Connect with us

Finance

IS 2015 THE YEAR OF M&A MANIA?

Published

on

loans

Written by Charlie Mayes, Managing Director, DAV Management

I was recently reading in Forbes Magazine that the U.S. has had the best first quarter for mergers since 2000 with $414.7 billion, and it was the best first quarter ever for Asia (non-Japan) M&A with $199.7 billion. In fact, the first quarter of 2015 will go down as the richest first quarter for mergers and acquisitions since Q1 2007. According to data from Thomson Reuters there has already been more than $843 billion in global M&A activity this year. That’s 23.3% higher than the $694 billion of M&A activity in the first quarter of last year, and nearly 72% higher than Q1 2013.

All the pundits are suggesting that there are some unavoidable pressures that will prompt further consolidation as companies have to buy or be bought to achieve growth in a low interest rate climate. Here in the UK we’re already seeing this with BT’s £12.5bn takeover of the British mobile player EE. This has started a game of chess in the telecoms sector which has rivals scrambling to play their next move.

On the face of it this all sounds like good news, especially as it’s hard to escape the feeling that 2014 was the year of the deals that never were, with lots of promise but less action.  So while the telecoms, media, technology and healthcare sectors are dealmakers’ favourites, M&A activity is anticipated to spread to other sectors in 2015 that have, until now, had a lacklustre pace of deals.

One huge driver of M&A this year is expected to be the slump in commodity prices, and with mining and natural resources companies accounting for 20 percent of all London-listed companies, a wave of merger mania is set to hit the City.   In the last month  oil giant Royal Dutch Shell has agreed a £47bn takeover of gas group BG in one of the biggest deals seen in the oil and gas sector in the last 20 years. It will create a company worth more than £200bn. In this case, the rationale for the deal appears to relate to gaining access to BG Group’s oil and gas reserves rather than any internal or market efficiencies that can be gained. If commodity prices stay low this year, we may be seeing more of this, creating a different approach to any merger.

But whilst M&A activity has had its largest first quarter since 2000, the actual number of global deals was down slightly year-over-year, from 9,402 to 8,926.  This continues the trend from 2014 when global deal value increased at a much higher rate than deal volume, largely caused by a large number of mega-deals. I believe this is also down to the fact that a lot of acquirers have learned the lessons of the past and are being more selective with their targets, paying more attention to finding the right strategic fit.  So, while the deal volume has not increased as anticipated, they are willing to pay a premium for targets that meet their selection criteria and growth plans. Companies are getting more cautious on the quality of deals. In fact, right now I would say that quality trumps quantity as investors get more critical and request more robust growth strategies and better returns.

Even as we move into a more positive economic climate the mantra is that acquisitions must be made to work. This means adopting the right approach from the start and managing a properly structured process through to the realisation of the envisaged benefits. This is true even in the case of Shell’s acquisition of BG Group where, despite the simplicity of the deal rationale, there are two huge business operations to merge and undoubted improvements in organisational efficiency and effectiveness to be found.

One of the problems for most M&As is that beyond the headline announcement of the deal, many simply fail to deliver the business value anticipated.  It’s a sobering fact that M&As are actually more likely to destroy shareholder value than create it.  According to some reports, between 50 and 70 percent of M&As either fail outright or fall short of their desired goals.

One of the most common causes of failure is that the acquiring organisation simply doesn’t manage the end to end M&A process effectively.  While the overall strategy and up front due-diligence may  be very solid, it’s the execution that goes off the rails.  Nowhere is this experienced more acutely than in the business and IT integration aspects of a merger which ultimately determines the degree to which any M&A transaction will succeed. In many sectors a large percentage of all merger synergies are dependent directly upon IT and in some, particularly financial services, it is the IT integration process that effectively drives the merger timetable.  It’s therefore concerning to learn that there is a long list of merged organisations who’ve struggled and in some cased failed to integrate their IT infrastructure effectively, resulting in a significant impact on the merger economics.

Why is this? Well, IT programmes on this scale are complex and involve big money. It’s also questionable whether many organisations actually have the necessary skills and experience in-house to plan and manage such challenging tasks. Although there is limited data available on the financial results of M&A driven major systems programmes, anecdotal evidence suggests that many suffer substantial overruns, do not deliver the desired outcomes, and are effectively written off.

Unfortunately, in many cases, the hard graft of making a merger work usually only starts once the ink is dry on the deal. At this point the organisation belatedly realises the extent to which it needs to unify the business, its culture and processes.  This often includes merging supporting systems such as back office systems and billing systems, and then consolidating IT platforms.

Whilst I am pleased that more due diligence appears to be taking place to identify the right target at the outset, this is only one part of the success of an M&A and executive management must start planning the integration activities before the deal is completed to understand where the risks to successful realisation of value lie. In my experience, integrating the IT systems and business processes of two merged companies is no different to any other business change programme.

Charlie Mayes - DAV Management

Charlie Mayes – DAV Management

Success factors include:

  • Meticulous planning – identifying  the risks upfront
  • Managing the programme in a structured way
  • Knowing what the business objectives are and understanding the vision
  • Defining the benefits and goals for the business and then focusing on their realisation
  • Ensuring stakeholders are closely managed and communications are regular, relevant and clear.

Irrespective of the reasons for the undertaking it, there really is no short-cut to making M&A integration work. It requires pace and clarity in the planning and then execution of your plans, effective due diligence, a viable integration plan, and then having the programme management capability on board to deliver it. With ‘merger mania’ on the agenda for 2015 those organisations that can successfully incorporate these principles into their merger methodology will be the ones that position themselves most effectively to take advantage of the deals to be had.

Finance

Hong Kong’s Cathay Pacific warns of capacity cuts, higher cash burn

Published

on

Hong Kong's Cathay Pacific warns of capacity cuts, higher cash burn 1

(Reuters) – Cathay Pacific Airways Ltd on Monday warned passenger capacity could be cut by about 60% and monthly cash burn may rise if Hong Kong installs new measures that require flight crew to quarantine for two weeks.

Hong Kong’s flagship carrier said the expected move will increase cash burn by about HK$300 million ($38.70 million) to HK$400 million per month, on top of current HK$1 billion to HK$1.5 billion levels.

Hong Kong is set to require flight crew entering the Asian financial hub for more than two hours to quarantine in a hotel for two weeks, the South China Morning Post reported last week, citing sources.

“The new measure will have a significant impact on our ability to service our passenger and cargo markets,” Cathay said in a statement, adding that expected curbs will also reduce its cargo capacity by 25%.

The airline, in an internal memo seen by Reuters, requested for volunteers among its crew who could fly for three weeks, followed by two weeks of quarantine and 14 days free of duty, adding it will be a temporary measure and not all its flight will require such an operation.

“We continue to engage with key stakeholders in the Hong Kong Government,” the memo said.

The government did not immediately respond to a request for comment.

Separately, a company spokeswoman said the airline could not detail the impact on vaccine transport specifically in terms of cargo shipments.

The aviation industry has been hit hard by the COVID-19 pandemic as many countries imposed travel restrictions to contain its spread.

In December, Cathay’s passenger numbers fell by 98.7% compared to a year earlier, though cargo carriage was down by a smaller 32.3%.

($1 = 7.7512 Hong Kong dollars)

(Reporting by Shriya Ramakrishnan in Bengaluru; Additional reporting by Jamie Freed in Sydney and Twinnie Siu in Hong Kong; Editing by Bernard Orr and Arun Koyyur)

Continue Reading

Finance

Travel stocks pull FTSE 100 lower as virus risks weigh

Published

on

Travel stocks pull FTSE 100 lower as virus risks weigh 2

By Shashank Nayar

(Reuters) – London’s FTSE 100 fell on Monday, with travel stocks leading the declines, as rising coronavirus infections and extended lockdowns raised worries about the pace of economic growth, while fashion retailers Boohoo and ASOS gained on merger deals.

The British government quietly extended lockdown laws to give councils the power to close pubs, restaurants, shops and public spaces until July 17, the Telegraph reported on Saturday.

The blue-chip FTSE 100 index dipped 0.1%, with travel and energy stocks falling the most, while the mid-cap index rose 0.1%.

“Stock markets are crawling between optimism around the rollout of vaccines and worries that a jump in virus infections and fresh local lockdowns could further affect recovery prospects,” said David Madden, an analyst at CMC Markets.

Britain has detected 77 cases of the South African variant of COVID-19, the health minister said on Sunday while urging people to strictly follow lockdown rules as the best precaution against the country’s own potentially more deadly variant.

Prime Minister Boris Johnson had earlier warned that the government could not consider easing lockdown restrictions with infection rates at their current high levels and until it is confident that the vaccination programme is working.

The FTSE 100 shed 14.3% in value last year, its worst performance since a 31% plunge in 2008 and underperforming its European peers by a wide margin, as pandemic-driven lockdowns battered the economy.

Online fashion retailers Boohoo and ASOS surged 4.8% and 5.9%, each. Boohoo bought the Debenhams brand, while ASOS was in talks to buy the key brands of Philip Green’s collapsed Arcadia group.

Recruiter SThree Plc gained 0.9% after its profit, which nearly halved, still managed to beat market expectations and the company said it had resumed dividends.

(Reporting by Shashank Nayar in Bengaluru; editing by Uttaresh.V)

Continue Reading

Finance

Top 8 Tax Scams to Watch Out For

Published

on

Top 8 Tax Scams to Watch Out For 3

It is tax time and that means finding the best way to file your taxes and to get a refund of any amount you’ve overpaid. Unfortunately, tax time also means plenty of scammers are thinking of new and clever ways to try and get their hands on your money or on your personal information (which they can use to get money).

Those who specialize in IRS tax scams are clever and can be very convincing. Your first line of defense is to always know what to be looking for in terms of common tax fraud in order to avoid being another victim.

8 Most Common Tax Scams

Protecting yourself from IRS tax scams can be tricky if you’re not aware of what the threats are. A good tax scam seems legitimate, and that is what makes them dangerous. Always be on the lookout for the eight most common tax scams, including:

  • IRS Phone Scams
  • Fake IRS Emails
  • Fraudulent Tax Preparers
  • Fraudulent Tax Refunds
  • Fake Charities
  • Set Up Offshore Accounts
  • Empty Promises
  • Frivolous Returns

To know what exactly you need to watch out for, let’s look at them in more detail.

1. IRS Phone Scams

If someone calls you claiming to be from the IRS, it is almost certainly one of many IRS phone scams. The IRS will never call you to demand money for back taxes or to confirm your personal information, so be immediately alert. Never give personal information over the phone, and don’t head to the bank to follow the demands for money.

If you do wind up on the end of an IRS phone scam, don’t become flustered by aggressive tactics by the fake “agent”. They are good at sounding threatening and demanding information or payments. Remain calm and ask for contact information. Tell the scammer you’ll call them back with the information. Either the scammer will give you fake information or he will work to avoid leaving any information at all. Regardless, don’t call him back. Simply report the call to the local police or the IRS.

2. Fake IRS Emails

Another very common fake IRS scam is phishing, or sending fake IRS emails, in a ploy to gather personal information. Fake emails will look authentic and will ask you to click on a link or to log in to a fake IRS website. The purpose of these emails is to simply gather your personal information to be used for other fraudulent purposes.

Just like with IRS phone scams, you should be immediately wary if the IRS appears to send you an email. The IRS does not contact citizens through email. All official IRS communication will come through standard mail. If you do find a fake IRS email in your inbox, forward it to the IRS. The IRS investigates these scams and has a dedicated email address for this very purpose: [email protected].

3. Fraudulent Tax Preparers

Some scam artists show up in a suit, open a storefront and offer to prepare your tax return for you. These tax preparers appear by all accounts to be absolutely legitimate, and many go to great lengths to convince customers of their years of experience and authenticity.

As a fraudulent tax preparer, however, the person is not legitimate. The scam artist can use your tax return in many ways for his own benefit. He can inflate your refund and skim off the top. He can charge outrageous fees for filing on your behalf. He can file your return correctly this year and gather all of your information to make a fake return for his benefit next year.

If you are going to have someone else prepare your taxes, be sure to look carefully through tax service reviews. Tax service reviews are available on many different websites that offer feedback on companies and services. These reviews will give you a very good idea about the legitimacy of the business and the reliability of the preparer. If a company doesn’t have any tax service reviews on any website, like e.g PissedConsumer.com, or BBB, that may be a sign that it’s a pop-up company that will disappear as soon as the scammer has what he wants.

4. Fraudulent Tax Refunds

Another very popular tax scam starts well before the tax season. To file a fraudulent tax return, the scammer must gather all pertinent personal information including a social security number. He then uses the information he gathered to file a fake tax return on your behalf. Naturally, he’s not going to send you the refund he’s claiming – that goes into the scammer’s pocket.

The best way to prevent a fake tax return is to guard your personal information close at all times. If nobody is able to steal your identity, they can’t file a tax return. Another good step is to file your own tax return as early as possible. That way, even if your information was stolen somehow, you will get your refund correctly and the IRS will be alerted when someone files a second return using your information.

5. Fake Charities

Charitable donations are tax-deductible if you’re itemizing your deductions. This creates possibilities for scammers to take advantage of others who are looking to reduce their tax burden and increase their refund by making donations. Fake charities can take on many shapes and forms.

Some may appear conveniently around tax time or be affiliated with fraudulent tax preparers. The claim is that by donating to a fake charity you will help others and reduce your own tax liability. Instead, you’re giving someone free money and you won’t be able to deduct the donation as it’s not a real charitable organization. Other fake charities involve you in a scam by promising to give you back your donation as soon as the tax return is filed, for example. It goes without saying that claiming a donation you didn’t actually make is tax fraud and highly illegal.

At the advice of his tax preparers, a famous country singer Willie Nelson moved some of his money into tax shelters and charities to help reduce his tax bill. The IRS grew suspicious of the moves and investigated. In one of the most famous IRS cases in the United States, Willie Nelson was hit with a tax bill in the millions when his charities and shelters were found to be invalid.

Willie didn’t have the funds to make the payments, so the bill continued to grow until the IRS finally grew so frustrated they raided and seized all of Willie Nelson’s properties including a recording studio, a ranch, and his home. Even that wasn’t enough to pay the bill, so eventually, Willie made a deal with the IRS. He recorded an album and all proceeds from that album went directly to the IRS to whittle away his debt. Willie did file suit against the accounting firm that advised the tax shelters in the first place, but the two parties settled out of court.

6. Set Up Offshore Accounts

Some tax scams sound good but require your participation in illegal activities. For example, you may meet an unscrupulous tax “professional” who offers to help you move some of your money into an offshore account.

This sounds legitimate as many people use offshore accounts for valid reasons, but by moving your funds into an offshore account with the intent of hiding that income from the IRS, you’re committing tax fraud. Additionally, if you’re working with a shady professional, it’s highly likely that neither you nor the IRS will see your extra income ever again. And you can still wind up with a legal case with your money stolen and gone.

7. Empty Promises

The tax preparer who encourages you to sign a blank tax form is nobody you want to work with. These preparers encourage you to simply sign the form because he or she is going to work out the numbers for you so that you can get the highest possible refund. If you do this, you are almost certainly subjecting yourself to tax filing scams.

Signing a blank tax form is potentially worse than simply signing a blank check for a stranger. Not only are you at risk of losing your personal information and any refund you might be owed, but you are also at risk of legal action by the IRS for signing your name on a refund that is almost certainly going to contain false and fraudulent information.

8. Frivolous Returns

The IRS sees a ridiculous number of what they call “frivolous returns” every year. A frivolous return is a tax return that is filed with the intent of simply wasting time. These frivolous claims have already been thrown out in court, so filing a tax refund making a frivolous claim is simply opening yourself up to additional action by the IRS including fines of at least $5,000. The top “frivolous claims” include:

  • Refusing to pay taxes on moral or religious grounds
  • “Opting out” of paying taxes
  • Invoking the First Amendment to “protect” you from taxes
  • Claiming only Federal Employees pay federal taxes
  • Claiming you have no income and therefore no tax liability (when you clearly do)

Top 3 Tips on How to Protect Yourself from IRS Tax Scams

Protecting yourself from tax fraud is a matter of being vigilant and mindful that there is always a possibility of something going wrong. Work with a trusted advisor or study up and file taxes yourself to avoid the uncertainty of allowing others to handle your financial matters. Often a bit of knowledge goes a very long way.

1. Know How the Tax System Works

One of the most common negative IRS reviews is that the tax refunds aren’t released immediately. In many IRS complaints, customers complain that they don’t get their refunds immediately.

While frustrating to wait, the IRS is usually very clear about processing times and has never sent refunds immediately after the filing window opens. The government doesn’t move quickly and reviews of documents and financial information submitted in your returns are necessary.

Additionally, relying on others to help you file your taxes every year can open you up to the possibility of fraudulent activities. Reviewing the tax codes and reading through the laws and requirements may not be exciting, but it will give you at least a basic understanding of how the process works so that you can look out for problems if you are trusting someone else with your information and money.

2. Always Read Carefully

The safest way to file your taxes is to do them by hand on the original IRS paper forms and to mail them using certified mail. Many people don’t choose to do this, however, as it can be very tedious and confusing if you do not know the tax system backward and forwards.

Instead, many filers rely on tax software and paid tax preparers. When using software or allowing someone to use the software on your behalf, it never gets too comfortable. There might be hidden fees in the software or glitches to overcome.

Reviewing choices carefully as the software takes you from screen to screen is a good way to avoid accidentally accepting hidden fees. Another option to avoid paying for fees you aren’t comfortable with is to simply abandon the return on one piece of online software and to try again with another – there are multiple tax return software options available.

3. Always Look for Tax Filing Scams

If you always expect to find a scam, you’ll never be surprised when one appears. Even tax preparers who have been in business for years can have some deceptive business practices that others assume are necessary or haven’t noticed them at all.

Tax time can be exciting if you’re entitled to a large refund, but it can be stressful if you don’t feel in control of the tax filing process. Educate yourself on the risks and tax scams that exist, and always exercise caution when choosing a method to file your taxes. Your personal information is closely tied to your money, so protecting both of them is often simply a measure of keeping your eyes wide open and using your knowledge to avoid traps and scams.

Continue Reading
Editorial & Advertiser disclosureOur website provides you with information, news, press releases, Opinion and advertorials on various financial products and services. This is not to be considered as financial advice and should be considered only for information purposes. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third party websites, affiliate sales networks, and may link to our advertising partners websites. Though we are tied up with various advertising and affiliate networks, this does not affect our analysis or opinion. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you, or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish sponsored articles or links, you may consider all articles or links hosted on our site as a partner endorsed link.

Call For Entries

Global Banking and Finance Review Awards Nominations 2021
2021 Awards now open. Click Here to Nominate

Latest Articles

A practical guide to the UCITS KIIDs annual update 4 A practical guide to the UCITS KIIDs annual update 5
Investing12 hours ago

A practical guide to the UCITS KIIDs annual update

By  Ulf Herbig at Kneip We take a practical look at the UCITS KIID What is a UCITS KIID and what...

Oil prices steady as lockdowns curb U.S. stimulus optimism 6 Oil prices steady as lockdowns curb U.S. stimulus optimism 7
Business16 hours ago

Oil prices steady as lockdowns curb U.S. stimulus optimism

By Noah Browning LONDON (Reuters) – Oil prices were steady on Monday as support from U.S. stimulus plans and jitters...

Dollar steadies; euro hurt by vaccine delays and German business morale slump 8 Dollar steadies; euro hurt by vaccine delays and German business morale slump 9
Business16 hours ago

Dollar steadies; euro hurt by vaccine delays and German business morale slump

By Elizabeth Howcroft LONDON (Reuters) – The dollar steadied, the euro slipped and riskier currencies remained strong on Monday, as...

Hong Kong's Cathay Pacific warns of capacity cuts, higher cash burn 10 Hong Kong's Cathay Pacific warns of capacity cuts, higher cash burn 11
Business16 hours ago

Hong Kong’s Cathay Pacific warns of capacity cuts, higher cash burn

(Reuters) – Cathay Pacific Airways Ltd on Monday warned passenger capacity could be cut by about 60% and monthly cash...

Stocks rise on recovery hopes 12 Stocks rise on recovery hopes 13
Business16 hours ago

Stocks rise on recovery hopes

By Ritvik Carvalho LONDON (Reuters) – Global shares rose to just shy of record highs, as optimism over a $1.9...

Fragile recovery seen in global labour market after huge 2020 losses - ILO 14 Fragile recovery seen in global labour market after huge 2020 losses - ILO 15
Business16 hours ago

Fragile recovery seen in global labour market after huge 2020 losses – ILO

By Stephanie Nebehay GENEVA (Reuters) – Some 8.8% of global working hours were lost last year due to the pandemic,...

"Lockdown fatigue" cited as UK shopper numbers rose 9% last week 16 "Lockdown fatigue" cited as UK shopper numbers rose 9% last week 17
Business17 hours ago

“Lockdown fatigue” cited as UK shopper numbers rose 9% last week

LONDON (Reuters) – The number of shoppers heading out to retail destinations across Britain rose by 9% last week from...

Alphabet's Verily bets on long-term payoff from virus-testing deals 18 Alphabet's Verily bets on long-term payoff from virus-testing deals 19
Business17 hours ago

Alphabet’s Verily bets on long-term payoff from virus-testing deals

By Paresh Dave OAKLAND, Calif. (Reuters) – For Alphabet Inc’s Verily, a healthcare venture that is one the tech giant’s...

ECB can price climate risk better than the market, Panetta says 20 ECB can price climate risk better than the market, Panetta says 21
Business17 hours ago

ECB can price climate risk better than the market, Panetta says

FRANKFURT (Reuters) – The European Central Bank can price climate risk better than market participants and should make its own...

Hong Kong's Cathay Pacific warns of capacity cuts, higher cash burn 22 Hong Kong's Cathay Pacific warns of capacity cuts, higher cash burn 23
Finance17 hours ago

Hong Kong’s Cathay Pacific warns of capacity cuts, higher cash burn

(Reuters) – Cathay Pacific Airways Ltd on Monday warned passenger capacity could be cut by about 60% and monthly cash...

Newsletters with Secrets & Analysis. Subscribe Now