Welcome to Edition 52 of Boardroom Brief.
This is a service specifically targeted at the needs of busy non-executive directors. We aim to give you a “heads up” on the things that matter for NEDs in the week ahead – all in two minutes or less.
A short week this week due to the Labour Day holiday in Western Australia.
KEY BOARDROOM BRIEF
ASIC publishes its report on corporate finance issues for the second half of 2017. ASIC’s Report (REP 567), covering the period 1 July 2017 to 31 December 2017, provides statistical data, highlights key focus areas, and includes guidance on ASIC’s regulatory approach to fundraising transactions, mergers and acquisitions (M&A), corporate governance issues, related party transactions and financial reporting. The Report, therefore, offers Directors insights about ASIC’s regulatory approach in the corporate finance sector to help them fulfil their legal and compliance obligations. The Report also demonstrates how ASIC facilitates business transactions in Australia while maintaining legal protections and safeguards for the investing community. See ASIC’s media release.
ASIC publishes its enforcement outcomes report for the second half of 2017. ASIC’s enforcement outcomes report provides a high-level overview of its enforcement priorities and key decisions across corporate governance, financial services, market integrity and small business compliance during the period 1 July 2017 to 31 December 2017. Directors should note ASIC’s enforcement priorities for the first half of 2018 and consider whether they require a renewed compliance focus for their own organisations. ASIC expects to focus on: (i) insolvency practitioners and others who facilitate serious illegal ‘phoenix’ activity and improper transactions in the face of insolvency; (ii) company officers who fail to stop their companies making illegal payments to officials of overseas governments; (iii) responsible lending practices in the consumer credit industry; and (iv) technology-enabled offending and/or cybercrime activity in the context of rapid technological developments. See ASIC’s media release.
Mergermarket report predicts a strong year for M&A activity. Mergermarket, in association with Donnelley Financial Solutions, interviewed leading global dealmakers and financial professionals on their predictions for M&A financing trends in 2018. In short, all signs point to a year of M&A activity expected to eclipse what was considered a robust 2017. Certainty around US tax reform, along with continued liquidity in the market, the low interest rate environment, low inflation and increased demand for business and revenue growth make it the perfect time to execute M&A transactions. As of 28 February, 2018 has already seen US$453.5bn worth of deals announced. Key findings of the ‘Market Spotlight: M&A Financing’ Report include: (i) 92% cite cash as the most popular financing source for corporate buyers over the next 12 months; (ii) 84% chose technology and telecoms as the sector where financing will be most available, with financial services a very distant second at 28%; and (iii) 76% believe the amount of leverage used by private equity buyers will increase over the next 12 months, with 32% expecting it to increase significantly.
THE WEEK AHEAD
Trump’s Trade War. Global commodities markets received a shock last week when the Trump Administration announced sweeping tariffs on steel and aluminium imports in a move that triggered a 1.7% sell-off on Wall Street. The measures are ostensibly based on Presidential powers relating to national security, the application of which are in some doubt, so while the measures are likely to be signed into law this week, we can expect legal challenges and potentially a complaint to the WTO. In the meantime, the uncertainty created by this further retreat from the principles of free trade is continuing to hurt commodities.
Government expected to consult on ‘ADIs’ for the purpose of the Banking Executive Accountability Regime (BEAR). With the BEAR – imposing higher standards of behaviour in the banking sector – commencing on 1 July 2018 for large authorised deposit-taking institutions (ADIs) and on 1 July 2019 for small and medium ADIs, the Government has indicated that it will make a legislative instrument defining small, medium and large ADIs for the purpose of the BEAR. The Government is yet to confirm when this consultation will take place.