The report entitled “International tax reforms and sustainable investment“ said that to cope with an environment of uncertainty and risk aversion, developing countries must get significant help from the international community.

“The need for investment in productive capacity, in the Sustainable Development Goals (SDGs) and in climate change mitigation and adaptation is enormous. Current investment trends in these areas are not unanimously positive,” said Rebeca Grynspan, Secretary-General of United Nations Conference on Trade and Development (UNCTAD).

“It is important that we act now. Even though countries face very alarming immediate problems stemming from the cost-of-living crisis, it is important we are able to invest in the long term.”

Coming off a low base in 2020, global FDI flows rose 64 percent to $1.58 trillion last year with momentum from booming merger and acquisition (M&A) activity and rapid growth in international project finance due to loose financing and major infrastructure stimulus packages.

While the recovery benefitted all regions, almost three-quarters of the growth was concentrated in developed economies as FDI flows rose 134% and multinational companies posted record profits.

Flows to developing economies rose 30% to $837 billion – the highest level ever recorded – largely due to strength in Asia, a partial recovery in Latin America and the Caribbean and an upswing in Africa. The share of developing countries in global flows remained just above 50%.

The reinvested earnings component of FDI – profits retained in foreign affiliates by multinational companies – accounted for the bulk of the global growth, reflecting the record rise in corporate profits, especially in developed economies.

The top 10 economies for FDI inflows in 2021 were the United States, China, Hong Kong (China), Singapore, Canada, Brazil, India, South Africa, Russia and Mexico.

2022 prospects

This year, the business and investment climate has changed dramatically as the war in Ukraine results in a triple crisis of high food and fuel prices and tighter financing. Other factors clouding the FDI horizon include renewed pandemic impacts, the likelihood of more interest rate rises in major economies, negative sentiment in financial markets and a potential recession.

Despite high profits, investment by multinational companies in new projects overseas were still one-fifth below pre-pandemic levels last year. For developing countries, the value of greenfield announcements stayed flat.

Signs of weakness are already emerging this year. Preliminary data for the first quarter shows greenfield project announcements down 21% globally, cross-border M&A activity down 13% and international project finance deals down 4%.

“UNCTAD foresees that the growth momentum of 2021 cannot be sustained and that global FDI flows in 2022 will likely move on a downward trajectory, at best remaining flat,” the report underline. “However, even if flows should remain relatively stable in value terms, new project activity is likely to suffer more from investor uncertainty.”

Variations among regions: overview of Africa, Latin America and industrialized economies

FDI in Africa hit a record $83 billion last year but this was significantly affected by a single intrafirm financial transaction in South Africa in the second half of 2021. Flows rose in Southern Africa, East Africa and West Africa while Central Africa stayed flat and North Africa fell.

Developing Asia, which receives 40% of global FDI, saw flows rise in 2021 for the third straight year to an all-time high of $619 billion. FDI in China grew 21% and in Southeast Asia by 44% but South Asia went the other way, falling 26% as flows to India shrank to $45 billion.

In 2021, FDI in Latin America and the Caribbean rose 56% – with South America’s growth of 74% sustained by higher demand for commodities and green minerals.

For structurally weak, vulnerable and small economies rose by 15% to 39 trillion, however influx to the least developed countries, landlocked and small island developing states combined accounted only for 2.5 percent of the world total in 2021, down from 3.5 percent in 2020. The impact of the pandemic intensified fragility and investment in sectors relevant for the SDGs – especially food, agriculture, health and education – continued to fall.

“In 2022, FDI flows to developing economies are expected to be strongly affected by the war in Ukraine and its wider ramifications, and by macroeconomic factors including rising interest rates,” the report said. “Fiscal space in many countries will be significantly reduced, especially in oil- and food-importing developing economies.”

Investing in Sustainable Development Goals

After taking a significant hit in the first year of the pandemic, international SDG investment jumped 70% last year. But most of the recovery growth came in renewable energy and energy efficiency, where project values reached more than three times the pre-pandemic level.

“While the 2021 recovery in value terms is positive, investment activity in most SDG-related sectors in developing economies, as measured by project numbers, remained below pre-pandemic levels,” the report said.

“Across developing Asia, investment in sectors relevant for the SDGs rose significantly,” the report said. “International project finance values in these sectors increased by 74% to $121 billion, primarily because of strong interest in renewable energy.”

International project finance is increasingly important for Sustainable Development Goals and climate change investment. Some positive steps in these areas in 2021 could be tested this year.

Announced international project finance deals hit a record of 1,262 projects last year and more than doubled in value to $656 billion.

The introduction of a global minimum tax on foreign direct investment will have important implications for the international investment climate but both developed and developing countries are expected to benefit from an increased revenue collection.

About UNCTAD

The United Nations Conference on Trade and Development (UNCTAD) is the UN’s leading institution dealing with trade and development. It is a permanent intergovernmental body established by the United Nations General Assembly in 1964.

UNCTAD is part of the UN Secretariat and has a membership of 195 countries, one of the largest in the UN system.

UNCTAD supports developing countries to access the benefits of a globalized economy more fairly and effectively. We provide economic and trade analysis, facilitates consensus-building and offer technical assistance to help developing countries use trade, investment, finance and technology for inclusive and sustainable development.

The post Global Foreign Direct Investment Recovered To Pre-Pandemic Levels In 2021 But Uncertainty Looms In 2022 appeared first on Global Trade Magazine.

The operational challenges of relying on manual processes and systems are well known and much maligned across the industry–incorrect documentation and KYC, non-interoperable systems, manual reconciliation, poor visibility, excessive costs, to name just a few.

Digital solutions have emerged in many different shapes and sizes, but one of the technologies which seems most encouraging is enterprise blockchain. Trade is a fundamentally decentralized system. The industry is heavily intermediated–predominantly by banks that help to facilitate transactions and provide the financing behind them, but also by insurers, customs officials and other market participants. Firms have tried countless times to apply centralized solutions to this decentralized system but, unsurprisingly, none have really worked. 

The decentralized nature of blockchain makes it a perfect fit for trade finance. For the first time, the entire industry is getting behind a technology and moving it into real world deployment at a record pace. The architecture underpinning the entire ecosystem of trade is undergoing complete digital transformation, and exciting new blockchain-enabled developments continue to emerge. One such development is non-fungible tokens, or NFTs. But what are they and how do they benefit participants? 

WHAT IS AN NFT?

A non-fungible token is a unique and non-interchangeable unit of data stored on a digital ledger. NFTs use blockchain technology to provide a public proof of ownership. You’ve probably heard of NFTs in the entertainment industry, largely because they can be associated as unique items with easily reproducible items such as photos, videos, audio and other types of digital files. But they also have wide applicability in the financial services space–and specifically in trade finance. 

It’s important to note that an NFT is simply a specific type of tokenization. Once a trade finance document or obligation has been tokenized, it can be referred to as an NFT. By contrast, a smart contract is a digital contract, stored on blockchain, which will execute once specified conditions are met. In the case of trade finance asset distribution, both smart contracts and tokenization work together to facilitate this activity.

WHAT ARE THE BENEFITS OF NFTs IN TRADE FINANCE?

In reality, NFTs for trade finance have been around for some time, though we’ve only just begun to describe them this way. You could think of trade finance as a practical implementation of the NFTs in the news today. Marco Polo is one such platform which already tokenizes payment obligations and invoices. 

Storing ownership data on blockchain reduces the costs and complications of paperwork that is otherwise required to verify the process. This is no small feat when you consider many of the processes and technologies underpinning trade finance have not been modernized in decades.

Take, for example, invoice financing. While a common activity, managing invoice payments and terms can be slow and inefficient for companies and their trading partners. They must navigate different currencies and jurisdictions, each with unique requirements in terms of contract terms and payments. 

By digitizing these manual processes and storing the data as an NFT, a technology such as blockchain has a real impact on reducing the costs, risks and delays to participants involved in trade finance. 

MAKING TRADE FINANCE MORE ACCESSIBLE TO SMEs

It is complicated and legally difficult to provide an optimal level of credit support to small companies. Nearly $1.5 trillion of demand for trade finance is rejected by banks, according to the Asian Development Bank, with 60% of banks expecting this figure to increase over the next two years. SMEs in developing markets that rely heavily on access to trade can be severely hindered through these outdated processes.

Tokenizing the payment guarantee of the final buyer can make it easier to provide this support, but there are important caveats to this. While tokenizing payment guarantees makes it cheaper and easier to execute credit support, there is no guarantee that these processes will then be used to extend supply chain financing through to the long tail of suppliers. It certainly could be used in this way, but it also might not be. This needs to be adopted at the industry level as suppliers would need to pass the NFT onto their own suppliers in turn for the tokenization of payment guarantees to truly be effective.

Although tokenizing the payment guarantee of the final buyer is a frequently mentioned use case, NFTs can also be used to digitize invoices for factoring, for example. Asset originators can tokenize invoices which can then be financed. This could be a very helpful step in enabling small companies to access the financing they need to grow trade.

EXPANDING THE TRADE ASSET ECOSYSTEM

Beyond their immediate benefits to banks and trading businesses, NFTs can also enable institutional investors to expand their activity in trade finance assets. These assets have historically struggled to scale for well-known reasons: investors find them complicated, there aren’t trusted quantitative benchmarks available and there often isn’t the necessary infrastructure to process them properly. Tokenizing trade finance receivables and payment obligations can simplify the process of asset transfer and solve one of these challenges, thus contributing to the scaling of trade finance assets.

Interest in trade finance as an asset class has grown over the past couple of years for reasons unrelated to NFTs. NFTs, as we think of them today, are relatively new and tend to be associated with digital content rather than physical goods. This framework suits trade finance assets because while they are linked to physical assets, the securities themselves are digital.

Programmable contracts used in combination with NFTs have shown great promise in tackling the problem of trade finance asset distribution. The use of the two functionalities together has promise as a way to support the building momentum around trade finance as an asset class.

OLD MEETS NEW

In order to get the most out of NFTs and blockchain for trade finance–like any nascent technology–they must be used alongside existing systems. In reality, most businesses will continue to use their long-standing legacy systems throughout this transition to a fully digitized space. 

It is crucial, therefore, that disruption is kept to a minimum. NFTs and enterprise blockchain platforms should be viewed as a means of supporting and improving current processes, rather than replacing them. In other words, integration is the single most important factor in helping this industry to keep up with the rapidly digitizing world around it.   

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As head of Trade and Supply Chain at R3, a Dublin, Ireland-headquartered enterprise technology and services provider with offices around the world, Alisa DiCaprio is responsible for trade strategy, standards and governance design. She was previously a senior economist at the Asian Development Bank and holds a doctorate from MIT.

The post DIGITIZATION’S NEXT FRONTIER: NON-FUNGIBLE TOKENS ARE A GAME CHANGER FOR TRADE FINANCE appeared first on Global Trade Magazine.

“The growth and investment in fintech points to closer collaboration between startups and incumbents, as well as regulators, investors and even consumers, as the industry searches for cost reductions, client-friendly experiences and technology upgrades,” said U+ Founder and Chief Executive Officer Jan Beránek. “Since technology use has redefined the financial services industry, incumbents and challengers are competing to acquire and analyze customer data. In an attempt to secure brand loyalty, developing client-friendly experiences is a key focus.”

With convenience and enhanced customer experiences at the top of the priority list in fintech, the U+ report also reveals a demand for software engineers to help businesses keep up with the fast-paced tech initiatives.

Innovative banking solutions have arrived in a major way, with about 30% of all global banking customers using at least one non-traditional financial service. With more than 26,000 fintech companies worldwide, now is the time for all financial service providers to secure their place within this sector, even if it means collaborating with innovative partners to lead the industry using big data and artificial intelligence, for example.

U+ also selected the Top Fintech Innovators after extensive market research, leveraging databases including CB Insights and Crunchbase. Market share, along with the amount and date of funds raised, were also considered as selection criteria.

The post Fintech Market to Reach $324 billion in 2026 appeared first on Global Trade Magazine.

The most telling data gathered in the region concerns business confidence, where survey results were drastically different in Mexico, Canada and the U.S. The majority of survey respondents in Mexico expect to see an improvement in business performance over the coming months, while in Canada, this picture is reversed with only a minority expressing optimism. The U.S. falls somewhere in the middle.

More than half of all sales transacted on credit

Of the total value of all B2B sales in the USMCA region, 53% were made using trade credit last year. This represents growth, as 44% of businesses told us that they increased the use of trade credit in the months following the pandemic.

Temporary fiscal packages in the U.S. and Canada have helped struggling businesses in the short term. As these are withdrawn in the coming months, we are likely to see a rise in insolvencies.

In this environment of heightened risk, it is important that businesses continually monitor the financial health of their customers and note any early warning signs of insolvency. Some of those signs may include slower payments or late payments. However, it should be taken into consideration that the pandemic has presented additional strain on the supply chain that is often out of any one company’s control, leading to slower payments.

Credit management costs rise sharply

Businesses throughout the USMCA region have reported a rise in the cost of managing their accounts receivable in the months following the Covid-19 outbreak. The sharpest rises were reported by businesses that managed credit and collections in-house.

In part, this rise can be attributed to an increase in the percentage of sales made on credit; simply a greater number of credit sales requires more resources to manage them. However, this may also be an indicator of a deteriorating risk environment, as the longer an invoice remains unpaid, the more resources it takes to collect on it.

For businesses that do not use trade credit insurance or an invoice collection service such as factoring, rising payment delays equate to rising costs. Businesses that do outsource credit management to such services enjoy the certainty that their invoice will be paid and that management costs will not escalate.

Businesses favor domestic markets for credit sales

The USMCA region saw many more domestic credit sales than foreign credit sales in the year following the outbreak of the pandemic, with a 60/40 split in favor of domestic customers. This could have been caused by the supply chain challenges that followed the Covid-19 pandemic, leading to concerns over offering credit to foreign customers.

Businesses outside of the USMCA region should approach trade in the region with optimism. While it is clear that the Covid-19 pandemic is not over, the region is rebounding as expected. If there’s one thing that businesses around the world have learned is that offering more flexibility within their supply chains can help tremendously in the face of unexpected events like the Suez Canal blockage, where its effects were compounded by the pandemic’s supply chain disruptions. Companies that diversify their customer base will be better prepared to capitalize on opportunities should their competitors face unexpected disruptions to their supply chain.

Uneven outlooks for growth

On average, most businesses across the region are positive in their outlook and expect to see improvement in the second half of 2021. Upon a closer examination, a country-by-country comparison reveals a vastly different picture. In Mexico, 81% of businesses surveyed anticipate growth, while 36% of businesses in Canada hold the same view. Businesses in the U.S. fall about halfway between these poles. However, it should be taken into consideration that each country in the USMCA all started from very different places before the pandemic, making their perceptions of recovery different.

Businesses in Mexico were experiencing a recession long before the COVID-19 pandemic and received limited financial support from their government over the past year and a half. In contrast, both the U.S. and Canada started from a stronger economic position going into the pandemic and have received substantial financial help from their governments to stay afloat.

Businesses in both Canada and the U.S. may be bracing themselves for the removal of government fiscal support as well, which will have a much greater impact on their business than those in Mexico who are used to the lack of government support and ready for a rebound.

Post-recession growth is predicted for all of the countries in the USMCA region. It will be interesting to see which businesses thrive and grow during this period and whether the optimism and pessimism expressed by the survey respondents comes to pass over the next year.

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Aaron Rutstein is the Vice President – Regional Director, Risk Services – Americas at Atradius

The post Optimism for Growth in 2021 is Uneven in the USMCA Region appeared first on Global Trade Magazine.

Mergers and acquisitions (M&As) in the Pharmaceutical/Biopharmaceutical industry are critical for organizations to implement strategic changes to their business. Whether it be to (a) future proof an organization’s pipeline by accessing innovation, (b) obtain additional manufacturing capacity or (c) to divest non-core assets (products, facilities, etc.), companies continue to grow, modernize and evolve to meet the targets set out in their strategic plans.

When two or more organizations reach the ‘deal’ and it is announced that ‘A’ will take over ‘B’ or that A and B will share in ‘A-B’, or indeed that ‘A’ will sell part of their organization to ‘B’, it is frequently followed by uncertainty and apprehension among internal stakeholders. This changing landscape tests an organization’s ability to communicate the distinct ‘win-win’ elements of the deal. The Kübler-Ross change curve (see fig.1 below) is always worth having in mind during this transitional period of M&A and never fails in tracking the internal stakeholder mindset, albeit with differing levels of severity.

Figure 1. Kübler-Ross Change Curve

The transition from pre-M&A to the post-M&A reality can be both fast and slow. The physical symbols of such transitions such as the company name, logo, and headed paper can be changed in a matter of minutes but the hearts and minds of management and employees can lag significantly further behind. It can take years before a post-M&A steady state is reached (sometimes never!) where full commitment to the change is obtained and all the anticipated ‘win-wins’ are realized.

Some acquired organizations are left to their own devices (pardon the pun medtech sector!) and they are run as true satellites whose contact with the corporate office is limited to communicating the positive financial results. In this scenario, the management team in-situ at the time of the M&A event are trusted to continue as-is and maintain the upward trajectory. Alternatively, and more commonly where there is a dominant merging partner, a strict cut-over timeline is applied for an acquired entity to morph into a fully incorporated affiliate. Typically, these sites implement corporate structures, policies and systems swiftly and assertively.

Where M&A becomes can be interesting is the cultural piece; everyone who has worked in an organization through a merger or acquisition knows that there can be a seismic shift in the objectives of the new organization… not so much what the objectives are but, how the objectives are expected to be met. Post M&A, organizations frequently change structure with new reporting lines, new titles, merged departments, increased/reduced layers of management with revised spans of control. Systems of work can also change where new policies are cascaded into procedures that are followed with varying degrees of success. Supporting systems, software tools and information flows are further material changes that tend to require extensive training and oversight in the early periods post-M&A.

When cultures collide in merging organizations, it has serious ramifications for business and its stakeholders. The industry is littered with mergers and takeovers that did not meet expectations simply because the cultural differences were too difficult to overcome. Naturally, organizations do not admit to failed mergers or acquisitions too often but some of the more interesting ones are referenced below.¹ Very often the differences in personal and collective discipline, personified in the leadership differences in the two organizations, is challenging for the organizations to reconcile. Where rigid, structured and conservative management methods meet innovative and unorthodox management can be a recipe for M&A difficulties.²

At PharmaLex, we believe we have a unique understanding of the cultural challenges experienced during Mergers and  Acquisitions. Having merged ourselves in 2017 into PharmaLex, we have insight in how to overcome the challenges of maintaining agility while benefitting from working in a bigger corporate environment, having economies of scale with an increased resource pool. In addition, we have supported numerous Quality and Regulatory functions through these challenging periods through Gap Assessments, Benchmarking Studies, Cultural Assessments, Staff Augmentation, Organisational Optimisation and Leadership Coaching and Mentoring. If you would like our team to assist you or your organization with some of the challenges of changing culture, please connect with us to discuss on +353 1 846 4742 or contact@pharmalex.com

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References

https://www.fiercepharma.com/special-report/top-15-m-a-mistakes

https://hbr.org/2018/10/one-reason-mergers-fail-the-two-cultures-arent-compatible

The post Supporting Mergers and Acquisitions in the Pharmaceutical/Biopharmaceutical Industry appeared first on Global Trade Magazine.

A special purpose acquisition company (“SPAC”) is a New York Stock Exchange (“NYSE”) or NASDAQ-listed shell company through which a team of sponsors raises capital in an initial public offering (“IPO”) for an unspecified future acquisition of an operating company, which in turn can quickly become NYSE or NASDAQ-listed upon merging with the SPAC. While SPACs have existed in some form for decades, their popularity has increased dramatically over the last two years. The over US$83 billion in gross proceeds raised in 248 SPAC IPOs in 2020 not only shattered the previous record of US$13.6 billion raised in 59 IPOs in 2019, but exceeds proceeds raised in the entire previous decade combined. The trend has continued to accelerate in 2021, with over 170 SPACs launched in the first two months of this year for over US$53 billion in gross proceeds, and SPACs making up over 70% of all US IPO activity.

The SPAC boom has been a major driver of the current revival in the US IPO market and helped reverse a two-decade cultural trend in Silicon Valley and the rest of the start-up world of staying private for a longer period of time. A merger with a SPAC has become an increasingly popular path to a public listing for start-ups in hot sectors such as electric vehicles and biotechnology, as well as portfolio company exit strategy for major private equity firms. Major private equity and venture capital firms, along with hedge funds, have also been prolific SPAC sponsors. SPACs have also increasingly been a vehicle for emerging market opportunities, both on the sponsor side by emerging market management teams and investors, and on the target side for emerging market companies looking for an efficient path to a US listing.

The Target

For a potential target company looking to gain access to US public markets, acquisition by a SPAC offers several advantages over a traditional IPO, including:

Speed to market. A traditional IPO will likely take months longer than being acquired by a SPAC given the broad disclosure requirements of a registration statement on Form S-1 (for a US company) or F-1 (for a non-US company) and accompanying US Securities and Exchange Commission (“SEC”) comment process, whereas a SPAC target’s principal public disclosure obligations will come in the proxy statement on Form S-4 (for a US company) or F-4 (for a non-US company), which has considerably less onerous requirements. On the other hand, the target company will need to be prepared to be an SEC-registered and NYSE or NASDAQ-listed company quickly, including appropriate financial statements, corporate governance and capacity to meet its future disclosure obligations.  Non-US companies, or Foreign Private Issuers, will in any case enjoy a significantly lower regulatory burden than a US company, including significantly less required disclosure of executive compensation, exemption from the proxy requirements of US public companies and the ability to generally (with a couple of exceptions) follow home country governance rules instead of those imposed on US companies by the SEC, NASDAQ and NYSE.

Pricing certainty. The target company’s valuation will be negotiated in a private, M&A-like process with the SPAC sponsors and, as discussed below, PIPE investors, as opposed to the underwriter-driven and highly volatile traditional IPO pricing that will depend on real-time market conditions and demand from public investors.

Release of projections. A target company can include forward-looking projections in its Form S-4/F-4 disclosure, unlike in Form S-1/F-1, giving it more control over its story as it introduces itself to US public market investors. A company will also generally enjoy more flexibility to engage in more detailed discussions with prospective acquirers and investors ahead of any transaction, compared to the restrictions on communications that come with a traditional pre-IPO process.

Control over corporate governance. A traditional IPO is a long, collaborative process with underwriters who will tend to look at all issues, including the building out and disclosure of the company’s post-IPO corporate governance, with a focus on maximizing public investor demand at the initial sale. Therefore, where founders seek to maintain a level of control to the extent permitted under SEC, NYSE or NASDAQ rules (and for non-US companies, governance rules exemptions by all three of these are broad enough that quite a lot is permitted), especially in the technology sector, they are likely to encounter more pushback from underwriters than from M&A counterparties with whom they are directly negotiating valuation. Of course, each transaction is different and the level of founder control a SPAC acquirer is prepared to accept will vary.

The SPAC IPO

While the SEC registration process for a SPAC IPO largely follows that of any IPO, with the filing of a registration statement on Form S-1/F-1 and SEC comments, in practice the lack of operating history and financial statements makes it a much more streamlined process. With no operating business to describe, disclosure will center on the experience of the sponsor team, the type of company that will be targeted for acquisition and the terms to the public shareholders of the SPAC.

Typical SPAC terms include:

Founder shares. Sponsors acquire initial equity in the SPAC for nominal value and purchase warrants to help fund costs, typically with built-in anti-dilution protections designed to ensure that such shares convert into at least 20% of the post-IPO and pre-acquisition company. This leads to the sponsors effectively acquiring their stake in the post-acquisition public operating company at a discount and potentially very attractive returns.

Units. Public shareholders are offered units typically consisting of one share of common stock and a portion of a warrant, which can only be exercised after the acquisition. Units, common stock and warrants are all publicly traded, and investors can unbundle their units to trade stock and warrants separately.

Searching period. A SPAC typically has up to two years after its IPO to submit a proposed transaction to a shareholder vote, or be required to liquidate and return the public shareholders’ investment plus accrued interest.

Shareholder redemption. When the sponsors propose an acquisition, or if they seek an extension of the searching period, public shareholders have the option to instead redeem their shares for cash at the IPO price plus accrued interest, with the right to keep their warrants and thereby maintain some upside exposure.

Trust Account. Capital raised in the SPAC IPO is placed in an interest-earning trust account to be used to fund the future acquisition, buy out any redeeming shareholders or liquidate and pay out the public shareholders if no acquisition occurs.

Acquisition by a SPAC

To meet the typical two year deadline to submit a proposed acquisition for shareholder approval, sponsors need to promptly begin the search process to allow adequate time to evaluate potential transactions, initiate and complete negotiations with targets, bring in PIPE investors, and begin and complete the S-4/F-4 drafting and filing process, including SEC review and comment.

Private-investment-in-public-equity (“PIPE”) financings by institutional investors in a SPAC prior to, or concurrently with, the announcement of a proposed acquisition have by now become standard. PIPE financings bring several benefits ahead of the acquisition, including reputable anchor investors to effectively endorse the new public company, price discovery as the valuation of the new public company is negotiated with the PIPE investors, and additional cash proceeds both for the acquisition and new public company operations, including as a backstop against uncertain levels of public shareholder redemptions.

Following the announcement of an acquisition, the sponsors will solicit the SPAC’s public shareholders’ approval of the transaction in a proxy statement filed on Form S-4 or F-4. As discussed above, this will be the principal disclosure document describing the business of the target company, including historical and pro forma post-merger financial data, as well as management’s discussion and analysis of its financial condition and results of operations. The S-4/F-4 will describe the terms of the proposed merger and transaction documents, the latter of which will be provided as exhibits. The document will also describe the process leading up to the transaction, including a history of the search process, insight into the SPAC’s management and board of directors’ analysis of potential transactions and decision-making process, and the role of outside advisors.  Once the acquisition is approved, under most structures the target is merged with the SPAC and its shareholders receive shares of the listed entity (in some structures the surviving public company is a new entity, but the end result is effectively the same for public shareholders).

Emerging Markets, Latin America and SPACs

Emerging market companies are increasingly participating in the SPAC wave. Most prominently, Grab Holdings Inc., a leading Southeast Asia technology company, recently agreed to be acquired by NASDAQ-listed Altimeter Growth Corp. in the largest SPAC acquisition in history. Other recent prominent transactions include, on the target side, India’s ReNew Power Private Limited’s proposed acquisition by, and NASDAQ listing through, RMG Acquisition Corporation II, and on the sponsor side, Chinese private equity firm Primavera Capital Group’s launch of Primavera Capital Group Acquisition Corporation, a SPAC to be listed on the NYSE.

Now, Latin American companies, especially in the technology sector, are also becoming the targets of SPACs. Several investment firms, including Softbank, LIV Capital, Rocket Internet and DILA Capital have recently formed SPACs with the intention of acquiring Latin American companies.

Brazilian businesses, in particular, have had a strong presence in the recent SPAC boom as both sponsor and target. SPACs sponsored by prominent Brazilian business figures that have gone public in the last two years include: NASDAQ-listed Patria Acquisition Corp., sponsored by Patria Investments Limited; NYSE-listed HPX Corp., led by 3G Capital and Vinci Partners veterans Bernardo Hees, Carlos Piani and Rodrigo Xavier; NASDAQ-listed Itiquira Acquisition Corp., led by Paulo Carvalho de Gouvea, previously associated with XP Inc., MMX, Eneva and Rede D’Or; NASDAQ-listed Alpha Capital Acquisition Company, led by OLX founder Alec Oxenford and former head of Qualcomm Latin American and Cisco Brazil Rafael Steinhauser; and NYSE-listed Replay Acquisition Corp., led by Edmond Safra and Gregorio Werthein of Argentina’s Werthein Group. All five of the foregoing launched with the stated purpose of acquiring a business in Brazil or elsewhere in Latin America. Replay ultimately announced the acquisition of Blackstone portfolio company and US-focused Finance of America Equity Capital LLC instead, illustrating the flexibility enjoyed by both SPAC sponsors and, via the effective put option on their shares, shareholders.

Patria, HPX, Itiquira and Alpha have yet to announce a proposed acquisition. Brazilian sponsors have also launched SPACs with the express purpose of outbound investment into the developed world, as was the case with the NASDAQ-listed vehicle launched by GP Investments in 2015, GP Investments Acquisition Corp., which ultimately acquired US software services company Rimini Street, Inc. On the target side, sanitation company Estre Ambiental S.A. became NASDAQ-listed through a December 2017 merger with Boulevard Acquisition Corp. II, a SPAC sponsored by executives of Avenue Capital Group which, interestingly, at its launch expressed no particular plans to seek Brazilian or non-US businesses.

Despite the recent increase in activity in the Latin American capital markets, the reality is that it remains a very volatile environment for companies to raise capital. In this context, Latin American companies, especially in the technology and financial sectors, have more recently in growing numbers considered a listing in the US as an alternative for their capital needs. For Latin American sponsors, it is an interesting opportunity to take advantage of the current excess of liquidity in the US market and make the bridge between US investors and great companies in Latin America looking for capital. As SPACs become an increasingly dominant portion of public US capital markets, Brazilian and other emerging market investors and companies who seek access to that market should naturally find themselves more active in one side or another of these transactions.

The post SPACs and Latin America appeared first on Global Trade Magazine.

A number of years ago, Deloitte conducted a survey to investigate issues of culture in mergers and acquisitions. The report defined culture as “the long-standing, largely implicit shared values, beliefs, and assumptions that influence behavior, attitudes, and meaning in a company.” In other words, corporate culture is how employees as a group think and act, and sometimes, cultural differences can become serious enough to derail integration.

As a simple example, a small startup might have Ping-Pong tables in the break room and provide sushi lunches for everyone on Fridays. These niceties may be less likely to persist at a large company with a stricter culture, so a merger between the two corporations could lead to disagreements between “fun” and “serious.” While disagreements over perks might frustrate employees, cultural differences can be much more serious, such as how leaders make decisions or how managers relate to their subordinates.

The first step to reconciling cultural differences is identifying them. As Deloitte notes, “The most insightful cultural observers often are outsiders, because cultural givens are not implicit to them.” Consider engaging key people from both companies to work on the cultural differences and decide how to reconcile them. This cultural integration team should hash out the details of what the key differences are, what needs to be kept, and what needs to be changed.

Early in the integration process, have the team start identifying how each company operates. Management style is an important aspect, but you should also consider how employees interact with each other and with managers within the company. Try to identify the implicit assumptions that both companies have. Once you have identified these assumptions, determine which ones align with the goals and vision of the combined company. Keep what will help.  Change what will not.

Throughout the process, make sure that the integration team communicates clearly what is happening and why. But do not simply dictate what changes will be made. Genuinely ask for input from employees at both companies. Keep them in the loop. Many people are wary of change, but transparency and being willing to listen will help prevent alienating anyone, which will encourage employees to stay.

When cultural integration is handled well, the combined company benefits from the strengths of the original organizations. McKinsey points out that “A merger provides a unique opportunity to transform a newly combined organization, to shape its culture in line with strategic priorities, and to ensure its health and performance for years to come.” Seize the opportunity and build a new corporate culture that benefits everyone involved.

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Louis Lehot is an emerging growth company, venture capital, and M&A lawyer at Foley & Lardner in Silicon Valley.  Louis spends his time providing entrepreneurs, innovative companies, and investors with practical and commercial legal strategies and solutions at all stages of growth, from the garage to global.

The post M&A Includes Smart Navigating of Culture Issues When Merging appeared first on Global Trade Magazine.

With the level of risk involved in online trading, it is good to learn everything you can. The knowledge will go a long way to guide you and help you err on the side of caution as you trade. We have compiled tried and tested strategies that will guide you towards investing successfully in the stock market.

1. Have a Trading Plan

We can define a trading plan as a blueprint that indicates the money management system for a trader alongside the entry and exit point.

Trading does not come naturally. A blueprint is vital for guidance. It is only your passion to make money and the hard work that comes with it that could be natural for some people. Even with the right skills, one needs to build it via learning and some behaviors.

A trading plan serves as the manual for trading. This is one of the things that differentiate a professional investor from another. It is essential to have an open mind and develop the knowledge that contributes to the overall success. The trading plan does not have to be rigid; in time, one can adjust it based on experience as you trade.

The trading plan takes the guesswork out of the game. It sets out the goal and the strategy you want to use to achieve them. It also spells out your acceptable risk level. With your trading plan, making a decision will be comfortable while trading. Every trading plan needs to have a means of entry and how you will get into a market. It should spell out the indicators and the characteristics of the pricing action to attract you towards a trade. In the same way, it will guide you when to exit.

2. Always Learn From the Markets

With the risk involved in trading, you need to arm yourself with the necessary knowledge. This means that you should find a lesson from each process. You cannot fully understand and predict the market and everything that comes with it. As a result, make it a habit to keep learning.

Politics, elections, world reports, pandemics, economic trends, news events, etc., can influence the market. The market system is pretty volatile and dynamic. A good understanding of the past and present market gives traders a good insight into what the future holds.

With research and insights from the Forex blog, you will understand the facts and interpret various economic reports.

3. Always Have a Stop Loss

Unless you are not willing to accept reality, the loss is inevitable in stock trading. The silver lining, however, is that you can control how much you lose. This is where a stop loss comes in.

A stop loss is like a particular risk value that each trader is willing to accommodate with every trade. It can either be a dollar amount or a specific percentage. The idea is to shield you from excessive risk in the trade. A stop loss is good psychologically as it allows you to accept that you will not lose more than what you set.

While we desire to exit all trade with a profit, this is far from the truth. Consider a stop loss as your imaginary personal protective equipment to mitigate risks. Make sure you always use a stop loss, even if you feel you are a professional trader. If you lose a trading section and exit with a stop loss, the loss will be within reasonable limits.

4. Gradually Build Up Positions

As a trader, your superpower is time. To be successful in trading, your aim for buying stock is a reward. The reward can come through any means like dividends, share price appreciation, etc., which could take a long time. With this, here are two buying tricks that can shield you from the uncertainty of the market.

Dollar-cost average:

This involves a regular investment of a fixed amount of money like weekly or monthly. When the stock price is down, this amount will purchase more shares, and fewer when the price rises. The central idea is to even-out the average price you give out.

Buy “the basket”:

It might be challenging to predict which company will benefit you in the long run. In this case, you buy all of them. This gives you a stake in all players, benefitting from any that generates profits. Besides, the gains from the profit can help you cushion out any loss. With this strategy, you get to identify promising companies and focus on them if you want.

5. Know and Understand Yourself

Market beating strategies and your personality are two different entities. As a result, you should take the time to understand yourself. Understanding yourself involves what triggers you to make decisions and your biases.

Indiscipline and lack of patience are two attitudes one needs to deal with to be a successful trader. The first couple of years as a trader will be a steep learning curve. The various market conditions that influence trading will not come at you in a month or a year. It takes a long time. Expect to make mistakes and learn from them during the early days. At times, trading might require the patience and discipline to do nothing.

One also needs to come to terms with the fact that it is essential to have what it takes to succeed with trading. It is necessary to understand whether one is willing to give what it takes to succeed and how it fits the overall goal. There are many resources online with advice on how to trade alongside the characteristics essential to thrive. Many of those resources agree that a positive mental attitude will position you for fantastic opportunities when trading.

Conclusion

These are vital trading rules that can guide you on the side of caution while trading. Be sure to understand them and how they work together. This way, they can help you establish a successful trading strategy. Trading is hard work that requires discipline, patience, and tenacity. Going through these tips will allow you to increase your chances of success in the field.

The post Top 5 Tips for Successful Online Stock Trading appeared first on Global Trade Magazine.

For many organizations, travel and expense management is a prime candidate for automation, with existing processes still manual, time-consuming, and error-prone. Today, customizable AI-powered technology exists not only to automate travel and expense management but to do so intelligently, enabling organizations to set their own rules and decision-making criteria based on their specific requirements.

AI technology is perfectly suited to this area. AI looks at everything – every transaction, every line item – spotting duplicates and anomalies over time and learning as it goes. AI also sees each transaction in context, not in isolation, and can identify problematic patterns across a large number of different users and companies.
There are many ways that the use of flexible AI-powered expense and audit technology can help enforce an organization’s specific policies. Here are some examples:

Different thresholds for specific projects

There may be different thresholds and expense policies that apply to specific projects within an organization. For example, first-class train travel may be allowed for a client project but not for other purposes. AI-based systems enable the automatic creation of custom rules to monitor spend within specific general ledger codes that represent particular client projects and company events.

Configure remote work expenses

With more employees working from home, and office hours now far more flexible, applying work-from-home policies automatically has become a big area of focus for many organizations. AI-powered expense audit technology can use dynamic conditions (such as who is working remotely on a given day) to apply different work-from-home policies automatically. If someone who is working from home submits a travel expense claim, for example, this will be flagged for further review.

Check for compliance variations

Organizations need to ensure compliance with anti-bribery and corruption regulations, such as the US Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act. These prohibit bribery (gifts, meals, entertainment, cash compensation, employment opportunities) in connection with international business, and violations carry civil and criminal penalties. This can be a complex undertaking because there are often specific variations or exceptions that need to be tracked. AI-based systems enable the creation of custom lists of requirements to detect these distinctions automatically.

Understand different documents

Many organizations require pre-approval for specific expenses, such as entertaining clients at a sporting event. Employees typically need to submit a signed business justification document along with their expenses. Although the format of these documents differs between organizations, AI can read, understand, and audit pre-approval documents, to make sure they have been signed off and company policy is followed.

Manage lifetime employee perks

Some employees are given a specific amount of money that they are allowed to submit for reimbursement over time, such as a lifetime or annual allowance for productivity tools. With customizable AI-based systems, it is easy to create custom rules to keep track of these expenses for each employee, to ensure they don’t exceed their allowance over time.

Flexibility needed more than ever

In today’s changing work environment, a one-size-fits-all policy does not make sense. As companies embrace remote working, travel, and expense policies need to be more adaptable to cater to employees purchasing video conferencing licenses, home office equipment, and productivity software.

Likewise, no two corporate travel and expenses policies are the same, and using AI to automate travel and expense management means enterprise finance teams can configure systems to automate their specific travel and expenses policies, risk assessments, and approvals processes, to reflect their own precise needs.

Conclusion

Spend management has become more complex, making the need for data-driven systems that provide automation, visibility, and control over expenditure more important than ever. An AI-based system means organizations rely less on an auditor’s luck in catching expenses abuses, and more on a systematic, evidence-based, and consistently fair approach.

When implemented correctly, the result is a well-defined and efficient travel and entertainment expense system that sets clear expectations for employees, reduces fraud, and provides up-to-date spend data to improve financial management and decision making. Particularly in the face of today’s rapid pace of change, AI-powered expense management automation vitally free finance leaders and their teams from manual, labor-intensive processes and help ensure that they can instead focus their time on the strategic concerns that matter most.

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Andrew Foster is the VP Consulting at AppZen

The post How AI-Driven Technology Can Make Expense Management Faster, Smarter, and Easier appeared first on Global Trade Magazine.

However, some words of warning: The research and data used in the DailyFX study were taken and analyzed in January, BEFORE the COVID-19 pandemic had impacted global financial markets. This study can be used as a reference and comparison to pre-pandemic areas, such as the health of the financial job market.

“The Top 20 Cities in the Global Financial Centers Index (GFCI)” was culled from data on finance and graduate vacancies per location, individual roles with the most availability and the most financially lucrative cities for each of these roles. Focus on the wider financial industry includes specific reports for trading.

Among the findings:

-London and New York lead the way with the most vacancies per trading role

-Having the skill of UCITS can increase your salary by more than $26,000

-San Francisco leads the way in locations for earning the most in finance

OPPORTUNITY FOR A CAREER

New York provides the most opportunities for those in trading roles. Combined with London they make up 42 percent of all trading roles available at the time of research. The U.S. provides the bulk of the locations, 59 percent of the 24,174 trading roles, with only Zurich and Frankfurt providing Europe’s next best locations.

TRADING ROLES: HOW MUCH DO THEY PAY?

OPPORTUNITY FOR A CAREER

Leading the opportunity index is London, with New York joining it at the top of DailyFX’s findings. Both cities provide significantly more opportunities for current professionals than their nearest rivals and graduates with 5.54 percent and 4.54 percent of all vacancies at graduate level. While other locations performed well, in the majority of cases the percentage of vacancies aimed at graduates was well below 1 percent. DailyFX’s results show that the worst location for graduates to look for a new role is Dubai with only 0.01 percent of all roles destined for graduates.

FINANCE ROLES: HOW MUCH DO THEY PAY?

Actuaries continue to earn good equivalent salaries at all three of the comparison levels shown. Budget analysts have the highest minimum salary of $53,501, while investor relations can achieve the highest maximum salary at $86,587.

One role with a wide range in potential salary is accountant. The research found that this role, which was most in demand according to vacancy data, has the lowest minimum salary of all roles analyzed at $39,942. Its maximum offered salary peaks at $78,523 but the overall average of $59,763 places it as the third lowest earning average salary.

While much of this data can be used as a guideline, many of the skills underpinning these industry roles are what many vacancies will be looking for. DailyFX undertook further research using the 20 most commonly appearing skills and experience criteria to understand how each particular skill and experience is valued in the industry. This was then used to reveal how the inclusion of each impacts the potential salary offered.

You can view more on the study here: www.dailyfx.com/forex/fundamental/article/special_report/2020/05/13/The-Financial-Trading-Skills-Index.html

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

The post NEW YORK RANKS AS THE TRADING CAPITAL OF THE WORLD appeared first on Global Trade Magazine.