HLB Cross-Border Business Talks Podcast Series

HLB Cross-Border Business Talks Podcast Series

Welcome to our podcast series, where we’ll be exploring the latest cross-border business topics with HLB thought leaders and special guests. Our podcast episodes provide bite-size analysis on today’s issues in 10 to 15 minute long episodes.

New episodes will appear regularly, as we share insights and ideas on a range of international business topics, from FDI and global economic trends, to the latest technology advancements in business and sector specific analyses. Sign up to listen to our podcast series via Spotify or Apple Podcasts.

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Eps 25: The integration of accounting and cyber forensics

00:12
and welcome to hlb's international tax
00:15
webinar
00:16
the title is tax implications of a no
00:19
deal brexit
00:21
it is november 24th the year 2020
00:24
and what a year it has been not only
00:28
are we dealing with covet and the
00:30
implications of
00:31
businesses the implication of movement
00:33
around the globe
00:34
and the social impact it's had we're
00:37
also dealing with
00:39
the us elections and finally the topic
00:42
of today
00:43
is brexit brexit and how that impacts
00:45
businesses and individually
00:48
people moving around the world so stay
00:50
tuned
00:51
we have a great panel to take a uh us
00:54
through these
00:54
updates but just a reminder you are
00:58
attending a brexit
00:59
conference webinar it's not a trek city
01:02
conference and if you don't know uh trex
01:05
it is a
01:05
trump exit from the white house so
01:08
we are having a more interesting topic
01:10
right now
01:12
and let's introduce the panel uh of mark
01:15
butler
01:16
from ireland say hello mark nick farmer
01:19
from the uk
01:20
the heat of the source of uh brexit
01:22
christian yonder from germany
01:24
pascal sheridan netherlands and
01:27
dave springsteen here to guide you
01:29
through the presentation
01:31
so let's move forward to the next slide
01:34
and get into the mandate from you guys
01:37
to make this interactive to answer your
01:39
questions
01:40
please use the q a box and we'll get to
01:43
your questions the best
01:44
the best we can so again the q advice
01:48
so what are we going to be talking about
01:50
today well there's four broad areas that
01:53
we will talk about and share ideas and
01:55
concerns
01:56
but before i do that by show of hands to
01:59
see what kind of biases we have on the
02:01
panel
02:02
who thinks is going to be a deal by year
02:04
end
02:07
the uk and ireland so chris
02:10
in pascal you don't think there's gonna
02:12
be a deal by your end
02:14
interesting okay so the agenda will be
02:18
an update on the negotiations
02:21
what are some of the sticking points
02:22
that we're facing right now in the

Eps 24: Emerging growth companies and M&A activity during the pandemic

Speakers:

Andrea Moseley, HLB’s Marketing and PR Manager

Chris DeMayo, HLB’s Global Emerging Technology Leader

Patrizio Prospero, HLB Malta

David Sacarelos, HLB USA

[00:00:00] Welcome to HLB Cross-border Business Talks, HLB's global podcast series on international business topics.

Andrea Moseley: Hello everyone. Welcome to the podcast I'm joined today by Chris DeMayo HLB's global emerging technology leader, Patricio Prospero from HLB Malta and David Sacarelos from HLB USA. We're going to be discussing emerging growth companies and M&A activity during the pandemic. In terms of MNA activity. What are you seeing in the marketplace? Chris, I'll start with you.

Chris DeMayo: I think when we look at 2020, we've seen a pretty significant increase in M&A but it's been for a lot of different reasons. There's been acquisitions happening because companies are sort of looking at the pandemic and it was, it was a painful, you know, event for them.

And they were sort of waving the white flag and saying, we don't [00:01:00] have the gumption to go another two, three years and rebuild from this pandemic. We'd rather just merge up and that was combined with big companies with big balance sheets, like the Facebooks of the world who had capital to deploy and wanted to acquire good technology and good client, a good employee basis.

So, you saw a lot of deals happening there. But then you also saw a lot of companies that had been really positively impacted by the pandemic based on where they were in the marketplace, online retailers, especially on wrong retailers of food and going out to the market and raising money and high valuations off of really aggressive revenue growth became another area where companies were benefiting from the pandemic in terms of M&A.

Andrea Moseley: Patricio, what are your thoughts?

Patricio Prospero: I think that as [00:02:00] every disruptive event brings even COVID has provided with a certain level of opportunities. So, I think for what concerns M&A what we have seen is that there were a lot of companies, especially in the new emerging technology that they had found the opportunity of acquiring companies, which they didn't manage to sustain their business through the pandemic. Having said that, I think that there were also companies which they have held to their original. We have seen a number of merger and acquisitions. They were delayed and they eventually will be closing in 2021.

We know that there are also a lot of companies, which they have requested a reassessment of the venue education of the value of the merger [00:03:00] because of the pandemic. So, I don't think that it affected everybody in the same way. I think that there is a way that there are companies, which they have actually benefited from the situation and from good opportunities.

But some other companies, they had to hold their horses and this fell through as well. So, I think that 2020 was a bit of a year where companies, they also had to put everything on stand by to eventually see how this situation is going to get after the COVID situation.

So, I'm quite curious to see what’s going to happen in 2021, because from the analysis that we have, through surveys and through the study, we'll see that we are seeing that eventually some merger and acquisition are going to be closed by the end of [00:04:00] 2021.

So, 2021 could be also a good year for this kind of deals to be actually achieved and close. Finally, what it was held in 2020 it could be finalised in 2021 so we will see what's going to happen this year.

Andrea Moseley: David, how, how have you seen the market?

David Sacarelos: Well, I think after the lockdown has happened in the last year and going into 2021, maybe my comments really about 2021, I think there's a renewed optimism. I think there is you know, quite a bit of government response. We get vaccines going out and I think there's a view that there's quite a bit of funding available and demand available.

The 2021 is going to be really a good year. Most people were talking with believe that 2021 will have valuations about the same or found higher than, than the in the past. And the [00:05:00] deals will be if anything, the same if not more. So, I think, yeah, obviously we had a big influx toward the end of 2020.

Most people are, are really looking toward 2021 to be a good year. I think, especially in technology, healthcare, consumer goods. Clearly retail and real estate probably are at the downside of that, of that trend. But I think overall, I think it's going to be an optimistic year for 2021.

Andrea Moseley: We're now, obviously in the era of remote working. Is real estate changing in this new time. And what are the role of emerging growth companies? David, I'll start with you.

David Sacarelos: Well, I think I think that the real estate and it kind of in a handful of different ways and it does impact how you think about emerging growth companies and, and their involvement in there. I think a real estate's going to have [00:06:00] to assess and continue to figure out their needs

and worked from home models and really whether or not, or how the market has changed from a supply and demand area clearly emerging work, emerging companies found new ways to attract capital, attract both financial capital and human capital and technology and other aspects of, of, of development and innovation. Globally because of the pandemic and you don't have to be in a building but that assessment's going have to continue. What we're seeing and hearing also is that young people are frankly, a little tired of not going into the office and being with other people they believe it does, in some cases, hamper innovation.

And they want to be able to do both. They want to be at home, and they want to go in. So, I think right now, you know, the market's going to have to assess really what is the supply and demand. In addition to that, at least in the United States, I think we're all looking at the [00:07:00] new Biden administration, secondly, to see where regulatory rules are going to change our tax laws, going to change.

Whether or not the broaden or limit opportunities zones those all impact the real estate market and they do impact, especially in Silicon Valley. A lot of folks have been thinking about putting start-up companies in opportunity zones because not paying tax on that gain is kind of a nice thing if you think about it.

So, there is questions about just regulatory rules and tax policy. Moving ahead. And I, and I think at least in the larger markets, probably in California, New York, and some of the others, we are looking at the disputes among landlords and tenants here in California. We just, yesterday came down and they are going to stop any kind of evictions from commercial, commercial property.

At least for now. So we're at least through June. So, we'll see where that leads. That's going to impact [00:08:00] technology companies, emerging companies that have long-term leases that theirs right now have on their balance sheets. So, we'll see where that goes as well.

Andrea Moseley: Patricio can we have your opinion as well?

Patricio Prospero: Yes. I'm in agreement with what David said.

Meaning that, of course working from home has brought a number of companies effectively cut costs and eventually having also the possibility of relocating their space or, changing the use of their space at the office. Although when we're looking at the human capital, I think that this has negatively affected on the long term.

On the long term, it will be negatively affecting also the way how especially in the tech industry people before used to perceive the work, I mean, I remember a few years ago before this pandemic [00:09:00] happened you know, working in a tech company was fun. It was fun job. You used to work with a tech company.

You used to go, for example, working in Google offices. And it was like enjoying the time with your, with your friends, having time to meet each other, to brainstorm, to create new ideas to discuss. Possibly new things to do. And that was one, most, probably one of the key success factor of a tech company, because they used to approach the human capital in a different way.

So, I think that before we use people working in tech company used to identify themselves with the culture of the company and they used to feel more belonging to the company. I mean, they, they, they felt this, this kind of sense of belonging because it was you know, the whole culture was actually sort of transmitted to the, to the person working in those offices. Today, working [00:10:00] from home, it standardized a bit, the experience, the experience.

So Although it could have brought a number of positive financial repercussions definitely it has also an impact on the way how people are living the work experience. I mean, we read statistics and we see that there are people who feel more depressed. People that they feel more the need of sharing. You know and, and maybe meeting other people and exchanging and sharing ideas. And this is something which on the long term it could affect, or obviously, especially for innovative company the innovation, the innovative elements. So, you know, even the fact that sharing experience, it makes, you know, a whole experience for people, you know, to come up with new ideas and innovative ideas.

So, I think that could be on long term something which we should be looking at in terms of human resources. [00:11:00]

Andrea Moseley: Chris, any thoughts?

Chris DeMayo: I think the ripple effect of remote work and the remote work environment is so deep. You could spend hours talking about how this is going to change the way that we work and live.

When you're in the middle of it, you always think of it as, as probably more of a change than it will be. So, I agree, it's not binary. We're not going to go to a full remote environment because there was, there was absolutely very real benefit to being around people. But I haven't talked with single client that has said we're going back to a five-day work week in the office.

Those days are over. And that's an interesting thing to think about because it opens up. So many different possibilities. First of all, you now can have people, you can now seek talent in places that were, are far, far away from your office. You can now accommodate [00:12:00] talent that, maybe you have somebody that didn't want to live in New York city or California, and wants to live in Topeka, Kansas. And they can't. So it's going to open up possibilities. It's going to change the offices are laid out. It may or may not change the square footage, but it may change the way that they're designed more collaboration, space, less offices and cubes, because not as many people were going to be needing offices because we'll be sharing spaces more than we will you know, having permanent spaces or perhaps we won't share spaces, but the spaces will be substantially smaller.

So, there's a lot of potential change that's going to come. And we just don't know yet what that looks like. You know, some of this is going to be great. For industries, certain industries, and some of it's going to be very damaging. I'll give you an example. When you think about where we have gone with online conferences and with video conferencing, you know, everyone [00:13:00] says we've advanced 10 years in, in a matter of 10 months that is going to have a very negative impact, a decimating impact in some cases on travel and hospitality, right?

Because business travel. It does not have to happen anymore in the way that it once did. Big important meeting to now happen on video conferences. That changes the dynamic of the marketplace. And real estate is, is, is, is certainly not going to be spared by that you know, to, to David's point, I think, you know, could people be looking for less space for no space?

Could people be changing their space? Absolutely. And, and I don't think anyone's going to be able to fully predict the long-term impact. But it will be a winners and losers impact. I think some, some industries will be very positively impacted. Some will be very negatively impacted. But I think the cultural norms have yet to be set as to what we're going to be expecting from our, our, our employee bases going forward.

Andrea Moseley: And you've [00:14:00] mentioned already how companies are still going public, but that has obviously changed. So, what do SPACs mean to tech companies in the marketplace? Chris, I'll start with you.

Chris DeMayo: Sure. Yeah. You know, SPACs have been around for, for a long time. But you know, over the last decade or so you really, haven't seen a lot of activity in this back marketplace in the United States the process of going public is normally a fairly long drawn-out expensive process. It could take years for a company to start the process of going public and actually come to that fruition. What's SPACs have done is it has created a fast track to going public. You know, the, the simple concept of this SPAC is a, an entity, which is a shell was formed that goes public. It has no activity other than literally having a bank account with money in it. It then goes out and acquires a private company. Which therefore makes that company now a public company [00:15:00] and it can be done in a matter of months rather than taking years to do. So, it fast-tracks the process of going public and getting companies into the public market.

And, and that has created a really frothy market in the United States in terms of potential companies, potential targets of SPACs and having liquidity events.

Andrea Moseley: How are you seeing things in Silicon Valley?

David Sacarelos: Well clearly whether you're a traditional SAS company, FinTech electric vehicle company, whoever you are the SPACs are offering a really enticing financing option.

Th this is another way to raise capital and it's it. It's somebody. Easier, I guess. And then it's going going through IPO. I, I noted Chris that on Monday, I just in preparation for our call, five companies announced plans to go public through SPAC mergers at valuations over a billion dollars a piece.[00:16:00]

Yep. And, and all the, one of the deals in the last number of last four months, it only one didn't include SPAC that was a, so there's quite a bit involved, quite a bit out there. And I think it's just another, the way I look at us, it's another financing option, whether it be faster or cheaper, or what have you is another way to go. If you are a tech company to, to raise capital. And so it's also attractive to private equity companies in California, and then in Silicon valley they've already been interested for years in SPACs and you're going to see many more funded, I think, in the coming years. Yes, there's reduced disclosure on the front end.

I think the companies have, have a chance to really speak more directly to their investors. Have a little more transparency in what they're doing. But Chris, I agree I have the question of the day is whether or not these valuations are realistic in the end. So, there is conversation in Congress and [00:17:00] in the federal reserve and some other folks and just making sure that, Whether or not, there should be some more regulation. We don't know nothing's happened at this point in time, but as we look at 2021, it's just another very good way to raise capital. I think that's a good way to look at it. Yeah.

Chris DeMayo: The risks that I see out there is so many of these companies that are going to be targets of SPACs.

Yeah, they're not really ready to be public companies, right? So they're going to snap a finger and all of a sudden they're going to be a public company. And these companies, the rules for their reporting is no different than a traditional public company. So, you know, are they going to have the internal accounting functions to be able to provide accurate financial statements on a quarterly basis?

Are they going to be able to speak accurately to the street about revenue, projections, and growth. These are things that they were never trained to do as a private company. And usually that's part of that kind of two-year process of going public is putting that infrastructure in place. And, you know, [00:18:00] how is that going to affect the market in the future when you have companies that just, they haven't, they're sort of building the plane as they're flying it and going into a big IPO.

And now you've got the public markets investing into these companies. You know, they're going to have. You know, step up and it's going to be, it's going to be a challenge for the next couple of years, to the extent that these you know, these private companies with thin internal accounting departments are going public.

Andrea Moseley: So, I'm conscious that the situation obviously is rapidly changing. And it continues to change it like an accelerated speed. What are your expectations for 2021? Who do you think the winners and losers will be in the kind of the tech space in regards to the pandemic? Patricio I'll start with you.

Patricio Prospero: We have seen a number of winners and losers during this pandemic. Whereas before discussing about working from home people, they stay more at home they travel less, they spend more time at their houses. So, all those, tech companies that somehow [00:19:00] provide services to people which stays at home, definitely they are the winner of the spirit of the pandemic. We mentioned before the videoconferencing and how this effectively has impacted the way how we do business and how we actually interact today. When you look at zoom, for example, an application that before pandemic had about 10 million subscribers, And in few months went up to 200 million that makes you understand how these kinds of companies they have actually achieved a big success during the pandemic.

Another winner is for example, the gaming company, as we said, people are spending more time at. And they have to entertain themselves. So, when you're at home, what you're doing is either watching a movie. So, there we see that the streaming company like Netflix or Amazon Prime and all these [00:20:00] kinds of, of, of companies, they have actually had a huge success, but also gaming company like Nintendo has more than doubled his sales during pandemic online gaming so those, I think that definitely. Two of the winners. I mean, if we want to identify winners, then there are companies which they didn't. I mean, in my opinion, they didn't benefit.

I mean, they, they won in some stages, but they also have lost in some other situations. Just to give you an example. If you take up Amazon, which is perceived to be one of the big winner of of this pandemic, if you look deeply to the situation, they have raised a lot of concerns with people working at Amazon about the work conditions of employees at Amazon which is creating a lot of pressure on on the company.

And on the other side, don't forget that Amazon, for example, has decided having the online sales business has [00:21:00] also owns one of the biggest cloud systems. So people are so, and a lot of companies, which they actually are in difficulty of payment are finding very difficult to pay Amazon's fees for what concerns so involve in formation, the cloud.

So that could detailing in a, in a high-risk. So it doesn't mean that everything, that signal it's looking good, it's actually. You know, something which is definitely a win. And there are those that we identify as major loser. Thinking about companies like Uber, for example, the transportation company that they have lost a lot of of business during the pandemic

They had to change their business model. Most of these companies, now they have moved to the business of delivering food rather than delivering person or driving people from, from, from one site to another. And definitely then the company. That we have seen in the past booming like [00:22:00] Airbnb or, or all the internet based tech middleman, what we call middleman.

They have seen a big loss during the pandemic because people are not traveling. So especially tourists to these importance, as we said, Airbnb booking.com. And all the other is they have seen a big loss in revenue during this period because there is no actually you know there are no actually people traveling, so business automatically has reduced.

I think that's a, in a nutshell, these could be those that, which we could identify as winners and losers. I maybe, I don't know if Chris or, or, or, or they, they have more, more to add to this, maybe they have a. Or opinions or other examples to provide.

Chris DeMayo: To your point. And if you're an online business that is able to deliver, you know, a good conveniently you saw a huge increase in revenue in [00:23:00] 2020. And the thing is, that's a permanent shift because you forced people to adopt a new technology. And now that they have they're going to stay with it. So, you know, retailers will, will have to, you know, deal with the fact that you're going to have a lot of people that were once going to walk into a storefront to buy something.

And now they're comfortable buying online. And, and, and when you think about different demographics, you know, younger people have always been doing that, but if you're, if you're in the, you know, the 50 to 70 year old demographic, maybe you weren't, and now you are, you may not be going back. And that's a huge, huge buying demographic I think that's probably one of the bigger shifts that you're going to see.

I think you know, they're definitely going to be a winner. And as I mentioned before, I think hospitality is, is going to, it's going to struggle for a long time travel and hospitality is going to struggle. I think you'll see a surge when the pandemic is over and people wanting to get their vacations in, but over the longterm, I think you're going to see business travel is going to, is going to be so different.

And that's where a lot of [00:24:00] money is made. Quite frankly, not necessarily on vacationers. You know I think that the, the technology community will net benefit from the pandemic and, you know, getting away from the economics. I think one area where I think is, is, is important is, you know, leadership in crisis. You know, when, when revenue's always going north and money's always flowing in from investors it becomes easy to lead.

I don't want to say it's easy to lead, but you know, you don't have some of the pressures that maybe are out there. You, you see companies emerge and leadership emerge when there's crisis, you know, how do you deal with cutting costs? How do you deal with people? Where, what are the decisions that you make?

And I think that having gone through this, the companies that come out the other side will be better, more solid companies that will be better businesses. Because they'll, they'll know that it's not just going to be about burning cash. And how fast can you spend money on, you know on employee [00:25:00] perks it's going to be about how do you build a business that can survive things that happen, that you don't see coming.

And I think that that may be one of the most important by-products of this pandemic that, that maybe we're not seeing right now, but that, that will grow out over time.

Andrea Moseley: David, any final thoughts?

David Sacarelos: Well, okay, so predictions for 2021. I always like when people ask me that question I have clearly, I think what most people feel is technology healthcare, consumer goods are still going to be at the forefront.

I think we have a number of clients who are doing some amazing things in ag tech. The, the field robotics and in farming is certainly something. People are keeping an eye on artificial intelligence, machine learning. We mentioned earlier, just the whole issue of remote work technology. The cloud tech companies are going to be, I think we're going to do fine.

The FinTech companies are going to do very well. Anything related to enterprise health [00:26:00] and wellness, I think we'll continue to do very well food tech, if you haven't already, you're probably won't buy a plant-based , is it called the hamburger? I don't know, but you'll be buying something that's plant based in the near future because that's something that people are interested, at least in the United States technology around the insurance industry will be, will be key in 2021.

We know in the bay area here in the Silicon Valley and mobility companies, your electronic electric vehicles. A lot of demand there. And I think there's going to be a lot of money put into that, into that technology space retail, health wellness and anything connected with supply chain technology can make it easier to move things from here to there and not have to be so the hold into a, a physical infrastructure that's some thoughts that I have at least maybe I'll leave it there.

Thank you

Andrea Moseley: all very much for your time. And thank you all for listening. [00:27:00] Thanks for listening for more information about this topic and other Cross-border business insights visit www.hlb.global/insights

Speakers:

Andrea Moseley, HLB’s Marketing and PR Manager

Chris DeMayo, HLB’s Global Emerging Technology Leader

Patrizio Prospero, HLB Malta

David Sacarelos, HLB USA

[00:00:00] Welcome to HLB Cross-border Business Talks, HLB's global podcast series on international business topics.

Andrea Moseley: Patricio, what are your thoughts?

Andrea Moseley: David, how, how have you seen the market?

Andrea Moseley: We're now, obviously in the era of remote working. Is real estate changing in this new time. And what are the role of emerging growth companies? David, I'll start with you.

Andrea Moseley: Patricio can we have your opinion as well?

Patricio Prospero: Yes. I'm in agreement with what David said.

So, I think that could be on long term something which we should be looking at in terms of human resources. [00:11:00]

Andrea Moseley: Chris, any thoughts?

Chris DeMayo: I think the ripple effect of remote work and the remote work environment is so deep. You could spend hours talking about how this is going to change the way that we work and live.

And, and that has created a really frothy market in the United States in terms of potential companies, potential targets of SPACs and having liquidity events.

Andrea Moseley: How are you seeing things in Silicon Valley?

David Sacarelos: Well clearly whether you're a traditional SAS company, FinTech electric vehicle company, whoever you are the SPACs are offering a really enticing financing option.

Chris DeMayo: The risks that I see out there is so many of these companies that are going to be targets of SPACs.

And I think that that may be one of the most important by-products of this pandemic that, that maybe we're not seeing right now, but that, that will grow out over time.

Andrea Moseley: David, any final thoughts?

Thank you

Eps 23: Cyber-risks in the age of remote working

Eps 22: How the European investment climate is adapting to the New Normal

Eps 21: COVID-19’s impact on the North American investment climate

Eps 20: The ongoing impact of COVID-19 on financial reporting

Eps 19: Transfer Pricing considerations in light of COVID-19

Eps 18: Emerging technology trends for 2020

Eps 17: Transforming business through AI

Eps 16: Investor confidence remains uncertain but opportunities are ahead

Eps 15: The role of Not-For-Profits in the development of Africa

Eps 14: M&A Trends in Africa

Eps 13: Cities of the Future

Eps 12: Consumer behaviour changes and the response of global businesses

Eps 11: Challenges and opportunities in today’s global real estate market

Eps 10: Why does the world need Cyber Security Awareness Month?

Eps 9: Blockchain intelligence: A compliance framework for crypto-currency transactions

Eps 8: Made in Italy: How Italian companies are successfully conducting cross-border business

Eps 7: The importance of soft skills in business

Eps 6: A profession in transformation: Audit practices are becoming more technology driven and culturally diverse

Eps 5: Investor confidence remains fragile

Eps 4: Why the revision of ISA 540 is creating a more collaborative dialogue between auditors and clients

Eps 3: The next generation of start-ups: Going across borders

Eps 2: US-China trade conflict: In every crisis there are always opportunities

Eps 1: Challenges and opportunities for foreign companies in the US in times of trade uncertainty

COVID-19 Cybersecurity Emerging Technology Europe Global Strategy and Growth Technology

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