone from the top All respondents thought their senior management sent out a clear anti-bribery message to their employees.

Moreover, 90% of companies would reject a future business opportunity if there was an unacceptable bribery or corruption risk associated with it, and 72% of businesses had already done so. These were extremely encouraging signs that businesses are willing to back up their values with tough commercial decisions.

The most important source of intelligence about corrupt conduct is a company’s own workforce: industry data suggests 45% of all frauds are detected because employees raise concerns. Corporate leaders need to encourage employees to speak out about bribery so that problems can be addressed early. It’s not enjoyable to be told about corrupt conduct by an employee – but it’s better than hearing it first from a police officer or journalist. Employees are more likely to blow the whistle when they hear a strong tone from the top, when they believe the company will respond to their concerns, and when there is a whistleblowing hotline in place.

Prosecutors in some jurisdictions are seeking to prosecute individual executives for bribery and corruption offences. Even if an executive is entirely innocent of any wrongdoing, the stress and disruption of being a potential suspect in the early phase of a criminal investigation can be enormous and has the potential to be career-limiting. Strong leadership in anti-bribery can reduce this risk.

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Beneath the surface The business response to bribery and corruption 2016

Self-reporting and negotiated settlements The risks of bribery and corruption are not just hypothetical: 80% of companies had discovered bribery or corrupt conduct in their business, and 41% of companies self-reported their own misconduct to law enforcement or prosecutors. Almost all respondents recognise the growing co-operation between law enforcement agencies in different jurisdictions to enforce bribery and corruption laws.

Respondents overwhelmingly favoured self-reporting their company’s own misconduct to law enforcement and prosecutors: 99% of respondents said they would do so if they discovered bribery or corruption in their organisation tomorrow. However, relatively few executives understood how self-reporting works in practice, or which jurisdictions incentivise self-reporting through lower penalties or negotiated settlements.

Growing your business means addressing the issues Sophisticated investors consider bribery and corruption issues before undertaking mergers and acquisitions: 67% of respondents said they conduct specific anti-bribery due diligence for M&A activity. This is important because buying a business tainted by corruption may mean inheriting legal liability or overpaying for the asset.

Almost all respondents said they expected to do more business in fast-growing developing markets in the near future. However, those markets often bear a higher bribery risk, and 77% of CEOs avoid doing business in certain countries. There are practical steps that can be taken to mitigate risks in high-risk markets and it’s worth it: companies that have a strong anti-bribery programme grow faster in developing countries.

More than 400 negotiated settlements, where prosecutors agree not to prosecute persons suspected of bribery in return for restitution actions, have been reached to resolve bribery charges. More than USD 7 billion of monetary sanctions have paid. Companies appreciate negotiated settlements because they avoid the uncertainty inherent in litigation, and prosecutors formally resolve crime that might otherwise go undetected. However, negotiated settlements are not suitable to resolve every bribery concern: there are particular problems around multijurisdictional schemes, when individuals are involved, and when developing countries do not play a role in their formation.

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Beneath the surface The business response to bribery and corruption 2016

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Beneath the surface The business response to bribery and corruption 2016

Methodology The survey was implemented on the following basis: Methodology: CATI (telephone interviewing) Demographic: Board level Directors of companies sized 500+ employees Countries: x12

Countries surveyed include: Hong Kong UK Ireland Brazil Italy China Singapore Dubai Spain France Switzerland Germany Participants: 500 in total Fieldwork dates: 2nd – 29th February 2016

Methodology This research project was carried out using computerassisted telephone interviewing (CATI) in each market.

All interviews were conducted by native language interviewers in each country on CATI software. In those countries where there is more than one native language, the respondents were given a choice as to which language they would prefer to answer.

All research conducted by Yolo Communications adheres to MRS Codes of Conduct (2014) and abide by the ICC/ESOMAR International Code on Market and Social Research. Within these parameters there are guidelines that ensure all research is carried out in a professional and ethical manner.

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Questionnaire translations The questionnaire was originally written in English and then translated into the additional localised languages where necessary in non-English-speaking countries by professional native translators. All translations are carried out by one native speaker of the relevant country and then proofread by a second professional native translator. Translators are also asked to make amendments to a questionnaire (if necessary) to incorporate local knowledge and provided English translations for any of these changes. Respondents are asked at the beginning of the questionnaire which of these languages they would like to be interviewed in.

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Chapter 1: It’s time for a more sophisticated conversation

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Beneath the surface The business response to bribery and corruption 2016

How important is bribery and corruption for business and why?

One in four senior executives describes bribery and corruption as very important, while 70% view it as important. However, this trend is almost reversed when it comes to responses from the largest businesses.

In organisations with more than 5,000 employees, 56% describe bribery and corruption as very important – perhaps reflecting the reduced visibility of day-to-day business operations and because these organisations are subject to bigger investigations.

In terms of role, operations directors are the most concerned about bribery and corruption, with 52% describing it as very important. As the most senior-ranking personnel with responsibility for the day-to-day running of the business, they have a unique perspective on the task of protecting a business from corrupt practices.

For the majority of senior executives, bribery and corruption are important because of the potentially damaging impact such practices could have on the commercial success of their organisation.

Respondents cited a range of potential consequences from reduced share price, an inability to secure investment and irreparable customer relationships if corruption were discovered.

Second to purely commercial concerns was the potential damage to reputation, with one in five businesses motivated to stamp out corruption for fear of the bad publicity which could otherwise arise.

One in 10 respondents reflected their company’s strong ethical culture, believing these issues to be important because good business practice is simply ‘the right thing to do’. The remainder spoke of the potential legal ramifications – significant fines were referenced a number of times but none of those surveyed mentioned imprisonment as a possible consequence of corruption.

Why are bribery and corruption important issues to senior executives?

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Spotlight on: China In 2013, Chinese public officials and GlaxoSmithKline managers received anonymous emails accusing the company of acting corruptly in sales to public agencies.1 Soon after, an intimate video of an executive accused of complicity in the misconduct was distributed; the video had apparently been shot in the executive’s home and without the consent of those filmed.2 A possible motive for the emails was that the executive had commenced an internal investigation into whether GlaxoSmithKline had been paying bribes to win business from state healthcare entities.3 GlaxoSmithKline retained ChinaWhys, a Shanghai private investigations firm that conducted due diligence investigations for the company, to investigate the video’s origins and circulation.4 Questions were raised about an ex-employee who had been accused of fraud.5 ChinaWhys’s investigation was soon interrupted by the arrest of its principals, Peter Humphrey and Yu Yingzeng, on charges alleging illegal trading in citizens’ private data, including real estate ownership records,6 ID card details and international travel records. In an apparently connected development, GlaxoSmithKline found itself under investigation for corruption,7 allegedly using a travel agent as an intermediary for the payment of bribes to doctors and other healthcare officials.8 After a year of investigation, the principals of ChinaWhys were convicted and sentenced to more than two years in prison.9 GlaxoSmithKline and five of its employees were convicted of corrupt conduct: the company was fined CNY 3 billion (USD 460 million), and the employees received suspended prison sentences.10 (20 other employees had already been dismissed).11 Both trials were conducted in a single day; the ChinaWhys trial was closed to journalists12 and the GlaxoSmithKline trial was held in camera.13

“Peter Humphrey trial: GlaxoSmithKline to blame, says son”, Malcolm Moore, Daily Telegraph, 7 August 2014.

“Revealed: sex tape blow open Glaxo’s China bribery scandal”, The Sunday Times, 29 June 2014.

“GlaxoSmithKline Blamed For Imprisonment Of Man In Chinese Sex Tape Extortion Fiasco”, Jim Edwards, Business Insider, 8 August 2014.

“Sex, bribes and videotapes see GlaxoSmithKline ex-boss Mark Reilly deported”, Lucy Tobin, The Independent, 19 September 2014.

“Peter Humphrey trial: GlaxoSmithKline to blame, says son”, Malcolm Moore, Daily Telegraph, 7 August 2014.

“China’s Chilling Crackdown on Due-Diligence Companies”, Ana Swanson, The Atlantic, 23 October 2014.

“Revealed: sex tape blew open Glaxo’s China bribery scandal”, Michael Sheridan, The Sunday Times, 29 July 2014.

“Glaxo Used Travel Firms for Bribery, China Says”, David Barboza, The New York Times, 15 July 2013.

“China sentences GSK-linked investigators to prison”, Brenda Goh and Engen Tham, Reuters, 8 August 2014.

“Sex, bribes and videotapes see GlaxoSmithKline ex-boss Mark Reilly deported”, Lucy Tobin, The Independent, 19 September 2014.

“GlaxoSmithKline Blamed For Imprisonment Of Man In Chinese Sex Tape Extortion Fiasco”, Jim Edwards, Business Insider, 8 August 2014.

“China sentences GSK-linked investigators to prison”, Brenda Goh and Engen Tham, Reuters, 8 August 2014.

“Sex, bribes and videotapes see GlaxoSmithKline ex-boss Mark Reilly deported”, Lucy Tobin, The Independent, 19 September 2014.

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Spotlight on: China (cont) It appears Chinese authorities intended for the ChinaWhys and GlaxoSmithKline convictions to send two strong messages to the market: first, private companies and individuals may not gather and process citizens’ data except in highly circumscribed circumstances; and secondly, corruption in state procurement would not be tolerated. Yet for many domestic and international companies in China, these two messages seem to be in tension with each other.

Both Chinese14 and foreign15 governments recommend that private companies conduct due diligence into business partners and employees in order to prevent bribery, money laundering and organised crime. But the ChinaWhys prosecution, and a tightening of the information that can be legitimately obtained, may dissuade companies from gathering data about individuals or companies in the course of routine due diligence. (In a similar vein, pre-M&A due diligence and audits are often made costly and difficult by confusing restrictions on the transmission of corporate data internationally). Equally, the personal attack on the GlaxoSmithKline executive who apparently responded to concerns once they were raised, and the firestorm that engulfed the company soon after, may tempt many companies to simply ignore concerns about corruption in China. Both these outcomes are undesirable, and expose companies to greater legal risk.

We strongly believe it is both possible and necessary in China to perform due diligence on business partners, to conduct audits and to respond to corruption concerns. However, those tasks are highly sensitive, and must be executed with meticulous regard to domestic laws to avoid creating fresh liability. Moreover, the timeframe and costs associated with doing so will be greater than in other markets.

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Actions speak louder than words While the overwhelming majority of senior executives view bribery and corruption as important, this does not appear to correlate with the way these issues are managed within a business.

Just half of respondents said their anti-bribery policies were better than they were five years ago, and even fewer at 41% thought their policies worked well in practice. Businesses appear to be struggling to create effective anti-bribery policies, with just 45% of senior executives describing them as “appropriate for our business” and less than a third claiming they actually understand their own policy. While this would be less surprising among a more junior audience, it underlines the difficulty those at the very top have in managing bribery and corruption.

The majority of respondents believe their anti-bribery policies make it more difficult to build their business, suggesting an apparent conflict between the task of managing ethical business practice and commercial realities. This perception could be explained by an apparent knowledge gap among these senior executives – only a minority say they have undertaken enough training on their anti-bribery policies.

How effective are anti-bribery policies?

say their anti-bribery policy is better than it was five years ago

say their anti-bribery policy is appropriate for their business

say their anti-bribery policy works well in practice

say they understand their anti-bribery policy

say their anti-bribery policy does not make building their business more difficult

say they get enough training on their anti-bribery policy

See for example “Chinese Due Diligence Guidelines for Responsible Mineral Supply Chains”, China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters, October 2014. The publisher is supervised by the Ministry of Commerce and the guidelines were developed in consultation with that ministry.

“Overseas Business Risk – China”, Foreign & Commonwealth Office, 10 July 2015.

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It’s time for a more sophisticated conversation about bribery and corruption At the London headquarters of WorldReach Limited, the CEO receives an unexpected phone call from a senior executive in Dubai: “Jenny, we’ve got a problem. Our Sales Director just told me we’ve been paying kickbacks to win business. It’s those invoices for ‘community relations’ he’s been submitting for years. What are we going to do?”

In the past, Jenny the CEO might have ignored the call, having been advised that bribery was merely the “cost of doing business” in certain industries and countries. Laws prohibiting companies from bribing public officials at home were enforced only in the most serious cases, and only the United States made any real effort to prosecute companies for bribing foreign officials. In some jurisdictions, it was not clear if it was illegal for executives to bribe other executives to win business. Jenny’s company either did not have an anti-bribery policy or it lay unread on a dusty shelf.

Companies routinely operated without clear policies or procedures on bribery and corruption: this issue was simply not a priority for business or for law enforcement.

Those days have gone. In the last decade, many countries have been clarifying and tightening their anti-bribery laws and increasing the penalties for breaching them. Those changes – often in response to pressure from the OECD – have taken place in places as diverse as the United Kingdom (2010), Australia (2010), the Czech Republic (2011), Italy (2012), Brazil (2013), Russia (2013) and even Turkmenistan (2014). Prosecutors have used those new laws and powers to step up enforcement: there were 231 foreign bribery cases concluded in 20102013 compared to just 11 in 2000-2003. Although the US remains the leading prosecutor of corrupt international businesses, jurisdictions such as Germany, France, Switzerland, Korea and the UK have also attempted to consistently enforce anti-bribery law.16 Business, too, has changed its attitude to bribery: 95% of respondents to our survey see bribery and corruption as a serious issue. In our experience, businesses’ sophistication in identifying and managing bribery risk has increased significantly in recent years. If WorldReach is like 80% of international companies, then it now has a formal anti-bribery policy.17 Why have businesses such as WorldReach changed their approach? Is there truth in the conventional wisdom the change is a response to stricter laws and more robust enforcement?

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Spotlight on: Ireland In the Irish context, corruption and bribery has traditionally been associated with payments to politicians for favours. In particular, there was widespread concern that decisions around the re-zoning of land were tainted, particularly when those decisions allowed lucrative commercial and residential developments. The 1990s and 2000s were dominated by inquiries into allegations that land developers had passed “brown envelopes” to public officials in return for favourable outcomes.

However, the fallout from the banking crash of 2008 has shown that bribery and corruption are not restricted to cash bribes to local government officials. The spectacular criminal allegations that followed the collapse of Anglo Irish Bank included the wholesale misleading of international markets and the ‘bed and breakfasting’ of circa EUR 7 billion in loans to boost the Bank’s balance sheet at regulatory reporting dates. Two criminal trials against former officers of Anglo Irish Bank have already taken place and a prosecution of the bank’s former chairman is forthcoming. Moreover, the bank’s former CEO, David Drumm, was extradited in a very public fashion from the USA to Ireland in order to face criminal charges.

The trials have shown that despite Anglo Irish Bank being a public listed company and subject to top tier regulation by a respected EU financial services regulator, it was not immune to corruption. If improper practices could take place inside a mainstream business like Anglo Irish Bank, the public wondered, then where else could it be taking place? Our survey reveals that those concerns are well-founded: almost all respondents said that bribery and corruption was a significant issue for Irish business, and 75% of Irish companies have had an issue of some description with bribery or corruption.

Figure 19, OECD Foreign Bribery Report: An Analysis of the Crime of Bribery of Foreign Public Officials, OECD, 2014.

Page 9, Global Anti-Bribery and Corruption Survey, KPMG International, 2015.

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Spotlight on: Ireland (cont) Yet despite the fallout from the Anglo Irish Bank trial and the importance of bribery and corruption to Irish corporate culture, the legal system remains too fragmented.

Perceptions of bribery and corruption among business leaders and the public have become more sophisticated in Ireland in the last few years, but the legal system has not moved with them.

The legislative framework for fighting corruption is outdated (it includes a statute from 1889) and vague. Both the OECD and Transparency International have called for significant legislative reform. In 2012, the government announced the Criminal Justice (Corruption) Bill, but it never moved to a final vote in parliament. In 2015, the Ministry for Justice and Equality announced the bill’s re-launch and a clarification of the law around bribery of foreign public officials, business-to-business bribery and corporate criminal liability.18 However, little practical action has so far been taken to transform the bill into law.

We believe that both businesses and citizens desperately need clarity on how Irish bribery law can be brought into the 21st century. In particular, government should learn from the efforts of other EU states and consult with the private sector on how they can work together to fight bribery and corruption.

Bribery as a business risk Our research shows that business leaders’ anti-bribery efforts are not primarily driven by a desire to avoid prosecution. In fact, only 10% of respondents saw legal issues as a significant reason to take bribery and corruption seriously. What’s more, while some of those respondents feared potentially high fines, none of them referred to the prison sentences that individual lawbreakers face: up to seven years in Singapore, 10 years in Ireland and Saudi Arabia – and life in China.

This should not be a surprise: although prosecutions of bribery offences are on the increase, they remain sporadic and rare. For example, of the 41 OECD member countries, 24 have never sanctioned anyone for a foreign bribery offence and only 25 have even a single foreign bribery investigation underway.19 In high bribery risk jurisdictions, substantive enforcement of bribery laws is often either unknown or is itself used as a weapon in political disputes.20 The majority of corporate leaders in fact see bribery and corruption as a business threat, not a legal one: 69% of respondents identified the principal risk of bribery as being the resultant negative impact on their businesses’ success, and almost three-quarters of companies have rejected a business opportunity because of the bribery risk associated with it. This is consistent with economic analysis that shows corrupt conduct does not bring a net benefit to a business once hidden costs and missed opportunities are taken into account.21 We have observed that business units that win contracts through bribery are rarely very profitable – not least because they frequently find it difficult to collect payment from dishonest clients, operate in a risky manner, and are vulnerable to extortion. Moreover, individuals who pay bribes often act in other ways that decrease efficiency. If WorldReach has discovered bribery, then most likely an investigation will also reveal fraud, theft, harassment and straightforward incompetence. In short, when companies host corrupt conduct, commercial decisions start to be made for non-commercial reasons and produce suboptimal outcomes.

We believe this insight should affect the way governments go about addressing corporate bribery and corruption. The traditional law enforcement model for economic crime is to target corporations as offenders to ensure that “crime doesn’t pay”: that is, punishment is a counterweight to the incentive to commit the crime. But in the case of bribery, this is too simplistic: most corporations already receive little or no long-term economic benefit from crimes committed under their roof. Law enforcement’s strategy should make it easier for corporations to identify and resolve corruption – including undoing any harm that has been done to others. We discuss this issue further in Chapter 3.

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“Ireland’s implementation of the United Nations Convention against Corruption”, Press Release, Department of Justice and Equality, 16 July 2015, last accessed on 07 April 2016.

Page 2, 2014 Data on Enforcement of the Anti-Bribery Convention, OECD Working Group on Bribery, November 2015. This is the most recently available data from the OECD. The level of investigation and enforcement will probably increase slightly when 2015’s figures are published, presumably in November 2016.

See for example Letting the Big Fish Swim: Failures to Prosecute High-Level Corruption in Uganda”, Human Rights Watch, 21 October 2013.

“Crime doesn’t pay, says Harvard bribery study”, CFO, 1 March 2016.

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A policy is good but effectiveness is better A further critical finding emerges in relation to the companies’ anti-bribery regimes. The vast majority of the international companies for whom respondents work have anti-bribery policies and procedures in place, and half of those executives believe those policies and procedures have improved in the last five years. This is encouraging, and it is at least partly attributable to the growing awareness around bribery that increased prosecutions have brought.

However, our research also identifies some uncomfortable truths: only a minority of business leaders think that the anti-bribery policies in place at their companies are generally appropriate and work well in practice. Even fewer executives actually understand those anti-bribery policies – perhaps because most of them do not receive enough training on them. Most worryingly, only a small minority feel that anti-bribery policies do not get in the way of building business. In short, anti-bribery is failing at many companies.

We have seen that these failures often result from inappropriate development and rollout of policies. In our experience of advising clients across the globe, business units in the highest risk markets should collaborate in the formulation and design of policies from the earliest stages, for example by proper use of focus groups and needsmapping. Equally, anti-bribery measures should – wherever possible – be incorporated into existing business processes, not added on top of them. Finally, anti-bribery policies need to be simply and concisely communicated. Eversheds recently assisted a client to radically simplify its anti-bribery policies for the simple fact that it was unrealistic to ask employees to read several hundred pages of dense legalistic text. If Jenny the CEO does not understand WorldReach’s anti-bribery policy, it is unlikely that her more junior colleagues will either.

More generally, companies need to realise that merely having a policy is not enough. Jenny and her managers need to get back into the business, asking the right questions: What kind of dilemmas are staff seeing in the market? Which anti-bribery measures are missing or being circumvented?

Would staff know what to do if they discovered a problem? Training needs to be creative, interactive and role-appropriate so that employees acquire the skills to identify and fend off corrupt demands. These relatively simple and cheap strategies help ensure that anti-bribery policies are effective, and help create a positive corporate culture, an issue we discuss further in Chapter 2.

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Spotlight on: Italy Why do companies face such challenging bribery and corruption issues when doing business in Italy? The country displays all the characteristics typically associated with low bribery risk: it is the world’s eighth largest economy,22 has a “very high” level of human development23 and has the highest possible rankings for freedom, civil liberties and political rights.24 Equally, at first glance, Italy’s anti-bribery laws seem to be world class: all bribery (whether public or business-to-business, domestic or foreign) is comprehensively prohibited under both the Criminal Code25 and Civil Code26. Companies can be prosecuted for corporate criminal liability for the corrupt conduct of their employees and directors27 and a 2015 law has reinforced the prohibition on false accounting, tightening restrictions on public officials and increasing criminal penalties.28 Also, few Italians believe corruption among police, prosecutors and judges is a barrier.29 Yet, at the same time, 97% of Italians believe corruption is widespread in Italy and 42% claim to be personally affected by corruption on a daily basis.30 The World Bank estimates that corruption accounts for 3% of Italian GDP up to EUR 60 billion.31 Moreover, Italians seem to have given up reporting corruption: government research shows that complaints from the public have been falling even as corruption continues to rise.32 In reality, corruption in Italy is growing but it remains largely hidden because of underreporting to the authorities and the difficulties inherent in pursuing and resolving corruption cases.

IMF eLibrary Data, last accessed at data.imf.org on 01 April 2016.

Table A1.1, Global 2015 Human Development Report, United Nations Development Programme, 14 December 2015.

Freedom In The World 2015, Freedom House, January 2015.

Articles 317-322 Article 2635 Under Decree 231/2001 Law 69/2015 Rule of Law Index 2015, World Justice Project, 2 June 2015.

Special Eurobarometer survey n. 397, February 2014.

World Governance Indicators, World Bank, 2016.

Corruption in Italy. Towards a prevention policy. Analysis of the matter, international profiles and reform proposals, Report, Government Commission for study and development of proposals in the area of transparency and corruption prevention in the Public Administration, 2012.

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Spotlight on: Italy (cont) Despite the fact that Italian anti-bribery legislation appears to be compliant with international standards, effective enforcement is made much more difficult by the strict operation of the statute of limitation that applies to bribery and corruption cases.

In response to a critical report from the OECD in 2011,33 a new law was enacted which provided for an increase in penalties for corruption crimes.34 However, the statute of limitations clock does not stop ticking once the suspect is indicted or while decision is under appeal. Consequently, bribery prosecutions become time-barred more frequently in Italy than in other countries.

More generally, Italy has yet to adopt a comprehensive, integrated anti-bribery strategy. Although it is true that the government’s priorities in fighting corruption in the public sector have been clarified35 and the National Anti-Corruption Authority has been given significant new supervisory and coercive powers, there is still a disappointing lack of guidance on and discussion of how businesses can fight public sector bribery at home and abroad. There is even less consideration of business-to-business corruption. If meaningful progress is to be made in reducing the hidden costs of bribery to business, consumers and citizens, the Italian state should turn its attention to practical measures that support private sector anti-bribery efforts. This could include improved protection for private sector whistleblowers, greater transparency in public procurement from private suppliers, encouraging the voluntary rollout of antibribery measures within private companies and, most importantly, engaging directly with the private sector to develop a national business-to-business anti-bribery policy.

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Spotlight on: Scotland When the UK Bribery Act came into force in 2011, a common concern was that companies would be prosecuted for excessive generosity: providing hospitality or corporate travel in a way that was unacceptably lavish in the eyes of prosecutors. The UK government reassured businesses that hospitality was a legitimate practice and that its priority was to identify and convict persons engaged in bribery, not entertainment. Five years on, two bribery cases resolved in Scotland illustrate prosecutors taking an entirely reasonable approach to hospitality, travel and gifts. Running up to 2011, two employees of Edinburgh City Council corruptly channelled at least GBP 1.5 million of contracts to a local construction company, Action Building Contracts Ltd. In 2011, an insider blew the whistle on the scheme, and the council workers and two directors of the construction company were charged with offences under the Public Bodies Corrupt Practices Act 1889 (the conduct having occurred before the Bribery Act came into force). Local media reports of the trial focused heavily on the hospitality the company provided to the two council employees: the court was told that at least GBP 30,000 was spent on taking the men to football matches, bars and lap dancing clubs.36 Ultimately, the council employees were each sentenced to roughly four years in prison, while the two directors of the construction company were sentenced to more than two years.

In 2012 and 2013, Brand-Rex Limited provided secret commissions via an intermediary to employees of a client in return for orders being placed with Brand-Rex. The commissions took the form of travel paid for by Brand-Rex such that a number of the client’s employees travelled on foreign holidays as a result of the corrupt scheme. Brand-Rex discovered the corrupt scheme in the course of an internal review, self-reported it to the Crown Office & Prosecutor Fiscal Service (Scotland’s prosecution service) in June 2015, and in September 2015 paid GBP 212,500 to avoid criminal prosecution under section 7 of the Bribery Act (failure of commercial organisations to prevent bribery by an associated person).37 At first glance, these enforcement actions may seem like responses to excessive entertainment. Upon closer examination, that is not the case. In the Action Building Contracts affair, the value and nature of the entertainment provided were not merely excessive, but wildly inappropriate.38 Further, the council employees received “tips” of GBP 42,521 over and above the hospitality,39 and fraud and money laundering were parts of the conspiracy.40 Similarly, in the Brand-Rex matter, the travel provided to the client’s employees took the form of foreign holidays: it was entirely unconnected to the company’s business and there was no work-related activities. Moreover, in both cases, it was the intention of the givers of the bribe to influence the recipients and win new business, not just to maintain a professional relationship. We believe that companies are rightly conscious of the actual and apparent bribery risks associated with providing gifts, hospitality and travel. It is wise to reflect on whether it is appropriate to provide foreign travel to clients’ employees – let alone allowing their spouses to travel or providing cash “travel expenses”. But thus far prosecutors in Scotland (like their colleagues in most other jurisdictions) have not shown any interest in taking action against companies for mere excessive hospitality in the absence of any corrupt intent.

Phase 3 Report: Italy, OECD Working Group on Bribery, 2011.

Law 69/2015 Pursuant to Law 190/2012 “Corrupt council repairs men in plea for leniency”, Edinburgh Evening News, 16 June 2015.

“Glenrothes cabling company pays £212,800 after reporting itself for failing to prevent bribery by a third party”, Press Release, Crown Office & Procurator Fiscal Service, 25 September 2015.

The amounts paid in cash to the men had been recorded by the construction company. “Corrupt council repairs men in plea for leniency”, Edinburgh Evening News, 16 June 2015.

“Corrupt council repairs men in plea for leniency”, Edinburgh Evening News, 16 June 2015.

“Four men sentenced to a total of over 13 years imprisonment for corruption and bribery at Edinburgh City Council”, Press Release, Crown Office & Procurator Fiscal Service, 18 June 2015.

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Chapter 2: Tone from the top

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A Consistent Approach?

All respondents agree that top management sets a clear tone on bribery and corruption in their organisation.

However, only 90% would reject a business opportunity due to bribery or corruption concerns. This is particularly significant given that the respondents are themselves all from senior management positions.

44% have stopped doing business with suppliers

Executives from China were the least sure: 28% said they neither agreed nor disagreed on the point, while all respondents from Brazil agreed they would reject such a business opportunity.

This concern was greatest among operations directors and perhaps, once again, this is best explained by the nature of their role. There were notable differences between jurisdictions, with 42% of Brazilian executives worried about tough growth targets giving rise to corrupt business practices. Around a third of respondents in France, Ireland and the UK shared this concern.

Actions speak louder than words

The majority of respondents said their organisation had focused on the nature of its business relationships, severing relationships because of concerns about bribery or corruption.

Almost three quarters (72%) of businesses said their organisations had turned down a business opportunity due to concerns around bribery or corruption.

39% have stopped doing business with agents or intermediaries

16% have stopped doing business with customers

of senior executives are worried employees would resort to bribery or corruption when faced with challenging growth targets 12% have stopped sponsoring events or organisations

11% have fired employees

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Spotlight on: England and Wales The UK Ministry of Justice’s guidance41 on what constitutes adequate procedures for preventing breaches of the Bribery Act 2010 places a heavy emphasis on effective communication between senior management and the workforce. As that guidance makes clear, anti-bribery policies and procedures should be “embedded and understood throughout the organisation through internal and external communication…Internal communications should convey the ‘tone from the top”.42 We believe this advice is sound – but six years on from the enactment of the Bribery Act, many organisations are still wrestling with what that communication should look like. We suggest that effective communication means more than rejecting bribery and corruption in the abstract – it also means listening and speaking out about the concerns that do arise.

A strong anti-bribery “tone from the top” should include encouraging employees to raise concerns about practices they think are unethical or potentially unlawful, as we discuss at [[Chapter 2 above]]. We have observed that encouraging employees to raise concerns is often most effectively achieved by companies establishing a whistleblowing function. In practice, this usually takes the form of a dedicated phone number and/or a web interface that can be used to report concerns. There is no single model for whistleblowing so a company will need to decide practicalities: whether it should be possible to receive anonymous calls, whether non-employees (for example, suppliers and members of the public) should be able to raise concerns, how to deal with a diverse and multilingual workforce, and what is the most effective to record reports in the light of complex data privacy concerns. More generally, companies need to decide whether they run the whistleblowing function internally, or whether they will outsource management of the service to a specialist provider.

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The message from management Setting the right tone from the top is critical if a company’s anti-bribery policies are to be effective. Encouragingly, our research shows that many companies are doing exactly that. The overwhelming majority of respondents believed that there was a strong corporate culture and that senior managers had communicated the tone from the top clearly.

Companies also need to give practical effect to the tone from the top by making difficult decisions when integrity is on the line. It is therefore encouraging that many respondents’ companies back their values when a bribery risk is identified: there is no better way to demonstrate that bribery is unacceptable than rejecting a business opportunity or cutting ties with certain customers because of bribery concerns. Both these behaviours were identified by our research.

We believe that successful international companies choose to send the right tone from the top for three main reasons: 1. Creating a low-bribery, high-growth environment A clear corporate culture sets out a company’s expectations in respect of corrupt activity. Most obviously, this works to dissuade employees from using corrupt methods to win or retain business: having been given clear and non-negotiable instructions to the contrary, an employee acting corruptly can never credibly claim to have been acting in the company’s best interests. Positive peer pressure also operates to reduce the risk that one individual employee’s poor decisions will be followed by others. In this way, isolated conduct should not become systemic or institutionalised.

The deterrent effect works externally as well as internally: if a company’s culture is communicated properly, this sets expectations among joint venture partners, suppliers, customers and even public officials. We are familiar with a global corporation that exports huge volumes of cargo through seaports in Southeastern China. Once it started promoting its rigorous anti-bribery policy, the company received far fewer demands for corrupt facilitation payments from local officials and found those demands easier to fend off. This effect works both ways. Companies that are known on the market for engaging in corrupt practices can be seen as a soft touch and actively targeted by the dishonest.

Researchers at Harvard University have found that corporations that engaged properly with anti-bribery grew 14.1% in high risk markets over three years, compared to growth of only 2.6% among companies that failed fully to develop anti-bribery practices.43 We believe this is likely a result of employees being able to discuss bribery risks without appearing disloyal, such that the company can plan its response to bribery challenges if and when they do arise. On the other hand, we have seen companies unable to act when presented with a challenge because discussing the issue is seen as somehow encouraging the misconduct. This brings to mind the old sailors’ superstition that learning to swim is unlucky.

The Bribery Act 2010: Guidance about procedures which relevant commercial organisations can put into place to prevent persons associated with them from bribing, Ministry of Justice, March 2011.

Page 29, The Bribery Act 2010: Guidance about procedures which relevant commercial organisations can put into place to prevent persons associated with them from bribing, Ministry of Justice, March 2011.

“Crime doesn’t pay, says Harvard bribery study”, CFO, 1 March 2016.

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2. Reducing the impact of bribery and corruption Generally speaking, the earlier corruption is detected within a company, the quicker it can be resolved and the smaller the liabilities will be. For a large company, the most important source of intelligence is its own workforce: 45% of all frauds44 are detected as a result of concerns raised by employees. Consequently, companies should work hard to create an environment in which employees feel comfortable escalating concerns. In particular, employees should believe that their genuine worries will be taken seriously and that they will not suffer retaliation for rocking the boat. On a practical level, whistleblowing hotlines are highly effective in making sure employees have a means by which concerns can be raised.

The recent experience of Standard Bank illustrates how a positive corporate culture can help a company to detect bribery early and then manage liabilities. In 2012, a handful of senior executives in the bank’s Tanzanian affiliate agreed an improper arrangement with local public officials in relation to a government bond issue. The bond issue took place without that arrangement being detected either by the Tanzanian government or more senior bank staff. In March 2013, very large amounts of cash were withdrawn from Standard Bank’s retail branches in Tanzania in order to make payments under the improper arrangement. At least four different employees raised concerns with the bank’s compliance team about those cash withdrawals: this swiftly led to an internal investigation which found those concerns to be well-founded. By April 2013, Standard Bank notified the UK Serious Organised Crime Agency that the bond issue and subsequent payments were potentially problematic. Subsequent investigations by Standard Bank and the Serious Fraud Office confirmed the employees’ concerns were well-founded and that there had been improper conduct. In November 2015, the SFO agreed a deferred prosecution agreement with Standard Bank, the first such negotiated settlement in the UK. Standard Bank’s issue was finalised within 18 months of the last cash withdrawal. This is in stark contrast to the more than seven years it takes for the average foreign bribery case to be concluded.45 Moreover, Standard Bank’s co-operation with the Serious Fraud Office unlocked the door to the deferred prosecution agreement, which in turn resulted in a 33% discount to the USD 25.2 million penalty that the court would otherwise have imposed.46 It is safe to say that employees’ willingness to raise concerns about bribery, and the bank’s proper response to those concerns, were critical factors in Standard Bank avoiding another five years of uncertainty and cost, and receiving a penalty reduction of around USD 8.4 million.

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Spotlight on: England and Wales (cont) If companies need to know how to receive difficult information, they also need to know how to communicate it: that is, to acknowledge when concerns have been raised, and to explain how they have been responded to. Many large organisations’ compliance teams circulate activity reports detailing key concerns to senior executives, which is critical for building consensus at the top of an organisation: but telecoms company Vodafone goes far above and beyond that. Each year it publishes a Sustainability Report that clearly explains the ethical standards of the company (including around bribery) and how concerns can be raised. The Sustainability Report also describes the ethical problems the company has faced in the previous year and how it has dealt with them. Consequently, employees and strangers alike can discover from Vodafone’s website that in 2014-2015, 602 concerns were raised by whistleblowers, of which 132 related to integrity issues i.e. conflicts of interest, corruption and fraud.47 483 instances of internal fraud that resulted in one or more employees being dismissed were also identified.48 Many companies would avoid disclosing these facts – but in our opinion, the transparency works to Vodafone’s credit. What better way is there to employees, consumers and the market that Vodafone seeks to operate ethically than explaining how it has dealt with ethical dilemmas in the past?

Page 22, Report to the Nations on Occupational Fraud and Abuse: 2014 Global Fraud Study, Association of Certified Fraud Examiners, 2014.

Page 14, OECD Foreign Bribery Report: An Analysis of the Crime of Bribery of Foreign Public Officials, OECD, 2014.

See para 16 of the decision in SFO v Standard Bank plc.

Page 132, Sustainability Report 2014/15, Vodafone Group plc, 2015.

Page 133, Sustainability Report 2014/15, Vodafone Group plc, 2015.

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Spotlight on: Spain Recent reforms to Spanish criminal law underscore the importance of directors and senior management sending the right tone from the top.

First, the Spanish Criminal Code49 now provides for the corporate criminal liability of companies if their employees or directors breach provisions on bribery, influence peddling or bribery of foreign government officials.50 Penalties upon conviction are severe: a corporate offender may be fined up to EUR 9 million, be dissolved, have its business suspended for five years, and/or be subject to judicial management of its business for five years.

However, there is an important defence to charges brought against a company under the Criminal Code: in general terms, if the company had in place an effective compliance programme that was overseen by an internal compliance officer or body before the relevant offence took place, then the company may not be found guilty of the offence. What “effective” means in this context is not fully articulated by the Criminal Code, but it seems unlikely a company that had not set a strong tone from the top would be able to leverage the defence.

Second, under the Corporate Enterprises Act (as in other jurisdictions) directors of a company are considered to be guarantors of the company’s good conduct. Directors of Spanish companies have a legal duty of diligence (supervision, monitoring and control) in respect of the company’s activities.

The combined effect of the Corporate Enterprises Act and the Criminal Code is likely to be that a director who fails to take sufficient measures to ensure that employees do not engage in bribery may bear personal criminal responsibility. In other words, a director that committed no corrupt act may still be prosecuted for his or her omission in failing to prevent one in certain circumstances. It will be particularly problematic for the director if the employee who engaged in the corrupt conduct was (or should have been) under their supervision and control.

To date, there have been no major criminal prosecutions of company directors for the corrupt conduct of employees under their supervision.

However, We believe it is only a matter of time before one takes place: in 2015, more than 2,400 people were arrested for corruption in Spain, up from a mere 389 in 2010.51 Equally, the Spanish government recently reaffirmed its commitment to vigorously enforcing its foreign bribery laws.52 Companies and directors should therefore examine critically their existing anti-bribery policies to see if they are really effective and there are no important omissions. When only 40% of Spanish respondents think their anti-bribery policies work well in practice, and only 15% of Spanish respondents understand those policies, it seems that many companies have a lot of work to do.

49 50 51 52

3. A little bit of self-interest Finally, senior managers should consider their own interests in ensuring that their organisation is sending the right tone from the top on bribery. In many jurisdictions, prosecutors are increasingly seeking to bring criminal cases against individual company executives. In particular, the US Department of Justice is working to correct a perception that it has allowed crooked executives to escape consequences for their corrupt actions while punishing the companies that employed them. The Deputy Attorney General has explicitly instructed her prosecutors that “corporate investigations should focus on individuals from [the investigation’s] inception”. Even if an executive is entirely innocent of any wrongdoing, the stress and disruption of being a potential suspect in the early phase of a criminal investigation can be immense.

Furthermore, in many jurisdictions criminal charges can be brought against the directors of companies as a result of an employee’s corrupt conduct, even when the director has not personally engaged in any wrongdoing and was entirely unaware of it. We discuss the situation in Spain, which is illustrative of that in many countries [see sidebar opposite]. More generally, regulators, employers and shareholders alike will ask tough questions of a manager who fails to detect corrupt conduct in a business unit under his or her supervision. Such an experience is likely to be extremely uncomfortable and has the potential to be career-limiting. Few managers would be happy to hear from an employee that there is corrupt conduct occurring in their business – but it is far more unpleasant to hear the same news from the CEO, the media or a police officer.

Article 31 bis.

Articles 427, 430 and 445, respectively, of the Criminal Code.

“Solo en 2015 se detuvieron en España a 2.442 personas por corrupción”, La Informacion, 18 February 2016.

“Ministry of Justice confirms full compliance by Spain with OECD recommendations to combat bribery in international transactions”, Press Release, Ministry of Justice, 16 March 2016.

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Chapter 3: Self-reporting must be considered

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Responding to bribery and corruption Without exception, all respondents who had discovered bribery in their own organisation said they took steps to address the issue.

Businesses are not very likely to fire employees (12%) or inform shareholders (11%) following the discovery of bribery or corruption.

A willingness to speak out?

A significant minority of respondents (41%) took the decision to self-report on discovering bribery or corruption in their organisation. However, there were substantive differences between jurisdictions. More than two-thirds of respondents in China said they had informed law enforcement agencies, while just 14% had done the same in Brazil.

This could be explained by an apparent lack of knowledge regarding self-reporting regimes around the world. Less than one-third of respondents could identify any jurisdiction that rewards companies for voluntary disclosure. If prosecutors want to see higher levels of self-reporting by international companies, then they need to make sure the benefits of doing so (for instance, easier access to negotiated settlements or reduced sentences upon conviction).

Despite the need for greater understanding, respondents nevertheless revealed a willingness to self-report, with 99% stating they would self-report to law enforcement or regulators if they discovered bribery or corruption in their organisation tomorrow.

Almost all respondents recognise the growing co-operation between law enforcement agencies in different jurisdictions to enforce bribery and corruption laws. This was most keenly felt by Brazilian respondents, perhaps due to the relatively recent introduction of anti-bribery laws in this jurisdiction (at the beginning of 2014).

Operations directors were the most attuned to the increased collaboration between law enforcement agencies, which once again underlines their role as the most handson when it comes to the practical management of bribery and corruption.

What do businesses do when they discover bribery or corruption?

Terminate tainted contracts

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Change policies and procedures

Inform law enforcement agencies

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Spotlight on: France French law does not provide for negotiated settlements, which are usually regarded as creatures of Anglo-American jurisprudence.

Proposals in February 2016 that negotiated settlements could be included in a forthcoming corruption bill were quickly withdrawn in response to professional scepticism expressed by many French judges, legislators and practitioners.

Consequently, a company that discovers corrupt conduct that breaches both French and foreign law cannot reach a negotiated settlement with French prosecutors in parallel to other jurisdictions as part of a “global settlement”.

Prosecutions in which offenders faced punishment in two different jurisdictions for substantially the same conduct have been seen as formally correct but substantively improper and a violation of the general principle of non bis in idem. Moreover, in the specific context of the bribery of foreign public officials, prosecutors could choose to have regard to article 4(3) of the OECD Anti-Bribery Convention53 (which suggests prosecutions for corrupt conduct across multiple jurisdictions should generally take place in only one jurisdiction) when deciding whether to bring charges. In these circumstances, how should companies that self-report corrupt conduct to foreign prosecutors expect to be treated by French prosecutors if there is a French dimension to the conduct?

The question is not merely theoretical, as the Vitol case shows. Like a number of companies, the oil company Vitol SA was found to have bribed Iraqi public officials to win business under the UN-administered Oil for Food scheme in the 1990s. Having pleaded guilty to a criminal charge of grand larceny under New York law pursuant to a 2007 plea agreement with the Manhattan District Attorney’s Office, Vitol was subsequently indicted in France and referred to the Paris Criminal Court. The same Iraqi schemes that were the subject of the New York plea agreement were the basis of the foreign bribery charges under French law.

53 54 55 56 57 58 59

Negotiated settlements Negotiated settlements – under which prosecutors agree not to prosecute persons suspected of bribery in return for restitution actions – are big business: more than 400 worldwide have resulted in more than USD 7 billion of monetary sanctions.54 In fact, in a world where 69% of all foreign bribery cases are resolved by way of negotiated settlements, it is no exaggeration to say that they are the mainstay of foreign bribery enforcement as we know it.55 Proponents of negotiated settlements claim that they incentivise offenders to self-report bribery that would otherwise go undetected and unaddressed by law enforcement. Foreign bribery is particularly difficult to detect: only 14% of foreign bribery cases are initiated as a result of law enforcement agencies’ own investigations.56 For their part, corporations seek negotiated settlements because they reduce uncertainty around whether there will be a prosecution because the restitution costs are lower than the (often fearsome) maximum penalties for offending and because avoiding conviction means the offender remains eligible for public procurement.

The vast majority of negotiated settlements to date have been with US prosecutors. This is no surprise considering that for 20 years the US was almost the sole enforcer of foreign bribery laws and that so-called alternative disposals of one sort or another have long been a mainstay of criminal and regulatory enforcement in the United States.57 In recent years, other jurisdictions have sought to replicate the perceived success of the US approach. Canada, Nigeria, Costa Rica, Germany, Kazakhstan and Switzerland have all used negotiated settlements to resolve bribery cases.58 The introduction of deferred prosecution agreements in the United Kingdom was specifically intended to increase the number of formal resolutions under the Bribery Act.59 Ireland and other jurisdictions are now considering introducing negotiated settlements for bribery offences.

We agree that there are many arguments in favour of allowing prosecutors the option to form negotiated settlements with wrongdoers, and particularly those that self-report bribery that otherwise would likely have gone undetected. However, there are still a number of issues that mean negotiated settlements will not always be appropriate for every circumstance.

Formally the Convention On Combating Bribery Of Foreign Public Officials In International Business Transactions. Both France and the United States are parties to that convention.

Page 19, Left out of the Bargain: Settlements in Foreign Bribery Cases and Implications for Asset Recovery, Anyango Odour et al, Stolen Asset Recovery Initiative, 2014.

Page 19, OECD Foreign Bribery Report: An Analysis of the Crime of Bribery of Foreign Public Officials, OECD, 2014.

Page 15, OECD Foreign Bribery Report: An Analysis of the Crime of Bribery of Foreign Public Officials, OECD, 2014.

Page 2 and Chapter 2, Deferred Prosecution Agreements: The law and practice of negotiated corporate criminal penalties, Polly Sprenger, 2015.

Page 18, Left out of the Bargain: Settlements in Foreign Bribery Cases and Implications for Asset Recovery, Anyango Odour et al, Stolen Asset Recovery Initiative, 2014.

Page 20, Consultation on a new enforcement tool to deal with economic crime committed by commercial organisations: Deferred prosecution agreements, UK Ministry of Justice, May 2012.

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When global settlements aren’t global For corporations, a key incentive to self-reporting and engaging prosecutors in settlement negotiations is that it reduces the risk of prosecution. As a result, 31% of foreign bribery cases result from the offender informing law enforcement about their own corrupt conduct.60 This reflects the long-standing principle in the domestic criminal law of many jurisdictions (often informal, but sometimes formal, as in the Spanish Criminal Code) that self-reporting offenders should be treated more leniently than those whose offending is discovered by authorities.

However, negotiated settlements are often problematic when applied to foreign bribery cases as they almost invariably involve conduct across multiple jurisdictions. In order to avoid prosecution in any jurisdiction, suspects will need to negotiate a so-called global resolution that covers all of the relevant jurisdictions. At best, this will be delicate and complicated, but if negotiated settlements are unavailable in one of the jurisdictions, it will simply be impossible. Moreover, negotiated settlements in the US and UK often require the parties to admit publicly certain facts about the problematic conduct – admissions that would quickly make their way to prosecutors in other jurisdictions.

These tensions can be illustrated by examining the negotiated settlements reached between BAE Systems plc, the US Department of Justice and the UK Serious Fraud Office in relation to the company’s conduct in selling radar systems to Tanzania. Although described as a global settlement, the settlements only resolved allegations under US and UK law. If there had been conduct under the law of Tanzania that was problematic, then Tanzanian prosecutors would still be entitled to bring proceedings against responsible persons.

In the past, when only a handful of jurisdictions bothered to enforce their bribery laws, this was a mostly theoretical risk. But as jurisdictions such as France ([[see sidebar]]) step up their enforcement efforts, the risk of being unable to negotiate settlements with all relevant jurisdictions increases. Subsequently, an unintended consequence of greater enforcement by more jurisdictions may be that self-reporting in any jurisdiction is less attractive.

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Spotlight on: France (cont) In July 2013, the Paris Criminal Court handed down a first instance decision in Vitol. It found that French courts should regard an existing foreign negotiated settlement as a bar to prosecution in France over what is fundamentally the same underlying conduct. That court took an analogous decision in June 2015 in respect of other companies that had reached a foreign negotiated settlement over Oil for Food issues.

In February 2016, the Court of Appeal gave judgment in an appeal of the Paris Criminal Court’s July 2013 decision in Vitol. The Court of Appeal found as a matter of law that foreign negotiated settlements should be a bar to subsequent prosecutions in France, stating: “considering the growing risk of multiple prosecutions, it is legitimate for the protection of citizens seeking justice to follow the same logic. So, the lower court rightfully ruled in the context of the application of Article 14, 7° of the Covenant, and added that Article 6 of the Code of Criminal Procedure, which deals with the extinguishing of the charges with res judicata, makes no distinction as to whether res judicata is in France or abroad”.

However, on the specific facts of Vitol, the Court of Appeal found that the substance of the New York grand larceny charges was not coterminous with the French foreign bribery allegations. Consequently (the Court of Appeal said) there was no non bis in idem issue, and there was no bar to further prosecution of Vitol.

The Court of Appeal’s decision has been appealed to the French Supreme Court.

Similarly, the Paris Criminal Court’s June 2015 decision in respect of the other Oil for Food companies will be appealed to the Court of Appeal. In the meantime, the inability to form negotiated settlements in France, and the continuing ambiguity around how foreign negotiated settlements will be regarded in French law, presents companies with real dilemmas in determining whether to self-report corrupt conduct. Under these circumstances, there is a real risk that prosecutors will not be informed of corrupt schemes, and a chance to transparently and formally address them will be missed.

Page 15, OECD Foreign Bribery Report: An Analysis of the Crime of Bribery of Foreign Public Officials, OECD, 2014.

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Spotlight on: Switzerland Swiss law enforcement officers are presently engaged in a vigorous and wide-ranging investigation into allegations of bribery, corruption and fraud at football’s ruling body, FIFA. Many suspects have been arrested and a number of premises linked to FIFA and its officers have been raised.

Swiss authorities are co-operating with a number of other jurisdictions including the United States and France. There is an obvious determination among prosecutors to ensure that Switzerland is not a locus of international bribery, and that bribery and corruption is not a major risk for companies doing business in Switzerland.61 Despite this generally positive picture, the country has not – to date – provided businesses or prosecutors with a leading framework of anti-bribery laws. Specifically, Article 322ter et seqq. of the federal Criminal Code prohibits the bribery of Swiss and foreign public officials, and provides for significant criminal penalties upon conviction. But B2B bribery is not per se an offence under the Criminal Code. Instead, it can only be investigated as unfair commercial competition under Article 4a of the Unfair Competition Act. In 2012, the Federal Sports Office concluded that the emphasis on competition left the position around employees and officers of international sports organisations unacceptably ambiguous.62 Within the scope of the Unfair Competition Act, public prosecutors are entitled to commence an investigation only upon filing of a formal criminal complaint by a third party: in other words, it is not possible for a prosecutor to commence a B2B bribery investigation at their own initiative e.g. because they have received intelligence from an informant or foreign law enforcement agency.

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The position of individuals A further problem arises around the position of individuals who are accused of wrongdoing. In some jurisdictions, most notably the United Kingdom, Negotiated Settlements are only available to corporate entities and not individuals. In other jurisdictions, there is an increased emphasis on the prosecution of individuals, regardless of how a case against a corporation is resolved. This is particularly the case in the United States, where the Department of Justice has reoriented itself to targeting executives involved in corporate crime.

The prospect of settling the legal liability of the company while being unable to resolve the reputational, administrative and financial liabilities of having individual employees or officers prosecuted will be an unattractive one. The company will not be able to move on and learn from the issue if it remains embroiled in a practical sense with investigations or prosecutions of associated individuals. Under these circumstances, negotiated settlements are less likely to be a viable tool to comprehensively resolve allegations of bribery and corruption.

What voice for victims in developing countries?

The failure of negotiated settlements to be truly global has also been a criticism voiced by Transparency International, Corruption Watch and the UNCAC Coalition. Advocating the interests of developing countries, they argue that negotiated settlements around foreign bribery are often finalised without proper consideration of the impact on the countries which suffered the greatest harm from bribery.

The World Bank notes that 97% of bribery penalties were imposed by countries other than those whose public officials were bribed.

Furthermore, only 3% of those penalties were transferred to the countries whose public officials were bribed.63 More than USD 20 billion per annum is stolen from developing countries and hidden in industrialised countries every year, while only USD 197 million has ever been returned to those same countries as a result of foreign bribery settlements.64 The true victims of most foreign bribery schemes – the citizens of developing countries – see little in the way of restitution as a result of negotiated settlements.

Switzerland is considered a low risk jurisdiction in the TRACE Matrix that assesses global business risk in different countries. Switzerland is ranked as the 7th least corrupt jurisdiction in Transparency International’s Corruption Perceptions Index which examines perceptions of state corruption among civil groups.

“Swiss move to show corruption a red card”, Simon Bradley, SwissInfo, 05 December 2012.

Page 73, Left out of the Bargain: Settlements in Foreign Bribery Cases and Implications for Asset Recovery, Anyango Odour et al, Stolen Asset Recovery Initiative, 2014.

Page 78, Left out of the Bargain: Settlements in Foreign Bribery Cases and Implications for Asset Recovery, Anyango Odour et al, Stolen Asset Recovery Initiative, 2014.

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The risk of discretionary disbarment Negotiated settlements have traditionally been attractive to corporations because they usually do not involve a conviction for bribery or corruption being recorded, which would ordinarily disbar the offender from public procurement for a number of years. However, the incentives to self-report and reach a negotiated settlement may be weakened according to the provisions of the latest Public Procurement Directive of the European Union that came into force in February 2015.

This is because – as before – those convicted of a bribery offence face mandatory debarment from all public procurement. However, a corporation may also be disbarred on a discretionary basis if it “is guilty of grave professional misconduct, which renders its integrity questionable”.65 If a corporation admits to misconduct as part of a bribery-related negotiated settlement, and if the public body is aware of those admissions (perhaps because competitors have gleefully drawn it to the public body’s attention), then the corporation could end up debarred from public procurement even when one of its objectives in reaching a settlement was to avoid debarment.

Corporations who rely heavily on public procurement should see this (and analogous provisions in public procurement rules outside the EU) as a significant risk. Landmark bribery-related negotiated settlements are often in sectors such as arms manufacturing,66 telecoms67 and pharmaceuticals68 precisely because they are so dependent on state procurement. If negotiated settlements are not seen as reducing the uncertainty around debarment, then corporations may be tempted simply not to self-report their conduct in the first place.

Spotlight on: Switzerland (cont) This potentially exposes corporations to the risk that its employees or officers could be secretly bribed to act against the company’s interests and if it does not file a complaint itself (because it is unaware or because the corrupt individual prevented it), nothing would be done. A 2011 report by the Council of Europe’s Group of States Against Corruption recommended repeal of the requirement for a criminal complaint before investigation.69 Finally, the maximum penalties applicable upon conviction for breach of Article 4a of the Unfair Competition Act are lower than for the bribery offences in the Criminal Code.

In response to these perceived weaknesses, the federal parliament recently passed the so-called “Lex FIFA”, a law to reform the Criminal Code. The Lex FIFA created a per se B2B bribery offence (i.e. regardless of whether the conduct took place in a context of competition), fixed the maximum penalties for B2B bribery as three years’ imprisonment, and ensured that private associations and sports federations would both be covered by the B2B offence.

Also, parliament allowed prosecutors to commence major bribery investigations at their own initiative.

It is unclear when the reforms will actually come into force. To date, most media attention has been focussed on the impact of the Lex FIFA on international sports organisations based in Switzerland, of which there are at least 60. It is true that in recent years UEFA (football), UCI (cycling) and the International Olympic Committee have all been affected by corruption allegations of the type that could be investigated under the reformed Criminal Code. However, Switzerland is also a popular location for commodities trading houses, financial institutions and EMEA headquarters, which are often required to do business in high bribery risk markets outside Switzerland.

Consequently, we expect the Criminal Code reforms will lead to an increase in the number of B2B bribery investigations commenced by Swiss prosecutors.

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66 67 68 69

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Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC, Official Journal of the European Union, L 94/95, 28 March 2014.

For example the BAE Systems and Lockheed Corporation negotiated settlements.

For example the Alcatel-Lucent and Siemens negotiated settlements.

For example the Novo Nordisk and Pfizer negotiated settlements.

Third Evaluation Round Evaluation Report on Switzerland on Incriminations, Council of Europe GRECO, 21 October 2011.

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Spotlight on: Germany The healthcare sector bears a higher bribery risk than many other sectors.

Probably the most important reason for this is that (outside the USA) most healthcare products are approved, shortlisted and/or purchased by statefunded healthcare systems. The relevant gatekeepers for these sales are doctors, hospital directors and health ministers, but they are neither using the products themselves nor spending their own money. These factors create an environment where gatekeepers are more likely to request or be offered bribes in return for sales. As those gatekeepers are considered public officials under most foreign bribery laws, regulators have targeted pharmaceuticals companies and there have been a number of major enforcement actions arising from exactly such circumstances.70 For example, SciClone paid penalties of USD 13 million after doctors and hospital administrators were bribed with travel, hospitality and cash gifts;71 Eli Lilly paid USD 29 million after bribes were paid to health ministry officials by way of bogus market research arrangements;72 and Novartis paid USD 25 million after physicians were paid secret commissions to prescribe its drugs.

In this global context, the position of Kassenärzte under German anti-bribery law is anomalous: these physicians are formally self-employed but treat patients within (and are remunerated by) the public health insurance system.

The Federal Court of Justice has held that Kassenärzte are not public officials for the purposes of articles 331 and 332 of the Criminal Code which prohibits public officials from accepting bribes, but neither are they businesspeople for the purpose of article 299 of the which criminalises B2B bribery.

Consequently, pharmaceuticals companies and other healthcare market participants could not be prosecuted under criminal anti-bribery laws if they were found to have provided Kassenärzte with cash, favours or gifts.

Although certain civil actions were still available (under the law against unfair competition, the physicians’ professional law, the social law and industry codes), this situation was widely seen as creating uncertainty. The federal government has now proposed to address this issue by adding new provisions to the Criminal Code which will criminalise passive bribery and active bribery respectively.73 The proposed reforms will specifically extend the B2B bribery provisions to all state-regulated healthcare professions, including all academic health professionals such as physicians, dentists, veterinarians, pharmacists, psychological psychotherapists as well as child and youth psychotherapists.

Non-academic health professionals including nurses and physiotherapists will also be included. No distinction will be made between employed and freelance professionals and between statutory and private health insurances.

These proposed reforms are now before the federal parliament and should be passed shortly. We believe that this will bring German law into line with global best practice and provide greater certainty to healthcare companies and professionals alike.

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See for example the remarks of Andrew Ceresney, the Enforcement Director of the US Securities and Exchange Commission, to the 2015 Pharmaceutical Compliance Congress: “FCPA, Disclosure, and Internal Controls Issues Arising in the Pharmaceutical Industry”, Speech, Ceresney/US Securities and Exchange Commission, 03 March 2015.

“SciClone Announces Final Resolution With The Securities And Exchange Commission And The Department Of Justice”, Press Release, SciClone Pharmaceuticals, 04 February 2016.

“SEC Charges Eli Lilly and Company with FCPA Violations”, Press Release, US Securities and Exchange Commission, 20 December 2012.

Articles 299a and 299b.

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Chapter 4: Growing your business means addressing the issues

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Dotting the Is and crossing the Ts Modern, sophisticated investors will now consider bribery and corruption issues before entering into mergers and acquisitions. This is wise in the light of issues around successor legal liability, the risk of buying business that might turn out to be far less valuable than described, and the reputational issues that might arise acquiring an unethical business.

This is clearly on the minds of many respondents to our research, who expressed concern over the effect that discovery of bribery or corruption in their organisation could have on potential investors. Moreover, if bribery and corruption issues were to be discovered during the due diligence process, the price a buyer would be willing to offer would be substantially reduced.

However, there is no consistency on this issue between board members.

81% of finance directors say they conduct anti-bribery due diligence on deals, while only 43% of operations directors agree.

of respondents said they conduct specific anti-bribery due diligence for M&A activity

Fear of the unknown As well as exploring M&A opportunities, almost all respondents said they plan to do more business with developing markets during the next five years. However, this potential for growth is being held back due to fears of doing business in particular countries. CEOs were the most risk averse, with 77% avoiding certain jurisdictions for commercial activities. Respondents in China were even more cautious, with 88% ruling out certain jurisdictions as too risky.

Respondents cited multiple and varied reasons for avoiding certain countries, including: – threat of terrorism / violence

of respondents said they would avoid doing business in certain jurisdictions

– economic / political instability – cultural differences – scarcity of resources / raw materials

75 76 77 78 79

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Outrage over bribery and corruption has caused a wave of popular dissent across Latin America. In Guatemala, tens of thousands of people took to the streets to express their fury over a corrupt duty evasion scheme known as “La Linea”.74 The International Commission Against Impunity in Guatemala concluded the corruption was directed from the highest echelons, and Vice President Roxana Baldetti and President Otto Perez Molina resigned and were arrested on bribery charges.75 In Chile, allegations of corrupt conduct by members of President Bachelet’s family caused her approval rating to plummet and led to calls for her resignation.76 And in Honduras, torchlit demonstrations took place after allegations that patients in the state healthcare system had died due to drug shortages while USD 350 million was embezzled from hospitals77 – including improper transfers to campaign funds.

But nowhere have bribery allegations had a more dramatic effect than in Brazil.

Operation Carwash is an ongoing federal police investigation into bribery, fraud and corruption at Petrobras, the state-owned oil company. Project Carwash is a hybrid of public sector and B2B corruption.

Investigators allege that contractors formed a bid rigging conspiracy to raise the price Petrobras paid for construction; in order to keep the cartel on track, bribes were paid to Petrobras employees, politicians and government employees. Prosecutors estimated the bribes could total more than USD 5 billion.78 Even Brazilians inured to corruption were shocked, and millions took to the streets to demand President Dilma Rousseff’s removal.79

– labour shortages – transportation issues due to geography

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The question for companies operating in

“An End to Impunity in Guatemala?”, Mike Allison, Al Jazeera, 29 June 2015.

“From President to Prison: Otto Pérez Molina and a Day for Hope in Guatemala”, Francisco Goldman, The New Yorker, 04 September 2015.

“Chile’s President Michelle Bachelet Approval Sinks Over Economic Malaise, Corruption And Stalled Reforms”, Brianna Lee, International Business Times, 16 September 2015.

“How hitmen and high living lifted lid on looting of Honduran healthcare system”, Nina Lakhani, The Guardian, 10 June 2015.

“Petrobras corruption scandal could reach US$ 5.3bn”, MercoPress, 12 October 2015.

“Millions join Brazil impeachment chorus in threat to Rousseff”, Anna Edgerton and Raymond Colitt, Bloomberg, 14 March 2016.

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Spotlight on: Brazil (cont) Brazil now is whether the Project Carwash allegations and the stringent Anticorruption Law of 2013 have precipitated a genuine change in Brazilian corporate culture.

Our research suggests that the business community has hardened its attitude towards corporate corruption: fully 100% of Brazilian executives believed that their company’s top management would reject new business if there were bribery and corruption concerns associated.

Considering Brazil has been classed as a high bribery risk market,80 this is a surprising finding: has the public revulsion at the scale of the bribery alleged in Project Carwash translated into a fundamental shift in the way business operates?

Perhaps not: our Brazilian respondents were also twice as likely to worry that aggressive targets set by management would induce employees to use bribery as a short cut to growing business: 42% of respondents held that concern, compared to only 19% of respondents worldwide. Under these circumstances, is seems possible that some Brazilian businesspeople could revert to the “bad old ways” when the pressure to close deals is applied.

Doing business in risky markets IIbn Battuta may have been the world’s first globaliser: between his birth in 1304 and his death in 1368, he criss-crossed Africa, the Middle East and Asia gathering and disseminating information about the cultural, religious and trading practices of the peoples he encountered. In doing so, he helped develop a global network of commercial and cultural exchange. Over the following six centuries, those global networks have continuously intensified to the point where, as Martin Luther King put it in 1967, “before you finish eating breakfast in the morning, you’ve depended on more than half of the world.”81 It is therefore no surprise that almost all respondents to our survey see further engagement with new markets as critical to their companies’ continued success. In fact, developing markets may be more important than ever: more than 40% of the world’s population lives in developing countries and the World Bank expects developing markets to grow twice as fast as high-income countries in 2016.82 But high-growth developing markets also tend to bear higher bribery and corruption risks.83 Each of the once-lauded BRICS economies has been blown off course by corruption scandals, perhaps none more so than Brazil ([[see sidebar]]). So how can corporations grow their business in developing markets without becoming entangled in corrupt conduct?

For companies doing business in Brazil, there is a unique opportunity to capitalise upon the post-Carwash sentiment of businesspeople and civilians alike. Those who are able to show a track record of anti-bribery will find it easier to be accepted as trusted business partners; those who proactively engage with their employees around training and whistleblowing will find a newly-receptive audience; and most importantly, those who learn from the lessons of Petrobras can avoid the legal and reputational firestorm that has enveloped that company.

80 81 82 83

See the TRACE International Gobal Business Bribery Risk Index.

“A Christmas Sermon on Peace”, Rev Martin Luther King Jr, The King Center, 24 December 1967.

See table on p.4, Global Economic Prospects, World Bank Group, January 2016.

“Quantitative relations between corruption and economic factors”, Shao et al, The European Physical Journal B, 12 April 2007 (Eur. Phys. J. B 56, 157–166 (2007))

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Beneath the surface The business response to bribery and corruption 2016

How should corporations measure risk anyway?

In order for anti-bribery measures to be effective and efficient, they have to be focused on the markets that pose the highest bribery risk to the company. Individual businesses often find it difficult to identify those markets for two reasons.

First, there is not yet an established and satisfactory index that measures the bribery risk posed to international businesses around the world. We have observed many companies that look at a country’s ranking on the Corruption Perceptions Index (CPI). Compiled by the international nongovernmental organisation Transparency International since 1995, the CPI compares civic organisations’ subjective perceptions of corruption in the public sectors of different countries. The CPI is certainly the best known bribery index – but it may not be the perfect tool for informing business decisions. That is because bribery affects citizens and corporations in different ways, and works differently in the public and private sectors. Consequently, the intensity and nature of citizens’ subjective concerns reflected in the CPI may be different from those of international businesses.

The World Bank’s Worldwide Governance Indicators report takes a different approach to the CPI in that it aggregates objective metrics that indicate the quality of state governance. This includes production of a specific control of corruption metric across most countries of the world.

Better control of corruption (and state governance generally) should be associated with a lower corruption risk posed to corporate investors, so corporations should find this report informative. Yet its utility may be limited by its orientation to civil society concerns and the fact that the last analysed data appeared in 2014.

Rand Corporation and TRACE International have attempted to plug the information gap by producing a specific tool for measuring the bribery risk posed to international investment. By analysing indicators of concern, the Global Business Bribery Risk Index (GBBRI) provides figures that are particularly useful to international business. This has produced some interesting findings: Brazil, for example, is seen as posing a significantly higher bribery risk to businesses (as measured by the GBBRI) than it does to private individuals (as measured by the CPI). Yet thus far, only 2014’s data has been published and the next report is scheduled for late 2016. It remains to be seen whether the GBBRI will develop into an established tool for business.

Spotlight on: Hong Kong Until recently, companies in Hong Kong regarded the US Foreign Corrupt Practices Act as the only game in town. This reflected the fact that for many years the United States was the only jurisdiction to consistently enforce its foreign bribery laws across Asia. Moreover, half of all US Foreign Corrupt Practices Act corporate enforcement actions in 2014 and 2015 involved Asia. Most companies in Hong Kong developed their anti-bribery programmes to reflect the requirements of US law, and paid little attention to other jurisdictions’ anti-bribery laws. But in doing so, have they unwittingly exposed themselves to risk in the light of changing enforcement trends?

We believe that two emerging trends suggest the answer is yes. Domestically, the Prosecutions Division of the Hong Kong SAR Department of Justice has become increasingly assertive in enforcing the Prevention of Bribery Ordinance (POBO), Hong Kong’s primary anti-bribery law. A greater number of prosecutions have been brought in recent years, and the penalties applied by Hong Kong courts have increased in severity. (An offender may be fined HKD 500,000 and imprisoned for 10 years.) While POBO enforcement action is still focused on individuals, corporate entities may also be prosecuted under Hong Kong law.

Internationally, the recent enforcement actions against Standard Bank (which received a penalty of USD 33 million) and Sweett Group (which received a penalty of GBP 2.2 million) placed the UK’s Bribery Act into the spotlight. The Standard Bank action attracted particular attention in Hong Kong because the bank became a subsidiary of the Chinese ICBC after the problematic conduct took place. If the UK Bribery Act was previously seen as a paper tiger, it now seems to have real teeth.

The implications of ignoring Hong Kong and UK law are significant. A practical example is the potential response to the bribery risk of hiring so-called “Princelings”: the offspring of influential decision makers.

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Spotlight on: Hong Kong (cont) P Morgan and Qualcomm paid high penalties after US regulators established they had hired Princelings to win business from state entities under their parents’ control. A number of other, similar investigations are ongoing.

An FCPA-centric response to Princelings would probably consist of screening prospective employees for connections with public officials (including senior employees of state-owned enterprises) and creating an information barrier between a Princeling employee and work performed for their parent’s organisation so the employer cannot be accused of receiving an advantage in return. But this does not fully cover the bribery risk.

Secondly, even where it is possible to get an idea of the bribery risk associated with a country as a whole, that prevalence may not reflect the bribery risk attached to investment in a particular sector. In our experience of bribery risk often varies significantly between industries: for example, a telecoms operator that is dependent on government for allocation of number blocks and spectrum will often face a higher bribery risk than a manufacturer of an unregulated non-consumer product.

In the absence of a single number that quantifies the bribery risk, the decision about whether to proceed will have to be made based on the judgement of a company’s key executives. That decision can best be made when there is a shared understanding of the corporate culture in respect of bribery risk (a topic we discuss in Chapter 2), a business plan that considers bribery issues from the start, and an understanding of how the company has successfully managed bribery risk in the past.

Unlike the FCPA, the POBO and UK Bribery Act also criminalise B2B bribery.

Consequently, it would be an offence under both these laws to hire a Princeling if the intention was to improperly influence the private sector company managed or controlled by the parent. The appropriate response to Princelings would need to involve screening for personal connections to not only government officials and managers of state-owned enterprises, but also privately-owned future or ongoing customers. Moreover, the POBO prohibits the sweetening of a public official (to maintain an overarching relationship even in the absence of identifiable business or business advantages). The FCPA-inspired information barrier method would fail as it does not matter whether there was an intent to obtain business. However, even simply to offer the Princeling employment to sweeten the public official would breach the POBO. What the Princeling example demonstrates is that anti-bribery programmes that are overly focused on FCPA compliance may result in companies doing business in Hong Kong having inadequate controls and being exposed to unacceptable levels of risk.

Instead of levelling down compliance to the standards of the FCPA, it is much better to adopt the highest standards applicable to the business worldwide and roll that out across the organisation.

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Beneath the surface The business response to bribery and corruption 2016

Not just whether to invest, but how?

When launching or reviewing business in high risk environments, companies have a choice about how they can structure their investment in order to mitigate bribery risk. The most significant issue to consider is the degree to which local actors will play a role in the business. In some markets (particularly in the Middle East), there is great external pressure to partner with a local investor. In others, it may simply be seen as a way of reducing start-up costs, gaining market knowledge and leveraging local networks.

The risk is, of course, that your partner does not share your compliance values and that their success on the market to date has resulted from bribery. Even aside from the reputational and commercial liabilities, corrupt conduct by your joint venture partner can easily create legal liability for you – even if you are unaware of it.

A further significant consideration revolves around the use of agents and other third parties. Almost 54% of foreign bribery cases involve the use of such persons to pay bribes.84 In some cases, those entities were deployed precisely for the purpose of engaging in corrupt conduct, but on other occasions, the business simply failed to have proper oversight of their activity. The use of agents in high bribery risk markets should only take place where there is a sound business case for their use and where their activity can be closely monitored.

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More generally, companies can mitigate and more closely monitor bribery risk by taking practical steps such as: – taking in-house certain functions that involve frequent or high risk contact with government agencies, even when those functions are usually performed by third party service providers e.g. customs clearance, product certification – scheduling compliance audits and trainings on a risk-sensitive basis so that business units in higher risk jurisdictions are reviewed more frequently – reducing or eliminating the use of agents or third party representatives, especially for sales to public institutions – ensuring that employees in the high-risk market have frequent contact and support from colleagues in other markets. This reduces the risk that local employees will feel isolated from the rest of the organisation and are unable to raise concerns about potentially improper conduct

Page 29, OECD Foreign Bribery Report: An Analysis of the Crime of Bribery of Foreign Public Officials, OECD, 2014.

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Spotlight on: Singapore Companies based in Singapore often serve as hubs for the whole Asia-Pacific region: for them, the greatest anti-bribery challenge can be ensuring employees across multiple jurisdictions and business units share the same values. We spoke to a professional with real insight into this important topic: drawing on her extensive experience as a General Counsel and Director, she explained how she strengthened her company’s anti-bribery culture across Asia-Pacific and worldwide:

felt strongly that we had obligations as professionals over and above just complying with the criminal law.

“Tone from the top is critical: my CEO was on board, and I helped him prepare a personal anti-bribery message to all our employees. We explained not only that we had to comply with anti-bribery law, but that we rejected bribery as a value. Our message was positive: “we will provide you with the support you need to do your business in an ethical and legal manner”.

There was a breakthrough when we rejected a business opportunity because the bribery risk was too high – and then we explained that decision to the employees involved. We demonstrated that when push came to shove, we put our long-term values over short-term gain.

“Fundamentally, I think that most employees are good people who want to do the right thing, but in large organisations there will always be some people who make poor choices. The critical moment is what happens after those poor choices: an organisation with good corporate culture will be resilient and will be able to resolve the consequences of those choices, but in an organisation with poor corporate culture those choices can become a systemic practice or an existential threat.

“The support of the CEO and the Board improved take-up across different regions and business units. Some people initially said “you corporate guys don’t know it works here”, but if you make a business case for change people will listen. As general counsel, obviously I saw bribery as a legal risk, but it was a commercial issue too: our brand and our integrity were critical to our commercial future. I think the “social licence to operate” concept was highly relevant to us: we needed the confidence and support of the communities in which we operated, and we

“When you operate across multiple jurisdictions, you have to understand all the legal regimes upon you – and then pick the toughest applicable regime as the base level for compliance across the whole business. Right now, I think that’s the UK Bribery Act, but standards are always improving.

“Employees want more than a paycheck from their job: they want to build something of which they can be proud. So when you’re responding to ethical problems, you have to be aware your response could really impact your colleagues’ sense of self-worth and purpose. When people were dismissed for ethical lapses, we told our workforce: that deterred some employees from transgressing, but more importantly it sent the message that if employees raised concerns, the company would take them seriously and act upon them. And once we showed that, employees initiated more conversations with the legal team – not just about anti-bribery, but also about compliance and legal issues generally”.

Spotlight on: United Arab Emirates Companies operating in the UAE face an anti-bribery conundrum: the domestic bribery risk is low but the bribery risks faced by the typical UAE-based company can be rather high. This apparent contradiction arises as a result of the country’s unique place in the world and the cross-border activities conducted by most UAE companies. Anti-bribery legislation in the UAE is generally sufficient for the protection of businesses. At a federal level, articles 234-239 of the Penal Code prohibit bribery of domestic public officials and businesspeople, and a person convicted of bribery may be fined and imprisoned for up to ten years.

Anti-bribery is recognised as a developing area and the Penal Code is supplemented by other federal and Emirate-level laws. In the Emirate of Dubai, Articles 118 to 122 of the Dubai Penal Code prohibit bribery of domestic public officials, and the Dubai Financial Fraud Law criminalises the receipt of illicit funds (which would include bribes) and the fraudulent receipt of public funds (which would include funds received from state-owned enterprises).

The country performs well on the relevant corruption indices: Transparency International ranks the UAE alongside France as the 23rd “cleanest” country in respect of public sector bribery and TRACE International considers the UAE to be a country that poses a “low” bribery risk to businesses – lower than Portugal and Spain, for example. In each case, these ratings are better than any other country in the Middle East.

However, the relatively tranquil bribery landscape in the UAE cannot be divorced from the UAE’s regional context.

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Foreign trade is hugely important to the UAE economy; a sophisticated outward-focused financial market exists in the UAE; and international companies often use Dubai as an operational hub for the region. Consequently, companies doing business in the UAE also need to consider the bribery risk posed by the economies with which the UAE is closely connected – and those economies are often significantly riskier than the UAE. For example, the UAE has often acted as a trading post and financial service centre serving customers in Iran, Iraq, Pakistan and Sudan, each of which is a high bribery risk jurisdiction. Moreover, the sanctions and export control regimes that target certain economic actors in those countries provide an added motive for corrupt transactions.

The UAE does not yet have a federal law that prohibits the bribery of foreign public officials or businesspeople outside the UAE. However, much (if not most) foreign bribery by UAE persons and entities will be illegal as a result of the extraterritorial operation of foreign anti-bribery laws – for example because they are subsidiaries or agents for foreign companies, because their employees are citizens of foreign states (more than 80% of UAE residents are expats),85 or because the transactions are conducted through foreign correspondent banks.

Under these circumstances, companies located in the UAE face a significant bribery risk even when the UAE itself is not a particularly risky environment. As always, an adequate understanding of an organisation’s exposure to high risk activities and markets will be critical to managing that risk.

“Give expats an opportunity to earn UAE citizenship”, Sultan Sooud Al Qassemi, Gulf News, 22 September 2013.

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Conclusion Our research has shown that the international business community has good awareness of bribery and corruption as overarching concerns. There is also recognition that bribery is a commercial risk as well as a legal one, and that anti-bribery policies are designed to protect the value of a business. Business leaders are also aware that investigations and prosecutions for bribery are taking place in greater numbers and in more jurisdictions than has been the case previously.

However, business leaders are also aware that addressing those issues is not always easy. Developing anti-bribery policies that are practical requires thought and planning. Spreading awareness among colleagues and sending the right “tone from the top” requires a concerted effort. Responding to concerns once they have arisen often involves accepting short-term pain to protect long-term gain.

As we have discussed throughout this report, there are practical anti-bribery tools that can be deployed. We believe the most effective anti-bribery tool is also the simplest: the conversation. If you’re a business leader, we would encourage you to open a dialogue with front line business units.

Starting points for those conversations could be: – do we really understand how our anti-bribery policies relate to the laws of the countries we work in – and to the business we do there?

– how would we respond to a whistleblower, a prosecutor, a journalist or an investor who had concerns about the way we do business across multiple countries?

– do we think that all our colleagues share our values – or what they would do if they thought we had breached ours?

– are we missing commercial opportunities because our compliance procedures are less sophisticated than our ability to manage risk?

The responses you get might be surprising, shocking or reassuring.

We are ready for a more sophisticated conversation around bribery and corruption – will you join us?

Neill Blundell (UK, Brazil)

Jack Cai (China)

Sophie Scemla (France)

Joos Hellert (Germany)

Leonie Tear (Hong Kong and Singapore)

Mariafrancesa de Leo (Italy)

Neil O’Mahony (Ireland)

María Hernández (Spain)

Monika McQuillen (Switzerland)

Rebecca Copley (UAE) 42

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eversheds.com ŠEversheds LLP 2016 Š Eversheds International 2016.

All rights are reserved to their respective owners.

Eversheds International is an international legal practice, The members of which are separate and distinct legal entities DT05954_04/16 44

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WHEN IT COMES TO AVIATION RECRUITMENT, THE CANDIDATE NOW HOLDS THE POWER The tables have turned in a once inspirational industry, where qualified airline and airport staff can now take their pick of the top aviation roles, according to a new report.

The report, carried out by aviation people experts AeroProfessional, took in the views of over 1,600 candidates who work in the industry, revealing surprising results.

More than 70% of candidates surveyed said that they have had more than one job offer on the table at the same time, with 34% confirming that they rejected a job offer after accepting it. Meanwhile, over half of respondents stated that they had left a job within a year of starting, with 18% staying in a role for just a month before moving to a better opportunity.

The survey results suggest that candidates are spoilt for choice, which is cause for concern for airlines and airports who still believe that they have their pick of the best staff.

Sam Sprules, a director at AeroProfessional, comments: “The results may come as a surprise to many airlines, but its shows that the industry is constantly growing, and we’re in a position where there are more jobs than suitable staff. As airlines aren’t speaking to candidates regularly, and only really know what’s going on in their business, they’re not aware of the bigger picture. Some still believe that aviation is this glamorous, sought after industry that everyone aspires to join.

“However, ignorance isn’t bliss. The aviation recruitment process is lengthy and expensive.

For example, flight simulator training for pilots costs thousands alone, and for other roles a lot of time is invested in whittling down candidates, reference checking and processing applications. So airlines simply can’t afford to ignore this trend.”

Sam suggests some tips to tackle the recruitment roadblock: “Keeping candidates informed of the process is vital, as they’ll feel like they’re more than just a number. Ask them about any reservations they may have about the role, and seek feedback if they do reject your job offer. If you give them a positive experience, they’re more likely to give you constructive feedback, which will help inform your future recruitment process, and help save you time and money.”

For the full report and further advice on how to address the issues highlighted, download ‘Why candidates don’t want your job’ at http://goo.gl/iYAiP7

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Why Candidates Don’t Want Your Job (and what you can do about it)

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INCREASED PUBLIC INTEREST IN HEALTHY LIVING HAS BOOSTED DEMAND FOR VMS PRODUCTS AND NUTRACEUTICALS The latest issue of Clearthought, which covers M&A activity and key trends in the global Vitamins, Minerals & Supplements market, is now available from Clearwater International’s Consumer team.

Increasing take-up levels of sport, alongside huge growth in global demand for natural ingredients, has combined to make the VMS sector particularly attractive to investors today.

What is most significant is that the market has become mainstream, no longer the sole domain of male bodybuilders or a few health fanatics. Instead, VMS products are used widely by consumers of all ages who are looking to improve and maintain good health and fitness.

The resulting surge in deal activity is far from over and we expect to see further M&A in this fast-moving market over the year ahead. We expect current suppliers will continue to consolidate the market and increase their geographic coverage whilst new entrants, typically established food industry operators, will look to higher growth markets.

Clearwater International’s consumer team have completed over 177 transactions, with a total value of €5.3bn, reflecting the global reach and in-depth market knowledge within the sector team.

For the full report download at http://goo.gl/K9qrTl

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Consumer Insights from Clearwater International

2016

clearthought Vitamins, Minerals & Supplements

Increased public interest in healthy living has boosted demand for VMS products and nutraceuticals

A global phenomenon M&A activity The market has seen major M&A activity across all channels driven by: • Established players consolidating and expanding geographic reach and/or growing their VMS product offering as more traditional food companies combat sluggish growth in their own markets; • Multinational FMCG (Fast-Moving Consumer Goods) companies looking to acquire/enter high growth niche categories such as VMS;

The VMS market

Nutraceuticals

Vitamin and supplement manufacturers develop products that contain ingredients which supplement the diet. These products can include: vitamins and minerals, speciality dietary supplements, herbs, protein powder, meal replacements and weight loss products, and speciality and elite sports nutritional products¹.

The sector has been further driven by booming demand for ‘nutraceuticals’, namely food and drinks with potential health benefits.

The surge towards natural flavourings and ingredients has become one of the largest and fastest-growing consumer trends of our time, while the market for ‘free-from’ products made with ingredients such as soy, corn and rice flours - has soared.

Increasing take-up of sport and the use of gyms, alongside growing interest from consumers in healthy products made from natural ingredients, is particularly driving huge global growth in the VMS sector.

What is most significant is that the market has become mainstream, no longer the sole domain of male bodybuilders or a few health fanatics. Instead, VMS products are used widely by consumers of all ages who are looking to improve and maintain good health and fitness. These products have become especially popular in the fast-growing triathlon, running and cycling markets.

The entire global dietary supplements market is expected to reach $84.8bn² (¤76.3bn) by 2020 with annual growth of 5.3%. The US vitamins and dietary supplements market alone reached $27.2bn³ (¤24.5bn) in 2015.

How VMS products are actually consumed and purchased has also been fundamental to the growth of the market, especially in terms of the move from powder-based products to convenience products such as ready-to-consume beverages and bars.

• VMS being an attractive sector for Private Equity as the market is fragmented and consolidating. It is sustaining double digit growth and mature enough to provide a stable return for investors; • Raw material, mineral and ingredient suppliers and processors suffering from volatility and pricing risks in commodity products, and therefore moving into lower volatility, highervalue-added products such as the VMS market; and • Low interest rates, easy access to debt, strong corporate balance sheets, and robust capital markets. ¹ IBISWorld: Vitamin & Supplement Manufacturing Market Research Report 2016

² Persistence Market Research: Global Market Study on Dietary Supplements, April 2015

³ Euromonitor International: Vitamins and Dietary Supplements in the US, December 2015

E-commerce has also played a huge role in driving the market, facilitating the mass market distribution of historically niche VMS products.

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PROTEST DEBT ON THE RISE AMONGST UK CONSUMERS UK consumers are increasingly standing up to poor performing service providers by purposely withholding payments, according to new research - with 48% saying they had withheld or defaulted on payments in the past as a result of poor customer service or billing issues.

The survey of 1,500 households, by Echo Managed Services, revealed a number of reasons for debt outside of consumers simply not having the financial means to pay. Almost 1 in 3 people hadn’t paid because the bill was incorrect or higher than expected; 14% because the bill was difficult to understand or there was a mix-up with it; and 6% because they’d received poor service. Just 28% of people said that late or non-payment was as a result of not having the means to pay.

The research also revealed that higher income households are less tolerant of poor service, with 1 in 10 of those earning more than £40,000 per annum having withheld payment for this reason in the past, compared to just 1% of those earning less than £10,000.

Echo understands the importance of collecting outstanding payments and is now urging service providers to improve their billing processes and customer service standards, in order to mitigate some of the reasons behind avoidable debt and to avoid losing valuable customers in a market full of competition and choice.

“There are many reasons why people might not pay a bill and although a lack of income would be the obvious reason, our research clearly indicates that these days debt cannot be attributed solely to financial circumstances. Consumers are now much more aware of their rights and have the freedom to exercise them. They might be less tolerant of poor customer service or innaccurate billing, or think that failing to pay won’t necessarily lead to debt collection procedures, for example,” said Monica Mackintosh, customer services director at Echo Managed Services.

“That’s why it’s so important to understand customers and their reasons for missing payments so that the debt can be mitigated before it becomes an issue, or be resolved as quickly as possible. Making sure bills are clear and accurate, regular pre-bill customer engagement, and early intervention such as payment reminders are essential. In addition, a range of internal and external data sources can provide a strong indicator of customer behaviour and propensity to pay. But data alone does not provide the answer and should be used to support personable and empathetic customer service to ensure customers receive a positive experience” she added.

The report also revealed that although most customers do feel guilty about missed payments (59%), a surprising 3% think that regular debt is acceptable and 4% think it’s acceptable if they have more pressing needs, such as paying for an annual holiday. Over 1 in 4 think it’s acceptable to get into debt in extreme circumstances, while 6% think it isn’t an issue to be late with payments and that it causes no harm.

For the full report download at https://goo.gl/Qh97gc

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COUNTING THE COST OF DEBT RECOVERY

Research by Echo Managed Services. May 2016

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PRIVATE EQUITY DUE DILIGENCE TRENDS 2016 SURVEY The famous foreign policy dictum “Trust, but verify” could also be the motto of private equity limited partners (LPs), according to a just-released report from eVestment highlighting LP due diligence trends.

In the global survey, while 72% of LPs said they often trust the high-level performance numbers provided by private equity general partners (GPs), 75% of LPs said they always or often recalculate those manager-provided numbers as part of their due diligence process.

As one survey participant said, recalculating those numbers is “a required process as part of both fiduciary responsibility and our own understanding.” Another said “Every once in a while, you’re going to find something that doesn’t quite makes sense, so it’s important to go through the process.”

Highlighting LP’s desire for standardization in GP performance reporting, 73% of respondents disagreed with the statement “It is easy to compare one fund manager’s performance numbers with another on a fair and consistent basis.” Five percent strongly disagreed with that statement. Only 22% agreed and no respondents strongly agreed with that statement.

Institutional investors are also undertaking more due diligence in general on private equity investment decisions. Forty-three percent of respondents are increasing their amount of quantitative due diligence and 61% are increasing their amount of qualitative due diligence.

“Private equity is attracting more interest from institutional investors and those investors have increased requirements for standardized information and due diligence,” said eVestment Director of Private Equity Solutions Graeme Faulds. “With the information needs of LPs increasing, GPs who hope to win mandates need to be prepared to be transparent with their past performance.”

Some other interesting findings from the survey include: LPs with less private equity assets under management (PE AUM) say they are more trusting of manager-reported numbers. 80% of LPs with less than USD1 billion PE AUM said they often trust performance, compared to only 44% of LPs with more than USD5 billion PE AUM; A vast majority of LPs (93%) want private equity fund managers to create value at portfolio companies with operational improvements, while very few were interested in value creation through financial engineering or market timing (21% for both – respondents could pick more than one answer); For the majority of LP respondents, due diligence levels don’t waiver when evaluating re-investment decisions. 60% of LPs carry out either the same or more due diligence on a manager they are re-investing with compared to a manager that is new to them; and Just over two-thirds (67%) of survey respondents carry out public market equivalent (PME) analysis, and half of them plan to increase their use of PME. The online survey was fielded to LPs in North America, EMEA and Asia, with respondents’ total assets under management over USD 3.4 trillion and private equity assets under management totaling over USD 140 billion. In addition to presenting the overall results, the survey parses results by geography and investor type and features a variety of verbatim quotes from survey participants who were contacted and interviewed by phone.

For the full report download at https://goo.gl/7YFOlt

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Industry Survey Private Equity Limited Partner Due Diligence Trends 2016

July, 2016

Summary Institutional investors in private equity continue to regard past performance as a critical element of their due diligence process. However, the majority of them will recalculate the performance numbers themselves as well as dig into what underlies the performance in a variety of ways. It is clear institutional investors are increasing the level of due diligence they undertake and this survey highlights some of the reasons why. We draw from respondents from a variety of firms across size, location and type to provide a comprehensive survey of institutional investors in private equity.

Highlights •

Participants reported total institution assets under management of USD 3.4 trillion and private equity assets under management of over USD 140 billion.

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Past performance is still a key driver of the LP investment decision making process, but the majority of respondents still don’t feel they can compare manager performance on a fair and consistent basis.

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Respondents are increasing their level of due diligence on managers, using increasingly sophisticated analysis such as PME.

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Private equity assets under management is a factor in the level of trust placed in manager-reported performance numbers.

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