GAMECHANGERS MAGAZINE FOUR / SEVENTEEN

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CONTENTS cover

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One third of financial institutions to acquire a FinTech firm in next 18 months

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BUY-SIDE CONSULTANCY PENTAGON APPOINTS SECOND INDUSTRY HEAVYWEIGHT

35 SENIOR HIRE IN TRANSACTION SERVICES FOR SMITH & WILLIAMSON GameChangers™ welcomes news and views from its readers. Correspondence should be sent to gamechangers@acq5.com For more information about GameChangers™ visit www.acq5.com/posts/ gamechangers/ GameChangers™ Copyright © 2017 GameChangers™ No part of this magazine may be reproduced, stored in a retrieval system or transmitted in any form without permission.

SAFE HARBOR The interviews in this publication may contain certain forward looking statements with respect to the financial condition, results of operations of the businesses profiled. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors which could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements and forecasts. The statements may have been made with reference to forecast price changes, economic conditions and the current regulatory environment. Nothing in these announcements should be construed as a profit forecast.

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60 INDUSTRY SPECIALIST TO HEAD UP HAWKSFORD'S FUNDS DIVISION

Entrepreneur nation -just over 4 million British workers will become self-employed

Four key trends in retail transformation in 2017 and what it means for skills development

52 Insurtech integrated to highlight why effective leverage of digital innovation is paramount to staying relevant

Accelerating Digital Wealth Management

TEAM David Rogan - President & Editor-In-Chief Jon Van Dyke - Editorial Director James Wiltshire - Publisher EDITORIAL J Robson - Editor-At-Large L. B. Kooler - Deputy Editor P Ramone - Senior Editor J LaRusso - Copy Chief M-C Fisher - Editorial Assistant B Sancheze - Senior Staff Writer ADVERTISING A Bott - Digital Advertising Director J Downey - Advertising Director Z Wolfel - Business Development Director C Thomas - Account Executive H Smith - Account Executive ADMINISTRATION A Kessler - Finance & Admin Director T Dolby - Technology Manager P Hughes - Operations Coordinator T. A. Black - Office Manager

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DUBAI INTERNATIONAL FINANCIAL CENTRE JOINS WORLD’S MOST INFLUENTIAL GLOBAL TAKAFUL FORUM Leading global financial hub is official Strategic Partner of 12th annual World Takaful Conference The 12th annual World Takaful Conference (WTC) will be convened by leading financial intelligence platform, Middle East Global Advisors, in strategic partnership with the Dubai International Financial Centre (DIFC).

To be held under the theme of “Stability, Authenticity & Technological Transformation”, WTC 2017 will build on its long-standing reputation for nurturing the development of the Takaful industry by facilitating thought-provoking discussions, actionable insights and connectivity.

The DIFC is the financial hub for the Middle East, Africa and South Asia, providing a world-class platform connecting the region’s markets with the economies of Europe, Asia and the Americas. It also facilitates the growth in South-South trade and investment.

The Centre offers all the elements found in the world’s most successful financial industry ecosystems, including an independent regulator, an independent judicial system with a common-law framework, a global financial exchange, inspiring architecture, powerful, enabling support services and a vibrant business community.

Speaking ahead of WTC, Ehsan Abbas, Chairman of Middle East Global Advisors, shared: “We are delighted to host the World Takaful Conference in strategic partnership with the DIFC Authority. At its inception 12 years ago, the DIFC was a founding partner and our long-standing partnership has been instrumental in enabling the Forum to develop its global proposition.”

Although Takaful markets have not grown in tandem with the sukuk and Islamic banking markets, the global Takaful sector is set to reach USD 20 billion by 2017, from USD 12 billion in 2011 (ICD Thomson Reuters 2014).

The industry is highly concentrated in the GCC and Southeast Asia with Saudi Arabia and Malaysia predominating the global market. Up until 2012, the industry grew at a CAGR of 10 to 12% in various key Islamic finance jurisdictions, and has exhibited a slowdown ever since. The challenging economic outlook along with a lack of awareness and underdeveloped regulatory frameworks constitute the main cause of this lackluster performance.

Speaking on DIFC’s partnership with the World Takaful Conference (WTC), Salmaan Jaffery, Chief Business Development Officer at DIFC Authority, said: “Islamic finance is a huge opportunity with US$ 2 trillion in assets globally and a potential market serving 1.6 billion Muslims. The DIFC is a global hub into the MEASA region, which houses the majority of this population, and Islamic Finance therefore remains a major focus area as we support the leadership of Dubai’s vision in establishing the emirate as the capital of Islamic economy.”

Mr Jaffery continued: “The Takaful industry faces significant competitive pressure in an already challenging macroeconomic environment. However, FinTech represents an incredible opportunity for the sector to gain competitive advantage by using advancements in areas such as artificial intelligence, big data, mobile technology, wearables, and telematics to develop new products, price competitively, manage risk, gain scale, improve distribution and drive profitability. Partnering with the World Takaful Conference allows the DIFC to encourage dialogue in these areas, thereby supporting the worldwide Islamic economy and helping it achieve long-term, sustainable growth.”

In 2016, WTC convened high profile guests and dignitaries from Dubai Islamic Economy Development Centre, Dubai International Financial Centre, Islamic Insurance Association of London, Insurance Authority UAE, PwC, Moody’s, EY, Swiss Re, Munich Re, Noor Takaful, Emirates RE and many more organisations.

HARMONIZATION OF INDUSTRY REGULATORY FRAMEWORKS A KEY THEME AT WORLD TAKAFUL CONFERENCE 2017 12th edition of conference to spearhead discussions underscoring the need for more collaboration amongst regulators and standard setters to address the prevalent fragmentation of the Takaful industry The 12th annual World Takaful Conference (WTC), convened by leading financial intelligence platform, Middle East Global Advisors, and held in strategic partnership with the Dubai International Financial Centre (DIFC) will gravitate around the theme of “Stability, Authenticity & Technological Transformation”.Owing to continued resilience in the estimated US$2 trillion global Islamic finance markets, the global Takaful market is expected to continue its double-digit growth momentum of about 14% in 2014 and is slated to cross over US$20 billion by 2017.

Undifferentiated strategies and intense competition are key factors that have adversely affected the short-term financial dynamics of operators in some markets. (EY Global Takaful Insights 2014) The absence of uniformity in regulatory frameworks is a pressing concern that obstructs a smooth way forward for the presently fragmented Takaful industry.

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BRIEF Keeping in line with the issue at hand, a host of sessions at WTC will gravitate around discussions with a strong focus on the standardization of regulatory and Sharia’ framework by industry facilitators, and how it is a pre-requisite to enhance growth.

Leading industry experts will analyse the challenges at hand and focus on coming up with effective suggestions with the ultimate aim of developing a convergence roadmap for regulators, operators and Sharia’ scholars.

WTC 2017 will build on its decade-long reputation for nurturing the development of the Takaful industry by facilitating thoughtprovoking discussions, producing quality research and generating actionable insights.

In 2016, WTC convened high profile guests and dignitaries from Dubai Islamic Economy Development Centre, Dubai International Financial Centre, Islamic Insurance Association of London, Insurance Authority UAE, PwC, Moody’s, EY, Swiss Re, Munich Re, Noor Takaful, Emirates RE and many more organisations.

WTC will take place on the 11th and 12th of April at the Dusit Thani Hotel, Dubai. The second day of the conference will take shape in the form of a dedicated stream InsurTech Integrated that will focus on the impact of disruptive technologies on the insurance industry. The stream aims to highlight the importance of developing digital proficiency amongst insurance operators in the light of stiff competition by spearheading a series of insight-generating discussions.

A LEGAL PERSPECTIVE ON THE GOVERNMENT’S BREXIT WHITE PAPER Following pressure from sections of Parliament and the public, Theresa May’s government has published a 77-page white paper document to set out a strategy for leaving the EU. But what does it add to what we already know? Stephen Chater, a solicitor at Postlethwate Solicitors, member firm of the UK200Group, explains.

The UK200Group is the UK’s leading membership association of independent chartered accountancy and law firms across the UK, whose firm’s act for a total of around 150,000 SME clients. Stephen Chater said, “In January 2017, the Prime Minister identified twelve key principles which are intended to form the basis for negotiating the UK’s exit from the EU (Brexit).

The Government has now published a White Paper, which aims to set out the basis for these twelve principles and the approach underlying them in developing a new strategic partnership between the UK and the EU. “In fact, although the White Paper is longer than expected (at more than 70 pages), it does not provide much detail beyond what was already available. It confirms some familiar points – that the UK will leave the single market, will end free movement of people and will no longer subscribe to the common commercial policy or apply the common external tariff.”

“It also emphasises some issues highlighting the Government’s intended ‘direction of travel’, such as terminating the jurisdiction of the European Court of Justice in the UK.” “The White Paper also makes clear that any free trade deal will require a dispute resolution mechanism. Various examples taken from other free trade agreements are listed in the White Paper, but there is no indication as to which version the Government might prefer.

“One intriguing feature follows the concern expressed in some quarters that what is being called the Great Repeal Bill (which will enshrine EU law in UK law following the UK’s exit from the EU) would confer powers on the Government to amend provisions without the need for Parliamentary scrutiny.”

“The White Paper makes it clear that most changes will require primary legislation and that individual bills will be laid before Parliament to determine the UK’s new immigration and customs systems. This process could bring to life some as yet latent opposition to Brexit on the Conservative benches, which might threaten the Government’s overall majority in some instances.”

“The Government maintains that it wishes to avoid a ‘disruptive cliff-edge’ on leaving the EU, but there is no indication in the White Paper about what would happen if no deal has been reached at the end of the two years of negotiation following the giving of notice under Article 50.”

“Apart from uncertainty over the mechanism for resolving future trade disputes between the UK and the EU, there are numerous other issues where the Government’s intentions remain unclear, such as whether powers currently exercised

by EU might be passed to devolved administrations and how the UK will ‘gain control’ of immigration. The White Paper considers the possibility of different deals on immigration for different sectors and regions, but the White paper simply invites interested parties to make suggestions as to how this might work.”

“The Government confirms that the UK will leave Euratom (the organisation which promotes the peaceful use of nuclear energy within the EU, but which is a legal entity entirely separate from the EU), but there is no indication of how cooperation on nuclear issues between the UK and other countries will be achieved after the UK’s departure.”

“The White Paper proposes ‘a practical solution that allows for the maintenance of the Common Travel Area’ (which allows free movement of people between the UK and the Irish Republic), ‘while protecting the integrity of the UK’s immigration system’. This is an extremely sensitive issue, and the Government’s aim has remained consistent since the EU Referendum without it providing any indication of how this might be achieved in practice.

“Unsurprisingly perhaps, the White Paper omits any mention of the financial contribution which will have to be made by the UK to EU central funds on leaving the EU, which has been estimated at around £60 billion.

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“In conclusion, the White Paper is a useful indication of the key issues facing the Government and its strategic aims, but it also serves to emphasise the magnitude of the challenges which have to be faced and the continuing uncertainties regarding how the future for the UK outside the EU will look in practice.”

The UK200Group, established in 1986, represents a significant group of trusted, quality-assured business advisers – chartered accountants and lawyers – who have over 150,000 SME clients in total. As such, the UK200Group acts as the voice for 1,899 charities, over 12% of all registered academies, more than 3,887 farms, 800 healthcare businesses and over 4,000 property and construction professionals. The organisation remains impartial on political matters, and presents the individual views of its members.

ACCOUNTING SERVICES FOR SMEs SET TO ‘BLOOM’ Bloom Accounts, a new, UK online bookkeeping and accounting services company has launched with offices in London, Hertfordshire and Gloucestershire. The concept behind Bloom is simple - it combines robust online technology with the personal touch of a team of experienced accounts and finance professionals and a flexible support structure. This means Bloom is able to provide a holistic, scalable bookkeeping, accounts, management reporting and forecasting service that can be easily accessed 24/7, through any computer or mobile device.

Bloom Accounts’ services start at just £289 per month without tying clients in to any long term commitment or contract. Friendly, hassle free and completely adaptable to the requirements of individual clients, Bloom Accounts is specialising in servicing the burgeoning SME sector and will be particularly targeting ‘time-poor’ owners and managers across a diverse range of business sectors.

Bloom Accounts was co-founded by seasoned financial services experts Peter Timothy, Michelle Phillips and Darren Phillips, who spotted a gap in the SME bookkeeping and accountancy services market. From years of experience they realised that in addition to requiring the ease and versatility of real-time access to day-to-day bookkeeping and accounting,SMEs also regularly required high end, one-to-one assistance and expertise on an ad hoc basis to help grow their businesses.

Bloom Accounts has been established to meet this requirement, providing one-to-one guidance from a highly experienced accounts and finance team to clients as and when they require it and covering areas such as year-end accounts, business finance, VAT and dynamic forecasting.

According to Bloom Accounts Director and co-founder, Peter Timothy, “I have spent a considerable part of my 25 year career working with SMEs.

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I hugely admire the energy and enthusiasm of small and medium-sized business owners and management teams, but also recognise that a lot more could be done to equip them with the real-time financial information and on-going advice that would help enable them to achieve their business goals.

Being on hand to provide this support as and when it is required is the foundation of Bloom’s proposition.”

SMES ARE MISSING OUT ON SALES THROUGH POSTCHECKOUT, APPS AND EMAIL Research conducted by performance marketing specialists Expressly revealed that less than 7% of small-medium businesses advertise on post-checkout pages, purchase confirmation emails or mobile app screens.

Unlike multinationals, SMEs overall are yet to harness up selling and cross-selling opportunities that post-checkout advertising messages present whilst the customer is still in ‘shopping mode’. Pay-per-click, cost-per-mille (per thousand impression) and other performance marketing standards are popular ways to acquire new customers, but smaller brands have bypassed less accessible avenues of customer reach.

A quarter of e-commerce managers felt that the current practices in online advertising could be more effective for both business and consumer.

Understanding their frustrations, and explains how industry giants such as Google’s AdWords and Facebook are lacking innovation in this area, ex-McKinsey consultant and cofounder of Expressly, Fabrizio Fantini, said: “SMEs are missing a trick in their marketing strategy.

The limitations of popular PPC and affiliate marketing programmes make it costly and complex for smaller enterprises to unlock the full potential of post-checkout, inapp and confirmation email ads in an intuitive way.

“Even when these channels are used, businesses can’t target the ads to a sufficient level.”

The study also demonstrated how less than a fifth (18.75%) of SMEs had partnered with another store for cross-selling purposes.

Non-competing, independent businesses have historically partnered in order to boost trade. But in the digital world, just 6% of small e-commerce businesses are part of an online affiliate marketing network. Large competitors such as Amazon, meanwhile, are major players in affiliate marketing.

Security problems (such as hijackers), and the difficulties of sourcing merchants with a relevant target market, are reasons for the slow uptake by SMEs.

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Predicting a change in the tide, Fabrizio continues: “Online alliances and affiliations allow two merchants to advertise to a parallel customer base with similar interests and demographics. They deliver a superior quality of leads compared to PPC, but complexities and trust issues hinder progress for smaller entities. It’s no surprise that corporates such as Amazon or eBay dominate the affiliate marketplace.

“There absolutely is room for revolutionary technology that cuts the legwork and costs involved in partnerships. That’s why we developed Expressly, so that SMEs can now forge strategic partnerships and agree on a fair cost-per-click to mutually increase their sales figures.

“Expressly invites e-commerce managers to try Expressly with their ‘500 free customers’ offer, extended until 28th February. Businesses register at www.buyexpressly.com, and embed a Powerlinks ad to their post-checkout page or email receipts, the 500-customer bonus will then appear in their account. The space will be populated with offers relevant to your customers, and each click will earn you credits towards free customer acquisition in the future.”

MAJORITY OF UK ACCOUNTANTS PLAN TO LEAVE THEIR JOB The latest data from the Chartered Institute of Management Accountants (CIMA) and recruitment specialist, Global Accounting Network, has found that 61% of UK-based qualified accountants plan on changing jobs in the next two years.

By comparison, 35% of Ireland-based accountants plan of switching jobs during the same period.

The survey, which collected responses from almost 8,000 CIMA members and student members, also found that almost half (48%) of accounting students are planning to move into a new role in the next 24 months.

The most frequently mentioned motivators for changing jobs amongst all groups were; financial reward, scope of the role and promotion prospects.

Furthermore, 7% of UK members who plan to take the next step in their careers have their sights set overseas, with Australia, New Zealand and Canada featuring as the most mentioned destinations.

Commenting on the findings, Adrian O’ Connor, Founding Partner at the Global Accounting Network, said: “It is no surprise that the majority of accounting professionals have aspirations to accelerate their careers in the coming months.

Demand for top accounting talent is positively booming and ambitious professionals are taking advantage of this landscape to reach for more rewarding opportunities with greater long-term prospects.”

“While this mobility is great news for organisations looking to further invest in their existing internal finance departments, it also serves as a warning to employers who wish to retain existing skills and expertise. Businesses must offer their current and potential employees a compelling employer value proposition, and communicate this effectively, if they want to keep their best people in this hugely competitive market.”

LAMONT PRIDMORE WARN HIGH EARNERS ABOUT HMRC RAIDS Higher rate taxpayers have been warned by leading Cumbrian accountants Lamont Pridmore to be vigilant over their tax affairs.

The warning comes after new data from HM Revenue & Customs (HMRC) shows that its Affluent Unit took an additional £438 million pounds of high earners.

Off the back of this success the Unit, which investigates the tax affairs of UK residents with an annual income of more than £150,000 or a net worth of over £1 million, is to gain an additional 20% funding boost from the Government.

Last year the Government also stepped up its pursuit of small to medium-sized business and in the year to March 2016 brought in an extra £468 million as a result.

Warning businesses and high earners, Lamont Pridmore’s Chief Executive, Graham Lamont said: “It is no secret the Government and HMRC are trying to close the UK’s expansive tax gap through targeting specific, sometimes vulnerable groups.

“It is commonly accepted that the gap for larger corporate firms has closed as far as it can without putting off inward investment to the UK, so now they have turned their sights elsewhere.”

Lamont Pridmore’s Head of Tax, Russ Cockburn, is a former HMRC Inspector of Taxes specialising in protecting high earners and SMEs from HMRC investigations, which puts the firm in a unique position to advise a wide range of businesses and individuals.

Chris Lamont, Partner at Lamont Pridmore, added: “Our Game Keeper turned Poacher Russ Cockburn is an expert in tax investigations and has a long history of helping clients.

“He can ensure that records are kept up to date and affairs are in order and not open to investigation.”

“We also offer a specialist Tax Investigation Service Protection Plan so that all fees are paid should the ‘taxman’ come knocking.”

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ENTREPRENEURS GENERATE £176 MILLION TURNOVER IN MIND BLOWING 2016 FIGURES FOR WORLD’S BIGGEST FREE BUSINESS ACCELERATOR • Entrepreneurial Spark launches impressive 2017 Impact Report • 3,152 jobs created by its entrepreneurs • 85% of businesses still trading compared to 40% nationally • New programme underway to reach even more entrepreneurs Entrepreneurial Spark Powered by NatWest launched its annual report, with an even bigger impact on the UK economy than ever before.

The mind-blowing figure in the Impact Report demonstrate beyond doubt that the world’s largest free business accelerator is at the forefront of an entrepreneuring revolution and continues to make significantly more entrepreneurs credible, backable and investable every year.

A focus on creating growth mindsets and hands-on enablement by Entrepreneurial Spark with the key support of all its partners in NatWest, KPMG Enterprise, Dell Technologies and Pinsent Masons means that is has now enabled over 1,700 businesses to grow and scale-up across the UK. The impressive figures are reflected across all four nations of the UK, with 2016 seeing hubs now open in England, Scotland, Northern Ireland and Wales and across all sectors.

The number of jobs created is a massive 3,152, all of which have a positive impact on the UK economy.

In the areas of turnover and investment the figures are even more impressive. The businesses supported by Entrepreneurial Spark have now turned over £176m and secured £151m in investment.

A people-centric and action-orientated approach means businesses that have been through the Entrepreneurial Spark programme have focussed and resilient leaders, and a fantastic chance of growing as a business. 85% of the businesses accelerated are still trading which is more than double the national average.

Entrepreneurial Spark recently created a new suite of programmes which will build even more people who build even better businesses. This evolved model will provide specialised, bespoke enablement for entrepreneurs on all stages of their journey.

Lucy-Rose Walker, Entrepreneurial Spark CEO said: “We’ve given this Impact Report the title ‘Blow Your Mind’ and it’s not hard to see why. The stats are truly mind blowing and we’ve enabled our entrepreneurs to create real jobs, huge turnover and significant investment via our focus on developing their entrepreneurial mindsets and behaviours.

Our entrepreneurs have turned over £176m, so it is clear what an impact we are having on the UK economy. “Our vision is to create positive social change by giving people the chance to grow and create jobs, and value in the economy.

It’s really gratifying to see that those entrepreneurs have now created 3,152 jobs across the UK, all of them creating social change by contributing to their communities and local economies.

“Our partnership with NatWest is such a powerful one and enables us to give hands-on practical help to start-ups of every kind, from that first spark of an idea, right up to bigger businesses needing to scale and grow. We also love working with KPMG, Dell Technologies and Pinsent Masons because as the experts in what they do they offer so much to our entrepreneurs.

“We have another exciting year ahead as we bring our entrepreneuring revolution to London, with our 13th hub and launch the first free, dedicated fintech accelerator in Scotland. It’s going to be another mind-blowing year.”

Alison Rose, CEO of Commercial and Private Banking for NatWest said: “The Impact Report shows that the support our free accelerators are giving to entrepreneurs is working, enabling them to create jobs across the UK, secure millions of pounds of investment and support their local economies.

Our hubs are now in every nation of the UK, in many major cities and we are excited to be opening a London hub later this year.”

Nicola Sturgeon, First Minister of Scotland said: “The entrepreneurial buzz around RBS’s HQ when I helped open the new entrepreneurial hub in 2016 was phenomenal and really signalled a change in the way the bank is being run. I am delighted that the bank’s partnership with Entrepreneurial Spark continues to go from strength to strength and more and more entrepreneurs are creating great businesses as a result. It is vital for the economy that start-up businesses are given all the support they need to succeed and the combination of the bank’s networks and connections and Entrepreneurial Spark’s know-how is a powerful mix.”

ZEN CUSTOMER FIRST BUSINESS TO RECEIVE ULTRAFAST G-PON FTTP Zen Internet customer Mathias & Sons, a Bristol-based provider of branded clothing for businesses, has become the first business in the United Kingdom to be provided with Fibre-to-the-Premises broadband (FTTP) using the latest Gigabit-Passive Optical Network (G-PON) technology.

BT Openreach is currently conducting a trial of the ultrafast broadband technology for businesses in the Bristol area. After Mathias & Sons expressed an interest in taking part in the trial, BT Openreach contacted Andy Sayle, Zen’s product manager for broadband and voice. Andy was told that the technology was available in the client’s area, and that Openreach could have it up and running in around two weeks.

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BRIEF Mathias & Sons ordered Zen’s top-of-the-range FTTP product, which has a theoretical maximum bandwidth of 330Mbps, and the product was, as promised, delivered in approximately two weeks. Prior to taking FTTP from Zen, Mathias & Sons had been a long-time ADSL customer of the company.

For Zen, the product was delivered in similar fashion to any of its other approximately 1000 FTTP connections (up to 80 new connections are added each month). The difference however was in the technology used by BT Openreach, which promises to make FTTP rollout much more efficient and widespread.

The technology promises FTTP connection bandwidth of up to 1Gbps, along with quicker and easier delivery and installation.

Andy says, “it is much easier than the traditional method of laying fibre cables, potentially hitting obstacles along the way, and it provides a better experience for the customer.”

According to Mike Hayward, digital marketing executive for Mathias & Sons: “Responsiveness is a cornerstone of the business that was being hindered by our internet speed. Following the new fibre broadband installation, we are now able to send designs and concepts to customers in seconds where it used to take ten minutes. This connection is a great step forward for us and not only makes us more responsive and efficient, but also helps to future-proof the business.”

Discussing his business’s partnership with Zen, Mike adds: “We have always found Zen to be responsive and helpful whenever we have technical problems, and would gladly recommend them to other businesses.”

Zen liaised with Openreach during the order, to provide feedback for the trial which, if successful, is planned to be rolled out to approximately 2 million premises by 2020.

As the technology becomes more widespread, FTTP connections will become available to many more business and residential customers throughout the United Kingdom. The potential increase in bandwidth offered to many more customers will enable more businesses to benefit from the kind of ultrafast connection speeds previously only available through costlier solutions, such as leased lines.

FEDEX SME EXPORT REPORT REVEALS UK SMES FUELLING UK EXPORT GROWTH More than 63% of British SMEs are exporting and making a significant contribution to rising international trade by taking advantage of declines in the value of the pound, reveals new research of exporting SMEs by FedEx Express. Exporting revenues contribute 59% of these SMEs’ total revenues, with a third predicting revenue growth to increase over the next twelve months.

The FedEx SMEs Export Report reveals the digital economy proves to be an essential enabler allowing SMEs to take advantage of international opportunities, with many increasingly embracing new technology and processes. Chief amongst these is e-commerce, which has already proven its worth as a serious driver of growth—more than eight in ten (81%) of UK exporting SMEs generate revenue through this platform and almost a third (30%) have reported increased revenues over the last 12 months.

Ed Clarke, Managing Director, UK ground operations, FedEx Express, said: “It’s promising to see exports could be having a positive impact on the UK economy.

To continue this upward momentum, governments and businesses across the world should play an increasingly important role to align SMEs exporting ambitions with the digital economy – providing more opportunities to reach new markets and customers. The FedEx acquisition of TNT Express is adding a remarkable European road network to the world-class air network FedEx Express already operates in Europe and around the world, creating even more possibilities for UK SMEs to export both in Europe and beyond.”

The FedEx SME Export Report reveals 86% of exporting British SMEs trade within Europe while 63% export outside of Europe. As well as realising their global ambitions, these businesses are increasingly recognising the wealth of opportunity available to diversify and open themselves up to new markets.

As a result, many are optimistic about the future, with a third stating logistics providers are helping them to respond to new market trends and developments.

Ed continues: “British SMEs are the bedrock of the economy.

As these businesses are displaying such great resilience in times of uncertainty, there will no doubt be an upswing in exciting and ambitious SMEs who also want to make their mark in today’s economy.

By benefiting from advice from their logistics providers, these enterprises will be ready to meet the challenges head on with a lot of positivity.”

Over the years, there has been more willingness from SMEs to export to markets which are seen as difficult to enter. For example, 38% of British SMEs export to the USA – making the country the top export market outside Europe – despite the unique challenges associated with the country, including its vastness, regional differences, and strong competition. Other countries SMEs are exporting to which can be difficult to enter include Canada, India and Australia.

Ed added: “SMEs have once again shown that they can act as the guiding light for Britain as it enters its new economic chapter. To help overcome challenges, businesses are investing in new technology, new processes and new staff.

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E-commerce in particular is a burgeoning sector so if businesses align themselves to this, they can use this as a springboard to new and exciting opportunities.” It is not just UK SMEs who have cause for optimism. The FedEx SME Export Report has found exporting SMEs across Europe are thriving and looking for opportunities overseas with 53% of them exporting to other continents, compared to 2015 which identified almost a third (29%) of SMEs exported to other regions.

In addition, exporting generates 65% of total revenue for these European SMEs, emphasising the importance of exploring international markets to grow and prosper.

The FedEx SME Export Report has emphasised SMEs recognise the importance of exporting to grow their revenues with e-commerce playing a crucial part of this.

David Binks, President, FedEx Europe, and CEO of TNT, said:

The merging of digital networks and physical networks has meant the world has become even more connected presenting more possibilities to export – contributing to SMEs growth, while boosting global competitiveness.”

“It’s positive to see the European SMEs community remains optimistic about their exporting prospects and growth.

NEARLY HALF OF UK INVESTORS POSITIVE ABOUT BREXIT, TWO FIFTHS FEARFUL OF TRUMP AND A STAGGERING 73% LACK FAITH IN THERESA MAY Seven million investors believe UK entrepreneurs will drive the economy back to strength New research among 1,000 UK investors by IW Capital uncovers the true impact of 2016’s triple threat of political shocks and their direct effect on the UK investor community, finding: • 2.21 million investors are entering 2017 with a greater risk appetite, thus seeking new investment classes • One in ten investors feel the shock political events of 2016 will influence their investment decision this year more than any other factor • 36% of investors think record-low interest rates will negatively impact their 2017 investment strategy, with 26% saying this issue is the single biggest risk to their investments • 44% of investors – nearly 11 million people across the UK – believe that Brexit will have a positive impact on their investment strategy in 2017 • However, 44% of investors are worried about the impact of Donald Trump’s Presidency on their investments • Just 27% said they have faith in Theresa May’s capability to promote investment value as part of a post-Brexit government • 3.19 million investors are re-evaluating their investment plans in light of interest rates residing at 0.25% • 27% – 6.62 million investors – believe entrepreneurs will play a critical role in driving private sector growth After a number of political and economic shocks in 2016, London-based investment firm IW Capital has conducted new research revealing how these significant events have affected investment decisions across the nation. In an independent, nationally representative survey of 1,000 Brits who have between £10,000 and over £250,000 worth of investments – not including properties or pensions – IW Capital found that investors believe Brexit will actually have a positive impact on their investment strategies in 2017, but are fearful of both the UK’s and US’s new political leaders. In light of the historic developments of last year, including the EU referendum, a new-look British government, and Donald Trump’s US Presidential election victory, the study uncovered that 2.21 million UK investors are entering 2017 with a greater risk appetite and are currently seeking new investment classes.

Moreover, an even greater number (2.45 million investors) said that the landmark political events of 2016 will influence their investment decision this year more than anything else.

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Despite much speculation on what the EU referendum result would mean for Britain’s private sector, two fifths (44%) of investors polled said they feel Brexit will actually have a positive impact on their investment plans in the year ahead.

However, the same number (44%) think that Donald Trump will be detrimental to their 2017 investments, while only a quarter (27%) of the UK’s investors stated that they have faith in Theresa May’s capability to promote investment value as part of a post-Brexit government. Interest rates also featured prominently on investors’ list of concerns. On 4 August 2016, the Bank of England (BoE) cut interest rates to 0.25% – the lowest they have ever been – and on 2 February 2017 it announced that it would be holding the rates at this record-low, despite further upward revisions for the UK’s 2017 economic growth forecasts.

The BoE’s decision has evidently impacted the country’s investors; 36% of those surveyed – the equivalent of nearly 9 million people – think record-low interest rates will have a negative effect on their investment strategy this year, while 3.19 million investors are now re-evaluating their financial plans in light of this issue. Despite the concerns surrounding new political leaders and the interest rates slump, investors have signalled their resounding confidence in the UK’s entrepreneurial talent. IW Capital’s research revealed that 27% of investors – 6.62 million people – believe entrepreneurs and private sector businesses will play a critical role in driving private sector growth in 2017, painting an optimistic picture for SME investment in high-growth sectors over the coming year. Luke Davis, CEO of IW Capital, commented: “In 2016, the UK experienced a number of historic political events, the true impact of which is now beginning to emerge more clearly in the investment arena. In a year of firsts, where sizeable political shifts made a notable impression across many financial markets, investor sentiment within the private sector has remained resilient.

“It’s interesting to note investors’ plans in light of the slump in interest rates and leadership discontent; transition brings opportunity, and this is reflected in today’s research. With investors looking to new investment classes as we enter into 2017, there is clearly a huge amount of confidence towards the country’s entrepreneurial capabilities, its resolute private companies and the potential of our innovative high-growth businesses to drive economic growth in 2017.

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TELEOPTI POSITIONED IN THE GARTNER MAGIC QUADRANT FOR WORKFORCE ENGAGEMENT MANAGEMENT Teleopti placed in the Magic Quadrant for the first time Teleopti, a global leader in feature-rich, employee-focused Workforce Management (WFM) solutions announced it has been positioned by Gartner, Inc. as a Niche Player in its 2017 Magic Quadrant for Workforce Engagement Management.* Teleopti had been previously cited in the Gartner Magic Quadrant but this is the first time that the WFM vendor has been placed in the quadrant.

The report evaluated 8 different software vendors on 15 criteria and positioned Teleopti in the Niche quadrant.

“We believe Teleopti has been recognized in the Magic Quadrant for the first year ever because our WFM solution reflects the growing need for a person-oriented focus when managing employees,” comments Magnus Geverts, Teleopti’s Chief Business Development Officer.

“In 2017 we will celebrate 25 years of innovation where employee engagement, and the software features that aid it, have constantly been a central focus.”

“Our unique lifestyle scheduling, agent self-service and gamification offerings are examples of our many industry-first employee engagement features.”

According to Jim Davies and Drew Kraus, the analysts for Gartner’s 2017 Magic Quadrant for Workforce Engagement Management, “Organizations need to assess the potential needs, expectations and aspirations of the next generation of employees within their centers. The impact a motivated and engaged employee can have — not just on operational performance, but also on the customer experience — should not be underestimated and should help justify future investment.”

Olle During, CEO of Teleopti, said, “At Teleopti we are proud to both be placed in the Magic Quadrant for the first time, and be positioned as a Niche Player, which we believe is owed to our continual efforts to be a best-of-breed WFM vendor, 100% of the time. In addition, a key focus and achievement for Teleopti in recent years has been our rapid growth both in the US and to the Cloud; this growth will continue to be a leading goal for the company moving forward.” * Gartner “Magic Quadrant for Workforce Engagement Management” by Jim Davies, Drew Kraus. January 19, 2017.

FTI CONSULTING’S GLOBAL SHAREHOLDER ACTIVISM MAP ILLUSTRATES THE GROWTH OF ACTIVIST INVESTING ACROSS THE WORLD Nearly 350 Activist Campaigns Occurred Outside the United States in 2016, Compared to 70 in 2010 FTI Consulting, Inc. (NYSE:FCN) published an update to its interactive Global Shareholder Activism Map, which shows that shareholder activism gained momentum and geographic breadth in 2016.

New markets such as South Korea and Japan felt the effect of governance changes and increasingly shareholder friendly sentiment in 2016 with landmark shareholder activism campaigns. Investors likely will continue to exert their influence in this region as they become more comfortable with this environment.

To measure the potential risk in each jurisdiction, FTI Consulting created an index to track activism threat level by country and map key activists within each location.

“The success of shareholder activism in North America continues to fuel its spread across the globe,” said Steven Balet, a Managing Director and Head of Corporate Governance and Activist Engagement at FTI Consulting.”

The analysis reveals that 342 activism campaigns took place outside the United States last year, compared to only 70 nonU.S. activist campaigns in 2010.

“These global shareholder activists are not necessarily U.S.based nor do they necessarily conduct their activism in the U.S. style.”

The research shows that Canada, Australia and the United Kingdom have the highest risk for an increase in activism outside the United States.

“They have, however, been increasingly successful in many jurisdictions across Europe, the UK and Asia.”

These countries have experienced changing economic factors, including a strong U.S. dollar, undervalued asset prices and increased global scrutiny of corporate governance standards.

The disruptive threat of activism presents boardrooms around the globe with fresh impetus to better understand shareholder issues and concerns in order to prevent activism occurring and to be better prepared should they be targeted, Mr. Balet added.

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FALL IN REAL WAGE GROWTH HIGHLIGHTS CRACKS IN BUOYANT LABOUR MARKET Commenting on the ONS Labour Market Statistics, Gerwyn Davies, labour market adviser at the CIPD, the professional body for HR and people development, said: “The record number of people in employment is, of course, good news. However, there are a number of underlying factors that remain problematic, for example the fall in real wage growth from 1.7% to 1.4% over the last three months. This is especially concerning given the prospect of rising inflation in 2017.

“While there is an annual increase of 2.6% in average weekly earnings of employees, both including and excluding bonuses, data from this week’s CIPD Labour Market Outlook shows that the ability of employers to increase pay in the year ahead is likely to be constrained.

“The figures also offer further evidence that Brexit has had a discernible impact on the allure of the UK as a place to live and work. The sharp growth in the number of non-UK nationals from the EU in work in the UK ground to a sudden halt in the second half of the year and has actually fallen in the last quarter.

“As a result, employers in sectors that employ relatively large numbers of EU nationals, which also account for a sizable proportion of vacancies, are likely to come under further recruitment pressures if, as we expect, this trend continues. As our Labour Market Outlook showed, the demand for labour is likely to remain strong in the near-term, which is reflected by the high number of vacancies reported in this month’s figures.“

CROWDSOURCING SPECIALIST WAZOKU SECURES NEW FUNDING FROM BARCLAYS TO SUPPORT FURTHER DEVELOPMENT Wazoku a UK crowd sourcing company and leading provider of collaborative innovation software, has received new venture debt finance from Barclays of £680,000.

A total of £2.3m has been provided, with equity financing from existing investors, Cambridge Angels and Fig, to support Wazoku’s growth strategy moving forward.

This investment brings the total raised by Wazoku since it was founded to £3.6million. The company has household brand customers including Aviva, Waitrose, John Lewis Partnership, Virgin Trains East Coast and Avis Budget Group.

“We are an early adopter of this new offering from Barclays and delighted to have secured their support,” commented Simon Hill, founder and CEO at Wazoku.

“We are in the process of expansion, with new additions to our management team, and new expertise in our data science team, and the investment will allow us to deliver sophisticated analytics for employee engagement, reward & recognition and cultural metrics.”

Wazoku will be making further investment in its platform to enable its clients to extend their ideation initiatives from internal employee input to customer and co creation activities.

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Wazoku also plans to continue its expansion through core European markets and North America.

This will include the strengthening of its global alliances network, which allows it to forge strong, partnerships spreading the message of EveryDay innovation through events and roadshows. Wazoku’s solutions help to foster an embedded culture of innovation through easy collaboration.

Its Idea Spotlight platform encourages internal and external crowdsourcing initiatives that allow organisations to draw on ideas from employees, suppliers and other partners to enhance their businesses and save money.

As well as supporting its data strategy, this round of funding will help its customers realise an even faster return on their investment in the Wazoku platform; this is the primary focus for the company, which enjoys 90% client retention.

Wazoku will be making further investment in its platform to enable its clients to extend their ideation initiatives from internal employee input to customer and co creation activities. Wazoku also plans to continue its expansion through core European markets and North America. This will include the strengthening of its global alliances network, which allows it to forge strong, partnerships spreading the message of EveryDay innovation through events and roadshows.

Wazoku will further enhance its ideation platform to deliver functionality to support team and project level idea building for global enterprise accounts.

“We are building our global footprint by bringing something new to existing and potential customers. We have moved beyond support for internal innovation so our client’s customers can also benefit, and as part of this, we are continually building integrations between our solution and other world-class enterprise, such as Microsoft Office 365, and social platforms.

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This new round of funding helps us to commit additional resource to this activity which has recently enabled us to integrate with Facebook, LinkedIn and Twitter for open innovation,” Hill added.

John Yeomans, Chairman of Cambridge Angels from 2013 to 2016, said: “We have been excited by our investment in Wazoku since we first got involved with the company. Under strong leadership Wazoku is making a significant difference to the operational performance of its existing customers, and as word spreads, this is helping to attract new business and grow the company. We are delighted to be involved.”

Barclays Innovation Finance allows the bank to offer increased access to finance to high growth early stage and innovative businesses.

Through the scheme, Barclays can deliver a range of funding solutions at more favourable rates as part of its commitment to supporting high growth businesses in the UK. The loans are backed by a guarantee from the European Investment Fund.

Sean Duffy, Head of Technology, Media & Telecoms at Barclays Corporate Banking, said:

James King, founder of Fig, said: “We are delighted to see Wazoku go from strength to strength. New additions to the Board, as well as Tier 1 banks signing up as clients, demonstrates how the company is maturing as the very best in the world look to work with the company. Barclays new offering shows a commitment to supporting growing businesses and it is great to see them so active in the market.”

“We developed our Innovation Finance offering to make sure we are able to support fast growing, forward looking UK companies as effectively as possible. Wazoku has demonstrated strong growth and is helping the organisations it works with to innovate more successfully. We’re pleased that our funding, coupled with the support of Wazuko’s investors, is going to allow them to do more with their existing clients, and reach new ones too.”

SWYX IS SHAPING THE GLOBAL ONLINE CONVERSATION ON UNIFIED COMMUNICATIONS

EUROPEAN MARKET REMAINS DYNAMIC AS LONDON SHOWS NO SIGN OF DRAMATIC BREXIT DOWNTURN

Swyx is considered to be one of the top 100 influencers on Twitter when it comes to “unified communications” according to a new report from Influencer Relationship Management Company, Onalytica.

Covering both brands and individuals, Swyx comes eighth in the list of most prominent companies, giving them a dominant voice within the active online community.

The conclusions of the report entitled, “Unified Communications: Top 100 Influencers and Brands” revealed that on Twitter, Swyx is heavily involved in the discussion of Unified Communications, showing that the European leader for unified communications for SMEs is ranked among the top 100 opinion formers of a highly engaged online community, which is characterised by a lively exchange between brands and individuals.

Swyx’s impressive ranking demonstrates that the Dortmund-based unified communications specialist understands the direction of the international market.

This is confirmed through the analysis of the main subjects featuring within the online community with the most widely discussed theme being the cloud, something that is at the heart of Swyx’s corporate strategy. The company is continuously expanding its portfolio of communications solutions from the cloud and is addressing the needs of its customers in this area with tailor-made solutions.

In order to identify the most important brands and individuals, Onalytica evaluated more than 18,000 English-language tweets on the topic of Unified Communications over a period of 90 days.

Some decisions delayed due to uncertainties, particularly Brexit and impact of GDPR. The latest Colocation Market Quarterly (CMQ) from BroadGroup Consulting shows strong demand for data centre space in the four Tier 1 European locations during the final quarter of 2016. Amsterdam has performed particularly strongly, with co-location partners continuing to build new capacity in the city.

The report shows Frankfurt remains strong while Paris has slowed slightly. Some fascinating findings regarding London as results from listed providers confirmed there has, so far, been relatively limited impact on the London market from Brexit.

However, the report indicates some marginal impact as the UK is increasingly seen as a location focused on UK data centre requirements. UK commitment from the hyperscale providers, not just in data centres but in broader UK investments in offices and logistics capabilities continues.

Commenting on what this means for data centre investors, Steve Wallage, managing director of BroadGroup Consulting points to investors being cautious about the UK, reflected in commercial property markets.

“While demand is strongly driven by cloud - both hyperscale cloud players and smaller cloud player - some decisions have been delayed due to uncertainties, particularly Brexit and impact of GDPR,” commented Wallage.

“In tandem we have seen new companies entering Europe from Middle East and Gulf States and Africa into Frankfurt,” he continued.

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BRIEF For those investors looking at European alternatives outside the UK - which remains the largest data centre market in Europe - there are many options and eager investment agencies. While Dublin and Amsterdam are potential choices, the Nordics, Luxembourg and Frankfurt, are all looking to compete for this business. However, Brexit and the implantation of GDPR could strongly influence investor decisions.

NEW GLOBAL RECRUITMENT SOFTWARE SEEKS FUNDING TO HELP MORE BUSINESSES FIND TOP TALENT The creators of game-changing recruitment software are seeking new investment as they tackle one of the biggest challenges businesses face – finding the right employees.

Talent Ninja is a human resources (HR) recruitment tool allowing businesses to attract candidates from a range of sources by advertising vacancies on a huge selection of platforms, without the hassle or cost typically associated with doing so.

Through Talent Ninja, investors have the opportunity to put their money into a business taking a bite of the global HR software and platforms market, which is valued at more than $14 billion with an expected growth rate of over 6 per cent per year until 2020.

But the proposition also comes with the added bonus of tax relief of 50 per cent for UK investors, as it is eligible for The Seed Enterprise Investment Scheme (SEIS).

Brett MacDonald, Founder of Talent Ninja, believes the company meets all the criteria of a sound investment as it has found a solution to a global recruitment problem and it is already proving popular not only in the UK and USA and Europe but in a variety of countries such as Malaysia, Singapore, South Africa, India, Australia and United Arab Emirates.

Brett, who is based in Sudbury, in Suffolk, said, “For a company to find the right person to join their team, they now need to be present in all the places that talent might be looking, which could be anywhere in the world. This is where Talent Ninja comes in. By signing up with us, employers can have access to a huge range of advertising platforms, without the headache of having to pick and choose which ones they want to use individually.”

Following the success of their soft launch in August 2016, with over 1,400 vacancies and 5,000 candidates looking for jobs already having used the software, the team behind the innovative recruitment tool is now seeking further investment. Their goal is to raise £100,000 so they can continue to increase its reach and client base, meaning it really will never have been easier for employers to find the right person for their organisation, quickly and cost-effectively.

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To achieve this, Talent Ninja is launching a fundraising campaign on crowdfunding platform, Crowdcube.

Crowdcube allows anyone to invest in businesses in exchange for equity – unlike many other crowd funding sites which incentivise donors through gifts.

MacDonald, a graduate of the University of Birmingham, who has 14 years’ experience in recruiting and talent management, added: “The success we have seen already since our soft launch not only demonstrates that our expert team really knows its stuff, but shows there is a real demand for what Talent Ninja can offer – and not just from within the UK either. Many of our clients are international companies who clearly appreciate how effective we are at helping them find the right candidates, wherever they might be.”

INDUSTRY VETERANS LAUNCH SIXIS - INNOVATIVE DEVICE SUBSYSTEMS FOR THE INDUSTRIAL INTERNET OF THINGS Industry veterans, Chris Begent and Tony Richardson announced the launch of Sixis, a new British company, which provides a complete device subsystem, consisting of the Sixis Connection Manager and physical devices, for the Industrial Internet of Things.

Chris Begent, Co-founder, Sixis, said “We aim to help system integrators and developers of Industrial IoT applications to bring their products to market more quickly and at a lower cost, by providing them with a complete Industrial IoT device solution.”

“We’ve poured over 100 man-years of experience into the design and manufacture of every Sixis device solution, laying a solid foundation for any Industrial IoT application”, said Tony Richardson, Co-founder, Sixis, “Already deployed with customers in over 100 countries, across six continents, our field proven technology provides partners with the peace of mind they crave.”

The Sixis Connection Manager, orchestrates communications between all Sixis devices, deployed as part of an application; securing all communications, providing remote device management and configuration, remote control of equipment, and ensuring accurate sensor data collection and integrity.”

In conjunction with the Sixis Connection Manager, the initial device portfolio consists of two cellular enabled, IIoT edge devices; the Sixis Mini and Sixis Midi. Both devices have been specifically designed to address the challenges of harvesting high quality, consistent sensor data and remote control of equipment in Industrial Internet of Things applications. The Sixis Mini manages the harvesting of accurate data, remote control of equipment, or the integrity of the communications path, leaving system integrators and developers to focus on development of the Industrial IoT application itself.

BRIEF Easy and quick to deploy, Sixis Mini provides excellent levels of sensor and control connectivity; for static, nomadic and mobile Industrial IoT applications. The Sixis Midi provides greater levels of sensor and control connectivity, in the same

small footprint and ultra-low power consumption package.

Designed for use in more complex environments, deployment and installation is simplified, through downloadable profiles and remote device management.

EDISON RESEARCH REVEALS THE RISK OF INVESTING IN LISTED PRIVATE EQUITY IS LOWER THAN PERCEIVED BY INVESTORS • Sector still trading at a discount to NAV despite strong five-year performance; most LPEs are running a net cash position with risk more tightly managed • Financial crisis has negatively affected investors’ perceptions of risk in LPE Edison, the investment research and advisory company, issues its latest report on Listed Private Equity (LPE) which finds that the sector displays a similar risk-reward profile to major equity indices, US real estate investment trusts (REITS) as well as other equity classes over the longer term. LPE also continues to trade at a 14% discount to NAV despite achieving double-digit annual returns over the last five years. Despite these findings, public market investors still tend to treat LPE with caution, citing leverage and investment commitments, lack of disclosure, high valuations and discount volatility as issues.

The view that LPE is considered more risky than other equity-like comparables, Edison believes, stems largely from the sector’s performance during the financial crisis which is still prominent in investors’ memories. The perception appears at odds with the strong recent performance of the LPE sector which has generated strong average annual total share prices returns over the past five years of close to 19% while NAV returns have been close to 10% with very low volatility. In addition, the long term riskreward profile which notably includes the financial crisis years and does not differ significantly from that for the major equity indices.

Analysis of more than 23 years of return and risk data however shows that LPE displays a similar risk-reward profile to major equity indices and US real estate investment trusts (REITs), and Edison notes that although NAV discount volatility during the financial crisis was acute, few portfolio companies failed.

The report also notes that the PE ownership model tends to mitigate risk as a result of portfolio diversification, extensive due-diligence, alignment of stakeholders and value creation through active management.

Moreover, the drivers of problems during the crisis – aggressive leverage and commitment – are no longer a feature of the sector.

Analysts at Edison believe that there has been a structural reduction in the risk profile of LPE following the financial crisis with most major LPE companies currently running a net cash position while investment commitments are much more tightly managed, providing an optimistic outlook, suggesting that the risk: reward profile could improve further over time.

The sector continues to trade at a considerable discount to net asset value (NAV) of 14% despite the strong recent investment performance of LPE, according to the Association of Investment Companies (AIC).

Edison notes that the discount has narrowed in recent months, partly due to continued strong NAV returns and corporate activity such as the HarbourVest bid for SVG. Rob Murphy, analyst at Edison Investment Research said: “We have seen that LPE has delivered competitive returns compared to equity indices and closed-end structures like US REITs both recently as well as over very long time periods and there is good reason for optimism regarding the perception of LPE moving forward.

The fact that the sector is trading at a meaningful discount reduces valuation risk compared to equity markets in general. The less flattering risk-return profile of the last 10 years will arithmetically fall out of the comparisons over the next couple of years or so, which should improve the sector’s relative attractiveness from an investment consultant’s point of view.

We believe that the PE model mitigates risk and the resilience of the sector has been demonstrated during difficult times, as evidenced by the low incidence of failed investments during the financial crisis.

The PE ownership model itself is relatively unchanged and has proved to be a highly effective and successful vehicle to create value in unlisted companies with tight control over risk and lessons have been learned from past mistakes at the LPE company level. The relatively aggressive leverage and commitment strategies at a few LPE companies are no longer a feature for the sector.

This augurs well for the relative performance of LPE in future down cycles, which will inevitably occur, and suggests potential to further improve the average risk: reward profile.”

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NEARLY TWO MILLION UK SHAREHOLDERS CLUELESS ON THE VALUE OF THEIR SHARES, IGNORED BY THE COMPANIES THEY BACK AND TRAPPED BY LACK OF EQUITY RELEASE No transparency, no communication – mass frustration as UK shareholders let down by poor investor relations Asset Match has surveyed 2,000 UK adults, revealing the widespread feelings of discontent being experienced by the nation’s community of private company shareholders. It found: • 10% of UK shareholders said they have never been given the opportunity to discuss options regarding their shares since making their original investment • A further 9% feel locked-in due to an inability to sell or trade the shares they own in a private company – equating to over 600,000 trapped and frustrated investors • Post-Brexit sentiment towards stocks and shares is resoundingly positive – 23% of UK investors said they intend to invest in stocks and shares in 2017, trumping property (11%), bonds (7%) and commodities (7%) • However, 11% of shareholders say they have held shares for longer than they intended to • This figure rises to 20% among 18-34 year olds, showing the next generation of investors are more frustrated by the lack of fluidity in equity investments • 27% of respondents – the equivalent of 1.8 million shareholders across the UK – do not know the current value of the shares they own • More than a million shareholders (16%) would like to invest in other high-growth businesses but cannot because of an inability to sell their existing shares • Almost a quarter (24%) of shareholders aged 18-34 said this was the case There is mass frustration among UK shareholders due to a lack of communication and transparency from the businesses they have invested in, new research by peer-to-peer trading platform Asset Match has revealed. Based on a survey of 2,000 UK adults, the study found that 9% of Britain’s shareholders feel locked-in due to an inability to sell or trade the shares they own in a private company – equating to over 600,000 trapped and frustrated investors.

The findings come, as investor confidence – particularly towards private company growth – is resoundingly high; a recent survey found that 44% of UK investors believe Brexit will have a positive impact on their investment strategies.

The same study showed that 23% of investors intend to invest in stocks and shares in 2017, making it far more popular as an asset class than property (11%), bonds (7%) and commodities (7%). However, an inability to release the value of the shares they currently own risks undermining this confidence, with the country’s shareholders trapped within their current equity investments, unable to re-invest into other private businesses despite wanting to.

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Asset Match uncovered that the discontent among shareholders stems from investor relations that had been left dormant, or lack of company activity to enable the activation of trading options.

Over one in ten (11%) shareholders across the UK are aggrieved that they have held shares for longer than they intended to when they made the investment – this figure rises to 20% among shareholders aged 18-34.

Furthermore, 10% of shareholders said they have never actually been given the opportunity to discuss options regarding their shares since making their original investment.

Indicative of the poor transparency and communication from the leaders of private companies, 27% of UK shareholders – the equivalent of 1.8 million people across the country – do not know the current value of the shares they own.

Lacking the knowledge or ability to release the value of their equity investments, many shareholders in the UK are finding themselves unable to execute their investment strategies as they would like – this in turn could damage the hopes of the nation’s businesses seeking growth finance.

Asset Match’s survey revealed that 16% of the UK’s shareholders (1.1 million people) would like to invest in highgrowth businesses but cannot because of an inability to sell their existing shares. This issue was even more pronounced among shareholders aged 18-34, where 24% were keen to invest in high-growth companies but cannot because they are locked in to their equity investments.

Stuart Lucas, Co-CEO of Asset Match, commented on the findings: “Demand among investors to buy shares in Britain’s exciting high-growth businesses is rising all the time, particularly as alternative finance, angel investment and crowdfunding become more prominent. However, this research uncovers a concerning problem being experienced by those who have already invested in these companies – namely, shareholders are too often ignored and pushed to one side.

“There are huge numbers of shareholders in the UK who want to sell their shares but cannot, don’t know how much their shares are actually worth, or wish to invest in other companies but are trapped in their current investments.

Failure to address this issue will not only breed further discontent within Britain’s shareholder community, but also risks stunting the long-term growth of the private sector by not enabling investors to sell shares and re-invest in the next generation of scaling companies.”

“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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ABN AMRO COMMERCIAL FINANCE PROVIDES FUNDING SOLUTION FOR TRADERIVER TO SUPPORT FUTURE GROWTH ABN AMRO Commercial Finance has provided growing fintech alternative financier TradeRiver Ltd a funding solution, which will enable the company to realise future growth ambitions. TradeRiver Ltd provides UK SME businesses with unsecured revolving credit facilities to fund purchases of goods or services. The business has been growing significantly in the past 12 months with new staff and customers taken and winning the Direct Lending Platform of the Year category for AltiFi 2016 Awards. The back-to-back style funding solution involves up to £25m including an accordion.

Richard Fossett, CEO said: “TradeRiver is excited to announce ABN AMRO Commercial Finance as our new primary debt provider. The significantly increased level of funding supports both the growth of TradeRiver and that of our customers. We’re delighted that ABN AMRO Commercial Finance has taken time to understand how our unsecured funding model operates and how TradeRiver will help British companies grow. TradeRiver can provide more SME and MME companies with the flexibility and capability to quickly take advantage of their growth opportunities.”

Jeremy Smith, corporate client origination, director, ABN AMRO said: “It’s always exciting to support a business that is in turn committed to helping businesses grow and we have experience in structuring creative funding solutions for this sector. We were really impressed with TradeRiver’s achievements to date and ambitions for the future and were happy to return this with a demonstration of our appetite for a proactive and long-term partnership.”

H.I.G. CAPITAL ACQUIRES ASSETS OF XTERA COMMUNICATIONS, INC H.I.G. Capital (“H.I.G.”), a leading global private equity investment firm with over €20 billion of equity capital under management, announced that it has acquired substantially all the assets of Xtera Communications, Inc (“Xtera”), a provider of innovative and bespoke sub-sea fiber optic solutions.

H.I.G. previously provided debtor-in-possession financing to the Xtera debtors in connection with the chapter 11 cases.

Established in 1998 and based in the UK (Harold Wood, Essex) and the US (Allen, Texas), Xtera supplies un-repeatered and repeatered sub-sea systems, using high performance optical amplifiers to carry data. Under H.I.G.’s ownership, Xtera’s management and technical team will remain at the helm of the business, focused on successfully executing key existing customer contracts and expanding the business in the rapidly growing markets it serves with a clear roadmap of disruptive product launches.

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Carl Harring, Managing Director at H.I.G. Capital commented: “We believe Xtera has considerable growth potential as an independent, well-funded business with a new ownership structure. Its world class IP protected technology is not only differentiated and superior to that of its competitors, but it is delivered to an impressive range of global clients at a cost-effective price point. We are excited to be working with this industry-leading team and our immediate focus will be to work with them to deliver and build on existing contracts and over the long-term, provide the financial support to enable the company to fully capitalise on its technology with a broader base of customers.”

Stuart Barnes, Founder of Xtera, added: “We are delighted to announce our new partnership with H.I.G. Capital, which has previously invested in the fiber-optics sector and has a proven understanding of how to grow specialist industrial suppliers into market-leading players. We share the same vision of strengthening Xtera’s footprint in the future.”

This investment follows H.I.G.’s recent successful sale of Fibercore, a UK-based designer and manufacturer of specialty optical fiber. Under H.I.G.’s ownership Fibercore grew from a niche producer into a world-leading provider of optical fiber to a range of high tech industries. H.I.G. acquired Fibercore from Cisco, in a carve-out transaction back in 2011.

BONELLIEREDE ADVISES TRENITALIA ON COMPLETION OF NXET ACQUISITION BonelliErede advised Trenitalia UK on the completion of the agreement with National Express Group PLC for the acquisition by Trenitalia of all shares of the company NXET (National Express Essex Thameside), which manages the C2C (City to Coast) franchise operating service between London and Shoesburyness, in the South Essex region.

The closing of the acquisition was conditional upon final consent from the UK Department for Transport. Massimiliano Danusso, managing partner of the London office, and comprised of counsel Helen Roberts and senior counsel Gianpaolo Garofalo, led the BonelliErede’s team advising Trenitalia UK. Partner Claudio Tesauro and managing associate Leonardo Armati assisted the client on competition law matters. BonelliErede’s team acted in synergy with a team of the UK-based law firm Stephenson Harwood led by rail partner Tammy Samuel.

Ashurst LLP advised National Express Group and Eversheds Sutherland advised the UK Department for Transport.

BonelliErede is the market leader for legal services in Italy, covering all areas of business and corporate criminal law. Thanks to its offices in Europe and Africa and to the partnerships with independent law firms around the world, BonelliErede is also a true international player. By combining the skills of its professionals, the firm also offers support through specialised working groups organised by sector and practice: the focus teams.

The focus teams are organised by sector and practice area and pool their individual legal expertise and their in-depth sector knowledge to offer clients assistance with all aspects of their businesses.

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ACT CLEAN – SPECIALIST OUTSOURCER TO LUXURY RESTAURANTS AND HOTELS SECURES PRVATE INVESTOR BACKING FOR £10.2MILLION MANAGEMENT BUYOUT Associated Continuity Teams Ltd (ACT Clean) has announced that it has secured private investor backing for a £10.2million management buyout – a significant deal that signals a new cycle of growth and energy for the specialist outsourcing company of kitchen porters, night cleaning and housekeeping. Founded in 2006, ACT Clean has grown swiftly, alongside the expansion of upmarket hotels and restaurants in London, and is now the market leader in its luxury niche. Its impressive, long-term client base ranges from Michelin-starred and prestigious restaurant groups to well-known hotel marques through to the Royal Household.

Focussing on the provision of fully managed and supervised kitchen porter teams, kitchen night cleaning services and front of house cleaning staff, ACT Clean provides a comprehensive and exceptional service that offers complete peace of mind to all clients, having driven an agenda of total compliance and quality since its inception. The deal was structured by Connection Capital LLP is a specialist syndicator of investment funds from private investors into direct private equity and commercial property deals and alternative asset funds.

It currently has some £180 million of funds under management across a diverse portfolio, including investments in Virgin Wines and Wagamama and property tenanted by Travis Perkins and Premier Inn. John Stevenson, CEO of ACT Clean said: “We have always been, and continue to be, committed to providing an exceptional service, every day – offering the highest standards of outsourced cleaning to the hospitality industry.

This new investment and partnership is a very exciting opportunity for, myself and our fantastic management team, to both consolidate and nurture our existing long-term client relationships as well as attract and develop new clients.”

Miles Otway, Partner at Connection Capital, who led the transaction said: “ACT Clean’s leading position in its niche luxury market, experienced and proven management team, prestigious client base and strong growth prospects make it a highly attractive investment proposition. We look forward to working with the senior management team of John Stevenson, Gillian Thomson and David Murray to take the business on to its next stage of growth.”

ELEMENTIS SIGNIFICANTLY INCREASES THE SCALE OF ITS PERSONAL CARE BUSINESS WITH US$360 MILLION ACQUISITION OF SUMMITREHEIS Acquisition adds a high quality business with significant potential for further growth in the attractive personal care segment Elementis plc (“Elementis” or the “Group”) announced that it has entered into an agreement to acquire SRLH Holdings, Inc. (“SummitReheis”) from an affiliate of One Rock Capital Partners, LLC (“One Rock”) for an enterprise value of US$360 million, (the “Acquisition”). SummitReheis will become part of an enlarged personal care business within Elementis. For the year ended 31 December 2016, SummitReheis is expected to report revenue of US$134 million and underlying EBITDA of approximately US$28 million. The acquisition enterprise value is equivalent to approximately 11.8x SummitReheis expected underlying EBITDA for 2016 (including run rate cost synergies).

SummitReheis is a high quality, high margin specialty chemicals platform that produces a range of critical active ingredients and materials tailored for use in personal care, pharmaceutical and dental products. SummitReheis’ anti-perspirant actives business (more than 60 per cent. of its sales) is the global leader in the manufacture and sale of active ingredients for anti-perspirants and has long standing relationships with key consumer product companies across the Americas, Europe and Asia.

Transaction highlights: • Acquisition creates an enlarged personal care business with annual sales of approximately US$200 million, significantly increasing the Group’s presence in this important end market • Enhanced growth potential driven by the combination of complementary products, customers and a broader geographic presence which together offer cross-selling opportunities

• Critical components for the US$13 billion anti-perspirant market with growth driven by increasing penetration in emerging markets and demand for premium and higher efficacy products in established geographies • Acquisition will be funded from cash resources and new debt facilities of US$475 million which will be supported by the cash generation characteristics of the enlarged Group • Expected to deliver material earnings accretion and substantial free cash flow accretion in the current financial year • Return on invested capital (“ROIC”) expected to be in line with Elementis’ cost of capital in the first full year of ownership Notification of Results and Special Dividend: • Elementis will report its Full Year Results for the year ended 31 December 2016 on 1 March 2017 • The Board of Elementis can confirm that it expects earnings per share for the year to 31 December 2016 to be in line with current market expectations • The Board confirms that its consideration of special dividends in respect of 2016 will not be impacted by the Acquisition Paul Waterman, CEO of Elementis plc, said: “At our recent Capital Markets Day presentation, we highlighted the growth prospects in personal care as a key opportunity for Elementis, driven by long term positive demographic trends and an increasingly sophisticated consumer. Our leading position with proprietary hectorite and Rheoluxe® rheology modifiers will be augmented by SummitReheis’ complementary position in specialty additives for anti-perspirants, pharmaceuticals and dental products.

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iDEAL BRIEF “The Group is well positioned to capitalise on this acquisition through the enhanced geographic footprint and strong customer relationships that it brings.”

“Together with our existing business, the acquisition of SummitReheis is transformative for our personal care business, creating a substantial, high return platform that will help accelerate our Reignite Growth strategy.”

Strategic rationale • Personal care market is a significant growth opportunity for Elementis • Anti-perspirants is a highly attractive, growing segment of the personal care market • Acquisition creates a ~US$200 million personal care business of Elementis with critical mass and significant growth prospects • Combines SummitReheis’ key active ingredients for antiperspirants with Elementis’ enabling technology of hectorites and synthetic polymers • Accelerates growth for both SummitReheis and Elementis as a result of the expanded footprint with key customers and broader geographical reach

• Combined business has strong relationships with key consumer products companies • SummitReheis products differentiated by their superior quality and certifications (for example, FDA requirements in the US and ECHA requirements in Europe) • Benefits expected from the realisation of additional growth opportunities Financial highlights • Enterprise value of US$360 million on a cash free, debt free basis • Immediate adjusted earnings per share accretion expected in the current financial year and double digit adjusted earnings per share accretion in 2018 • Expected to enhance Elementis’ group margin in the current financial year • Run rate cost synergies of up to US$3 million per annum identified • ROIC expected to be in line with Elementis’ cost of capital in the first full year of ownership • Funded through Elementis’ existing cash resources and US$475 million of new debt facilities • Elementis to remain prudently financed post acquisition

HAM BAKER GROUP SOLD BY FRP ADVISORY TO INTRINSIC, THE BIRMINGHAM BASED EQUITY FUND, SECURING JOBS AND A FUTURE FOR THE MAJORITY OF THE GROUP’S BUSINESSES Newly formed Ham Baker Group Limited, backed by Intrinsic Equity, has acquired the shares in five solvent subsidiaries of F.J.Holdings Limited and the trade and assets of the Flow division of Ham Baker Adams Limited from the administrators at FRP Advisory, the business advisory firm, safeguarding more than 130 jobs across the group. The companies acquired were Industrial Valves Limited, Industrial Penstocks Limited, Industrial Pipeline Solutions Limited, IVL Flow Control Limited and FJ Estates Limited (together “the Solvent Entities”).

Raj Mittal and Russell Cash, partners at FRP Advisory, were appointed on 15 February 2017 as joint administrators to F.J.Holdings Limited and one of its subsidiaries Ham Baker Adams Limited (“Ham Baker Adams”), the Stoke based engineering group, and swiftly completed a sale of the Flow division of Ham Baker Adams and the shares in the Solvent Entities. The administrators are currently assessing options for the remaining Process division of Ham Baker Adams. The Stoke based business manufactures and supplies bespoke products to the water and wastewater markets. The group’s dedication to product design, quality engineering and installation support has positioned the Ham Baker brand as a market leader.

The group reported consolidated turnover of £30m in its most recent accounts but faced cash pressures following an expansion into larger, longer-term contracts. Efforts to raise additional funding over recent months failed and the group needed to seek the protection of administration in order to secure a more viable solution in the interests of all stakeholders.

Raj Mittal, joint administrator and partner at FRP Advisory, said: “We’re delighted to have secured the future of a large proportion of this key employer in the Stoke area. We are continuing to explore options for the Process division and would encourage any interested parties to make contact.”

KEROGEN CAPITAL INVESTS IN ENERGEAN ISRAEL Athens, Greece - Energean Oil & Gas (“Energean”) has announced that Kerogen Capital (“Kerogen”) has committed to invest an initial US$50 million in Energean Israel, a subsidiary of Energean, ahead of the planned $1.3 billion development of the Karish and Tanin gas fields, offshore Israel. Energean Israel is the operator of and holds a 100% interest in each of the Karish and Tanin licences, acquired from Delek Group in December 2016, for an upfront consideration of $40mm as well as $108.5mm in contingent payments.

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Proceeds from Kerogen’s investment in Energean Israel will finance the acquisition and key workstreams to investment sanction including FEED studies and the Field Development Plan currently being prepared in cooperation with TechnipFMC. The fields contain at least 2.4 Tcf of Gas contingent resources (NSAI report), and will be developed through an FPSO that will be the first to be installed and operated in the East Mediterranean. The gas produced from the fields will supply Israel’s growing domestic gas market, with first gas expected in 2020.

Kerogen’s investment is subject to approval by the Israeli Government, after which Kerogen will own a 50% interest in Energean Israel with Energean holding the balance.

iDEAL BRIEF It is intended that Roy Franklin OBE, Kerogen Executive Board Member, will become Non-executive Chairman of Energean Israel.

“As well as through the additional exploration potential in offshore Israel, all of which are underpinned by a supportive government policy and favorable financing environment.”

Energean Group Chairman & CEO, Mr. Mathios Rigas, commented:

Roy Franklin, Kerogen Executive Board Member, commented:

“We are delighted to welcome Kerogen to the Karish and Tanin project, planned to deliver gas to a rapidly growing market in 2020 for the benefit of Israeli domestic consumers and the economy. Energean has already commenced negotiations with potential gas consumers in Israel and is progressing rapidly the Field Development Plan that we expect to submit to the Israeli Government by May 2017 with an intention to FID the project by year end 2017.

“Energean’s track record speaks for itself. The company has successfully redeveloped the Prinos complex in Greece, increasing reserves and production substantially.”

“We believe Israel is an attractive destination for energy investment offering exciting growth opportunities through the development of Karish and Tanin.”

“Kerogen intends to collaborate with Energean to deliver a successful development of the Karish and Tanin fields in Israel.

“This investment provides Kerogen with exposure to a largescale, low break-even discovered gas resource located within an OECD country, which, as a near-term development, can benefit from today’s deflationary cost environment.”

ECREBO SECURES £12 MILLION INVESTMENT FROM PARTNERSHIP THAT INCLUDES AIR MILES AND NECTAR FOUNDER, SIR KEITH MILLS Ecrebo, the retail point of sale marketing specialist, has announced a £12 million investment from Air Miles and Nectar founder Sir Keith Mills and former Warburg Pincus Head of Europe, Joseph Schull.

The new funding will support increased investment in product and technology development for Ecrebo’s digital marketing platform, and will help to accelerate the retail technology specialist’s global expansion, with a particular focus on North America.

This will build on Ecrebo’s success to date in Europe, and entry into the American market in 2016. The funds will also be used to recruit new talent into Ecrebo’s growing team.

Sir Keith Mills and Joseph Schull will join Ecrebo’s board as directors alongside the company’s Founders, Dr Hassan Hajji and David Vernon. Existing investor Octopus Ventures, one of Europe’s largest venture capital teams, is also participating in the investment round and will continue to be represented on the board.

Ecrebo’s innovative technology platform enables retailers to deliver targeted offers and messages to customers at the checkout alongside their receipt or digital receipt. Since 2010, the Ecrebo platform has processed more than £35 billion in transactions for some of the world’s leading retailers, including M&S, Waitrose, and PANDORA, and generated more than £500 million in additional sales.

The Reading-based business also recently featured in the Deloitte UK Technology Fast 50 2016 as one of the UK’s fastest-growing technology companies.

Sir Keith Mills, said: “I am delighted to announce this investment in Ecrebo, who impressed me with their firmly-established credentials and leadership within the retail technology sector. Ecrebo’s technology gives retailers the ability to open up a marketing channel that is fully retailer-owned, enabling them to reach all their customers and engage them on a one-to-one basis in a way which is personalised, rewarding and convenient. I am looking forward to working closely with the Ecrebo team in the coming months to help them grow the business both in the UK and internationally.”

Joseph Schull, said: “Ecrebo’s technology platform is highly differentiated and greatly valued by the company’s world-class customers, who derive demonstrable ROI from it. Hassan Hajji and his colleagues have developed an ingenious application which seamlessly integrates with customers’ point of sale infrastructure and enables personalised communication at the till, which can be rapidly rolled out at scale. We see considerable growth potential from new and innovative products which are already in development, as well as further geographic expansion to build on the successes achieved to date.”

Dr Hassan Hajji, Ecrebo Co-Founder and CEO said: “We are delighted to secure investment from Sir Keith Mills and Joseph Schull and to welcome them both to our board. Their long-standing retail expertise and investment experience will help to further enhance our product offering, recruit the best talent, and expand into North America, and beyond. We’re really excited about the impact this investment will have on both our customers, our employees and our technology in helping us to reach our full potential.”

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ADVENT INTERNATIONAL SUBMITS BINDING OFFER FOR STADA ARZNEIMITTEL AKTIENGESELLSCHAFT TO STADA MANAGEMENT BOARD • Cash offer of €58 per share – Premium of 66 percent compared to STADA’s stock price prior to the publication of share purchases of activist investors • STADA shareholders will additionally benefit from the expected dividend payment in June 2017 • Decision of submission of identical public takeover offer to STADA shareholders subject to approval by the management board of STADA • Advent supports management’s strategy and commits to the company’s presence in Germany and to grow STADA’s OTC and generic platforms • As a strong and experienced partner, Advent endorses STADA’s strategy to build on its leading market position, maintain its independence and accelerate its international expansion plans • Additional capital available to accelerate growth • Attractive offer with high transaction security in the best interest of the company, its shareholders and employees Advent International Corporation (“Advent”) submitted a legally binding, fully financed offer to purchase all STADA shares to the management board of STADA Arzneimittel Aktiengesellschaft (“STADA”). Advent is convinced that this offer comes with high transaction security and is in the best interest of the company, its shareholders and its employees.

The binding offer as well as the decision to make a voluntary public takeover offer for all shares (WKN: 725180 / ISIN: DE0007251803) of STADA are subject to approval by the management board of STADA. The offer price will be €58 per share.

• This corresponds to a premium of around 66 percent compared to the share price on March 31, 2016, before the share purchases of activist investors became public.

• It also implies a premium of around 26 percent compared to the calculated volume-weighted three-month average share price before Advent first approached STADA with an indicative proposal on February 1, 2017.

Advent currently expects the transaction to close after the dividend payment for the business year 2016. Investors would therefore benefit from the expected dividend payment in addition to the cash offer price.

As a strong and experienced partner, Advent would further boost STADA’s growth through investments in new products, line extensions and acquisitions.

Advent has a firm commitment to STADA’s management, its long-term strategy and to Germany as a base for business and future investment. Advent has no intention to sell off significant parts of the business or to split the company.

In fact, Advent’s long-term strategy for STADA centres on developing new growth areas and the targeted acceleration of its international expansion.

The geographic focus will be on markets where STADA already has a leading position, particularly Germany, Italy, Spain, the UK, Belgium and Russia.

Advent has also identified additional growth potential through expansion and investments in Asia and Latin America. Advent has access to additional capital for future acquisitions and will make its operational experience, sector expertise and extensive global network available, to support management in the execution of its strategy.

Advent International has been active in Germany for more than 25 years and works in close and trusting collaboration with the management teams of its portfolio companies.

Since its foundation, Advent has completed over 35 investments in the healthcare sector worldwide, including in the fields of pharmaceuticals (Viatris – formerly Asta Medica, Grupo Biotoscana, LKM, Terapia, Tropon), pharmaceutical distribution (Mediq, Genoa), pharmaceutical outsourcing in sales and clinical research (inVentiv Health), services for health insurance companies (Cotiviti), and service providers and clinics (MEDIAN Kliniken, Priory, ATI Physical Therapy Holdings, American Heart of Poland, Casa Reha).

MAVEN CAPITAL PARTNERS COMPLETES £6.5 MILLION MBO OF HEALTHPOINT LIMITED Funding package will enable Healthpoint to drive growth through new product development and further penetrate grocery multiples, value retailers and export markets Maven Capital Partners (“Maven”), one of the UK’s most active private equity houses, has completed a £6.5 million management buy-out of Healthpoint Limited (“Healthpoint”), which sources and supplies healthcare and beauty products into the retail sector.

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The equity investment was funded through Maven’s co-investment network for professional clients ‘Investor Partners’, with debt and working capital funding provided

by Barclays plc. The investment will enable Healthpoint to fund further new product development, with around 30 new product lines in the pipeline for launch in the next year, and support the business in driving organic growth from its long-established relationships.

The company is also focused on a buy-and-build strategy with follow-on funding available from Maven to grow the company by acquisition.

Blackpool based Healthpoint has carved a successful niche within the rapidly expanding ‘value’ segment of the personal care and beauty market.

Its portfolio of branded products, which include ‘Derma V10’ and ‘Clear & Simple’, offer an affordable, high quality alternative to the premium branded products.

iDEAL BRIEF

Healthpoint’s products also include a range of over the counter (“OTC”) medicines bearing the “Healthpoint” brand, with the OTC range set to expand significantly following the investment.Founded in 1996, the business has grown to become one of the largest suppliers of tertiary branded healthcare products in the UK. In 2014 the business was sold to the current management team, led by Managing Director Amanda Parkinson, who implemented a focused commercial strategy leading to a number of industry awards and growth within the customer base.

Healthpoint now supplies over 300 product lines to retailers, wholesalers, healthcare and pharmacy chains, as well as the export market.

Amanda Parkinson, Managing Director at Healthpoint, said: “We are passionate about delivering high quality products and excellent customer service to our growing customer base, and are delighted that Maven shares our vision for the business. We have plans to drive the value of our brands, increase the number of products across the whole product range, capture market share and also target overseas sales growth.”

Ryan Bevington, Investment Director at Maven, added: “We are delighted to have completed the investment in Healthpoint, which is a leading player operating in a growing segment of the market. We look forward to working with Amanda and her team to help the business continue its impressive growth over recent years.

Healthpoint is another example of a high-growth portfolio company which is bringing a large number of new products to market over the coming year and planning to target the export market which provides hugely exciting opportunities.“ Key advisors to the transaction were: • Corporate Finance and tax advice provided by Paul Kaiser, Katy Lamb and Stephanie Davidson at UNW • Legal advice to Maven by Paul Jefferson and Katie Porter at Gateley plc • Commercial due diligence by RPL • Insurance due diligence by Vista • Financial due diligence by RSM • Management due diligence by Stratton HR • Legal advice for management provided by Schofield Sweeney

INVESTCORP TO ACQUIRE MAJORITY STAKE IN EUROPEAN ONLINE MARKETPLACE AGERAS Investcorp Technology Partners, which focuses on tech-enabled investments in the European lower middle-market as part of the Investcorp Group (“Investcorp”) announced that it has reached an agreement to acquire a majority stake in Ageras A/S (“Ageras” or the “Company”), a fast growing European online marketplace matching Small and Medium-sized Enterprises (“SMEs”) and micro-businesses with professional services providers such as accountants and lawyers.

Despite receiving no external investment until now, Ageras grew its revenues by approximately 60% over the last financial year and, in 2016, connected ~16,600 customers successfully.

Ageras operates in five markets, Denmark, Sweden, Norway, Holland and Germany from its Copenhagen headquarters. The Company has delivered consistent growth by reinvesting cash generated back into the business.

The investment by Investcorp is expected to underpin Ageras’ high standards of service delivered to its customers and partners, and will help to drive continued growth in the Scandinavian market, as well as the Company’s broader international footprint.

It will also allow for expansion into new geographies, leveraging Ageras’ strong brand, reputation for dependability and their insights into the professional service market.

Commenting on the investment, Gilbert Kamieniecky, Managing Director focused on Investcorp’s technology investments in Europe, said, “Ageras’ unique combination of customised service and high automation positions it perfectly to connect SMEs with accountants and lawyers. Its best-in-class levels of customer satisfaction coupled with recurring sales into its partner base have allowed it to secure a leading market position in Europe. These fundamental business strengths, coupled with an outstanding management team, make it an ideal candidate for Investcorp to partner with.”

Rico Andersen, Chief Executive Officer, Ageras, added, “From the first moment we met Investcorp it was clear that they were the right partner for Ageras as we transition to the next level in our growth trajectory. Investcorp has a fantastic track record of growing founder-owned companies in the technology space, and its global presence and extensive network will support Ageras’ continued international expansion. Executing this investment from Investcorp is a great vote of confidence in Ageras’ development to date, and we believe their ongoing support will open up multiple opportunities for future growth.”

Investcorp has established a market leading position of investing in lower mid-market technology companies with a particular focus on founder-owned Data, IT Security, Internet / Mobility and Fintech / Payments businesses, and has raised more than $1 billion in funding for technology investments. Investcorp continues to see a strong technology deal pipeline in the market with Ageras marking its second investment in the sector within four months.

Gilbert Kamieniecky and Julian Bennet will join the board of Ageras as non-executive directors.

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iDEAL BRIEF

AQUILA CAPITAL EXPANDS NORDIC PORTFOLIO WITH ACQUISITION OF WIND PROJECT IN FINLAND Aquila Capital is expanding its portfolio in the Nordics with the acquisition of its first project in Finland, a wind farm with an installed capacity of 14.4 MW on the coast near Kokkola.

The Windpark Ykspihlaja includes four Nordex N131/3600 turbines and is in one of Finland’s most favorable locations with an average wind speed of 7.7 meters/second[1]. This will generate a capacity factor of 43%, which is above average for wind projects.

Ykspihlaja is the third project that Aquila Capital has acquired on a turnkey basis with OX2, one of the largest wind developers in Scandinavia. As a seller and general contractor, OX2 is responsible for completing the park by the beginning of 2018 and the ongoing technical on-site management. Susanne Wermter, Head of Special Infrastructure Investments at Aquila Capital, said: “This transaction represents the realization of another project from our Scandinavian pipeline and our first in the popular Finnish wind market. The Ykspihlaja wind farm is one of the last projects to benefit from the expiring Finnish green energy support scheme, from which it will receive a state-guaranteed, fixed-market premium on the electricity price in the first 12 years of operation.”

Paul Stormoen, CEO for OX2 Wind, adds: “We are pleased with our excellent cooperation with Aquila Capital and that we are able to announce our third deal together in just a few months.”

Roman Rosslenbroich, CEO and Co-Founder of Aquila Capital, said: “Due to the high demand for renewable energy infrastructure, a deal pipeline of attractive target investments is a decisive success factor for investment managers. The long-standing cooperation with leading market participants such as OX2 is therefore of great importance for the sustainable positioning of Aquila Capital in the Nordics.”

The acquisition increases Aquila Capital’s track record in the wind sector to about 1,000 MW. With regards to the Nordics, Aquila Capital has implemented renewable energy projects with a total installed capacity of more than 800 MW since 2011.

CONSORTIUM ANNOUNCES INVESTMENT IN THAMES WATER Borealis Infrastructure (“Borealis”), the infrastructure investment manager of OMERS, and Wren House Infrastructure Management Limited (“Wren House”), the infrastructure investing arm of the Kuwait Investment Authority, (each a “Consortium Member” and collectively the “Consortium”) has announced that they have agreed to acquire a 26% stake in Kemble Water Holdings Limited (“Kemble”), the ultimate holding company of Thames Water Utilities Limited (“Thames Water”), from Macquarie Infrastructure & Real Assets (“MIRA”).

The Consortium consists of international infrastructure investors with proven track records of investing in UK infrastructure, which will bring significant financial and operational expertise to Thames Water. Financial details of the transaction have not been disclosed.

Thames Water (the “Company”) is regulated under the Water Industry Act 1991 and is owned by Kemble. Other large shareholders in Kemble include pension funds and other long-term investors from the UK and around the world.

Thames Water is the UK’s largest water and wastewater services provider serving 15 million customers across London, the Thames Valley and surrounding areas. The Company supplies 2.6 billion litres of drinking water per day, and treats 4.4 billion litres of wastewater per day. Thames Water is regulated by Ofwat, the Environment Agency and the Drinking Water Inspectorate.

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Borealis and Wren House are committed to the responsible, long-term ownership and development of Thames Water.

Each Consortium Member’s primary focus is to support management’s goal to continue to deliver a high quality customer experience and value for money both now and in the future. The Consortium has met with Thames Water’s existing management team and we look forward to working closely with them to pursue this goal. The Consortium will support Thames Water’s ongoing £4.5 billion capital investment programme - for the 2015 to 2020 regulatory period - the largest in the UK water industry.

The Consortium Members have proven experience as trusted long-term investors in critical UK infrastructure, as evidenced

by Members’ current investments in London City Airport, Associated British Ports, SGN, Belfast International Airport and High Speed 1.Outside the UK, the Consortium Members have additional significant experience as investors in major regulated utilities in Canada, the USA, Australia, Spain, Sweden, Finland and Czechia.

They have a strong track record of investing in and growing excellent businesses, maintaining good relationships with customers, staff, management, regulators and other stakeholders. Ralph Berg, Executive Vice President & Global Head of Infrastructure, OMERS Private Markets, said: “Thames Water is the UK’s largest water company, a crucial provider of public utility services to almost a quarter of the UK’s total population. The geographical area the Company serves is amongst the most densely populated and economically vibrant in Europe and Thames Water’s commitment to deliver high quality customer service and value for money will receive our full support.”

iDEAL BRIEF A spokesperson for Wren House, said: “Our investment will form a core part of our growing UK investment portfolio and will support the Company’s improving performance trajectory over the past few years.

In addition, our long term investment horizon allows us to support Ofwat’s ambition to drive customer service, resilience, affordable bills and innovation in the industry.

We look forward to working closely with Thames Water’s management team in achieving these objectives.”

Sir Peter Mason KBE, Chairman of Thames Water, said: “We welcome Borealis and Wren House on board as new investors in Thames Water and look forward to working with them in pursuit of our mission to provide the essential service that’s at the heart of daily life, health and enjoyment.”

LEAPFROG INVESTS IN FINCARE, A DISTINCTIVE PLATFORM FOR FINANCIAL INCLUSION Fincare to launch a Small Finance Bank dedicated to under-served India • LeapFrog co-invests with True North, TA Associates, Tata Capital, SIDBI, Kotak Mahindra Old Mutual Life Insurance Ltd, and Edelweiss Tokio Life Insurance - $75 million transaction • Disha Microfin, a Fincare group company, is one of only ten institutions approved as a Small Finance Bank as part of Indian Prime Minister Modi’s significant push for financial inclusion • Demand for financial services in the two most underserved segments (women and rural communities) drives Fincare’s annual growth rate of 79 per cent • The World Bank estimates that to-date only six per cent of Indian adults over the age of 15 have borrowed from a financial institution LeapFrog Investments, the specialist investor in emerging markets and pioneer in profit with purpose investing, announced its acquisition of a stake in Fincare.

Fincare is one of the largest and fastest-growing financial inclusion platforms in India, reporting a 79 per cent annual growth rate in assets under management over the last three years.

The new investment in Fincare represents a significant commitment by leading global investors, to India’s banking industry. LeapFrog’s stake is part of an overall $75 million transaction by investors including Tata Opportunities Fund, Kotak Mahindra Old Mutual Life Insurance Ltd, Edelweiss Tokio Life Insurance offices, TA Associates and True North.

Recent demonetisation policies led by the Indian government, as well as the introduction of ID cards for over 1 billion citizens, are aimed at facilitating the growth of a secure, digital and mobile-centric banking system across the country. Disha Microfin, a Fincare group company, is one of only ten institutions in India to receive in-principle approval from the Reserve Bank of India to become a Small Finance Bank, a centrepiece of the government’s financial inclusion agenda.

Small Finance Banks are required to guarantee at least 50 per cent of their loan portfolios are comprised of loans and advances below $37,500, ensuring underserved consumers can access smaller sums of credit, thereby driving financial inclusion.

“This investment is testament to the scale of the opportunity for financial inclusion in India, and underscores the ability of Fincare products to drive significant revenue expansion alongside social impact for India’s underserved rural communities”, said Rajeev Yadav, Group CEO for Fincare in Bangalore.”

“Today’s announcement will enable us to continue to build the infrastructure required to accelerate our growth, in line with our mission to facilitate a lifetime of progress at the base of the pyramid through financial and social inclusion.”

“Fincare sits firmly at the intersection of profit with purpose.

Its excellent management team has built an outstanding high-growth, profitable and customer-centric model that reaches underserved people with essential financial services,” said Michael Fernandes, Partner at LeapFrog.

“This is a perfect example of a company improving the lives of emerging consumers and delivering strong returns.”

Fincare advances financial inclusion for two of India’s most underserved demographics: rural communities and women.

The company currently provides financial services to over 1.2 million emerging consumers, defined as people living on under $10 per person a day, the majority of whom are women, and 95 per cent of its total customer base lives in rural areas.

LeapFrog’s investment will support Fincare in scaling to reach millions of first-time consumers with vital financial products.

India is one of the fastest-growing emerging economies, with a developed financial sector. However, there is significant progress to be made on furthering financial inclusion.

According to the World Bank, just 6 per cent of Indians over the age of 15 have borrowed from a financial institution, while only 9 per cent have accessed credit for a farm or other business.

India’s microfinance industry is projected to experience significant growth in the coming years to meet demand for financial tools, with the sector already reporting a 34 per cent compound annual growth rate (CAGR) in lending in 2015-16, according to Sa-Dhan, the country’s self-regulatory organisation of microfinance institutions. LeapFrog has been the partner of choice for several of India’s preeminent financial companies – including Mahindra Group, Shriram Group, Magma Fincorp and IFMR Holdings – working to seize this historic social and commercial opportunity.

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GENPACT STRENGTHENS ARTIFICIAL INTELLIGENCE CAPABILITIES WITH ACQUISITION OF RAGE FRAMEWORKS Addition of enterprise-level AI capabilities furthers Genpact’s ability to drive digital transformation at speed and scale for clients

As a result, clients can address customer needs and market dynamics, manage risk better, differentiate their offerings, and achieve topline growth using AI technologies.

Genpact (NYSE: G), a global professional services firm focused on delivering digital transformation for clients, has signed a definitive agreement to acquire Rage Frameworks, a leader in knowledge-based automation technology and services providing Artificial Intelligence (AI) for the Enterprise.

Terms of the deal are not disclosed. As part of its strategy to drive both digital-led innovation and digital-enabled intelligent operations for its clients, Genpact is investing in leading technologies, such as AI, that are transforming the way companies in many industries compete. The acquisition of Rage Frameworks advances this strategy, extending the frontier of AI for the enterprise. Genpact will embed Rage’s AI in business operations and apply it to complex enterprise issues to allow clients to generate insights and drive decisions and action, at a scale and speed that humans alone could not achieve.

“As clients evolve their digitization journeys, AI is moving from experimentation into the mainstream. Enterprises are looking for comprehensive solutions which they can successfully deploy without an army of AI specialists,” said Sanjay Srivastava, senior vice president and chief digital officer, Genpact.

“As advanced technologies such as AI fundamentally change the definition of work, the ability for CXOs to find and leverage new solutions that combine the best elements of human expertise and machine intelligence, will be critical to their ability to gain and sustain competitive advantage,” said NV ‘Tiger’ Tyagarajan, president and CEO, Genpact.

“In this time of unprecedented change, clients are looking for a different kind of partner – one that is able to combine the latest technological advances and real-world domain expertise with a deep understanding of their business to create meaningful transformation. The addition of Rage enhances our ability to do that and to drive digital-led innovation at scale.”

Rage provides a leading AI platform in cognitive computing that enables large enterprises across industries to leverage advanced AI techniques and simplify automation challenges.

Clients use this platform to derive unprecedented real-time insight for a range of mission-critical functions, including automatically reading and extracting data and insights from balance sheets and other financial data, contracts, news, and business reports. They are also leveraging Rage’s solutions for front desk automation, real-time intelligence, and pricing – transforming how commercial lending, policy underwriting, financial statement analysis, investment research, and multi-system reconciliation can be performed.

“The unique combination of Rage’s no-code development platform and deep global talent pool of AI, automation, and financial services expertise, coupled with Genpact’s domain expertise and what we believe is the world’s largest digital process sandbox, allows for a level of agility of implementation and speed to insight that was previously unattainable.”

Genpact plans to expand Rage’s AI offerings and take them to both existing and new clients in the financial services, insurance, consumer packaged goods (CPG), life sciences, industrial engineering, and high tech industries, addressing existing and emerging application areas including supply chain optimization, supplier risk management, supply chain cost audits, purchase order automation, and automated contract reviews.

The acquisition follows a successful strategic partnership between the two companies over the last 18 months. The two companies have partnered on a number of strategic client engagements, including an automated management reporting solution for a large global insurer and global CPG leader, as well as automated financial spreading solutions for several large financial institutions, among others.

“As the market for enterprise AI continues to grow at an unprecedented pace, we are excited that, with this transaction, we will be able to further scale and deploy advanced solutions across a broader client base,” said Dr. Venkat Srinivasan, CEO and founder, Rage Frameworks.

“With the ability to leverage Genpact’s deep domain expertise, together, we have the ability to generate an even deeper level of actionable insights and AI-driven automation businesses need to create sustainable competitive advantage.”

KINGS BROMLEY NURSING HOME ACQUIRED BY RD CAPITAL PARTNERS Kings Bromley Nursing Home in Burton-On-Trent, Staffordshire, has been acquired by RD Capital Partners LLP (RDCP Care Limited) in a leveraged buyout deal supported by a seven figure funding package structured by Allied Irish Bank (GB).

The 55-bedroom facility has been purchased from its previous owners Embrace Care Group and will become RDCP Care’s flagship nursing home.

Kings Bromley Nursing Home provides specialist residential, nursing, palliative, dementia and physical disability care for older people. Offering expert care and support to people with a wide range of conditions such as Parkinson’s disease, stroke, heart and chest related problems, reduced mobility and dementia.

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(left to right) Allied Irish Bank (GB) Relationship Manager David Booth (red tie) is pictured with Kings Bromley Home Manager Rosie Howell and new owners Iryna Dubylovska and Sameer Rizvi from RD Capital Partners

Despite the change in ownership, no changes to staff will be made at the care home. The new owners plan to make a range of aesthetic improvements to the facility including redecorating and refurbishing the property.

Established in July 2015 by Sameer Rizvi and Iryna Dubylovska, RDCP Care is the care home management arm and subsidiary of London based investment firm RD Capital Partners LLP. Kings Bromley marks the company’s first nursing home acquisition of 2017, with a deal pipeline to acquire at least two further care homes this year.

Relationship Manager David Booth from Allied Irish Bank (GB) developed a seven figure funding deal to support RDCP Care’s acquisition of the nursing home.

Sameer Rizvi, Managing Partner of RD Capital Partners LLP said: “As an investment firm, our main focus is buying out and managing care homes and nursing homes across the UK. The UK has a robust care sector and arguably the world’s best investment landscape, which is supported by very favourable demographics and excellent service providers (lawyers, accountants, brokers and bankers). Over the next decade or so, we see a number of investment opportunities that will allow us to provide top returns for RDCP partners and investors.”

“We are very pleased that our acquisition of Kings Bromley Nursing Home has been a success. This is precisely the type of care home we look for: ‘Good’ CQC rating, stellar financial performance, largely purpose-built and run by a top management team.

“This deal would not have been possible without David Booth’s unwavering support. This is also the first time we have worked with David and Allied Irish Bank (GB) and we have been very pleased with the competitiveness of the funding offer. David has worked alongside us brilliantly and we look forward to continuing our relationship with him in the future.”

David Booth, Relationship Manager at Allied Irish Bank (GB) said: “I am delighted to be working with Sameer and Iryna and supporting their development of RD Capital Partners and RDCP Care. From our first meeting, I have been very impressed with their growth plans and look forward to working with them going forward.” Kuits Solicitors’ corporate senior associate Jan Winstanley led the funding transaction for Allied Irish Bank (GB) supported by associate Helen Mather and solicitor Ryan Brown, while real estate finance partner David Marlor advised on the property-related matters, along with banking solicitor Alexander Dickinson.

Hempsons Solicitors’ partner Faisal Dhalla led the transaction for RD Capital Partners on the corporate side, supported by partner Michael Dulhanty on property-related matters. Hazlewoods LLP partners Andy Brookes and David Main, along with senior manager Richard Pitt, provided financial and tax advice to the RDCP team.

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OLIVE GARDEN OWNER DARDEN SEEKS NEW GROWTH SOURCES WITH CHEDDAR’S ACQUISITION Darden Restaurants Inc. agreed to acquire Cheddar’s Scratch Kitchen for $780 million in cash, giving the owner of Olive Garden another restaurant brand it can use to fuel growth.

The Orlando, Florida-based company also boosted its earnings outlook for the year. It now expects $3.95 to $4 a share, with same-store sales growing about 1.5 percent.

Darden is buying the chain from an investor group that includes private equity firms L Catterton and Oak Investment Partners, according to a statement. Cheddar’s, founded in 1979, has 165 locations across 28 states.

Darden expects to generate $20 million to $25 million in pretax savings from the merger by fiscal 2019. The deal will add 12 cents a share to earnings in 2018, excluding the initial costs of the integration, the company said.

With casual-dining sales remaining sluggish, Darden is looking for new sources of expansion. And Cheddar’s provides strong annual volume per restaurant, Darden chief executive officer Gene Lee said. Each location averages $4.4 million a year.

Cheddar’s will become Darden’s eighth dining brand. The chain sells dishes such as pasta, sirloin steaks, grilled catfish and baby-back ribs. It also has a bar with cocktails, beer and wine.

“This addition will also enable Darden to further strengthen two of our most important competitive advantages: our significant scale and our extensive data and insights,” he said in the statement.

Darden also posted better-than-expected results for its third quarter, which ended Feb. 26. Earnings were $1.32 a share, excluding some items, topping the $1.27 average estimate.

Same-store sales gained 1.4 percent at Olive Garden, its flagship chain. Analysts had estimated a 0.4 percent increase.

Catterton and Oak bought Cheddar’s in 2006 when it had just 55 locations, betting that the business’s cooked-fromscratch approach could work on a larger scale.

Restaurant deals have been picking up lately. Golden Gate Capital has agreed to buy Bob Evans Restaurants from Bob Evans Farms Inc.; General Atlantic has taken a minority stake in Joe & the Juice; Oak Hill Capital Partners has agreed to purchase Checkers Drive-In Restaurants Inc. and Roark Capital bought a majority stake in Jimmy John’s Sandwiches.

TIKEHAU CAPITAL CELEBRATES SUCCESSFUL LISTING ON EURONEXT PARIS Market capitalisation €1.5 billion Euronext has welcomed asset management and investment group Tikehau Capital’s listing in Compartment A of its regulated market in Paris.

Tikehau Capital was founded in Paris in 2004 and manages assets totalling nearly €10 billion. It has built its growth on four asset categories: private debt, real estate, private equity and liquid strategies (bond management/diversified management and equities). Tikehau offers its clients—both institutional and private investors—alternative investment opportunities targeting long-term value creation. The company is using this listing and a public tender offer of its subsidiary Salvepar1 to consolidate its operations and enable a better understanding of its business model, which stands out for its capacity to allocate capital across its four business lines and its atypical profile as a multi asset-class investor.

Tikehau Capital (ticker code: TKO) was listed through the admission to trading on 7 March 2017 of a total of 70,888,284 shares.

The offering price was set at €21 per share. The company’s market capitalisation on the day of listing was around €1.5 billion.

“We are delighted to list today on Euronext Paris, in a new and important step in the history and growth of Tikehau Capital,” said company co-founders Antoine Flamarion and Mathieu Chabran at the listing ceremony.

“Consolidating our asset management and investment businesses and simplifying our shareholder structure and governance will benefit us as we step up the pace of growth. Listing offers an additional visibility and trust factor for our investor clients.

We would also like to welcome the Fonds Stratégique de Participations which is joining our shareholder base, and extend warm thanks to all our shareholders, old and new, our partners, and our employees for their support and contributions to the success of this operation.”

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“Gamechanger, what we define as an individual or business that aims to create a new model that leaves the older model obsolete.

Gamechangers impact how the game is played from one objective and ruling model to a completely new vision – changing the face of how we know something.�

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BUY-SIDE CONSULTANCY PENTAGON APPOINTS SECOND INDUSTRY HEAVYWEIGHT Pentagon Consulting, a leading provider of advisory and delivery services to the investment management community has announced that Clare Vincent-Silk has joined the firm as Head of Advisory. The appointment follows the recent appointment of Jonathan Clark as CEO, further bolstering Pentagon’s senior team.

Clare brings over 30 years’ experience in the financial sector, most recently as Managing Director of Investit. She has extensive expertise in a number of areas including target operating model design for new dealing platforms, system selections across different business areas, MiFID impact assessments and managing complex change programmes.

“This is an exciting time to be working within the investment management industry, where operational change and business transformation are key for success. I am very pleased to join Pentagon, which has a very strong reputation for effective, pragmatic delivery,” said Vincent-Silk.

“Following the recent addition of Jonathan Clark, Clare joins the Pentagon management team at the perfect time, bringing together a wealth of experience from leading investment management consultancies,” said Matthew Peacock, Chairman. ”We see her appointment as being an essential element of our continued growth trajectory.”

Clare Vincent-Silk, Head of Advisory, Pentagon Consulting

Jonathan Clark, CEO, commented: “We are thrilled to have Clare join the firm. She brings a unique combination of practical consultative experience, thought leadership across the investment management industry and a successful track record of delivery. Clare’s exceptional skills will be key in helping firms respond to increased market complexity, regulatory change and the need for operational efficiency.”

ADVANCED BATTERY CONCEPTS LLC ANNOUNCES THE APPOINTMENT OF MR. DAVID BARRIE AS CHAIRMAN OF THE BOARD OF DIRECTORS The Advanced Battery Concepts’ board of directors announced that it has added David Barrie to its board and elected him chairman effective February 10th, 2017.

David Barrie succeeds Ted Skinner, who, after five successful years as chairman, announced in January his decision to step down from the chairmanship but will remain on ABC’s board of directors.

David has spent the last two and a half years assisting Advanced Battery Concepts with its technology licensing strategy to global battery manufacturers in his capacity as the Principle of Barrie International LLC – a company providing strategic and operational consulting, principally in the area of mergers and acquisitions, to senior management of companies in the U.S. and abroad including NYSE listed companies and international advisory firms. David has considerable experience in strategic planning, mergers and acquisitions, international business and building for growth.

David has and does hold many significant positions including Chairman of the Board at MFRI Inc., Senior Executive Advisory Board member of Brown, Gibbons, Lang & Company (“BGL”), an investment-banking firm, Sitting Director on a private for-profit company, Director for several non-profit institutions, including the Cleveland Museum of Natural History. In addition, David serves as an instructor for the Cornell Law School annual transactional law competition and has presented programs on best merger and acquisition practices to corporate executives. He is a member of the National Association of Corporate Directors (“NACD”) and earned his Bachelor of Arts in Political Science and Economics from Kenyon College and his Juris Doctor, Law, from Cornell University Law. Dr. Edward Shaffer, Advanced Battery Concepts CEO & founder, commented “David brings a vast amount of experience to our team and has already demonstrated his abilities with the successful negotiation of our first two technology licenses to global battery manufactures. We are very proud to have David as chairman to help ABC continue its license roll out in 2017 with several potential licensees already engaged”.

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CHAIRMAN OF EUROPE’S LEADING SOLAR ENERGY COMPANY APPOINTED DIRECTOR OF U.S STATE DEPARTMENT PARTNER ORGANISATION - GLOBAL TIES U.S. Introducing the appointment of Chairman of Europe’s leading solar energy company (Lightsource Renewable Energy Ltd) to the Board of Global Ties U.S, one of the world’s largest citizen diplomacy organisations. A non-profit partner of the U.S. State Department, Global Ties U.S. delivers international exchange programs that connect business, non-profit, government, and academic leaders from around the world with their U.S counterparts. The organisation leads a network of over 100 organizations and partners in 45 States and 16 countries. Lightsource Renewable Energy Ltd is Europe’s leading solar energy company. To date, the company has developed, installed and operated over 1.3 GW of solar energy and deployed over $2.75 billion in solar PV projects in just five years ($1.4 billion invested in 2015 alone).

Lightsource’s Chairman and Founder, Vicente Lopez Ibor Mayor is also the former Commissioner of Spain’s National Energy Commission. Vicente said, “I am honoured to be appointed as a Board member for an organisation as prestigious as Global Ties U.S.” “Chaired by Jennifer Clinton, Global, Global Ties’ efforts to foster connections between international communities and their U.S counterparts is needed perhaps more than at any time in recent history.”

“As someone dedicated to advancing the cause of clean energy, this appointment to the Board of the world’s largest citizen diplomacy organisation stands as a promising step in the right direction for the clean energy movement.”

Vicente Lopez Ibor Mayor - professional background: • Founder and Chairman of Lightsource Renwable Energy Ltd, Europe’s leading solar energy company • Former Commissioner of Spain’s National Energy Commission • Founding Partner of Spanish energy law firm, Estudio Juridico Internacional Lopez-Ibor Mayor & Asociados (EJI) • Founder of a new award-winning domestic solar storage company called Ampere, which recently won a contract with one of Brazil’s largest construction companies.

• Has contributed to numerous media outlets as an expert commentator on energy related issues including CNBC, BBC, CNN, The Huffington Post and Al Jazeera amongst others.

DAVID AZÉMA JOINS PERELLA WEINBERG PARTNERS AS PARTNER. Perella Weinberg Partners announced that David Azéma has joined the Firm as a Partner in its Advisory business. Mr. Azéma will lead the Firm’s investment banking practice in France, providing strategic and financial advice to clients in the country. He will be based in London. Mr. Azéma joins from Bank of America Merrill Lynch, where he was Chairman of Global Infrastructure and Vice Chairman of Global Corporate and Investment Banking for Europe since 2014.

From 2012 to 2014, Mr. Azéma oversaw the French government’s holdings in strategic companies, including inter alia EDF, Engie, Orange, Renault, Safran and Airbus, as head of Agence des participations de l’Etat (APE).

Prior to that, he served as CEO of KEOLIS, a global leader in public transportation; Deputy CEO of SNCF Group, a leading French transport and logistics group; CEO of Vinci Concessions, the infrastructure division of Vinci, a global concessions and construction company; and CEO of Eurostar Group Ltd., the high-speed passenger rail service between the UK and mainland Europe Peter Weinberg, Founding Partner and Head of Advisory at Perella Weinberg Partners, said, “We are excited to welcome David to the Firm. David is an experienced executive and a well-respected member of the European businesses community. His experience, knowledge and network will be invaluable to the Firm and our clients.”

Dietrich Becker, Partner and Co-Head of European Advisory at Perella Weinberg Partners, said, “Europe remains a center for deal making as European companies seek growth opportunities and foreign buyers target attractive assets on the continent.

France is among the most attractive European countries for our business, and David’s addition significantly strengthens our ability to serve our clients in this important market.”

Mr. Azéma commented, “PWP has a demonstrated ability of providing its clients differentiated solutions that address their distinct strategic needs. I am excited to be joining this firm, which remains an agile and independent company with a workforce of 600 collaborators.”

Biography of David Azéma Mr. Azéma began his career in 1987 as an auditor in the government accounting office. In 1993, after two years in the cabinet of France’s Minister of Employment, he joined SNCF, the French railway company, where he held positions of increasing responsibility, including “Charge de Mission” in the Strategy Department and Advisor to the President and Director of Subsidiaries and Participations.

He later became Chairman of the Consortium InterCapital and Regional Rail Ltd. before assuming the role of CEO of Eurostar Group Ltd, the subsidiary of SNCF, SNCB and Eurostar UK that operated the Eurostar high-speed rail service. In October 2002, Mr. Azéma joined VINCI as CEO of VINCI Concessions.

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In June 2008, he returned to SNCF Group as Deputy CEO, rising to become CEO of KEOLIS. From 2012 to 2014, Mr. Azéma was Commissioner for the French Government Shareholding Agency, then he joined Bank of America Merrill Lynch as Chairman of Global Infrastructure and Vice Chairman, Global Corporate and Investment Banking Europe.

Mr. Azéma holds a Bachelor degree in Law and is a graduate of the Institut d’Etudes Politiques de Paris (political sciences institute) and Ecole Nationale d’Administration.

EQUINITI INTERNATIONAL PAYMENTS STRENGTHENS TEAM WITH SIX HIRES ACROSS THE BUSINESS The leading global payments provider, Equiniti International Payments, has appointed six new members of staff as it drives forward further growth across the business.

Aftab Baig joins the global payments provider as Head of FinCrime Compliance (Interim), and reports into Nick Pedersen, Managing Director. Thomas Campbell joins as Business Development Director, reporting into Nick Pedersen and David Beresford. David Poore joins as Relationship Management Director, reporting into Nick Pedersen.

Oliver Ayres and Callum Miles have also joined as Business Development Manager and Business Development Associate and will report into Thomas Campbell, with Amy Kilpin joining as Head of Marketing. Amy will be responsible for managing and implementing all elements of marketing across the business and reports into Nick Pedersen.

Nick Pedersen, Managing Director of Equiniti International Payments said: “We’re thrilled to welcome each new team member and their arrivals further strengthen our high calibre international payments offering.

“Their appointments demonstrate the solid growth we have achieved so far and strongly express our ambition for further growth throughout 2017 and beyond. As we look to target new market sectors, our aim to marry simple, clear products with an integrated end-to-end payments solution has not changed, and we will continue to thrive in delivering payments simply, quickly and efficiently.”

INDUSTRY SPECIALIST TO HEAD UP HAWKSFORD’S FUNDS DIVISION

Based at Equiniti International Payments’ offices in Crawley, Aftab will be responsible for ensuring the business is further developing its capabilities to meet the evolving challenge of financial crime, a key role to guarantee Equiniti’s edge in the technological development of international payments networks.

Simon Page, Director of Funds, Hawksford

He joins from HSBC, where he held the role of Hybrid Project Manager & Business Analyst and has over ten years’ experience in financial crime compliance, having also held similar roles at Lloyds Banking Group and Barclays.

Hawksford has bolstered its funds capabilities with the appointment of industry expert Simon Page as the director of its funds division.

Thomas will lead the new business sales effort and help drive growth in new target markets such as eCommerce, travel and leisure, challenger banks and financial institutions, based from Equiniti International Payments’ London office. Previously, Head of Sales at Ebury Partners, Thomas has also held the role of Corporate FX Dealer at Western Union and has over six years’ experience in the FX and payments sector.

Also London based, David will lead the relationship management team to ensure the highest standards of service and execution are met for new and existing customers. He joins from Moneycorp where has spent the last ten years as a Senior Corporate FX Dealer, in charge of various relationship teams.

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Simon will lead Hawksford’s fund services team and is responsible for managing divisional operations and the delivery of excellent client service to the business’s private equity and real estate clients.

A member of the Institute of Chartered Accountants in England and Wales, Simon started his career at KPMG in Liverpool before moving to PricewaterhouseCoopers in the Cayman Islands in 2007 as a senior associate with responsibility for the management of a portfolio of private equity, real estate and hedge funds. He moved to Jersey to join State Street, formerly Mourant International Finance Administration, in 2008 where he held numerous senior funds positions, most recently as vice president and head of private equity fund services.

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Simon said, ‘I have developed substantial knowledge of fund and corporate services delivery, globally and am looking forward to sharing my expertise with Hawksford’s established team. Hawksford is a dynamic organisation with a relationship-based approach to client service, delivery and quality. I welcome the opportunity to play a pivotal role in shaping its funds offering.’

This is an exciting time for the market: we are seeing businesses and investors still keen to complete acquisitions and expand and we are ideally placed to assist them.”

Hawksford Group Chief Executive Michel van Leeuwen said, ‘Simon’s rigorous technical understanding of the industry and client needs will be a huge advantage in driving the next stage of growth for Hawksford’s funds offering. Hawksford has an ambitious growth strategy in place and our funds division is one of its cornerstones.’

Hawksford is an international corporate, private client and funds business.

SENIOR HIRE IN TRANSACTION SERVICES FOR SMITH & WILLIAMSON Accountancy, investment management and tax group, Smith & Williamson, has further strengthened its transaction services team in Bristol with the appointment of Marcus Graham.

Marcus has joined Smith & Williamson’s growing transaction services team as an associate director from Deloitte. The transaction services team helps clients with their investment decisions by highlighting key deal issues, negotiation points and value drivers in corporate transactions. Marcus has previously worked with companies, entrepreneurs, private equity investors and lenders.

A corporate finance specialist with over 10 years’ experience of advising business owners, boards, investors and financial institutions on all aspects of company transactions, Marcus will focus on due diligence, business valuations, business planning and raising debt finance.

Marcus said: “I am delighted to have the opportunity to join a team which is deeply embedded in the South West business community but at the same time retains a national focus. Smith & Williamson has earned an excellent reputation for delivering high quality services to its clients. I look forward to building my network further in this exciting market and bringing my transactions experience to the team.”

David Roper, a partner and head of transaction services at Smith & Williamson’s Bristol office, said: “We are delighted to welcome Marcus to our team. He brings significant experience to our clients, having worked closely with owner-managers and private equity investment portfolio holders, financial institutions, substantial private enterprises and large listed companies.

Marcus Graham, Associate Director, Smith & Williamson

Marcus has a degree in Economics from Cambridge University, is a chartered accountant (ACA) and holds the Corporate Finance Qualification (CFq).

STIRLING SQUARE CAPITAL PARTNERS BOLSTERS DACH TEAM Stirling Square Capital Partners (“Stirling Square”), a leading pan-European mid-market private equity firm has announced the appointment of Dietrich Hauptmeier to its investment team. Dietrich will be based in London and contribute to the firm’s investing activities in the DACH region. Dietrich joins Stirling Square from TA Associates, a growth-focused private equity firm with offices in Boston, Menlo Park, London, Mumbai, and Hong Kong.

As a Principal at TA Associates he focused on coverage of industrial, technology, and business and financial services companies in northern Europe. While at TA Associates, Dietrich was a board member of Onlineprinters, a webto-print service provider based in Germany, and a board observer at Soederberg & Partners, a provider of pension and other financial products based in Sweden. Prior to TA Associates Dietrich also spent time on the investment teams at Palamon Capital Partners and KKR, both in London.

Stefano Bonfiglio, Managing Partner at Stirling Square, commented: “We are delighted to welcome Dietrich to our growing team. Stirling Square’s already strong presence in the region will be bolstered by Dietrich’s deep experience in sourcing and executing transactions in Germany and beyond.”

Dietrich added: “I am excited for the opportunity to join the distinctly entrepreneurial, pan-European team at Stirling Square, which has unique abilities to handle the complexity inherent to the mid-market. In my new role I look forward to supporting great businesses and managers in fulfilling their ambitions, be it through consolidation, vertical integration, geographic expansion, or other value creation strategies.”

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PINEL ADVOCATES BOLSTERS ITS BANKING TEAM WITH REGULATORY EXPERT Pinel Advocates has announced the recruitment of James Mews as Counsel, continuing the successful growth of the business. James joins Pinel Advocates from the States of Jersey, where he was Director of Finance Industry Development.

Advocate Andrew Pinel commented “We are pleased to have James in our banking and regulatory team. He brings unique experience, through involvement in drafting and developing a range of legislation, acting in key roles in connecting with industry and acting as in-house counsel at the Jersey Financial Services Commission. We look forward to further developing our banking and regulatory offerings over the coming years.”

James Mews, Counsel, Pinel Advocates

SIDLEY CONTINUES TO BUILD OUT ITS EUROPEAN PRIVATE EQUITY PRACTICE WITH AN EIGHT-PARTNER ADDITION IN MUNICH Sidley Austin LLP announced that it will be significantly strengthening its private equity, corporate and restructuring practices with the addition of eight partners to its Munich office.

The new group comprises seven partners from Kirkland & Ellis, headed by leading private equity and M&A lawyer Volker Kullmann, and Kolja von Bismarck, head of the German Banking and Financial Restructuring group at Linklaters.

Joining Mr. Kullmann in the move from Kirkland are tax partner Roderic Pagel, corporate partners Björn Holland, Christian Zuleger, Marcus Klie and Nicole Schlatter, and finance/capital markets partner Markus Feil, a close-knit team who have worked together for many years.

The eight new Munich partners will join corporate partner Jan Schinköth, who himself joined Sidley’s Munich office last month, and Erik Dahl, who opened Sidley’s Munich office last year, coming with his team of five other private equity-focused partners based in London.

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With these new partners, Sidley will have been joined by 21 new private equity-focused corporate, finance, restructuring and tax partners in London and Munich, with nearly all of them having worked closely together prior to joining Sidley.

“The addition of these outstanding partners to our Munich office is another key step forward on Sidley’s road toward first-tier global leadership in acting for managers and holders of private capital,“ said George Petrow, Sidley’s managing partner for the European region.

“Contrary to growing skepticism in some quarters about the future of globalised markets, we remain convinced that the ability to offer cross-border legal services will continue to offer outstanding growth opportunities to the firms capable of exploiting them, and nowhere more so than in private equity, restructuring and M&A. The Munich team build-up is an important milestone for our firm because in any viable global growth strategy, Germany is bound to play a crucial role,”.

Explained Erik Dahl, global co-leader of Sidley’s Private Equity practice.

“Home to the largest economy in Europe and the fourth largest in the world, Germany, with Munich as one of its most dynamic hubs, still offers significant potential for private equity and restructuring relative to other key regions, especially at a cross-border level.”

“We have spent a lot of time in putting together a group of market leaders in Germany who combine a wealth of transaction experience with legal excellence and commercial judgment, and who share our vision of a multidisciplinary European team working cohesively on a global scale.

Like all my colleagues now joining Sidley’s Munich office, I am delighted by the outstanding prospects of this move” commented Volker Kullmann.

“What has impressed me most about Sidley is its willingness to move forward as a truly global firm, its strive for excellence and its team culture. I have no doubt that Sidley’s global success story will continue to unfold, and I look forward to being a part of it.”

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SPINVIEW GLOBAL APPOINTS NEW CHAIRMAN TO DRIVE GLOBAL BUSINESS GROWTH Geoff Sutton, ex General Manager of International Media Publishing Group at Microsoft, has joined leading virtual reality company Spinview Global as Chairman.

The experienced digital industry executive and pioneer of cutting edge technologies, joins Linda Wade, CEO, Zoran Grahovac, Business Development and Zeljko Radosevic, Head of Technology and Software Services, together with an experienced management team, to focus on growth of the Spinview business in the UK, Nordics and overseas.

Following an early career as a senior Fleet Street journalist at newspapers including the Daily Mail, Daily Mirror and Today, Sutton went on to launch the UK’s first online-only news site MSN News.

His subsequent position as a senior leader at Microsoft through the growth of the internet-era, saw him run MSN, Hotmail, Messenger, Search and online services across UK, EMEA and latterly all international markets outside of the US. For the past two years, Geoff has advised, consulted and managed a number of companies including Ferrari, Unilever, sport social network Sportlobster, Read Cars publishing, growth experts Atlantic Leap, shopping technology Monotote and VC Atlantic Bridge, before taking up his new role as Chairman at Spinview Global.

Geoff’s addition brings the commercial team to a total of nine, including four other ex-Microsoft managers, namely: • Linda Wade, previously Head Business Development for EMEA MSN, and Managing Director of Clear Media with roles supporting companies including Outbrain.

• Jo Worsfold – Director of Business Operations, previously Business Manager for MSN • Dax Aiken – Global Sales, ex Head of Sales at Microsoft • Kelly Jacobson Collins – Director Partner Management, ex Partnership and Business Development at MSN and The Guardian Geoff comments, “I believe there is a huge opportunity here to build a big, profitable and ground-breaking business in the innovative VR space. Spinview are ‘making VR simple’ and I believe we can become the platform that is required by many businesses to host and develop their VR content experiences.”

Linda Wade comments, “We are delighted to have Geoff join our team as Chairman and help spearhead the Spinview platform to the next stage of its development. At Spinview our sole aim is making VR simple.”

“We believe you shouldn’t do VR for VR’s sake but the right use of VR or 360 content can tell an incredible immersive story.

Companies are creating great new content every day, the issue they face is how to get that content to the end users.”

“We know that this industry is changing daily and we adapt to these changes to support businesses, so they don’t have to.

Geoff is an expert on digital media, digital transformation and always operates at the cutting-edge of technologies such as VR and big data.”

“His experience fits perfectly to help us drive our ‘simplifying VR’ mission forward.”

Spinview, the Swedish start-up, now headquartered in the UK, is at the forefront of digital technology and is a unique marketing platform that allows users to upload and host their virtual content experiences easily.

A full end-to-end platform for Virtual Reality Content, Spinview combines a technology interface with a range of content marketing, social sharing and distribution platforms, all designed to increase sales and promote customer loyalty.

Spinview is revolutionizing marketing by providing businesses with a low-cost direct distribution platform across a suite of distribution outlets.

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PARADE

The Commute Traveling in style

The ride Mutt Motorcycles Vs Buster + Punch, 125, Black White Mutt Motorcycles background is in one off custom Motorcycles, with a 15 year history in bike building and over 200 hand built motorcycles under their belt, it was only right to continue the custom work into our Mutt range. Benny has worked with Buster & Punch, one of the worlds leading lighting and interior design houses on several motorcycle projects including a completely bespoke Harley Davidson and a Hand built Honda cafe racer.

When launching the latest Mutt Range, a collaboration with B&P was on our list of priorities. Working closely with the design team at B&P to create a limited run of unique specials based on our popular Mongrel Model. B&P specified the short megaphone exhaust, wider rear knobbly tyre, custom white shocks and kicked up rear frame rail with a bespoke seat.

A Buster & Punch paint scheme, white grips and cross-braced bars complete the look of this bike. The team at Mutt Motorcycles are producing a limited run of these bikes in its Birmingham workshop.

Features • 18” wheels • Twinduro Tyres • Cross Braced black bars • White grips • Custom upholstered seat • Modified rear frame • LED Indicators • LED rear light • Headlight grill • Tinted yellow headlight lens • Custom coloured rear shocks

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Features • Weight (Dry) 105kg • Seat Height 780mm • Engine Single 4-stroke • Displacement 125cc • Max Power 12hp • Max torque 10Nm • Transmission 5 speed manual • Top Speed 70mph • Fuel tank 12L • Custom paintwork • Each bike is a numbered limited edition

PARADE

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PARADE

Get the Look Belstaff – Mens Classic Tourist Trophy Jacket

Hedon – Heroine Racer Helmet, Knight White

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PARADE

Roland Sands – Ace Gloves, Oxblood

Red Wing – Iron Ranger 8119 Boots, Oxblood

Red Wing – All Natural Boot Oil

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PARADE

Headwave - Tag Helmet

Turn your entire helmet into a sound system with the Headwave Tag. The Headwave uses your lid’s shell as a soundboard, creating true surround sound while you ride. With an internal battery, Bluetooth connectivity, and one-button operation, the Headwave is easy to use.

Ami Powersports - AX-12 Arai

Tint your Arai visor with the touch of a button. The AX-12 visor insert is shaped to work with Arai’s brow-vented shields and uses liquid-crystal technology to instantly switch from clear to dark smoke at the touch of a button (or automatically).

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PARADE

Mininch - Tool Pen

The Tool Pen is a functional lightweight and compact multi tool, designed to support various bolts & screws. Available for both metric and imperial sizes this tool is a great accessory for any tool kit, to help you get back on the road. Made from solid aluminum the tool pen can hold 6 bits at a time, with each bit layered over the next in a tailor made hexagon barrel. Each Tool Pen comes with 16 bits in a set, containing all of the bits that you will need for work on your motorcycle.

Magura - HC1 Master Cylinder

Magura’s new HC1 radial master cylinder uses a forged body and piston plus new seal technology to offer excellent brake feel and power. Available in 12mm, 13mm, and 16mm piston diameters, the HC1 is appropriate for any brake system.

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Hues of Mustard Starting spring off bright.

Habitat – Thea, Metallic Iridescent Glass Vase

Maisons du Monde – Fjord, Mustard Yellow 4-Drawer Chest

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PARADE

Made.com – Margot 2-Seater Sofa

Hare & Wilde – Herringbone Wool Blanket / Throw

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WILD & WOLF Wild Wood Illuminated LED Globe Light English Mustard

Fern & Grey – Ory Stool

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“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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‘Direct Lending – What’s Different Now?’ bfinance market intelligence paper reveals that competition for private debt deals has never been higher with a record amount of dry powder despite reduced fundraising; senior direct lending funds become riskier • While private debt funds raised significantly less money in 2016 than in 2015, the level of dry powder reached a record high at over $220bn as competition heightens • Senior direct lending funds have become riskier according to a range of metrics including leverage and deal terms and funds classified as senior debt now include 30-80% unitranche and 15-30% subordinated loans • There continues to be a rapid pace of new entrants (27%), particularly from private equity firms • European investors seek purer senior debt offerings and global exposure, with many now exploring US direct lending for the first time Competition for private debt deals has never been higher with a record amount of dry powder in 2016 despite reduced fundraising. Senior direct lending funds have become riskier over the past four years, with leverage creeping up and unitranche loans becoming increasingly dominant as managers try to keep IRR expectations on track despite spread compression. Meanwhile the industry attempts to respond to investor appetite for purer senior debt vehicles and new European demand for US direct lending.

These are the key conclusions of bfinance’s latest Market Intelligence paper “Direct Lending – What’s Different Now?” The paper draws on insights from 2016-17 consultancy work and, in particular, data from five senior direct lending searches conducted between November 2016 and February 2017. Last year, bfinance completed private debt mandates worth over $1.25 billion, of which nearly $930 million comprised direct corporate lending.

This volume represents an increase of well over 100% on 2015.

More competition, greater risk Fundraising, although down on 2015, remained strong in 2016. According to Preqin, private debt funds raised $73.8 billion in 2016, while “direct lending” funds raised $43 billion, with the level of dry powder reaching a new peak of over $220 billion. There has been significant like-forlike spread compression in the upper-mid market. While mangers still expect returns above 8% in unlevered senior funds, a less conservative profile is required to achieve this. Given this very competitive environment we expect a significant performance dispersion between upper and lower quartile managers.

Although direct lending has expanded rapidly over the past few years, many argue that there is still room for further growth, citing overall corporate lending volumes, upcoming regulatory changes and the potential for growth in the ‘less crowded’ sponsor-less sector.

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Default rates have remained low, averaging below 2% for direct lending and around 3-4% for leveraged loans. Yet the risk picture is concerning. Leverage (debt/EBITDA) has crept upwards and deal terms have eroded with the spread of “cov-lite” arrangements.

Unitranche loans have brought many advantages but structures should be closely examined and handled with care. These can take many forms and appear to be moving away from their original simple structure with lenders taking on more risk in the capital stack and higher multiples.

Banks have pressed to regain market share in private corporate lending, exploring more bespoke and creative models including a recent spate of manager/bank unitranche financing partnerships such as SMBC/Park Square and Varagon/Ares. Bank syndication is also in a very healthy state relative to 2008 and is the source of much manager dealflow. The relationship between banks and asset managers is more often symbiotic than competitive.

From a pure manager selection perspective, bfinance has identified four primary themes that are of particular relevance today based on recent client engagements: new entrants and the rapid evolution of the asset manager universe; demand for “purer” senior debt strategies, European appetite for US investment and the trend towards lower headline fees.

Composition of the private debt manager roster is evolving with new entrants continuing to emerge The most recent bfinance searches in for senior private corporate debt funds (Europe, US and Global) reveal that 27% of the available pooled vehicles represented the manager’s first ever senior fund. In several cases these are firms that have previously managed non-senior funds. In other cases, these are entirely new entrants in the private debt arena, most often from private equity firms.

The changing composition of the roster adds complexity to a marketplace already characterised by fluctuating availability due to the closed-ended nature of most vehicles. This makes up-to-date provider analysis particularly crucial. It also affects the way in which managers should be assessed, such as a focus on personal rather than institutional track record.

Growing appetite among pension funds and insurers for purer senior debt funds While plenty of asset owners and managers are hungry to reach for yield in today’s compressed market, a significant proportion of allocators are finding the current roster of senior direct lending funds too risk-seeking for their needs.

More than half permit over 20% of the fund to be invested in subordinated debt.

European asset owners are increasingly keen to invest in US private debt Many European investors have so far steered clear of the very different US market due to the greater leverage at fund level, unfavourable taxes and currency hedging costs involved.

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Yet willingness to consider different types of risk, greater experience in the asset class and views on the current opportunity set have all contributed to changing demands.

Prominent US managers have introduced European vehicles in order to take advantage of this dynamic. Yet, on the whole, the private debt industry does not service European appetite for “global” or US private debt investment as effectively as investors might wish.

While further product development would clearly be helpful, asset owners might also consider recalibrating views on aspects such as leverage and collateral in order to tap US opportunities more effectively, paying close attention to the many differences in how American and European lenders actually generate returns.

Trend towards lower headline fees, although structures must be analysed with care Management fees of 1% plus carry of 15% with a catch-up appears to be the current industry norm for senior debt funds, with considerable flexibility for negotiating further downwards if investing in size, particularly in management fees. Yet hurdle rates, catch-up levels and administrative fees prove critical to overall leakage and should be handled with care.

Fee structures and administrative charges are of paramount importance in an asset class where up to 25% of gross returns can potentially be swallowed up by costs. Yet before considering fee numbers, it is necessary to understand fee structures.

Ultimately, considerations such as where the hurdle rate is set and whether the manager uses a catch-up structure can have far more influence on take-home figures than whether the carry percentage is 10 or 15 percent.

The report authors are Kathryn Saklatvala, Global Content Director, Niels Bodenheim, Director - Private Markets and Dharmy Rai, Associate - Private Markets.

Niels Bodenheim, Director in Private Markets at bfinance, commented: “Within ten years, unitranche has gone from novel concept to instrument of choice. For managers, the unitranche has provided a way of boosting returns without adding further to the proportion of subordinated debt in portfolios, since it is technically first-lien. Investors, however, should keep a careful eye on the structures and terms underpinning these loans. Increasingly complex models have emerged. We’re seeing lenders introducing a component of PIK relative to cashpay in unitranche, enhancing returns but creating a more back-ended structure (deeper J-curve). We’re also seeing more cases where the unitranche is going deeper into the capital stack, which can be a source of concern for a loan classified as senior debt.”

“Cash flow debt multiples are now at the upper end of historical levels, with figures of 6x or higher deserving particular scrutiny. Most importantly, although we have seen some restructuring of unitranche deals, we have not yet seen how they fare through a full credit cycle.”

The investment case relative to public fixed income practically wrote itself, while the story of how banks pulled back from corporate lending in Europe was a powerful and intuitive one. But 2017 is very different from 2011/12.

Although the overall risk/reward equation is still attractive relative to public corporate debt, the current climate is more nuanced. New challenges include the increased risks in senior debt funds, new entrants in the manager roster and increasingly complex loan structures. We expect significant performance dispersion between upper and lower quartile managers, particularly through the end of the current credit cycle.”

Dharmy Rai, Associate - Private Markets, bfinance, commented: “As a group, US senior debt funds tend to produce higher returns than their European counterparts, in large part due to the additional leverage they use at the fund level. Yet there are many other differences in the way that European and US managers generate their income and overall IRR. For instance, origination fees make up a greater portion of overall yield for European managers than US peers. European investors looking towards US direct lending opportunities should be sensitive to structural differences and impact of hedging and tax consideration.”

‘Sensation seekers’ make better CEOs, research finds ‘Sensation seekers’ embrace innovation and make better CEOs, says Jingjing Zhang, Assistant Professor of Accounting at Desautels School of Management, McGill University. CEOs who search for exciting yet risky experiences – such as flying small aircraft – embrace diverse and high-impact innovation projects in business. The researchers examined the performances of 88 CEOs who were also pilots and 1,123 non-pilot CEOs in US firms from 1993 – 2003. This revealed that firms with a pilot CEO are able to increase their number of patented products or services by 66.7% and the number of citations of these patents by 43.9%.

Zhang says: “Our research demonstrates that companies led by ‘sensation seekers’, who display the same thrillseeking tendencies as pilots, are able to generate more patents with greater market impact than their peers. This is because CEOs with this particular personality typically improve innovation effectiveness and pursue more diverse and original projects.”

The research suggests that businesses employing a ‘sensation seeker’ as a CEO are likely to be far more innovative. Zhang says: “Managers with an inclination for creativity in corporate settings are far more successful when innovating. An openness to new ideas, and a willingness to pursue new methods of working overrides their desire to maintain structured and repetitive situations.

They are also likely to be more innovative consumers, unafraid to try new products and always aware of alternatives. Having this personality type at the helm of a business in an industry requiring high levels of innovation is likely to be a stepping stone to success.”

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Insurtech integrated to highlight why effective leverage of digital innovation is paramount to staying relevant One-day stream to pioneer discussions stressing on the growing need for insurance operators to embrace technology to maintain a competitive edge The inaugural edition of InsurTech Integrated, convened by leading financial intelligence platform, Middle East Global Advisors, and held in strategic partnership with the Dubai International Financial Centre (DIFC), will gravitate around the theme of “Harnessing disruptive technologies to thrive in a digital era”.

Digitization has been touted as a catalyst for unprecedented change, and has resulted in constant disruption to existing business models, processes and services for insurance operators. Add to these unstable financial markets, low interest rates, changing regulations, increasing acquisition costs and uncontrollable losses from natural disasters. Insurance companies have been feeling the pinch greater than before to constantly innovate and evolve their strategies to thrive and maintain a unique edge amongst competitors.

With a host of obstacles like culture constraints, legacy technology and slow pace of delivery, insurance operators have been ill-equipped to handle the changes that digitization brought. Enhancing customer value and establishing a direct control of customer relationships have been established as key drivers for adopting digitization, taking precedence over acquiring new clients and increasing sales.

With increasing acquisition costs, customer retention becomes all the more crucial and has emerged as a critical milestone that insurance operators seek to achieve. (EY Global Insurance Digital Survey 2013) A leading Global Digital survey established that insurance operators who opted for a thoughtfully executed and adaptable digital strategy are more successful than their counterparts at reducing customer service costs whilst increasing customer satisfaction and retention.

(EY Transforming Customer Service in Insurance Through Digital Innovation 2015) In light of the constant technological disruption of the insurance industry, InsurTech Integrated will pioneer discussions focused on developing suggestions for adaptable digital strategies for insurance operators that besides enhancing customer experience, will lead to economies of scale in the long run. Leading technology Gurus will converge to analyze and discuss the issues at hand whilst offering valuable insights for the smooth adoption of digitized processes that will chart the way ahead for the insurance industry. InsurTech Integrated will take place on 12th of April at the Dusit Thani Hotel, Dubai.

The stream aims to highlight the importance of developing digital proficiency amongst insurance operators in the light of stiff competition by spearheading a series of insightgenerating discussions.

Is Blockchain the missing piece of the puzzle that will turn the tide in favour of the insurance landscape?

One-day stream to launch discussions stressing on the massive potential Blockchain harbours to drive enhanced customer engagement T The inaugural edition of InsurTech Integrated, convened by leading financial intelligence platform, Middle East Global Advisors, will gravitate around the theme of “Harnessing Disruptive Technologies to Thrive in a Digital Era”.

In the wake of immense digitization, insurers are no strangers to disruption. Even today, the effect of Catastrophe bonds on the reinsurance market is felt to have unexpected consequences on direct insurers. Constant innovation of business strategies has become vital in order to thrive and maintain a unique competitive edge. A constantly growing and chronological digital ledger of all bitcoin transactions that have ever occurred, Blockchain has been known to be used extensively in the banking industry.

Arguably called the greatest revolution since the dawn of the internet, it is vital to recognize the massive potential blockchain harbours in turning the tide in favour of the insurance landscape.

Blockchain builds on a set of four characteristics: decentralized validation, immutable storage, redundancy and encryption. Three prime avenues where effective implementation of blockchain can reap rewards for insurers include: increasing effectiveness in fraud detection and pricing, innovating insurance products & services and reducing administrative cost. Interestingly, as of 2014-15, investments in blockchain-related start-ups across industries had escalated to more than USD 800 million. Despite the fact that blockchain stands poised for exploration by insurers, unlocking its massive potential and harnessing it fully to drive efficiency is still a long way off. The core value of blockchain that is essentially extremely decentralized in nature, can only be realised basis extensive collaboration with relevant parties like competitors, suppliers, etc.

(Mckinsey & Co., 2016)

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This gives rise to a host of technological, market and regulatory obstacles. Another major challenge that blockchain faces is the fact that it is a substantial investment with a presumable five-year realization timeline, making it logical to opt for alternative solutions that bring faster returns in areas that do not heavily depend on blockchain.

While blockchain may not bring immediate returns today, it is slated to underpin the sector’s growth in the future. In light of the growing disruption in the insurance sector, InsurTech Integrated will pioneer discussions focused on how effective implementation of blockchain could be of strategic interest to insurers. Leading experts comprising Max Di Gregorio, Partner, Digital & Technology Consulting Lead FS, PwC Middle East; Saqr Ereiqat, BlockChain Evangelist & Management Consultant and Cecil O’Brien Owens, Chairman & CEO, Total Technologies and Solutions FZ-LLC (‘TTS’) will discuss the key issues at hand extensively whilst offering valuable insights highlighting the opportunities and threats that come along with the technology.

InsurTech Integrated will take place on 12th of April at the Dusit Thani Hotel, Dubai.

The stream aims to highlight the importance of developing digital proficiency amongst insurance operators in the light of stiff competition by spearheading a series of insight-generating discussions.

Automation using artificial intelligence poised to be the next game changer in the insurance industry?

InsurTech Integrated to launch discussions stressing on the need to leverage the power and potential of advanced data technologies to achieve enhanced efficiency in business workflows.

The inaugural edition of InsurTech Integrated, convened by leading financial intelligence platform, Middle East Global Advisors, will gravitate around the theme of “Harnessing disruptive technologies to thrive in a digital era”. Over the past decade, copious volumes of data and the need to use it have far overtaken human capabilities. With the focus on front-end customer interactions taking centre stage, it is no secret that the back offices of most insurance companies follow underlying processes that are often repetitive and monotonous. A considerable amount of resources in terms of money and time is invested in manual tasks that serve as the link to connect various departments and business units. In the wake of immense digitization, streamlining business processes to enhance efficiency and enable better customer experiences has been a prime focus for the insurance industry.

An emerging technology trend, Robotic Process Automation (RPA), can emulate administrative tasks and workflows that are rule-based, repetitive and voluminous.

While its application results from the routine to the revolutionary, the effective implementation of such automation can lead to enhanced applications handling, claims processing and data entry, enabling a scalable, flexible and responsive workforce for insurers of the future.

It can help in achieving approximately 35% reduction in cost for high volume rule-based tasks. (EY, 2016) Expressing his views on the importance of leveraging newage technology to drive efficiency, Jonathan Matchett, Director, Insurance Advisory, Ernst & Young, said, “Driving efficiency through operational excellence has been a consistent goal for the insurance sector over the last decade. Successive waves of innovation in areas such as shared services, outsourcing, and automation/workflow have delivered results, but have had their challenges.

In the current global operating environment, cost pressures are as acute as ever, and Robotic Process Automation (RPA) is opening the door for insurers to new opportunities for efficiency. I look forward to having an interactive discussion on this subject at InsurTech Integrated.”

Another technology gaining widespread momentum is telematics, the ideal combination of telecommunications and informatics. Under the telematics umbrella falls the integration of the Global Positioning System (GPS) technology. Often associated synonymously with vehicle tracking, telematics as a technology has massive potential that transcends beyond fleet management.

The effective usage of Telematics could aid insurance companies to monitor driver behaviour, allowing them to determine risk more accurately, and eventually adjust their insurance premiums accordingly. While RPA and Telematics might serve as important technologies that transcend conventional performance trade-offs, insurance companies’ complex core transactional platforms and their constituent software architecture do not allow the seamless and speedy integration of new artificial intelligence technologies.

In light of the growing disruption in the insurance sector, InsurTech Integrated will pioneer discussions focused on the application of advanced digital technologies like RPA & Telematics and how they could be of strategic interest to insurers. Leading technology Gurus comprising Jonathan Matchett, Director, Insurance Advisory, Ernst & Young and Frederik Bisbjerg, Executive Vice President - MENA Retail, Qatar Insurance Company (QIC) will unite to discuss the key issues at hand extensively whilst offering valuable insights highlighting the opportunities and threats that come along with the technologies.

InsurTech Integrated will take place on 12th of April at the Dusit Thani Hotel, Dubai. The stream aims to highlight the importance of developing digital proficiency amongst insurance operators in the light of stiff competition by spearheading a series of insight-generating discussions.

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Accelerating Digital Wealth Management Private banking and wealth management transformation programmes don’t need to be too risky, lengthy or costly Under pressures from competition, regulators and empowered customers, financial institutions are well aware of the imperatives to change and adopt digital business models and client relationship approaches. Strategic transformation initiatives are typically resource- demanding, long in duration and with many dependencies and uncertainties. The timeline to realisation of benefits lags behind the rapidly changing market, causing doubts in the effectiveness or even in the justification of transformation programmes. This article looks at a practical acceleration approach by phased implementation of separate focused initiatives, incrementally achieving the objectives of the big programme.

The Drivers of Change We live in dynamic times, indeed, where the only constant is change. From the very local and every day, to the macro and global levels, volatile is the new steady. Competition is getting ever tougher and puts irresistible pressure on margins. True about most sectors, very acute in the broader financial industry, this has not left Private Banking and Wealth Management unaffected.

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Cost-income ratios are everyone’s worry in the sector, and for many - a matter of survival.

Unpredictable financial events (and occasional blunders) are forcing authorities to seek stability via stricter and stricter regulation. Regulatory changes, while protecting consumers and society, are adding extra pressures on bankers and wealth managers - limiting their strategic and operational options and decision freedoms, while also adding considerable compliance costs to the already endangered cost-income metrics.

Against this difficult landscape, customers are also increasingly demanding and empowered by the ubiquity of communication and information. Until recently only mentioned in lip-service clichés like «customer is king» and «at the heart of our business», now customers are coming to the forefront armed with technology and knowledge.

Their expectations can no longer be ignored, as financial institutions grasp the fact that customers, not products and not technology, are the true source of shareholder value.

The clients of private banks and wealth managers have long been pampered in tune with their high net worth, and have been enjoying long-lasting and rewarding relationships. This can no longer be taken for granted, as demographic and behavioural stereotypes get busted by realities. Today we see many ageing (and wealthy) baby-boomers as tech- savvy as the proverbial millennials.

And more important: as wealth changes hands into the next generation, retention becomes a matter of proposition relevance, deep understanding and meeting nextgeneration needs and expectations.

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Technology, not least, is another major driver of change.

Always developed to solve problems, it ironically creates problems for those adhering to status quo, to established business models and outdated ways of interacting with HNW clients. This is happening on fundamental/structural and on operational levels. Our ability to collect and amass information is now posing a challenge, as Big Data requires a quantum leap in capabilities to organise, govern and utilise that critical asset. At the operational end, the clever and user-friendly automation of specific processes, touch points or product enablers has the potential to replace big and heavy existing structures. And the potential to disrupt entire businesses and industries.

The Transformation Imperative To respond adequately to all these factors, private banks and wealth management organisations must embark on strategic programmes of significant change. One dominant theme in recent years has been Digital Transformation. It has the potential to address most of the pressure factors and, indeed, the proponents make bold promises in that respect. Many companies in all industries have made (or are about to make) the decision to invest and commit to a Digital Transformation initiative. Private banks and wealth managers, albeit a bit later, are following the trend and have their own programmes. Unfortunately, the meaning of «digital» is by far not universally understood.

In particular, the cross-functional, enterprise-wide and comprehensive nature of the transformation has often escaped leadership attention. As a result, we come across institutions where «digital transformation» is believed to belong in a particular single department (usually IT or Marketing), and paradoxically in more than one place becoming «digital» is considered accomplished with the... launch of a mobile app.

This leads us to believe that, despite the hype phrase getting a little «tired» (there are those already abandoning Digital and looking for the Next Big Thing), true transformations are yet to happen. Those who have embarked on strategic programmes have years of work to reach a new maturity level and those still contemplating will feel the pinch to finally do it - as a matter of survival.

Regardless of their early or advanced position on the digital journey, private banks and wealth managers need to keep in mind that wide-reaching and comprehensive change is a critical success factor and efforts need to be planned and coordinated accordingly; only then they can expect to see the measurable results in reducing costs, improving customer experience and retention, and ultimately growing shareholder value.

Total or Selective Transformation?

To succeed against the high-pressure background, any transformation has to be decisive and radical. It starts with a leadership vision and requires determined commitment.

And this is where many initiatives start to flounder, lose momentum or outright fail to achieve their objectives.

Determination and commitment is not easy - because transformations are big and difficult! There are many risks that not everyone is willing to take. There is complexity and significant demand for resources, including capital investment and difficult-to-find talent.

There is the usual resistance to change and the fear of the unknown. There are egos and politics... lots of factors against a successful undertaking hoping to reach meaningful targets within reasonable time. Revolutions make history but don’t happen every day and often involve blood. No wonder we don’t see too many digital revolutionaries in the boardrooms of financial institutions.

Evolution, on the other hand, usually achieves the same results in a safer and incremental way. Today’s problem is, the mentioned growing pressures won’t allow the time for evolution to take its course. It needs acceleration.

This is where thought leaders and some industry practitioners are now starting to look at selective transformation through a series of focused initiatives.

To accelerate the process and make the most of scarce resources, such initiatives (some use language like «point solutions») need to be rigorously prioritised on cost/ benefit basis with speed of implementation impacting both variables. High priority focused initiatives are more manageable and results can be more immediate. The approach lowers both risks and resourcing barriers, and allows for flexible «pivoting» (change of tack) in the process of building the new capability. Success with early initiatives provides confidence and wins support for the ones that follow, eliminating many fears and points of resistance.

Trends for Focused Initiatives Seen from the opposite end - of potential responses to the challenges, there is no shortage of offerings in the market.

Many technological and business responses to the drivers of change have been around in the last few years, maturing and getting wider acceptance. Maturity and acceptance tend to «snowball», building exponentially to explosive growth until they become business-as-usual. We believe that some of the following are reaching such critical mass: • Automation of both front- and back-office processes.

The preferred buzzword is robotics but don’t expect to see any walking creatures from Star Wars. While the front-end solutions may talk with a human voice (think Siri, Cortana, Alexa or the less creatively named person in your phone you call Google) but the emphasis is on better experience in self-service and on new D2C propositions (e.g. roboadvisors). At the back end expect increasing volumes of low-skill, repetitive work to be handled by a virtual workforce, freeing up resources for intelligent and creative tasks that enhance the value proposition for the bank’s high-value customers.

• Payment solutions have already exploded in numbers and diversity, especially those empowering the end- customer with mobility and ubiquity. This year Blockchain (and similar distributed ledger technologies) will most likely move from limited pilots into mainstream production, e.g. for remittances or trade finance.

• Data capabilities will benefit from new analytical techniques and tools for predictive and prescriptive decision support, many involving AI and machine learning (already behind the above front-end robots), and cognitive computing.

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Improved analytical capabilities will underpin better client differentiation approaches, enhanced segmentations and segmented end-to-end processes with real-time decisioning. Much of this is non-technical effort in strategies and process design, as is the governance of Big Data in the depositories built or connected with new technology.

• IoT (internet of things) may be another buzzword, associated with telematics or connected lifestyle solutions, becoming particularly relevant to the private banking and wealth management industry. It has a significant differentiating potential for offering superior personalisation, enhanced offerings and value propositions.

Still in early maturity phases, this trend is a great opportunity for early adopters and is to be closely watched or experimented with.

• Customer Interaction platforms: the revisited customer - centric push requires better relationship building, hence the renewed interest in CRM, as well as CX (customer experience) tools like the robotic personal assistants. In the new modular architectures, open APIs allow the integration of any combination of channels and touchpoint interfaces. Outputs from many of the above (like predictive analytics, IoT data) can be fed to these touchpoints to create the ultimate experience and relationships.

Business, not just Technology Innovation When we speak of technology advances as both a driver and a response, and when markets are obsessed with buzzwords like «fintech» and «insuretech», it is easy to overlook the point that what is changing is business and technology is only an enabler.

In responding to the second important challenge above (innovation culture) we cannot overemphasise that innovation should equally address business models and processes, regardless of technologies that improve existing ones. Establishing a culture is in the «people» domain but, like most transformational change, critically depends on wide cross-functional engagement, rather than being left to the HR or OD function.

The proposed acceleration through focused initiatives is a good place to build innovation culture on the go. The faster development cycle of compact initiatives, their adaptive flexibility make them very much like the agile method in software development and the increasingly popular discipline of design thinking. DT is, in fact, highly recommended for both building an innovation culture, and for creative solution development.

Looking at the entire big picture, it becomes apparent that an accelerated transformation approach is very similar in nature and outcomes to the «big bang» programmes. It is delivered, however, with more frugal resource allocation and better risk control, while still allowing a phased implementation of a bigger and complete transformation roadmap.

Original Source: Synpulse

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‘Direct Lending – What’s Different Now?’ bfinance market intelligence paper reveals that competition for private debt deals has never been higher with a record amount of dry powder despite reduced fundraising; senior direct lending funds become riskier • While private debt funds raised significantly less money in 2016 than in 2015, the level of dry powder reached a record high at over $220bn as competition heightens • Senior direct lending funds have become riskier according to a range of metrics including leverage and deal terms and funds classified as senior debt now include 30-80% unitranche and 15-30% subordinated loans • There continues to be a rapid pace of new entrants (27%), particularly from private equity firms • European investors seek purer senior debt offerings and global exposure, with many now exploring US direct lending for the first time Competition for private debt deals has never been higher with a record amount of dry powder in 2016 despite reduced fundraising. Senior direct lending funds have become riskier over the past four years, with leverage creeping up and unitranche loans becoming increasingly dominant as managers try to keep IRR expectations on track despite spread compression. Meanwhile the industry attempts to respond to investor appetite for purer senior debt vehicles and new European demand for US direct lending. These are the key conclusions of bfinance’s latest Market Intelligence paper “Direct Lending – What’s Different Now?” The paper draws on insights from 2016-17 consultancy work and, in particular, data from five senior direct lending searches conducted between November 2016 and February 2017. Last year, bfinance completed private debt mandates worth over $1.25 billion, of which nearly $930 million comprised direct corporate lending. This volume represents an increase of well over 100% on 2015.

More competition, greater risk Fundraising, although down on 2015, remained strong in 2016. According to Preqin, private debt funds raised $73.8 billion in 2016, while “direct lending” funds raised $43 billion, with the level of dry powder reaching a new peak of over $220 billion. There has been significant like-for-like spread compression in the upper-mid market.

While mangers still expect returns above 8% in unlevered senior funds, a less conservative profile is required to achieve this. Given this very competitive environment we expect a significant performance dispersion between upper and lower quartile managers. Although direct lending has expanded rapidly over the past few years, many argue that there is still room for further growth, citing overall corporate lending volumes, upcoming regulatory changes and the potential for growth in the ‘less crowded’ sponsorless sector. Default rates have remained low, averaging below 2% for direct lending and around 3-4% for leveraged loans

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Yet the risk picture is concerning. Leverage (debt/EBITDA) has crept upwards and deal terms have eroded with the spread of “cov-lite” arrangements.

Unitranche loans have brought many advantages but structures should be closely examined and handled with care. These can take many forms and appear to be moving away from their original simple structure with lenders taking on more risk in the capital stack and higher multiples.

Banks have pressed to regain market share in private corporate lending, exploring more bespoke and creative models including a recent spate of manager/bank unitranche financing partnerships such as SMBC/Park Square and Varagon/Ares. Bank syndication is also in a very healthy state relative to 2008 and is the source of much manager dealflow. The relationship between banks and asset managers is more often symbiotic than competitive.

From a pure manager selection perspective, bfinance has identified four primary themes that are of particular relevance today based on recent client engagements: new entrants and the rapid evolution of the asset manager universe; demand for “purer” senior debt strategies, European appetite for US investment and the trend towards lower headline fees.

Composition of the private debt manager roster is evolving with new entrants continuing to emerge The most recent bfinance searches in for senior private corporate debt funds (Europe, US and Global) reveal that 27% of the available pooled vehicles represented the manager’s first ever senior fund. In several cases these are firms that have previously managed non-senior funds. In other cases, these are entirely new entrants in the private debt arena, most often from private equity firms.The changing composition of the roster adds complexity to a marketplace already characterised by fluctuating availability due to the closed-ended nature of most vehicles. This makes up-to-date provider analysis particularly crucial. It also affects the way in which managers should be assessed, such as a focus on personal rather than institutional track record.

Growing appetite among pension funds and insurers for purer senior debt funds While plenty of asset owners and managers are hungry to reach for yield in today’s compressed market, a significant proportion of allocators are finding the current roster of senior direct lending funds too risk-seeking for their needs.

More than half permit over 20% of the fund to be invested in subordinated debt.

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European asset owners are increasingly keen to invest in US private debt Many European investors have so far steered clear of the very different US market due to the greater leverage at fund level, unfavourable taxes and currency hedging costs involved. Yet willingness to consider different types of risk, greater experience in the asset class and views on the current opportunity set have all contributed to changing demands.

Prominent US managers have introduced European vehicles in order to take advantage of this dynamic. Yet, on the whole, the private debt industry does not service European appetite for “global” or US private debt investment as effectively as investors might wish.

While further product development would clearly be helpful, asset owners might also consider recalibrating views on aspects such as leverage and collateral in order to tap US opportunities more effectively, paying close attention to the many differences in how American and European lenders actually generate returns.

Trend towards lower headline fees, although structures must be analysed with care Management fees of 1% plus carry of 15% with a catchup appears to be the current industry norm for senior debt funds, with considerable flexibility for negotiating further downwards if investing in size, particularly in management fees.

Yet hurdle rates, catch-up levels and administrative fees prove critical to overall leakage and should be handled with care. Fee structures and administrative charges are of paramount importance in an asset class where up to 25% of gross returns can potentially be swallowed up by costs.

Yet before considering fee numbers, it is necessary to understand fee structures. Ultimately, considerations such as where the hurdle rate is set and whether the manager uses a catch-up structure can have far more influence on take-home figures than whether the carry percentage is 10 or 15 percent.

The report authors are Kathryn Saklatvala, Global Content Director, Niels Bodenheim, Director - Private Markets and Dharmy Rai, Associate - Private Markets.

Niels Bodenheim, Director in Private Markets at bfinance, commented: “Within ten years, unitranche has gone from novel concept to instrument of choice. For managers, the unitranche has provided a way of boosting returns without adding further to the proportion of subordinated debt in portfolios, since it is technically first-lien.”

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“Investors, however, should keep a careful eye on the structures and terms underpinning these loans. Increasingly complex models have emerged. We’re seeing lenders introducing a component of PIK relative to cashpay in unitranche, enhancing returns but creating a more back-ended structure (deeper J-curve).”

“We’re also seeing more cases where the unitranche is going deeper into the capital stack, which can be a source of concern for a loan classified as senior debt. Cash flow debt multiples are now at the upper end of historical levels, with figures of 6x or higher deserving particular scrutiny. Most importantly, although we have seen some restructuring of unitranche deals, we have not yet seen how they fare through a full credit cycle.”

Kathryn Saklatvala, Global Content Director at bfinance, commented: ”The rise of direct lending, and of private debt investment in general, has undoubtedly been one of the biggest themes in post-GFC institutional investment. When you look at where investors have increased allocations, where they’ve added new allocations, what they want to talk about, this has been top of the list for several years. The investment case relative to public fixed income practically wrote itself, while the story of how banks pulled back from corporate lending in Europe was a powerful and intuitive one.”

“But 2017 is very different from 2011/12. Although the overall risk/reward equation is still attractive relative to public corporate debt, the current climate is more nuanced.”

“New challenges include the increased risks in senior debt funds, new entrants in the manager roster and increasingly complex loan structures. We expect significant performance dispersion between upper and lower quartile managers, particularly through the end of the current credit cycle.”

Dharmy Rai, Associate - Private Markets, bfinance, commented: “As a group, US senior debt funds tend to produce higher returns than their European counterparts, in large part due to the additional leverage they use at the fund level.” “ Yet there are many other differences in the way that European and US managers generate their income and overall IRR. For instance, origination fees make up a greater portion of overall yield for European managers than US peers. European investors looking towards US direct lending opportunities should be sensitive to structural differences and impact of hedging and tax consideration.”

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The hottest sector for late stage tech investing in Europe is non-tech • Investments masquerading as tech disguise the fundamental weakness of Europe’s late stage funding rounds. • Only 20 real tech companies in Europe get crucial late stage funding each year.

Europe is much further behind the US in late stage tech investing than it appears, according to analysis by Magister Advisors.

Late stage tech funding is far behind the US, and surprisingly over 1/3 of funding rounds in Europe target non-tech e-commerce or marketplace businesses.

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Magister Advisors identified 171 Series C, D and E funding rounds across Europe since 2011, using PitchBook. We categorised the companies by activity, into e-commerce, fin-tech, ad-tech, software, entertainment, communications hardware, other hardware, and telecoms.

Non-tech investing might be preferable were it not for world-class tech engineering capability across Europe in key areas such as cybersecurity, block-chain, AI or virtual reality, plus a host of more prosaic enterprise software. applications.

It paints a stark picture.

It might also be defensible were it not for the fact Europe’s two big ‘winners’ so far have been SAP and ARM, prime examples of the value of European-created IP. Worse, labelling digital consumer investing as ‘tech’ masks the huge and persistent gulf between the European investment industry and the US.

• 61 of the 170+ late stage companies were e-commerce or online marketplace businesses, the biggest category at 35% of the total.

• Software was the next biggest group at 42, and this includes ALL of the ‘hot’ sectors like security, artificial intelligence, analytics, and applications for vertical markets.

• Fin-tech, perhaps the most hyped tech category in Europe, saw only 20 such rounds.

• Ad-tech, another recently ‘hot’ European sector registered only 11 rounds.

• E-commerce is ‘non tech’.

In our view e-commerce or online marketplace businesses are retail businesses first, technology companies second.

Most software powering e-commerce can be bought off the shelf, and there is little if any underlying intellectual property (IP). For example, Uber and Lyft’s apps do basically the same thing, and Etsy and eBay operate the same type of marketplace. They use tech, but scale, not core IP, is the differentiator. And to companies like DeliveryHero and Deliveroo, logistics know-how is far more valuable than coding skills.

Only 20 ‘real tech’ companies get crucial late stage money each year.

Subtracting e-commerce investments leaves just over 100 financings over five years, or only 20 a year. Let that sink in for a second. Across 27 European countries, 700m+ people and spanning the last five years, barely 20 ‘real tech’ companies a year get serious money to really scale. The late stage tech funding market is functionally non-existent.

No wonder so many European real tech companies get acquired before raising a Series C round. And those that don’t want to sell early often have to shift to the US, with the best evolving into US businesses. The value destroyed for the European tech industry is incalculable.

Late stage European money is funding digital consumer activity, not the next Microsoft.

What is happening is late stage money is helping digitise European consumer activity, relying on an accessible base of 700m consumers. As e-commerce reaches 20% of all retail, and with Europe boasting sophisticated payments and logistics, it’s easy to back the next online business selling offline goods more cheaply, or in a slicker way. Plus, the drivers for success in these businesses don’t require an engineering PhD to understand.

However, lets be clear; this is not tech investing, which in our view means backing already sizeable IP-based businesses to accelerate international growth, or expand product offerings.

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We understand that this is a classic ‘chicken and egg’ situation. The tech industry in Europe is very young, there is hardly a local IPO exit option, and the elusive combination of world class business talent and technology know-how (the secret sauce behind all current tech giants, from Apple to HP) is harder to assemble in Europe. As a result, the prospect for creating $1B+ public ‘real tech’ companies in Europe appears structurally more challenging. Contrast with the relatively straightforward alternative of creating an innovative offering distributed via smartphones to hundreds of millions, and the choice is in many cases ‘a no brainer’ in VC parlance.

In our view however there is persistent, and significant bias away from backing IP-based companies. Witness the number of relatively small European tech companies that are acquired for $100m or more each year, and its clear there is plenty of raw material with which to build serious tech companies competing from Europe.

What is to be done?

Given that growth capital flows rationally towards the best risk/reward opportunities, what is to be done to break the ‘vicious circle’?

Create and highlight role models real tech CEOs can follow with confidence – It has been decades since SAP IPO’d. Since then enterprise knowledge software company Autonomy briefly scaled to a $10B+ valuation, but its story is no longer perceived as a role model. More recently, it is imperative that we celebrate prominently and broadly the few real-tech companies that have ‘made it’ since, including Criteo, Markit and Ingenico to name a few. There are enough role models around, but they are not widely known.

Enable tax-advantaged financing for Series C real tech companies –While national or supra-national ‘solutions’ are never problem-free, the reality is the UK’s EIS programme and similar early stage tax schemes elsewhere in Europe, have contributed to an amazing increase in Series A capital.

Endless ink can be spilled on whether all of this capital has been wisely deployed. But as a ‘pump-primer’ its value is undisputed. We believe a similar program promoting IPbased real tech companies raising larger later stage rounds can, over a 5-10 year period, have a similarly dramatic effect. One way would be for a national ‘venture debt’ provider to co-fund larger later stage rounds, requiring less equity capital from risk investors.

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Proactively encourage creation of European late stage funds – European or national money is already very prominent in earlier stage venture funds, so much so that the EIF (the EU’s funding body for VC’s) is often a makeor-break, though challenging, investor in funds that are trying to raise capital. Proactive direction of capital towards later stage funds with specific remit to back Series C and later real tech companies in Europe can quickly accelerate a small group of those companies. By creating one or two new ‘winners’ to take the place of ARM and SAP, the vicious circle can rapidly reverse.

Encourage senior-level immigration into the EU – Most CEO’s running America’s biggest tech companies are immigrants. Apple was founded by the son of an immigrant. Intel was founded by a Holocaust survivor.

And the list goes on. There is no question the same trend will occur in Europe in the coming decades. Immigrants wilful enough to cross borders, who possess an excellent technical education (IIT in India is as good as MIT in Boston), are prime candidates to take critical C-level leadership positions in later stage European companies.

And today European entrepreneurs willing to return to Europe, given US immigrant sentiment, can augment that flow. Attract an unfair share of these returnees, and in a decade European late stage tech will be transformed. The funding gap otherwise will only get worse.

We think that now is the time to take key steps to create a functioning Series C funding market for European real tech. Many Series A and B funded companies are graduating to the stage where €20m+ Series C rounds are necessary if they are to scale independently. At the moment we see many opting for premature M&A exits, when at least some should remain private and build more value before selling.

Everyone (everywhere) loves a €100m cash M&A exit before a large Series C funding round. That is, until they experience the value of creating a €1B+ value company by raising that bit of additional later stage capital that causes company value to accelerate. Only when that happens can we begin to talk about a European phenomenon in tech that begins to challenge Silicon Valley.

Entrepreneur nation – just over 4 million British workers will become self-employed • One in seven British workers (15%) aim to become self-employed at some point in the future • One in 10 of these (12%) hope to make the transition in the next six months • But a quarter (25%) would need to be made redundant before they consider taking the plunge Great Britain is a nation of aspiring entrepreneurs, according to a new report from Aldermore, the specialist lender and savings bank. Just over one in seven, the equivalent of four million** British workers want to become self-employed at some point in the future, and more than one fifth (22%) saying it has always been an ambition.

One in 10 workers (12%) are looking to make the transition in the next six months. For many (25%) though, the goal is further away and could take over five years to reach. A further quarter (25%), say they would only consider becoming self-employed if they were made redundant from their current job, whilst for 20%, being unhappy in their current place of work would push them to take the plunge.

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Reasons for becoming self-employed Employees who have not yet taken the step, one of the most cited drivers is the opportunity to earn more money (37%). This is particularly prevalent among those aged 25–34, of whom almost half (48%) cited this as a motivation. Being able to improve work-life balance (35%) is also a top reason. The reality however is quite different. When asked, half (50%) of those who are already self-employed** say they have not been able to earn more money since becoming self-employed.

In addition, there is also the fear of failure, with a quarter (25%) of Britain’s aspiring entrepreneurs stating they were worried about their business failing.

Charles Haresnape, Aldermore’s Group Managing Director, Mortgages, says: “Taking the step to become self-employed is a brave and bold decision and we love the fact that in the UK more and more people are doing so. However, we know that whilst it can open the door to many amazing opportunities, it can be a risk, with uncertainty and financial instability from start up.

“We want to make things easier for aspiring entrepreneurs by trying to ensure some security when it comes to home-buying.

Almost a third (30%) of self-employed home owners believe the mortgage application process was biased against them, while almost two thirds (63%) of those who have experienced difficulty securing a mortgage said it was because it was difficult to find a provider who understands individual business owners.

“All too often self-employed borrowers do not fit the ‘norm’ for many lenders and it can be a real challenge for self-employed to receive the financial support they need to buy a home. This is why we are working to simplify the process of applying for a mortgage. Aldermore has a human approach to lending, and out specialist advisers consider each case on an individual basis.”

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Four key trends in retail transformation in 2017 and what it means for skills development Big Data, Article 50, and speed to market will be some of the key trends in retail transformation in 2017, according to Venquis.

An analysis by the specialist change and business transformation consultancy outlined some of the major areas of change expected to impact the retail arena in 2017. It found that these trends are likely to drive significant demand for analytics, tech and change management specialists.

Ed Richardson, Consultant in retail contract team at Venquis, comments:

Ella North, Consultant in retail permanent team at Venquis, comments:

Cost control and continuous learning

Big data

“With 2017 likely to be an economically challenging year, we anticipate that the trend from 2016 of major core IT change projects undergoing a degree of restructuring to temper spiralling costs will continue. We expect more of a focus on the improvement of the structuring of change projects, with more emphasis on learning from past mistakes. This has elicited a strong demand for programme directors, managers and change leads, all of whom have experience of shaping programmes.”

“The retail market continues to become ever more targeted as we live in an increasingly information-led society. Ultimately, only those with the most accurate and effectively cleansed data will succeed so we can expect professionals with strong web and data analysis skills to be in high demand.”

Speed to market and customer journey “Firms are taking on board what customers want and consequently there will be a real focus on speed to market and developing a transparent customer journey. Retailers will continue to invest heavily in their online capabilities which will create a need for IT infrastructure to meet the anticipated demand. This means we can expect to see technological expertise become even more highly sought after in the retail arena.”

Article 50 “The big one. Obviously, we’ve only recently gained a clearer idea of what Brexit could entail and as a result few retailers have committed to any concrete strategies.

However, if freedom of movement laws are affected there is a chance that customer service workers will be in significant demand.”

“And while London’s reputation and pull as a leading global tech hub should remain strong for some time, there is a chance that a hard Brexit could affect the expertise that has been drawn from around Europe.”

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The rise of carve-outs, 6 steps to greater value With so much uncertainty and change across global economies and financial markets, coupled with increased shareholder activism and focused competition, corporates are under immense pressure to increase returns, according to leading global law firm Baker McKenzie. This is causing companies to re-examine their business models and to identify areas of the business where there is no longer a strategic fit, with a view to divesting them via a carveout. There is no doubt that carve-outs are becoming more prominent as a way for corporates to unlock value from their non-core enterprises, with them currently accounting for 10% of all M&A activity globally. In the UK, from analysis undertaken by Baker McKenzie, almost 20% of FTSE 100 companies, with a market cap exceeding £453 billion, have issued profit warnings in 2016, making them ripe for restructure and divestment. Carve-outs are particularly attractive for private equity (PE) firms, especially across Europe, where there are opportunities for them rapidly to build a portfolio and, in the process, pick up specific assets.

Highlights • The proportion of carve-out deals, where the buyer is a financial institution (such as a PE investor) has more than doubled since 2009 rising from 10% that year to 23% in 2016.

• 90 of the largest carve-out deals between 2012-2016 involved 50 or more jurisdictions.

• Carve-outs tend to follow the economic cycle with companies using tactical divestments to restructure and weather the economic storm. 2009-2014 saw an increase in divestments by US firms. However, last year saw a dip in the number but an increase (in percentage terms) of deals

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in the Middle East, Africa and Latin America, reflecting increased restructuring in those geographies.

• The general trend is towards an increasing number of carve-outs as a percentage of all divestments, as particularly seen in the consumer, EMI, pharma, industrials and materials sectors.

Planning your carve-out Over the past four years, Baker McKenzie has worked on 149 carve-outs valued at $100 million or above with many being multi-billion dollar deals. This has enabled us to develop strategies that avoid loss of value, together with steps you can take to create the right circumstances for success: 1. Sellers, think like your buyer: although you may not see a future for a particular asset in your company, to generate serious buyer interest and the highest price, you need to identify how other owners may value it differently.

2. Buyers, focus on what you want and protect it: as a prospective buyer you will probably know the price you are willing to pay for the asset, as well as your objectives for the deal. However, you may not have included other factors, such as making the most of vendor due diligence to avoid repetition and the speed at which you can complete the deal, both of which could affect the price.

3. Design a deal structure: there is always an acquisition structure that suits both the buyer and seller. The ideal structure will maximise the value for you and the other party, whether you are the buyer or seller. It will also minimise business disruption through the separation process.

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4. Focus on the details with a team that knows the local market: whether you are the buyer or seller, unforeseen delays will be costly. Small, local issues can turn out to be material to the deal, or they can change the structure of the transaction.

5. Plan your HR strategy: HR should be strategic, not tactical. HR issues are sometimes left until the implementation stage, rather than addressed when the deal team plans its strategy.

6. Put everything together: you want to get the best price for your assets. It’s important to you that your buyer and other stakeholders are confident in the process and not surprised as the transaction progresses.

Good planning is key to creating this confidence.

Tim Gee, London M&A partner, Baker McKenzie said: “Post the financial crisis carve-outs have become increasingly more common as large companies reassess their businesses, letting go of non-core units to focus on activities key to their strategy.”

“With careful planning, carve-outs are seen by global businesses as a preferred route to unlocking value. For them to be a success, you need a deep understanding of local law, competition and tax requirements in multiple jurisdictions globally.”

New ONS M&A report shows International deals in the UK hit record levels Livingstone has just released its 2014-2016 Global M&A deals Tracker, which breaks down the volume of international M&A deals. Stats include the following: • Chinese acquisitions of UK companies increased by 215% in the period 2014-2016, although they account for only one in 20 international acquisitions in the UK marketplace; • US investors remain the largest source of international investment in UK businesses, with total inbound acquisitions increasing 5% from 2014 to 2016.

• Inbound UK M&A accounted for nearly 44% of the UK’s total 2016 deal activity; • Inbound UK M&A surged by nearly 15%, with a significant spike in Q4 2016 jumping from 514 deals in 2015 to 588 in 2016; • A large proportion of this rise in investment came from Chinese buyers, with deals up by 215% (2014-2016) into the UK; • Buyers from the Americas remained the largest source of international investment in UK businesses, whilst European deals increased by nearly a fifth (18%), from 185 to 208, accounting for more than 35% of all inbound deals recorded; • The UK’s business services sector, which grew at a rate of nearly 40%, reflecting the UK’s strong service-led economy.

• The UK’s media & technology sector grew by 25% year-on-year, and accounting for nearly a quarter of all inbound M&A deals, up from 20% in 2015.

Commenting on the findings, Jeremy Furniss, London-based Partner at Livingstone, said: “While 2016 was a year of significant political change, particularly given the US election result and the Brexit vote, it was a strong year for M&A. The rapid increase in acquisitions by Chinese investors has attracted attention across the world, and is set to continue.

“Our findings highlight that M&A activity into the UK has grown at a record pace as investors from Europe, the Americas and Asia take advantage of the cheaper pound to acquire successful companies in a strong economy.

“The current interest rate environment remains at historically low levels, which in turn creates continued appetite for acquisitions that have the potential to generate solid returns – and we see no reason for this to change in 2017. This landscape, coupled with the UK’s strong tech scene driving innovation and reacting to disruptive technologies, will continue to encourage further foreign interest in UK businesses this year.”

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Our purpose is to save lives and alleviate suffering by developing solutions for diseases with vast economic and social consequences.

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REPORTS A PRESENTATION OF FACTS OR FINDINGS

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Seven Critical M&A Transaction Mistakes

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109.

Industries in 2017

Accelrating Digital Innovation In Finacial Services

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European PE Breakdown

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PitchBook

MVISION

intralinks

Rise of the Rooster

The Economist

MERRILLCORPORATION

SIMMONS&SIMMONS

Forecast of Global M&A activity through Q2 2017

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One third of financial institutions to acquire a FinTech firm in next 18 months

• 31% of banks and asset managers expect to acquire a FinTech firm within the next 18 months • Those who don’t plan to do so, 45% say the regulatory risk is too high, and 48% say they are delaying acquisitions while they seek greater certainty about which firm(s) would make the best target • 41% of firms that don’t plan to make a FinTech acquisition cite ‘culture clash’ as a deterrent against M&A • 75% of respondents say they must improve their partnering capabilities to accelerate digital innovation New research from international law firm, Simmons & Simmons, shows strong investment appetite among banks and asset managers, with 31% expecting to acquire a FinTech firm in the next 12 to 18 months as a way to improve their digital innovation.

The firm surveyed 200 senior level respondents (30% at c-suite level) across five financial centres to investigate why most large institutions in the financial services sector are struggling to innovate quickly enough.

While acquiring a FinTech firm could go some way to addressing the innovation challenge, of those not pursuing an acquisitions strategy, 45% state that concerns about regulatory risk is holding them back, while 41% cite ‘culture clash’ as a deterrent against M&A. Commenting on the findings, Khasruz Zaman, M&A partner at Simmons & Simmons says: “Major financial institutions are increasingly looking at making FinTech acquisitions as a way of accelerating the adoption of new technology and innovation in their businesses. We expect this to result in a significant increase in investment and M&A activity in the FinTech sector over the coming years”.

“With this focus on acquisitions and investments, it is essential to adopt a streamlined process for executing transactions and to ensure that regulatory and reputational considerations – which could have an impact on the viability of a proposed transaction – are dealt with upfront.”

Hyperfinance, Simmons & Simmons’ flagship research programme investigates how large banks and asset managers are accelerating their digital innovation. The research shows us how the industry leaders are learning to reach hyperspeed.

Report: https://goo.gl/FRAVGs Gamechangers 68

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HYPERFINANCE ACCELERATING DIGITAL INNOVATION IN FINANCIAL SERVICES

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ARE YOU READY FOR HYPERFINANCE? There is a revolution under way in the financial services sector, and it is accelerating innovation at a startling pace Innovation is disrupting almost every link in the financial services value chain: from the emergence of automated investment services in wealth management, to the advent of new digitally-enabled business models such as crowdfunding, and increasingly intelligent regulatory software.

A rapidly expanding universe of FinTech start-ups in these and other areas has attracted growing investment over the past few years, with global FinTech investment reaching a record high of $46.7bn in 2015.1 And while overall FinTech investment dipped to $24.7bn in 2016, corporate venture capital activity was actually up, as banks, asset managers and others sought to on-board innovation being spearheaded by FinTechs.

This disruption poses a very real threat to the incumbents’ status quo, but prescient banks and asset managers are working out how to fast-track their own innovation and best institutionalise emerging technologies to seize competitive advantage.

‘Hyperfinance’ is a flagship research programme from Simmons & Simmons.

The programme, undertaken in partnership with Longitude Research, investigates how large banks and asset managers are accelerating their digital innovation.

The findings explain the challenges financial institutions and asset managers are experiencing as they seek to accelerate their innovation, and they also show where improvements can be made. Most importantly, the research tells us how the industry’s leaders are adapting their innovation strategies to reach hyperspeed.

JEREMY HOYLAND Managing Partner, Simmons & Simmons

1. The Pulse of FinTech Q4 2016, KPMG, 21 February 2017

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CONTENTS 1 KEY FINDINGS

6 3 HOW TO GO HYPER

ON THE LAUNCHPAD: ARE INNOVATION STRATEGIES WORKING?

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22

THE TRUTH ABOUT COLLABORATION

TO BUY OR NOT TO BUY? STEALING A MARCH THROUGH ACQUISITION AND VENTURING 30 INNOVATING OUTSIDE THE MOTHERSHIP: SUCCEEDING WITH ACCELERATORS AND NEW BUSINESS UNITS

32 KEY STATS: ASSET MANAGERS AND HYPERFINANCE

33 ABOUT THE RESEARCH

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KEY FINDINGS FIRST-MOVERS CAN BE FAST MOVERS Only a handful of financial institutions and asset managers can claim to be setting the pace in digital innovation. Just 7% of our survey respondents feel that the bank or asset manager they represent is industry-leading in digital innovation. A stark acknowledgement that large firms struggle to act as first-movers.

The rewards for those able to accelerate innovation, however, could be huge.

(See Page 9)

INNOVATE TO GROW The most innovative institutions are more likely to have grown revenues and seen better returns from new products. Of the firms that are ahead of their peers in digital innovation (‘Innovation Leaders’), 79% report some level of revenue growth over the past 12 months versus just 49% of other respondents. What is more, 80% of Innovation Leaders say the digitally-driven products and services they have launched over the past three years have opened up new revenue growth, versus 49% of other respondents. (See Page 10)

NOT EVERYONE IS FINTECH-READY Collaborating with FinTech firms is integral to innovation, but most large institutions are poorly equipped for this. Three-quarters of respondents accept they need to improve partnerships with outside firms, such as FinTechs, to accelerate innovation. Yet, they are not geared up for such collaboration, with complex decision-making processes and their approach to intellectual property causing problems. And only 19% consider their procurement processes to be ‘highly effective’ in enabling collaboration with FinTech firms. (See Page 13)

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REGULATORY RISK COULD HAMPER INVESTMENT There is an appetite to acquire the right FinTech firms, but regulatory risk is a serious concern. Nearly one third of respondents (31%) expect to acquire a FinTech firm within the next 18 months. Of the remaining two thirds, 45% cite concerns about regulatory risk as a key deterrent. Meanwhile, as the FinTech sector matures, leading banks are establishing strategic investment units to beat the competition to the best start-ups – and to gain the first-mover advantage in on-boarding new technology. (See Page 24)

CYBER INSECURITY

CONSORTIA CONUNDRUM

Cybersecurity risks are the biggest barrier to better partnering. Nearly three-quarters (71%) of respondents report that cybersecurity is the most significant risk associated with partnering with FinTech firms. This reflects the sector’s stringent data protection and compliance requirements – and the financial and reputational cost of any lapse. (See Page 17)

Industry consortia are vital, but the model needs refining. The industry recognises the need for consortia to implement certain new innovations, such as distributed ledger technology. However, 60% of respondents think some existing consortia are ineffective because they have too many participants, and 68% say they would need a high level of control over the direction of a consortium to participate. (See Page 20)

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HOW TO GO HYPER Six steps to faster digital innovation

ESCAPE THE ‘FOUR WALLS’ Whether it’s creating a separate legal entity, or establishing an innovation lab within a start-up ecosystem, freedom from the constraints of organisational processes and culture can be hugely beneficial to accelerating innovation and collaboration with other partners. Engaging carefully with the main organisation can help to ensure that the unit’s innovation is a commercial success. (Page 30)

ADAPT THE ON-BOARDING PROCESS Large institutions can speed up the on-boarding of FinTech firms by adopting a more flexible and tailored approach. Legal and compliance must be ready to use a ‘lighter touch’ for lower-risk collaborations with FinTech firms. (Page 13)

GET PRAGMATIC ABOUT IP A flexible approach to IP structuring is crucial. Licensing arrangements are increasingly important to FinTech firms’ innovation in certain areas, while banks and asset managers that are comfortable with licensing structures can become early adopters – and gain further benefits.

(Page 13)

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CENTRALISE YOUR DIGITAL INNOVATION STRATEGY As FinTech firms become more diverse in their activities and new FinTech hubs emerge globally, multinational banks and asset managers need a coordinated plan of attack to stay abreast of new technology. A centre of excellence or centralised knowledge base is key for efficiently marrying the right innovations with the needs of the business. (Page 22)

KNOW YOUR PARTNERS When carrying out due diligence on a potential FinTech partner, there is no substitute for spending time getting to know the founders and other senior staff in person. Asking the founders to describe their technology development cycle and their approach to compliance gives a much clearer view of the risks presented by an early stage business. It works better than asking them to fill in a 200-page procurement questionnaire and provide a raft of policies they may never have read. (Page 13)

PICK THE RIGHT INVESTMENT MODEL Outright acquisition of FinTech businesses could quash innovation, as firms might need to work with multiple players to develop cross-industry solutions. Taking a minority stake in a FinTech firm bypasses this risk, enabling financial institutions and asset managers to get closer to the development of the technology. (Page 22)

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ON THE LAUNCHPAD: Are innovation strategies working?

The rapid growth of the FinTech sector since the financial crisis is forcing incumbent institutions to solve a new problem: how can large, complex financial organisations significantly accelerate their pace of innovation?

Nimble competitors are emerging across the industry to disrupt the value chain: whether they are challenger banks such as Monzo, investment platforms such as Betterment, or innovative lending platforms such as Funding Circle.

The meteoric rise of these firms poses a material threat to traditional banks and asset managers – if they don’t take decisive action. “The bleak dystopian view for banks is not just the idea that they become the ‘dumb pipes’ that carry out payment transactions. It’s the idea that they might become the ‘dumb capital’. Holding money and lending it out, while more tech-savvy businesses control the customer engagement layer,” says Dean Nash, Head of Legal & Compliance at Monzo.

However, large banks and asset managers are not standing still. Our research highlights some of the ways in which they are responding to this potential threat.

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FIGURE 01 ACCELERATING INNOVATION

Which of these approaches has your organisation used in the past three years to help improve its digital innovation capability?

55%

43%

Investing in building our own in-house expertise

Setting up our own new business units to deliver a specific FinTech product

48%

41%

Collaborating or partnering with FinTech/ innovative firms

Setting up accelerator or incubator programmes for FinTech/innovative firms

Source: Simmons & Simmons, ‘Hyperfinance’ research, 2017

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37%

33%

Establishing joint ventures (JVs) with FinTech/ innovative firms

Corporate venturing

33%

31%

Joining consortia projects with other financial services institutions (e.g. R3)

Acquiring FinTech firms/start-ups

There is widespread innovation activity among our respondents, with many pursuing multiple strategies to accelerate their innovation. The problem is that they are struggling to achieve the best outcomes from their innovation strategies.

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INNOVATION STRATEGIES ARE FALLING SHORT Only 7% of our respondents feel their institution is industry-leading in digital innovation. Overall, however, two-fifths describe themselves as ahead of industry peers to some degree.

FIGURE 02 STEALING THE FIRST-MOVER ADVANTAGE

How would you describe your institution’s current level of digital innovation versus rival banks or asset managers?

2% 7% 7%

33%

Industry leading

Ahead

Same level

40% AHEAD

Behind

Lagging far behind

Please note: Total does not equal 100% due to rounding

52%

This 40% is our group of Innovation Leaders. Who describe themselves as more digitally mature than other organisations across their front, middle and back offices.

Source: Simmons & Simmons, ‘Hyperfinance’ research, 2017

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INNOVATION LEADERS

INDUSTRY MAJORITY*

Launched 5+ new digitally-driven products (e.g. robo-advisory, payments app, peer-to-peer lending)

60%

17%

Implemented 5+ new digital middle/back-office solutions (e.g. RegTech solution)

44%

16%

Increased total revenue over past 12 months

79%

49%

Source: Simmons & Simmons, ‘Hyperfinance’ research, 2017

The Innovation Leaders’ ability to maximise returns from breakthrough strategies creates a clear distinction between them and the industry majority. In seizing the initiative, the Innovation Leaders are putting themselves in a strong position to gain first-mover advantage.

*Industry Majority refers to the 60% of respondents who are not in the Innovation Leader group

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FIGURE 03 STRUGGLING TO OPTIMISE

To date, how effective have your organisation’s approaches been in improving digital innovation?

(Percentage reporting each strategy as ‘highly effective’) Investing in building our own in-house expertise

46% 32%

47%

Setting up accelerator or incubator programmes for FinTech/innovative firms

14%

49% 28%

33%

Setting up our own new business units to deliver a specific FinTech product/innovation

Collaborating or partnering with FinTech/ innovative firms

16%

31%

Acquiring FinTech firms/start-ups

23%

Innovation leaders

Industry majority

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Source: Simmons & Simmons, ‘Hyperfinance’ research, 2017

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For the industry majority, however, strategies for accelerating digital innovation are falling short.

For instance, only 16% consider their collaborations with FinTech firms to be highly effective.

“Most banks’ processes and IT estates have not changed one iota.

Their compliance processes are still very manual and disconnected.

Their APIs (application programming interfaces) are not really geared to deliver proper access. So it’s this legacy complexity that is making it very difficult for FinTechs to work effectively with banks.”

Nigel Verdon, CEO and Co-founder of Railsbank

Established players are not going to transform into agile innovators overnight. But it is clear that a minority of industry leaders are enjoying more success than most.

What can the rest of the industry learn about the tactics these leaders are using to improve outcomes?

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THE TRUTH ABOUT COLLABORATION Building in-house FinTech expertise is the most popular approach of survey respondents. 55% are already doing this. But this is a long-term strategy. With Hyperfinance at the door, incumbents recognise the need to move faster.

It is unsurprising then that their second-choice strategy – cited by 48% – is to partner with FinTech firms.

Once viewed predominantly as a threat to banks and asset managers, FinTech firms are now recognised as essential innovation partners.

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ARE PARTNERSHIPS WORTH THE RISK? Pairing sophisticated, highly-regulated multinationals with small, fast-evolving start-ups creates clear challenges and risks.

The majority of our respondents acknowledge that they are poorly equipped for collaboration with FinTech firms:

FIGURE 04 PARTNERING MISMATCH?

To what extent do the following factors create challenges for your institution’s collaboration with FinTech firms?

54%

54%

53%

50%

Concerns about achieving the required return on investment (ROI)

Aligning different organisational cultures/ways of working

Institutional rules limiting our ability to provide services to FinTech firms

Complexity of our decision-making structures

48%

48%

40%

Institutional desire to own IP rather than be satisfied with a licence

Establishing allocation of liabilities or risks

Our procurement processes

In addition, large numbers of respondents are concerned about inherent risks of collaborating with the FinTech sector: risks such as cybersecurity (71%), and uncertainty about the regulatory status of potential partners and their activities (51%).

Our research shows, however, that these challenges are not insurmountable.

Source: Simmons & Simmons, ‘Hyperfinance’ research, 2017

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MANAGING INTELLECTUAL PROPERTY Around half (48%) of our survey respondents say that there is an institutional desire to own the intellectual property (IP) when working with FinTech firms. This can stand in the way of effective collaboration.

Gary Chu, Global Lead Lawyer for UBS’s FinTech Innovation Lab, argues that the industry should move away from a mindset where institutions always feel the need to own IP outright. This is because it can sometimes be counterproductive for innovation models that are based on cooperation, which is especially important in the distributed ledger technologies space.

“At UBS, we see the value of IP as a key source of competitive advantage. And we’ll protect it to further our strategy.

But in working with third parties such as FinTechs or other banks, we recognise the core interests of our collaborators and seek to be creative in how we allocate and manage ownership of IP. For example, we can own IP but still grant broad licences. Or we can allow a third party to own it and seek broad enough licences for us to do what we need to do. There are other possible variations on this theme.”

Gary Chu, Global Lead Lawyer for UBS’s FinTech Innovation Lab

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INTELLECTUAL PROPERTY IN THE HYPERFINANCE ERA WHY PRAGMATISM TRUMPS PROPRIETORSHIP

Angus McLean, IP Partner and Head of FinTech at Simmons & Simmons, explains why institutions that are pragmatic about IP ownership will be rewarded.

Q

WHEN DOES IT MAKE SENSE FOR A LARGE INSTITUTION TO FORGO OUTRIGHT IP OWNERSHIP?

A

“ Firstly, a bank or asset manager needs to consider IP in the context of its main objective for the partnership. On one hand, if you’re seeking to launch a specific service, or solve a particular business problem, there’s a good case for acquiring the IP outright. On the other hand, if you’re seeking to access state-of-the-art technology, perhaps in an area such as RegTech, it may be critical that the third party has the freedom to work for multiple industry players, so they can continue taking the technology forward. Licensing would then make more sense, as taking outright ownership makes it very difficult to motivate the business to develop that technology stack further.”

Q

HOW CAN A BANK OR ASSET MANAGER THEN MAXIMISE THE VALUE OF THAT LICENCE?

A

“Being the first institution to license a FinTech firm’s technology can deliver strong competitive advantages, if the agreement is structured effectively. You may be able to negotiate a discounted royalty rate or licence fee. In some instances, you could insert more stringent obligations granting access to new releases developed by the licensor, and perhaps encourage the FinTech firm to develop some bespoke components for you. As a first-mover, you also get to understand the technology better than your competitors and can take more control over the direction of its development.”

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CYBER INSECURITY The partnering risk that our survey respondents are most concerned about is the threat to data security.

FIGURE 05 THE CYBER CONUNDRUM

To what extent would these areas pose a risk to your business if collaborating?

71%

60%

55%

Cybersecurity risk

Security of the solution-testing environment

Sharing large volumes of data

This level of concern is unsurprising. The direction of regulatory travel – the European Commission’s General Data Protection Regulation (GDPR) and revised Payment Service Directive (PSD2) both come into force in 2018 – means that financial institutions and asset managers must devote greater resources to data governance over the next few years.

“There is a real economic imperative to share data with partners to help provide better services to customers,” says Robert Allen, Financial Markets Litigation Partner at Simmons & Simmons. “But it does carry risk. Financial services institutions could face legal liability as a result of a security breach.

There is also the reputational impact that would arise. So you really need to trust the people you are sharing data with. This means that carrying out technical and legal diligence on potential partners will be key.”

In our survey, 56% of respondents say that they would be able to collaborate with FinTechs better if the firms were more transparent with their data protection compliance. “I think technology providers can become savvier about the assurances the banks need, such as being able to detail exactly where data is being held,” says Diana Paredes, CEO and Co-founder of Suade Labs.

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High risk

Risk

Barclays’ Andrew Dentice, a FinTech specialist in the Operations, Technology and Commercial Legal team, says the bank is now placing more of a focus on cybersecurity in its contracts with third-party vendors. “A lot of the focus is on the procedural elements of a cyber-incident,” he says. “If you’re relying on standard confidentiality provisions, or data protection provisions, then it’s quite a blunt instrument. It’s actually really helpful if a contract sets out what your partner has to do and what it has to provide you with if an incident occurs. Whether it’s shutting down systems, providing you with access to audit, or enabling you to reclaim data.”

Alex Brown, Partner and Head of TMT at Simmons & Simmons, notes other practical steps that should be considered too: “I think it’s also key to perform more robust due diligence and security audits of the FinTechs upfront, including penetration testing. So you can work out where the vulnerabilities are before you enter into an arrangement,” explains Brown.

Source: Simmons & Simmons, ‘Hyperfinance’ research, 2017

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ON-BOARDING AND THE PROCUREMENT OBSTACLE COURSE

Procurement processes are a major stumbling block in the bid to become agile and achieve first-mover advantage.

They can be frustratingly complex and slow.

THE COMPLIANCE QUAGMIRE

PROCUREMENT AND PRODUCT GOVERNANCE

Railsbank’s Nigel Verdon believes the main problems in procurement are legacy compliance processes, and a lack of alignment between compliance and the commercial objectives of the business. “Compliance processes have been stacked up over time in response to the financial crisis, but now what banks have is a complete quagmire,” he explains.

For a large bank or asset manager to move beyond the development stage and embed a FinTech firm’s solution into its product set, there are a host of requirements that can’t be circumvented. “You can make the legal terms as simple as you like if you are prepared to absorb the liability if the proposition fails. But if you want a proposition to be distributed to a traditional bank's customers, it has to comply with some fairly entrenched schedules of security and operational standards,” says Monzo’s Dean Nash. “You can’t carve out a different risk appetite for a new business when it’s all part of the same corporate entity. The way around it is to create a different entity, which is beholden to a different set of standards, or somehow carve out a department that plays by its own rules.”

Verdon says that FinTech firms in areas such as payments or foreign exchange will be classed as high risk by the financial services institutions.

“The fact that they might be licensed by the FCA (Financial Conduct Authority) means nothing,” he explains. “Because if money laundering runs through it, and the bank processes it, it’s clear whom the regulator will target.

Part of the problem here is that for a new solution to be launched, both the procurement process and the product governance process must be completed. But the two are rarely well-coordinated.

Sophie Lessar, Retail Finance Managing Associate at Simmons & Simmons, notes the importance of engaging legal early on to improve product outcomes. “If you have a situation where developers come up with a product and then ask legal to add the relevant wording, it’s going to make it clunky and that will defeat the purpose of the innovation,” she says. “If you understand the legal requirements from the outset, you can make sure you meet them while still creating a userfriendly experience for the end-consumer.”

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TOWARDS AGILE PROCUREMENT AND BEYOND Our research suggests a set of best practices for procurement:

01. A FLEXIBLE MODEL

02. A TWIN-TRACK APPROACH

Tailor on-boarding requirements based on the type of engagement, streamlining these for smaller, lower-risk projects.

Undertake procurement and product governance processes simultaneously, avoiding delays by answering legal and risk questions at the outset.

03. COORDINATED FUNCTIONS

04. EDUCATED PARTNERS

Close working relationships between innovation teams and commercially savvy legal, risk and governance professionals can speed up on-boarding and save headaches down the line.

FinTech firms with former bankers at the helm may have a distinct advantage when it comes to faster on-boarding. Large institutions will be able to move faster when FinTechs understand the assurances they need on areas such as data security, and make this information readily available.

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STREAMLINING THE CONSORTIA MODEL With several banks recently removing themselves from the prominent R3 blockchain consortium, 2 it is important to question the existing model of industry consortia.

Respondents overwhelmingly recognise the value of working with industry consortia to develop certain digital solutions, such as distributed ledger technologies, with 72% citing this as vital. On the other hand, 60% believe that many consortia involve too many organisations to be effective.

FIGURE 06 THE PROS AND CONS OF CONSORTIA

Agree

To what extent do you agree with the following statements about consortia projects?

Strongly agree

55%

18%

Working with industry consortia is vital to introducing new FinTech solutions in the financial services sector

38%

27%

We prefer to focus on investing in our own digital solutions than investing jointly through a consortium

46%

24%

Incentives for consortia participants need to be better aligned for them to be effective

49%

20%

We would only be happy to join a consortium if we had a high level of control over its direction

40%

40%

21%

21%

Existing consortia have too many organisations involved to be effective

We have concerns that joining industry consortia will have a negative impact on our competitive advantage

Source: Simmons & Simmons, ‘Hyperfinance’ research, 2017 2. Goldman Sachs and Santander have left a major blockchain group, City A.M., November 2016

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“I think a practical point arises as to whether large consortia are the best vehicles for developing innovative technology. You need agreement on everything from prioritisation of projects for exploration to IP ownership, and the constitution of the consortium can become very unwieldy if there are more than four or five parties involved.”

Angus McLean, Simmons & Simmons

Our survey results suggest the industry would like to see smaller consortia, better alignment of incentives for consortia members, and a high level of control over the consortium’s direction of travel. But there has to be a balance.

For distributed ledger-based solutions, for example, there is little point in having systems that work for only a small segment of the industry. The value is generated by enabling a network effect.

Perhaps a good archetype is the way UBS and other consortium banks are approaching the development of the Utility Settlement Coin (USC): by starting small and then expanding over time.

“We’ve kept the USC consortium to five members at the current stage of development, to maintain focus and momentum, better achieved in a smaller group,” says UBS’s Gary Chu. “We’ll need to get other banks on board as we build out the technology.

For now, the fact that we have Swiss, Spanish, German and US banks as members helps us take account of different legal and regulatory perspectives. We recognise that if we want to roll out USC industry-wide on a utility basis, it needs to be workable from the perspective of major financial markets globally.”

“Care is needed to ensure consortia arrangements do not give rise to technical or practical competition law issues.”

Charles Bankes, Competition Partner at Simmons & Simmons

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TO BUY OR NOT TO BUY? Stealing a march through acquisition and venturing Our survey results suggest a surprisingly strong investment appetite among banks and asset managers for the next 12 to 18 months. 32% expect to undertake corporate venturing focused on the FinTech sector.

31% expect to acquire a FinTech firm during this time.

MARKET MATURITY AND THE DESIRE TO ACQUIRE Among respondents in New York, this appetite is stronger still. Two-fifths (39%) are eyeing up FinTech deals over this period, compared with just 29% in London and 21% in Hong Kong.

Ian Wood, who heads Simmons & Simmons’ corporate and commercial practice for Asia, says that the market in Hong Kong is relatively immature in comparison with other financial centres. “There are a lot of start-ups, but many of them are not yet at a stage where they have shown themselves as a viable business, or proven their technology such that they make strong acquisition targets,” he explains.

In Hong Kong and Singapore, 66% say that a lack of certainty about the best targets is spoiling acquisition appetites. It is the region’s top barrier to acquisition. For New York-based respondents, however, the biggest concerns are regulatory risk and the potential for culture clash, with 53% citing these reasons.

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FIGURE 07 DETERRENTS TO ACQUISITION

What are the main reasons why your organisation will not choose to acquire a FinTech firm in the next three years?

66% 48%

41%

37%

We are delaying acquisitions until we're more certain about the best target

46%

46% 33%

We don't think acquisition is the best route to improving our digital innovation

Total

New York

Hong Kong & Singapore

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53% 51%

We are concerned it would create a culture clash in our organisation

41%

33%

40%

We are put off by uncertainty about intellectual property (IP) ownership

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45%

53%

50% 37% 26%

The regulatory risk is too high

29%

FinTech valuations are too high / unrealistic

42% 40% 43%

There is a lack of available capital for such an acquisition

Source: Simmons & Simmons, ‘Hyperfinance’ research, 2017

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REDUCING ACQUISITION RISKS WHILE GOING HYPER Penny Miller, Financial Services Regulation Partner at Simmons & Simmons, says the relative infancy of the FinTech sector, and a regulatory framework that isn’t tailored to emerging FinTech business models, creates challenges for institutions and asset managers seeking to understand the regulatory position of a business.

“Some FinTech businesses also operate in newly regulated areas where there is a patchwork of new (and untested) regulation across different jurisdictions.

A key area of risk mitigation is, therefore, to ensure that the FinTech business has a clear understanding of the regulatory landscape in which it sits and a strong compliance culture. Ideally, you also need advisors who understand how both new and existing regulations are being interpreted and applied by the regulators in this constantly evolving area.”

Penny Miller, Simmons & Simmons

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For those organisations that are seeking to acquire FinTech firms, there are a number of measures that can be taken to help minimise the risks involved:

01. REGULATORY STATUS

02. IP POSITION

In a sector where both innovation and regulation are changing fast, it is vital to establish whether a FinTech firm’s founders understand its regulatory status. Has the FinTech firm taken advice or consulted the relevant regulatory bodies in its market?

There are several potential pitfalls linked to IP. FinTech founders commonly originate from financial institutions or software houses.

So there is always a risk that software code, or information that qualifies as trade secrets, may have been brought into the firm from previous employers. Face-to-face interviews are a key tool for uncovering the likelihood of residual risks. It really helps you understand how the business has grown and the speed at which the firm has developed its technology.

03. EMPLOYMENT RISK In a bid to spur on rapid growth, FinTech start-ups are often on the hunt for good enterprise software developers, who understand what banks and asset managers are looking for in new technologies. With a limited pool to draw from, FinTech founders may naturally be tempted to poach previous colleagues. This brings with it the risk of claims from former employers for breaches of restrictive covenants.

04. MARKET-WIDE SOLUTIONS For some FinTech firms, the ambition for their innovation may be to create industrywide solutions. For example, some firms developing blockchain-based solutions have the potential to become a core part of the financial services industry’s infrastructure.

This may bring unexpected regulatory burdens. Before acquiring such firms, large institutions will need to assess the current and future regulatory status of the business and technology in question. They should also consider whether investing in or acquiring the business could inhibit the number of other banks and asset managers that will adopt the technology.

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A FOCUS ON VENTURING Our survey results show that banks and asset managers prefer corporate venturing to outright acquisition of FinTech firms.

The approach has several advantages. It is lower risk, given that less capital is required. At the same time, institutions can choose how closely they want to engage with the target firm. This helps to control, where appropriate, the direction of technology development. However, the firm usually retains the flexibility to connect with other institutions (including the investor’s competitors). It is the better option if the investor sees a benefit in the target firm continuing to do business with other financial institutions or asset managers.

“We want the companies that we invest in to be innovative in their approach, technologies and platforms, and would expect these companies to have other financial institutions as customers. That’s one of the reasons we prefer to focus on taking minority stakes. We are also willing to co-invest with other banks and financial institutions, which is an innovative approach not just for us but for the broader financial services industry.”

Ore Adeyemi, Director of HSBC’s Strategic Innovation Investments unit.

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HUNTING FOR FINTECHS: HOW HSBC IS GETTING AHEAD WITH ITS VENTURING UNIT

Ore Adeyemi, Director in HSBC’s Strategic Innovation Investments unit, on how the bank is approaching corporate venturing in the FinTech sector.

1

TOP-DOWN APPROACH

4

KEY AREAS OF INTEREST FOR NEW TECHNOLOGIES

4

STEPS TO IDENTIFYING STRATEGIC VALUE

In 2014, HSBC set up a Group Innovation unit to coordinate the bank’s approach to understanding and on-boarding innovation. This unit was established and endorsed directly by the bank’s Group Management Board. The Strategic Innovation Investments team is a key part of this, focused on venture capital investments. “There are people focused on digital innovation across many different parts of the bank, so we have implemented a structure which allows for a coordinated approach to the way we understand, capitalise on and drive the trends transforming our industry,” explains Adeyemi.

HSBC is targeting four specific areas in its hunt for FinTech investment opportunities: Security (‘protecting the bank’) Big data and analytics Open banking and client networks Operational efficiency (‘improving the bank’)

Each senior manager in the investment unit has internal business clients, helping them understand and focus on the business’s innovation needs.

FinTech investment targets must fulfil certain important criteria: Providing new insight Catalysing adoption Supporting the business Financial returns

3

CRUCIAL RISK ASSESSMENTS

Taking an equity stake in an early stage firm always carries risks, so these risk assessments are crucial in any investment decision: Business viability Evolving regulatory landscape for digital innovation in financial services Reputational risks

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TOP TARGETS IN CAPITAL MARKETS FINTECH: A VENTURE CAPITALIST’S TAKE ON HYPERFINANCE Mark Beeston, Partner at Illuminate Financial, a venture firm focused on innovative technologies impacting capital markets, explains why capital markets players need to focus on the ‘four Cs’ to stay competitive.

Q

WHAT AREAS OF FINTECH SHOULD CAPITAL MARKETS PARTICIPANTS BE PRIORITISING FOR INVESTMENT?

A

“ We are at a moment of generational change in terms of market infrastructure. The change driver is no longer the front-office quest for competitive advantage. It’s about four factors: cost, control, capital and compliance. If you’re not addressing those, you’re going to be out of business.”

Q

WHAT KINDS OF TECHNOLOGIES BEST MEET THESE CRITERIA?

A

“ Though we’re 10 years post-crisis, regulations such as Basel III and MiFID2 are only starting to bite now. Any technologies that can support the incremental requirements of new pieces of regulation, or that offer scalable models for process needs, represent interesting opportunities. Two businesses within our portfolio that are hitting clear and present regulatory and compliance challenges are CloudMargin and Privitar.”

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INNOVATING OUTSIDE THE MOTHERSHIP Succeeding with accelerators and new business units Our respondents report encouraging success in establishing new business units for FinTech innovation. Of those taking this approach within the past three years, 38% say it has been highly effective in improving their digital innovation. This puts it ahead of other strategies that firms are pursuing.

Creating a separate subsidiary or legal entity operating outside of the main business offers several distinct advantages:

PROCESS DESIGN The potential to establish new processes. For instance, circumventing any unnecessary legacy compliance processes.

AUTONOMY Innovation teams can be given more freedom to make decisions and accelerate development of new technologies.

IMPROVED COLLABORATION Working outside the constraints of the main organisation may align the business culturally and procedurally with potential collaborators.

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The Innovation Leaders in our survey have achieved their greatest success through new business units, or accelerator and incubator programmes. Diogo Garrido, Digital Innovation Strategist at Millennium BCP bank, is convinced that this is the right approach. “Banks need the firepower to transform how they serve their customers, and to bring new

solutions to market much faster,” he says. “This means bringing the right FinTech talent into the business and putting the right environment around it. These new divisions represent the future of the bank. If you put these innovation labs inside the main organisation, it can destroy the lab."

THE SCIENCE OF INNOVATION: HOW UBS’S LEVEL39 LAB IS ACCELERATING BLOCKCHAIN R&D In 2015, Swiss bank UBS set up an innovation lab at London’s Level39, Europe’s largest FinTech accelerator. Gary Chu, UBS’s Global Lead Lawyer for the innovation lab, explains how it is speeding up the bank’s development of distributed ledger technologies (DLT).

“Situating our team in an environment which promotes creativity and disruption was a fundamental part of our strategy. It allowed us to easily collaborate with start-ups and financial institutions, which were active in the spaces we wanted to explore.”

Gary Chu, UBS

One of UBS’s most prominent collaborations in DLT is with Clearmatics, with which it has been developing the Utility Settlement Coin (USC) since 2015. Following a successful proof of concept, UBS has formed a consortium of banks for USC.

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UBS’s approach to coordinating the lab with the main organisation is key to ensuring that its innovation delivers real value for the business.

UBS coordinates the lab with internal advisory and control functions too. This can help avoid legal or compliance headaches linked to innovation, as well as smooth the collaboration process.

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KEY STATS: HOW ASSET MANAGERS ARE APPROACHING HYPERFINANCE Disruptive innovations such as automated investment advice are becoming more advanced.

Investment flows into low-fee, passive investment vehicles are increasing. Regulatory and transparency requirements are deepening. So it’s easy to see why the asset management sector is turning to FinTech solutions. Our survey assesses the innovation strategies that asset managers are pursuing, and where they stand out from the broader financial services industry:

INNOVATION STRATEGIES When asset managers’ innovation strategies over the last three years are compared with those of our banking respondents, we see that asset management firms have been:

EMERGING TECHNOLOGY Asset managers are more advanced in implementing data analytics engines than banking respondents (48% vs. 36% feel they’ve implemented this technology)

More active in establishing accelerators or incubators (47% vs.38%) Less active in setting up joint ventures with FinTech firms (30% vs. 40%) More focused on building in-house FinTech expertise (64% vs. 50%) Involved in considerable collaboration with FinTech firms – 50% have done this

ACCELERATING INNOVATION 64% of asset managers say it’s likely they will put in place new service level agreements with FinTech partners over the next 18 months 67% will work to improve alignment between innovation, procurement and legal teams to improve digital innovation

DELAYING ACQUISITION

45% will introduce new measures to improve the security of the testing environment for new digital solutions

Only a minority of asset managers (27%) have acquired a FinTech firm or innovative start-up over the last 3 years Of those that haven’t pursued M&A, 55% are delaying due to uncertainty about the best target, while 53% say the regulatory risk is too high

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ABOUT THE RESEARCH During January and February 2017, in collaboration with Longitude Research, we undertook a comprehensive programme of quantitative and qualitative research across the financial services industry

THE SURVEY

We surveyed 200 seniorlevel respondents – 30% at C-suite-level – from large banks and asset management firms

67% were banking respondents, and 33% were asset managers

Respondents were drawn from roles in operations, IT, legal and compliance, and innovation/strategy

50% of respondents were from institutions with annual revenues of $1 billion+

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Respondents covered five financial centres: Frankfurt (25%), Hong Kong (12%), London (25%), New York (25%) and Singapore (13%)

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THE INTERVIEWS We conducted 16 in-depth interviews about digital innovation in the financial services industry with experts from banks, FinTech companies and Simmons & Simmons.

We would like to thank the following contributors for sharing their valuable insights for the research: ANDREW DENTICE FINTECH LEAD Barclays Operations, Technology & Commercial Legal

ALEX BROWN PARTNER, HEAD OF TMT Information, Communications Technology Simmons & Simmons

DEAN NASH HEAD OF LEGAL & COMPLIANCE Monzo Bank

ANGUS MCLEAN PARTNER, HEAD OF FINTECH Intellectual Property Simmons & Simmons

DIANA PAREDES CEO AND CO-FOUNDER Suade Labs DIOGO GARRIDO DIGITAL INNOVATION STRATEGIST Millennium BCP GARY CHU GLOBAL LEAD LAWYER UBS FinTech Innovation Lab MARK BEESTON FOUNDER AND MANAGING PARTNER Illuminate Financial Management NIGEL VERDON CEO AND CO-FOUNDER Railsbank OLIVER BUSSMANN FOUNDER AND MANAGING PARTNER Bussmann Advisory ORE ADEYEMI INVESTMENT DIRECTOR HSBC Strategic Innovation Investments

CHARLES BANKES PARTNER EU, Competition & Regulatory Simmons & Simmons IAN WOOD PARTNER Head of Corporate & Commercial for Asia Simmons & Simmons PENNY MILLER PARTNER Financial Services Regulation Simmons & Simmons ROBERT ALLEN PARTNER Financial Markets Litigation Simmons & Simmons SOPHIE LESSAR MANAGING ASSOCIATE Retail Finance Simmons & Simmons

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Seven Critical M&A Transaction Mistakes

SEVE CRITI N TR ANCAL M& A MIS SACTION HOW TAKE S M& A TO AVO ID P ITFAL

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How to avoid common M&A pitfalls Companies often make common mistakes that can negatively impact M&A transactions.

Successfully completing a large-scale M&A transaction is a complex process. The potential for any number of mistakes and/or problems is extensive, but most fall into seven distinct areas that include the following: • Improper planning • Unrealistic project assessments • Improper allocation of time • Poor resource utilization • Miscommunication • Lack of secure business tools, and • Limited access to quality business information • The occurrence of any one or a combination of these circumstances has the potential to derail even the most viable M&A opportunity.

One of the reasons that M&A transactions fail is an inability to quickly identify all the potential areas of “synergy savings” (areas where the newly merged organization achieves substantial cost savings) early in the discovery process. Controlled information access ensures the secure use of critical business data and information management tools that balance the needs of both buyers and sellers during the M&A process.

This accelerates decision-making and post- transaction business plan implementation. Controlled access also offers several unique advantages that provide buyers with the timely and accurate information they need to determine the overall viability of the transaction.

It also empowers the seller to protect “live documents” that may contain sensitive, proprietary, or copyrighted information from being distributed outside of the active bidding group(s). Such circumstances increase the likelihood of information falling into the hands of competitors, the media, or unscrupulous online predators.

Achieve smoother integration, more accurate information discovery, greater document security, and more timely completion of M&A transactions.

Technology, in the form of the online virtual data room (VDR) has emerged as a solution to optimize the due diligence process by overcoming the many limitations inherent in the traditional paper-based data environments. With a controlled VDR, all documents are captured and indexed to an online database, making information discovery more accurate and complete.

Report: https://goo.gl/ss0UAL

Gamechangers 108

Industries in 2017

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Despite an improved global economic backdrop, mounting uncertainties will weigh on companies in 2017 – especially given the election of Donald Trump as US president.

Two surprising and contradictory events took place in early November, with important ramifications for business in 2017. First, the Paris Agreement on Climate Change entered law, sooner than many (including The Economist Intelligence Unit) foresaw as recently as a year ago. Shortly after this, Donald Trump, an avowed climate-change skeptic, was elected US president.

This report, which brings together our 2017 forecasts for six industry sectors, is not primarily about President Trump. However, as the surprise result sinks in, it is clear that his administration could bring huge changes for all six industries: automotive, consumer goods and retailing, energy, financial services, healthcare and telecoms.

First, a sample of successful predictions from Industries in 2016: • We predicted that the scandal over emissions from Volkswagen’s diesel vehicles would only slightly affect its car sales, which in the event rose 2.1% in the first nine months of 2016 (albeit lagging global market growth of 4.7%). As we also foresaw, however, regulators’ attitudes to emissions have hardened, with on-the-road testing on it’s way in the EU. • We forecast that seasonal sales like Black Friday, Cyber Monday and Alibaba’s Singles Day would begin morphing together into a solid period of discounting lasting from early November until the New Year. In 2016, Alibaba started Singles Day a month early, as the concept extended beyond China to Hong Kong and Taiwan.

Meanwhile US-based Amazon will run its Black Friday deals from November 1st to December 22nd.

• Although US shale-oil drillers are suffering amid low oil prices, as we predicted their production has not dipped sharply enough to cause a sharp upswing in global prices. The price of Brent crude in 2016 is likely to come in to average US$45/barrel, even lower than our prediction of US$53/b.

• We said that emerging-world financial systems would become more market- oriented, with China slowly dismantling exchange controls. China proved us right by easing up quotas on flows of funds for foreign institutional investors.

• We predicted that the backlash against tax inversion deals in pharmaceuticals would intensify. In the event, Pfizer was forced to cancel its planned mega- merger with Allergan after US tax rules changed.

• We expected telecoms utilities to start investing in gigabit fibre broadband technology. BT in the UK is among those to have stepped up its rollout, with an announcement that it will provide gigabit broadband on its Openreach business network.

Report: https://goo.gl/VPl9Zj 109 Gamechangers

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The UK Government’s intention to trigger the Article 50 process of leaving the European Union (EU) by the end of March has seen a 2% decline in early-stage M&A activity in the UK in Q4 2016, compared to the same period one year prior. This means announced M&A deals in the UK could decline in Q2 2017.

“Uncertainty around the government’s exit strategy with the EU is likely to have a chilling impact on inward investment and M&A activity over the two-year negotiation period. This is being reflected in declining early-stage M&A activity, already unable to maintain the momentum that saw a 7% post-Brexit-vote jump in Q3 2016,” said Philip Whitchelo, VP Product Strategy and Marketing, Intralinks. According to the latest Intralinks Deal Flow Predictor, early-stage M&A activity in Europe, MENA increased by 9%, with the strongest performing countries France (up 28%), Spain (up 24%), Germany (up 17%) and Italy (up 15%). Europe’s largest M&A market, the UK, was a notable exception, declining by 2%. The top three EMEA sectors for YoY growth in Q2 2017 M&A announcements will be Consumer & Retail, TMT (Technology, Media and Telecoms) and Energy & Power.

Year-over-year (YoY) growth in early-stage M&A activity in Q4 2016, which is an indicator of M&A announcements in Q2 2017, grew by 7% globally – showing early indications that 1H 2017 is set to be a new record annual first half for M&A announcements. The increase in activity was driven by increased numbers of early-stage transactions in three out of the four global regions: Asia Pacific (APAC, up 44%), Latin America (LATAM, up 11%) and EMEA (up 9%). In North America (NA) early-stage M&A activity declined by 5%.

Regional M&A predictions according to the Intralinks Deal Flow Predictor include: • In APAC, M&A announcements in Q2 2017 will increase YoY, with the strongest levels of growth coming from India, Southeast Asia and Japan. The top three APAC sectors for YoY growth in Q2 2017 M&A announcements will be Financials, Consumer & Retail and Healthcare.

• In LATAM, M&A announcements in Q2 2017 will increase YoY, with the strongest levels of growth coming from Argentina and Mexico, with Brazil showing flat or slightly declining M&A activity and Chile declining. The LATAM sectors with the strongest YoY growth in Q2 2017 M&A announcements will be Healthcare and Real Estate.

• In NA, M&A announcements in Q2 2017 will decrease YoY. The NA sectors leading the decline in announcements in Q2 2017 will be Consumer & Retail, Industrials and Energy & Power. The Materials, Financials and Healthcare sectors will, however, show increasing announcements in Q2 2017.

Report: https://goo.gl/rXTfx9 Gamechangers 110

Rise of the Rooster Rise of outb Chinese

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Chinese money to heat up M&A in next 12 months • Report released by MVision Private Equity Advisers and the London Business School reveals private equity’s attitudes to Chinese outbound acquisitions • Private equity firms expect to face more competition from Chinese buyers over the next 12 months across multiple sectors, with healthcare expected to see the biggest surge in interest • Healthy assets and well-known brands are seen as the most favoured assets for Chinese buyers • 76% of GPs think the influx of Chinese buyers into the market is inflating valuations Private equity firms globally anticipate a surge in interest from Chinese buyers for acquisitions in healthcare, tech and infrastructure, according to research conducted by MVision Private Equity Advisers in conjunction with the London Business School. Conversely, the private equity community expects real estate, a longstanding safe haven for Chinese investment, to attract less interest. Geographically, General Partners (GPs) polled expect mainland Europe to attract the most Chinese investment this year, with the U.S. in second place.

Understanding where Chinese appetite for outbound acquisitions lies is key for many GPs in Europe and the U.S., who spent much of 2016 coming up against such bidders, whether corporates or Chinese GPs, in auction processes. Competition at auctions has intensified over recent years, but now it appears that more bidders are entering the race.

Two thirds of GPs said they had come up against a Chinese buyer in an auction process more frequently over the last 12 months, with 29% of GPs admitting they had lost out to a Chinese bidder at auction in 2016.

Almost half (45%) of the GPs polled perceive offers submitted by Chinese buyers to be overpriced. Whether due to the prices offered or simply the addition of new players, 76% believe that increasing numbers of Chinese bidders are escalating valuations. Critically for the private equity industry, a resounding 86% of the GPs surveyed anticipate that rising numbers of Chinese buyers will provide them with more exit opportunities.

This is despite an uncertain future for Chinese M&A. General Partners noted that government intervention may stifle Chinese buyers’ attempts to make significant investments abroad, as China tightens regulation in an effort to prevent a large-scale “capital flight”.

Report: https://goo.gl/pBHbnL 111 Gamechangers

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European PE Breakdown

2016 Annua l

Europ ean Breakd PE own

Fundraising strong as deal value subsides Key takeaways • European private equity fundraising totaled ¤70 billion in 2016 – the most since before the financial crisis. More than eight out of every 10 funds to close hit their stated targets.

• The value of PE investments fell by 24.9% last year, though that was still good enough for the second most of any year since 2007.

• Despite the Brexit referendum, PE activity in the UK largely mirrored that of the rest of Europe.

• EV/EBITDA multiples held steady at 8.2x in Europe, compared to 10.9x in the US. 2016 was a tumultuous year for European governments and investors. The prime ministers of Britain and Italy both resigned, the region continued to grapple with sovereign debt repayments, and concerns continued around the riskiness of some money center banks - not to mention the refugee crisis that has gripped the continent for some time now.

PE investors expressed unease, and the value of PE investments fell sharply.

In contrast, fundraising had a very strong year, which should counteract some investors’ fears.

With major elections in France, Germany, and the Netherlands this year, as well as the continual development of Brexit proceedings, the investment landscape will continue to change, and PE investors will have to adapt along with it.

Report: https://goo.gl/Pb3Q2c Gamechangers 113

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