Insights

06/11/17

Boardroom Brief: Week commencing 6 November 2017

Welcome to Edition 40 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.

KEY BOARDROOM BRIEF

Crowd Sourced Equity Funding. On 29 September 2017 the Corporations Amendment (Crowd-sourced Funding) Act 2017 (Cth) came into effect. The Act amends both the Corporations Act 2001 (Cth) and the Australian Securities Investments Commission Act 2001 (Cth) to establish a crowd sourced equity funding (CSF) regime, allowing eligible companies to raise money from a large number of investors who each make small financial contributions in exchange for equity. Although the term ‘crowd funding’ is commonly associated with the technology sector, the introduction of the CSF regime could also present an alternative capital raising pathway for early stage resource companies. See G+T client publication Crowd Sourced Equity Funding: An Unconventional Opportunity for Conventional Resource Equity Raising?

Abandoned Acquisitions: Why do some deals fail to complete? An interesting report released by Mergermarket last week (“Abandoned Acquisitions: Why do some deals fail to complete”) revealed that 7.2% of worldwide M&A deals announced last year failed to complete - the highest rate of deal failures since the start of the global financial crisis in 2008. The report found that failure rates for deals involving public company targets is significantly higher than for private targets. It also highlighted that the probability of failed deal completions for public targets is influenced by five significant predictors: target termination (break) fees; target and acquirer size; the target’s initial reaction to the deal announcement; the number of financial and legal advisers retained by the acquirer for the deal; and the type of consideration offered by the acquirer to the target company’s shareholders. Please contact the authors if you would like a copy of the report.

Australian FinTech streaming ahead. Treasurer Scott Morrison has stated in a media release that the Government has welcomed the release of the EY FinTech Australia Census 2017, which reveals the strength and maturity of Australia's FinTech sector. The Census provides a comprehensive overview of the Australian FinTech landscape, showing that the number of FinTech firms operating in Australia is now approaching 600, having more than doubled since 2015.  This growth indicates that the products and services offered by FinTech firms are in demand from Australian consumers and significantly, the Census reports that more than half of Australian FinTech firms are looking to expand overseas. FinTech adoption in Australia is high, having almost tripled since 2015 and is expected to further increase to nearly 1 in 2 Australians in the next 12 months.  See the Treasurer of Commonwealth of Australia, the Hon Scott Morrison’s media release. Also see the full Census results on the EY website.

Listing Rule amendments for reverse takeovers. As reported in edition 38 of Boardroom Brief, the ASX has released its final Listing Rule Amendments to regulate reverse takeovers. These amendments will come into effect on 1 December 2017 and represent a continuation of a trend towards more prescriptive regulation of significant transactions by listed entities. For further information please see G+T client publication Reverse takeovers update - final Listing Rules amendments.

THE WEEK AHEAD

RBA on hold. The Reserve Bank Board meets tomorrow 7 November and there is near complete consensus that the Board will keep rates on hold (rates have not been adjusted in November since 2011). The Reserve Bank has indicated that interest rates will be targeted at inflation and growth while macro prudential policy will address financial stability.

Macro prudential policy. On this subject, the rate chart below (sourced from Westpac) demonstrates just how important macro prudential targeting has been in influencing lending (and borrowing) activity. Although there have been no changes to the RBA cash rate in over 12 months, investors (and owner-occupiers on interest only plans) have suffered ~20% increase in borrowing costs over the same time period. Another reason why – despite historically low “official” rates – the household sector has been feeling the pinch.

 

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