BOLD DECISION MAKERS STUART ROSE TALKS ABOUT HIS TIME AT

MARKS & SPENCER AND CURRENT MARKET TRENDS

CMS IN ACTION

RADICAL SHIFTIN EMPLOYMENT

RIGHTS

BEWARE:WHO DO YOU THINK OWNS

WORK EMAILS?

WHAT IS HAPPENINGIN THE MARKET

Corporate Talk

December 2012

Here’s how CMS ranks in independent

M&A legal adviser rankings

Here are some recent awards we have won

Source: Bloomberg 2011, by deal count

Talk is cheap...

1stIN EUROPE

2ndIN THE UK

4thGLOBALLY

Legal Innovator of the Year

AWARD WINNER

INNOVATIVELAWYERS2012

AWARD WINNER

INNOVATIVELAWYERS2012

Most Innovative Firm in

International Strategy

1

Consumer

Q2 2012 Q3 2012

0

5

10

15

20

25

# o

f d

eals

European M&A deals by sector (deal size >£500m)

40

35

30

Energy Financial

Services

Lifesciences Real Estate

& Construction

TMTHotels &

Leisure

15 1

71

7

11

11 1

4

23

5

8

38

30

11

2 1

Source: Mergermarket Source: Mergermarket

Consumer

32

12

63

17

5

Q2 2012 Q3 2012

0

100

200

300

400

500

# o

f d

eals

European M&A deals by sector (deal size <£500m)

600

Energy Financial

Services

Lifesciences Real Estate

& Construction

TMTHotels &

Leisure

15

4

54

14

30

75

74 1

47

97

20

61

65

38

53

05

LET’S TALK SHOP...

There is no doubt that the

Eurozone uncertainties continue

to affect M&A deals in the UK

and across Europe. According to

Mergermarket (see graphs below), the

number of M&A deals across Europe in

our key sectors in both the mid-market

and high end markets fell considerably

during Q3 – European M&A was back

at the same activity levels last seen in

Q2 2009 when the fi nancial crisis was

at its peak. 

It is true that we were expecting deal

activity to slip in Q3 as Olympic fever took

hold and while the number of completed

transactions overall was low, throughout

Q3 our Corporate team was still very busy,

especially in certain of our key sectors like

Energy and Financial Services. We continue

to be very busy well into Q4 also.

Deals are taking longer to close and are

still prone to collapse, but the appetite is

still there for the right opportunity along

with the fi nancing – albeit often in less

conventional forms. Overall the market

is extremely challenging and likely to

remain that way in 2013 for all bar a

small number of sectors and particularly

attractive targets.

This edition of Corporate TALK features some of the issues that we have been discussing with our clients recently.

If you would like to TALK shop with

us we would love to hear from you.

What is happening in the market

Andrew Sheach, Head of Corporate

T +44 (0)20 7367 2969 E andrew.sheach@cms-cmck.com

Louise Wallace, head of our

Consumer Products group, met

with Sir Stuart Rose last month

to discuss M&A trends. Stuart was

Chairman and Chief Executive of Marks &

Spencer at the time it was facing

a hostile approach from Sir

Philip Green and he was

also Chief Executive of

Booker, Argos and

Arcadia. Stuart currently

has non executive roles

at Land Securities,

Woolworths (the listed

retailer in South Africa) and

Bridgepoint Capital, plus he is

currently Chairman of Blue Inc.

Q: Retailers and consumer goods companies have seen a prolonged slow down in Europe and there is little sign of recovery at the moment. Do you think businesses should wait out the slow period or do we need a radical rethink of how to operate in this sort of environment?

A: It has been a long recession, but I am

a glass half full person and I think the

recession is actually coming towards an

end and I think the UK is doing better

than a lot of people think. If you look at

what is happening to those businesses

that have got a decent proposition, good

quality products and good services are

actually still doing pretty well. Those that

aren’t have got to look out, but that was

always the case. What is interesting in the

UK is that we seem to have got to a point

of stagnation when I think what we

should actually be doing is encouraging

businesses to start investing again. I think

we are the bottom of the cycle, I think

we could surprise ourselves on the

upside as we go into next year

and I think companies ought

to really start moving

forward and we need

to ask ourselves the

question, why are they

not doing that?

Q: Do you think the Government needs to

do more?

A: No I think it is self imposed. Businesses

over the last 4 or 5 years have become

nervous about doing things; non executive

directors have become so nervous:

reputationally-nervous, balance sheet-

nervous, remuneration-nervous.

You are not buying a business

for 1 or 2 years you are buying

for a 10 year cycle or longer in

which case I think people ought

to be looking. This is a good time:

prices are comparatively low,

there is stability in the market,

if you are a company with a

decent covenant you can borrow

money and therefore balance

sheets are in pretty good order.

Q: What about those peoplethat aren’t doing well?

A: Recessions are not all a bad thing and

if you are as old as me and you have worked

through 5 recessions it’s a bit Darwinian

really. The strong get stronger and the

weak get weaker – there are quite a lot of

businesses that over the last 10 years have

disappeared but frankly they deserved to

disappear. They didn’t realise that the world

is a place that keeps moving, they didn’t

keep investing, they didn’t actually understand

where the consumer was headed and as a

result they found the world had passed

them by. That happens in any scenario it

just happens quicker and more radically in

a recessionary type environment.

Bolddecision makers

Stuart Rose talks about his time at Marks & Spencer

and current market trends

“we should be

encouraging

businesses to start

investing again”

2

Louise WallaceCorporate Partner

T +44 (0)20 7367 2181

E louise.wallace@cms-cmck.com

THE BIG TALKOur lead feature this edition looks at

Q: Has social media changed the dynamic between customers and retailers or brands?

A: It has changed the dynamic.

The biggest most important change

in the past 45 years since I have been in

retail is the speed of change, the second

thing is the fact that we have become

global. Taking a very extreme example,

if David Beckham goes to a party in LA

and wears a white tie people will go

into shops in London today and ask for

a white tie because we live in an instant

world. In the old days if somebody in

M&S decided that pink was the colour

for knitwear next year we put it into the

shops and you bought it. The consumer

who is always thought of as king is

absolutely king now because

they can make a comment

about just about anything.

You have got to be very

careful about how or

what you do and you

really do need to keep an

eye and an ear open for

what consumers are saying

because if you don’t you

will fi nd yourself in quite

diffi cult trouble.

A negative can be a positive because if

you are quick at the fi rst sign of trouble

you can actually adjust your thinking to

show the customers that you are

listening. A few years back at

M&S a couple of bright

young ladies complained

that M&S were charging

£2 extra for a large size

bra. The fact is that it

does cost more to make

a large bra and we were

justifi ed in charging more

for it but this became quite a

big issue on twitter to the extent

that they had about 10,000 people

within a week. So what did we do?

We sat down and said maybe we

should do something about this.

We reduced the price of

the bras overnight, put a

wonderful advert out of

a girl standing there and

we put a sign across her

saying “we boobed” and

M&S who enjoy a market

share of some 28-29%

on brassieres put on a 1%

market share in a month, the

press loved it, the consumers all

turned out because they said M&S are

listening. So you can use social media to

your advantage but you have to watch out,

don’t ignore it. The worst thing you can

do in any business is to be paralysed,

doing nothing is not an option. Doing

something now even it is only

90% right has to be better

than doing nothing. People

want some sort of reaction.

Doing nothing is a killer.

Q: So your message to consumer products and

retailers at the moment is to get brave and get

out there.

A: My message would be enhance

your brand, polish it up and burnish it and

invest in it because that is your life and

once you have got a brand like that it has

got incalculable value. The second thing

is that I would be really going down the

route of innovation which means investing

in your business; invest, invest, invest.

The third thing I would be saying is that,

after careful research, I am going to

take a couple of brave decisions and the

fourth thing is that I would do it now and

not tomorrow.

The full interview can be viewed at www.cms-cmck.com

“People want

some sort

of reaction”

“Doing nothing

is a killer”

3

4

Radicalshift in employment rights

“employers can insiston owner-employee contracts for newhires from April 2013”

The Chancellor recently

announced radical plans for

employees to give up some

of their statutory employment

rights in exchange for shares in the

business they work for. Any gain made

on those shares on a subsequent disposal

would be tax free; although there could

be an upfront income tax and NICs

charge at the point the employee acquires

the shares. In exchange for the shares,

employees would enter into an owner-

employee contract and be required to

give up their employment rights on unfair

dismissal, redundancy, the right to request

fl exible working and time off for training

and will be required provide more notice of

a fi rm date of return from maternity leave.

Although the new owner-employee status

will be optional for existing employees,

employers can insist on owner-employee

contracts for new hires once the legislation

introducing the concept comes into force

in April 2013. Whilst the owner-employee

concept is principally intended for start-ups

and small and medium sized companies,

it may be used by companies of any size.

Given the potential upfront income

tax and NICs charge coupled with the

forfeiture of valuable employment rights

in exchange for a speculative capital gains

tax saving, it remains to be seen how

popular the owner-employee concept

proves to be.

4

SMALL TALK

4

BEWARE– emails are not property

Once your employees have left

don’t be left high and dry...

A recent case reaffi rmed the

generally accepted position of the English

courts that proprietary rights do not exist

in information, and applied this principle

to emails. An employer will not, therefore,

have a proprietary claim over the content

of the emails of its employees and

consultants.

How does it affect you?The case is a reminder that contractual

agreements, such as employment

contracts and consultancy agreements,

may need to include obligations about the

use and retention of emails and the return

of emails upon request by the employer

or at the end of the term of the contract.

Plus emails sent and received by

employees or consultants should be

stored and backed up on the employer’s

system. Particular care should be taken

where emails are sent by an employee or

consultant from their personal computer.

SMALL TALK

55

Case:Fairstar Heavy Transport NV v Adkins and another

[2012] EWHC 2952 (TCC)

Recent CMS publications

Changes to the

prospectus regime

Eurofi t – How to get in

shape to deal with

Eurozone risks

European M&A

Study 2012

The Bribery Act’s

fi rst year

Duties & Responsibilities

of Directors

© CMS Cameron McKenna LLP 2012. Strictly private and confi dential.

This document and its contents are the property of CMS Cameron

McKenna LLP and are for use only by the partners and staff of the fi rm.

1208-000222

Deals we have recently acted on

ENERGY SECTOR

CKI/Power Assets Holdings ConsortiumAdvised consortium on its acquisition of West

and West Utilities gas distribution network from

a consortium comprising Macquarie, IFM, AMP,

and CPP. Enterprise value £2 billion.

FINANCIAL SERVICES SECTOR

MetLifeAdvised Metlife, Inc. on acquisition of Aviva

Life Czech, Aviva Life Hungary, Aviva Life

Romania and Aviva Pensions Romania.

TMT SECTOR

LDCAdvised LDC on the take private of Boomerang Plus,

the AIM-listed production company.

LIFESCIENCES SECTOR

Takeda Pharmaceutical Company Limited.Advised on its €9.6 billion acquisition

of Swiss pharmaceutical company

Nycomed A/S and subsequent integration.

INFRASTRUCTURE & PROJECTFINANCE SECTOR

Nautical Petroleum plcAdvised on its recommended

takeover by Cairn Energy PLC

for £414 million.

CONSUMER PRODUCTS SECTOR

Delhaize GroupAdvised on its €932 million

acquisition of Delta Maxi Group.

CMS in actionWE DON’T JUST TALK THE TALK...

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