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La pandémie de coronavirus a entraîné de la turbulence économique qui met une certaine pression sur les entreprises de toutes tailles. Plusieurs entreprises, que ce soit celles qui sont touchées négativement ou celles qui enregistrent une croissance dans le climat actuel, cherchent à obtenir du capital à court terme ou à former des partenariats à plus long terme. La pandémie présente des occasions uniques pour les gestionnaires de capital d'investissement privé, de capital de risque et d'autres actifs non traditionnels tout en procurant aux écosystèmes commerciaux dans lesquels ils exercent leurs activités une aide nécessaire en leur offrant un accès à du capital. Nous avons compilé une série de questions fréquemment posées concernant la mise en place de structures de fonds dans un tel environnement :
With the rise of shareholder activism in recent years and its evolution into an asset class of its own, companies should prepare themselves for targeted shareholder activity by assessing their vulnerability to such actions. To accomplish this, FTI Consulting built the Activism Screener (the “Screener”), a proprietary model that evaluates U.S. and Canadian public companies’ vulnerability to shareholder activist pressures, based on a variety of quarterly reported metrics. The Screener was built and refined in 2017 and 2018 in collaboration with experts across FTI Consulting’s practices, drawing expertise from corporate finance, corporate governance, and forensic and technical accounting professionals. [...] This report provides a starting point for companies and their advisors seeking to locate their most prevalent vulnerabilities from an external perspective. Contact us if you would like to discuss how to create a long-term, actionable plan to address these vulnerabilities and to increase the confidence of all investors, including those not yet present.
Tomorrow, June 3rd, 2020, the shareholders of Alphabet (GOOG), Google’s parent company, will meet for its annual general meeting, where yet again, shareholders will put forward proxy resolutions to bring up for a vote. This year, there are 10 shareholder proposals up for vote, ranging from a push for equal shareholder votes to requests for reports on sustainability metrics, to gender and racial pay equity, and human rights-related risks. [...] Not all Shareholders are Equal. One proposal has recurred in every annual general meeting since 2017: Equal Shareholder Voting. The proposal is #5 on the ballot for 2020 as well, and it asks that the board adopt a recapitalization plan for all outstanding stock to have one vote per share. At present, Alphabet has a multi-class voting structure, where each share of Class A common stock has one vote and each share of Class B common stock has 10 votes. Because of this, the founders of Alphabet, Larry Page and Sergei Brin control a majority of the company’s voting power, though they own less than 13% of the stock, and have stepped down from running the company. [...] And if it doesn’t, and Alphabet continues to ignore minority shareholders, it will raise a red flag around governance, which could prove unwise, even for a monopoly like Google.
With coronavirus upending the world economy, a long and growing list of companies from Disney to Rolls-Royce have slashed dividend payouts. In past downturns, these payments have tended to snap back quickly when normality returns — but this time some investors are not convinced that will happen. They believe the crisis may catalyse a significant shift in how companies spend their free cash flow, following increasing acceptance that businesses bear a responsibility towards employees and wider society as well as shareholders. Businesses are under pressure from both investors and governments. A rising number of investors have called on companies to cut dividends to ensure they stay afloat during the crisis. Many governments have attached strings to bailout packages, requiring companies to suspend investor payouts. Once businesses stanch the bleeding, the new corporate zeitgeist and popularity of environmental, social and governance (ESG) investing could mean that dividend cuts extend beyond the downturn. Some analysts argue that concerns such as fair wages for employees may take precedence over returning cash to shareholders.
Executive compensation counsel taking minutes of compensation committee meetings and working with the compensation consultant to make sure the meetings go smoothly with informed decisions translates into a better proxy and a winning say-on-pay vote. Equity plan proposals are more likely to win shareholder approval and less likely to attract proxy trolls when executive compensation counsel and the compensation consultant collaborate in advance on the appropriate plan modifications and disclosures, determining whether the equity plan with its proposed modifications will pass shareholder advisor tests. Executive compensation counsel and compensation consultants are useful resources for compensation committees when developing and approving compensation arrangements. A compensation committee can maximize the benefit provided by both advisors by setting up a collaborative process with executive compensation counsel, the compensation consultant, and internal company professionals. The following examples show how integrating both advisors into the decision-making process can benefit a compensation committee.
A rocket ship built by Elon Musk’s SpaceX company thundered away from Earth with two Americans on Saturday, ushering in a new era of commercial space travel and putting NASA back in the business of launching astronauts from U.S. soil for the first time in nearly a decade. NASA’s Doug Hurley and Bob Behnken rode skyward aboard a sleek, white-and-black, bullet-shaped Dragon capsule on top of a Falcon 9 rocket, lifting off at 3:22 p.m. from the same launch pad used to send the Apollo astronauts to the moon a half-century ago. Minutes later, they safely entered orbit. “Let’s light this candle,” Hurley said just before ignition, borrowing the words used by Alan Shepard on America’s first human spaceflight, in 1961.
An odd thing is happening amid the tragedy of the coronavirus crisis. The working world is splitting into two: those who love working from home and those who don’t. Some prefer working from home because they are more productive and have more fun. In the absence of long commutes, they have rediscovered their private life and their family. Their organizations are seeing that they are getting more done and have begun announcing that working from home will become permanent. [...] The horrors of micromanagement become even worse when working-from-home. These workers can’t wait to get back to the office, not because it’s good but because it’s the lesser of two evils. And their micromanaging bosses can’t wait to see them come back so that they can get on with finding out what these workers have been up to, discovering where they went wrong and plotting how to straighten them out and get them back on track.
Nicolai Tangen has almost crossed the finish line to become one of the most powerful people in global finance. The 53-year-old London-based hedge fund manager signed a contract that requires some sacrifices on his part in exchange for the title of chief executive of Norway’s $1 trillion wealth fund, the world’s biggest. The entity that hired him and that manages the fund, Norges Bank, presented a set of terms it hopes will appease critics and allow Tangen to start as CEO on Sept. 1. The Supervisory Council of Norges Bank, its watchdog, is due to respond on June 11. As part of his contract, Tangen has agreed to forfeit control of his personal fortune, which is estimated at over $860 million. His pay as CEO -- roughly $670,000 a year -- will cover just a fraction of the wealth tax he faces in Norway. Tangen, whose contract is designed to persuade the world that his appointment won’t carry with it any conflicts of interest, says he “will only have one hat,” when he becomes CEO. “And that’s the oil fund hat.” Tangen’s appointment has been mired in controversy since it was announced in March. He wasn’t on an official list of candidates, and Norges Bank’s watchdog has since criticized the hiring process for failing to address potential conflicts of interest tied to his personal wealth and current job. The fund Tangen founded, AKO Capital LLP, uses tax havens.
Data loss - whether accidental or intentional - is a big problem for organizations. Why? Because people control our data, and people break the rules and make mistakes. We’re only human. [...] In fact, there’s been a 47% increase in incidents over the last two years; this includes accidental data loss and deliberate data exfiltration by negligent or disgruntled employees or contractors. [...] Do security, IT, and compliance leaders have true visibility over how their employees are handling and mishandling data on email?
The SEC has declared immediately effective (yet another) proposed change to the rules of an exchange—this one from the NYSE. The NYSE has adopted new Section 312.03T of the NYSE Listed Company Manual, which will provide a temporary exception, through June 30, 2020, from the application of the shareholder approval requirements for specified issuances of 20% or more of the outstanding shares (Section 312.03) and, in certain narrow circumstances, by a limited exception for issuances to related parties or other capital-raising issuances that could be considered equity compensation (Sections 312.03 and 303A.08). Although not entirely congruent, the exception appears to be modeled closely on the comparable Nasdaq exception that was approved just over a week ago. (See this PubCo post.) In light of the unprecedented disruption in the economy as a result of COVID-19, many listed companies “are experiencing urgent liquidity needs during this period of crisis due to lost revenues and maturing debt obligations.” The temporary exception is designed to respond to this unprecedented emergency and to help companies access necessary capital quickly.
American investors pay $100 billion every year in mutual fund fees. These fees are deducted from their savings and reduce future investment returns. Over 20 years, the compounded drag on investment returns is well into the trillions, which begs the question: Is even one dollar of these fees “excessive” under the fiduciary standards of the Investment Company Act? [1] The answer from mutual fund boards and federal district courts has been a resounding “no.” Each of the billions of dollars in annual fees was approved by independent boards of directors, and each instance in which investors have challenged a fee has been rejected by a federal judge. But, as discussed herein, there appears to be good reason to question whether mutual fund fees are, in fact, universally fair. If price constraints on fees make up a “three-legged stool”—a term coined by academics in reference to (i) competitive pressures; (ii) board oversight; and (iii) excessive fee lawsuits—then the more than $20 trillion in assets supported by this “stool” are in a precarious position.
Telehealth has helped expand access to care at a time when the pandemic has severely restricted patients’ ability to see their doctors. Actions taken by healthcare leaders today will determine if the full potential of telehealth is realized after the crisis has passed. COVID-19 has caused a massive acceleration in the use of telehealth. Consumer adoption has skyrocketed, from 11 percent of US consumers using telehealth in 2019 to 46 percent of consumers now using telehealth to replace cancelled healthcare visits. Providers have rapidly scaled offerings and are seeing 50 to 175 times the number of patients via telehealth than they did before. Pre-COVID-19, the total annual revenues of US telehealth players were an estimated $3 billion, with the largest vendors focused in the “virtual urgent care” segment: helping consumers get on-demand instant telehealth visits with physicians (most likely, with a physician they have no relationship with).With the acceleration of consumer and provider adoption of telehealth and extension of telehealth beyond virtual urgent care, up to $250 billion of current US healthcare spend could potentially be virtualized.
Laurentian Bank of Canada slashed its quarterly dividend, the first payout cut by a large Canadian lender in almost three decades. The Montreal-based regional bank chopped its dividend by 27 cents to 40 cents, a 40 per cent reduction. The move came as Laurentian posted fiscal second-quarter results Friday that missed analysts’ estimates, the result of higher provisions for loan losses to brace for the financial impacts of the coronavirus pandemic. Citing the “highly uncertain economic environment,” Laurentian said it cut the quarterly payout “to provide greater financial strength and flexibility to support continued growth” and “the pursuit of the bank’s strategic plan.” The last time a major Canadian bank reduced its dividend was in 1992, a move made by Montreal-based National Bank of Canada.
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Corporate directors trying to meet their fiduciary responsibility to maintain cash reserves by canceling dividends during the coronavirus pandemic could see much of the savings eaten up by surprise tax bills. Companies are being forced to reconsider how they deploy their cash reserves during the coronavirus outbreak, with many pondering if they should drop or delay their planned dividends. Additionally, some governments are banning financial aid to companies that pay dividends or complete share buybacks.
Regulations differ between countries, but multinationals need to be aware of how the rules apply to each entity as the details of these procedures could turn a benign transfer into tax liabilities, tax advisers warn. Taxes that could end up applying include capital gains tax, interest withholding tax, and corporate income tax. Already many household names such as IWG Plc, Barclays Plc, and Thales SA. have announced they are canceling their final 2019 dividends, with many more expected to take similar measures as companies rush to boost liquidity.
Pursuant to the recently-amended Washington Business Corporation Act (WBCA), effective June 11, 2020, corporations subject to the WBCA that are public companies1 will be required to either have a "gender-diverse board" by January 1, 2022 or comply with new board diversity disclosure requirements. The law considers a board to be gender diverse if, for at least 270 days of the fiscal year preceding a public company's annual meeting of shareholders, the board is comprised of at least 25% of individuals who self-identify as women. If a public company's board is not sufficiently diverse by January 1, 2022, it must disclose in its annual proxy statement to shareholders or post on the company's primary website a "board diversity discussion and analysis" that includes information regarding the company's approach to developing and maintaining board diversity. [...] Washington's bill follows similar legislation passed in California in 2018 requiring each publicly-traded company with its principal executive offices located in California to have at least one woman on its board of directors by the end of 2019.
Section 220 of the General Corporation Law of the State of Delaware is the statute allowing shareholders of a Delaware corporation to seek books and records for various purposes, including to investigate potential corporate wrongdoing, among other things. When properly utilized, stockholder use of the Section 220 remedy should help avoid litigation where corporate records can correct misconceptions about how and why questionable events took place, resulting in a higher quality of the claims that are actually pursued to litigation. [...] Although in the past issuers routinely settled Section 220 demands short of litigation, more recently, the apparent desire to test the boundaries of the statute and to develop methods to slow the stream of investigations seems to be high on the list of the defense bar. An often repeated (but apparently false) etymology of the word “sabotage” ascribes the source of the word as the practice of laborers throwing their wooden shoes, or “sabots” into machinery to disrupt production. Whether the story is false or not, it serves as an apt metaphor for the latest defense strategies to foul the workings of the streamlined and summary Section 220 litigation in practice.
The benchmark S&P 500 Index .SPX has risen around 40% off of recent lows, hit in late-March at the height of market panic during the coronavirus outbreak, and is now roughly 10% shy of all-time highs hit in February. The whipsawing markets stunted companies’ ability to issue new shares and raise cash, with just $4.8 billion sold in March, the lowest monthly total since December 2018, Refinitiv data showed. The market has rocketed back with $22.3 billion sold in April and $65.3 billion in May, the highest on record. [...] The share sales echo a similar trend in U.S. debt markets, where companies have raised more than $1 trillion so far in 2020. As in debt markets, the balance of companies selling new shares has shifted from those facing an imminent cash crunch to those stocking up on rainy day funds. “There are a whole host of companies that have been hugely impacted by COVID-19 and have had to recapitalize,” said Santosh Sreenivasan, head of equity-linked capital markets for the Americas at JPMorgan Chase & Co.
Over the past five years, international organizations ranging from the United Nations and the G20 to the World Economic Forum and the International Organization of Securities Commissioners (IOSCO) have advocated expanding environmental, social, and governance (“ESG”) or “non-financial” reporting by public companies.[1] In 2019, the European Union introduced a new “taxonomy” to standardize how sustainability measures are integrated into financial systems and announced new ESG disclosure rules for investment managers. This past February, the European Securities Market Authority (ESMA) rolled out a Sustainable Finance Strategy that builds on these frameworks for transparency around sustainability factors and risks. European governments are already implementing the commission’s Non-financial Reporting Directive and its 2018 Action Plan on Financing Sustainable Growth. All told, financial and securities regulators or stock exchanges in over 80 countries are now working to standardize how ESG information reaches investors.[2]
For two years in a row, Europe’s largest stock-market listings have taken place in Amsterdam, which has beguiled companies with a deep pool of international investors and corporate governance norms that tilt in favor of management teams. [...] “Amsterdam has a deep and broad investor base that’s very international in share,” said Rients Abma, executive director at Eumedion, a Dutch corporate governance forum for institutional investors. On average, 85% to 90% of blue-chip Dutch stocks are owned by non-Dutch institutions, according to Abma. [...] More flexible corporate governance standards make the Netherlands an attractive listing destination, he said. The Dutch corporate governance model gives management several legal options to gain more control over a company at the expense of investor power, said Corne van Zeijl, buy-side analyst at investment company Actiam. “A listing in the Netherlands doesn’t imply giving away power to shareholders.” The option to establish a “Stichting” -- a legal entity that shrouds the company and is essentially a takeover defense in the face of a hostile bid or shareholder activism -- also makes Amsterdam an attractive home for firms, Abma said.
The supervisory board of Deutsche Lufthansa AG approved Germany’s 9 billion-euro (US$10 billion) bailout proposal, paving the way for the airline to receive the lifeline should shareholders accept the deal. With the carrier’s cash reserves dwindling, Lufthansa’s supervisory board voted in favor of the plan and called an extraordinary general meeting of stockholders for June 25. The board’s approval was unexpectedly delayed last week after members balked at European Union demands for slot disposals, a matter resolved in a deal sealed late Friday. The spotlight now turns to the investors, who hold Lufthansa’s fate in their hands. They face a choice between a capital hike that will dilute their own shareholdings or tipping Europe’s biggest airline toward insolvency. Lufthansa’s management has told German government officials and labor representatives that it will run out of cash on June 15, people familiar with the matter have said.
With the coronavirus pandemic exacerbating the most vulnerable people’s financial struggles, the Spanish government has decided to implement what it’s calling a national minimum income, ensuring that people in the nation’s 850,000 lowest-income households receive at least roughly $500 a month in income. The plan aims to reach 2.3 million people and is expected to cost the government about €3 billion a year. Spain’s government first floated the idea of a version of a universal basic income back in December, according to Spain’s English-language newspaper El Pais, in a deal that the country’s Socialist Party and left-wing Unidas Podemos agreed on to create “a general mechanism to guarantee earnings for families with no or low income.” The COVID-19 pandemic accelerated that plan, the paper reports; Spain’s government first released details of this national minimum income in April, and Deputy Prime Minister Pablo Iglesias announced its creation at a news conference on Friday. “Today is a historic day for our democracy,” Iglesias said, according to El Pais. “Today this government is showing that its political choice is social justice and that it takes the [Spanish] Constitution seriously.”
The COVID-19 pandemic has caused a societal crisis of far-reaching implications. For the moment, employee, environmental, social and governance (EESG) concerns may appear to have taken a back seat to economic survival, but in the longer term, a robust corporate response will require firms to re-evaluate their priorities. Once the economic recovery has begun in earnest, there is likely to be heightened investor interest in, and public scrutiny of, key areas of EESG, particularly as they relate to firm performance, human capital and enterprise resilience. The COVID-19 pandemic has shown that the nexus between corporate performance and societal wellbeing has never been stronger. The potential role of major corporations in perpetuating global inequities and exacerbating the disparate effects of large-scale crises, and their capacity to ameliorate human suffering through private sector action in support of government initiatives, are indisputable. For better or worse, the pandemic and future crises are likely to increase the extent to which the public perceives large corporations as entities that can and should bear a heavy burden of corporate social responsibility.
Buyers in M&A transactions should consider a number of due diligence items in response to COVID-19 and the governmental response thereto. As parties pursue mergers and acquisitions transactions during, and in the wake of, the COVID-19 pandemic, both buyers and targets should consider a number of factors from a due diligence perspective, including the impact of COVID-19 and related developments on the target from a legal, compliance, human resources, business, insurance, financial, and operational perspective. This post identifies some of the issues buyers should consider when undertaking legal due diligence in connection with an M&A transaction, and highlights for targets some of the types of due diligence questions they may need to address. As with any due diligence investigation, due diligence related to the COVID-19 pandemic should be tailored to the particular target company. Accordingly, the applicability of each of the topics discussed below will likely vary based on the particular target company, its industry and geography, and a number of other factors.
In this edition of Graphic Intelligence, we examine the earliest available GDP numbers by industry amid the COVID-19 crisis. Overall, Canada’s GDP shrank by 7.2 percent relative to February 2020, with arts, entertainment and recreation most affected at -42.2 percent. Also severely affected were air transportation at -41.8 percent, food services and drinking places at 39.6 percent, and accommodation services at -31.2 percent. More positively, forestry and logging grew by 7.1 percent relative to Feb. 2020, and rail transportation grew by 4.9 percent following a particularly sluggish February. While these numbers do not reflect the full extent of the COVID-19 crisis in terms of lost jobs and income, they provide a glimpse of the severe impact it has had on Canada’s economy.
When companies in financial difficulty are forced to sell assets – especially real assets such as factories, business units, real estate, or the entire company – the news is often seen as negative all around. In these situations, often referred to as “fire sales,” companies are forced to sell assets below fair value (see Pulvino, 1998[1]), and the spillover effects can be costly as well. These spillover costs, or externalities, include plant closings and job losses that hurt employees, suppliers, customers, and competitors (see Goolsbee and Krueger, 2015[2]). Fire sales may also depress the values of the assets of healthy companies in the same industry (see Benmelech and Bergman, 2011[3]).
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