Describe a current commercial issue that has interested you and explain why it interested you?
The issue of soaring interest rates combined with the fluctuating value of the British Pound Sterling has piqued my interest. From a historical low of 0.1% for a sustained period of 10 years, the interest rates have risen to 2.25% this quarter. Amidst the growing strength of the US dollar and the sinking value of the pound, we observed a 37-year low of $1.0915 reaching parity with the dollar. The strength of the dollar will enable US private equity firms to aggressively buy and take over UK companies. Firms can leverage their position to take on ‘undervalued’ companies and gain an advantage with significantly cheaper deals. Triton’s £1.3 billion ‘take-private’ of Clinigen Group in April this year is an example of the same. Even last year, private equity firms made over 15 deals for UK companies (both takeovers and minority stakes) with a combined value of £25 billion. Private equity firms are Sidley Austin’s biggest clients. This means increased opportunities for the firm to advise its clients on a wide range of areas like M&A, restructuring and finance among many others.
This interests me because of my keen interest in the private equity sector. Completing virtual work experience programmes of several firm’s exposed me to the challenging and complex facets of private equity. I’ve extensively researched the on-going private equity deals and analysed their commercial viability. This has helped me develop a strong commercial acumen and motivated me to delve deeper into this field.
Our thoughts
Positives
- I like that the first sentence very clearly answers the question.
- The answer then goes on to provide necessary background relating to the issues raised.
- It is generally very well written, in terms of spelling, grammar and sentence structure.
- The answer brings in broader commercial knowledge (i.e. specific statistics, interest rates, an example deal etc.), which gives the impression that the applicant has really read around the topic and has strong commercial awareness.
- I like that the applicant explains why the issue is relevant to Sidley Austin.
- The applicant clearly states why the topic interested them (thus answering strand two of the question, which others might miss).
Potential points for improvement
- Although most of the logic in the answer is sound, it could be stated more clearly so that people without a foundational understanding of the interrelation between interest rates and currency fluctuations could easily get to grips with it all.
- For example, the sentence about the value of the pound vs. the dollar could be clearer. The applicant doesn’t actually state what “$1.0915” is referring to, meaning they’re assuming this will be understood by the reader (which might not be correct – especially if the first line of review is a junior graduate recruiter).
- In addition, the applicant doesn’t state why the strength of the dollar will enable US PE firms to buy UK companies more easily (it would only take a few words to clarify that because UK companies will likely be sold in GBP, if each USD is worth more GBP, this essentially makes the cost of deals cheaper for businesses that have USD to invest).
- I’m not sure the word “aggressively” is necessary. The currency fluctuation won’t necessarily spark a series of hostile takeovers / aggression may not be needed provided that the shareholders of UK companies are willing to sell.
- It’s a bit confusing to say that interest rates have very recently risen, but then use examples from the previous year to highlight the change in behaviour from PE firms.
- If mentioning that the issue could result in opportunities for private equity firms relating to restructuring, the applicant should explain why. I would have thought that restructuring is mostly relevant in this context when PE firms or their portfolio companies are struggling (which doesn’t link to the main point raised about PE firms aggressively acquiring UK companies). Perhaps the applicant is suggesting that restructuring might become more commonplace in the UK if interest rates (and thus the cost of servicing debt) continue to increase.
- I think the last sentence doesn’t really answer the question.