Loading More Content
7-Eleven are a chain of convenience stores. They were originally founded back in 1927 in Dallas (albeit running a very different business model at that point), and are still headquartered in the US today (being based in Irving, Texas). However, in 1991, Ito-Yokado (a Japanese chain) bought a 70% stake in the company and, following various restructurings since (with a particularly significant step in 2005), the chain is now officially owned by holding company Seven & I Holdings Co Ltd (based in Japan).
As a brand, 7-Eleven has almost 85,000 stores across the world (being active in 19 countries, including having the most location in Japan, and becoming a household name in the US). Many of its stores actually display different regional variations on the name. For example, 7-Elevens are often branded as ‘Speedways’ in the Midwest. The brand is generally known for its long opening hours and relatively low prices – along with speciality items like the large slushies on offer in many locations.
Moving on now to the potential buyers, Circle K is a Canadian convenience store chain owned by Alimentation Couche-Tard (aka ACT). Circle K has a complex and often difficult history – the company was founded in Texas in the 1950s and initially performed well, but struggled to the point of facing bankruptcy in 1990. New owners ACT stepped in during 2003 and invested heavily in the brand. More recently, they have announced their intentions to grow the Circle K brand name itself (rather than using regional name variations, as 7-Eleven often do). This has now replaced, for example, ‘Statoil’ in Europe, and ‘Kangaroo Express’ in the US (the process having been completed by 2020).
Internationally, Circle K is far smaller than 7-Eleven (roughly 15,000 vs 85,000 stores across the globe), but the two are much more closely aligned in size based on US stores alone. Regardless, these are two huge names in the convenience store space – so much so that it has been suggested that there may be some competition law objection to the deal (particularly in the US) over concerns of a monopoly (as we will examine in a little more detail shortly).
ACT has suggested that its bid is a ‘friendly, non-binding proposal’ – in other words, simply testing the waters at this stage. Seven & I Holdings (over in Tokyo) have reportedly formed a one-off committee in order to review the terms of the offer and decide whether to engage in further conversation.
The deal values 7-Eleven at $38 billion – just over £29 billion. If accepted, this would be the largest foreign takeover in Japanese history.
There are a number of angles to consider here for aspiring lawyers. Whether an aspiring solicitor applying for open days, vacation schemes or training contracts, or a future barrister looking to secure pupillage, there are a significant number of points to be analysed in the context of application forms and interviews.
First, there is a general need to demonstrate your commercial awareness as part of such application processes. Generally, this means highlighting your understanding of how businesses work (and how that intersects with the work of a law firm or chambers). You can develop your commercial awareness further through regularly engaging with a range of well-established news sources like the Financial Times or Economist, which will provide detailed financial analysis of stories like these. Showing your commercial awareness is particularly important if you are looking to apply to the larger law firms which have very corporate-centric workloads (think Magic Circle, elite US, etc).
In this story, there are a number of general ‘business’ points to be aware of. Naturally, you could look into the price of the valuation. Is it fair? Investment bankers spend the majority of their time creating such valuations – taking all of the factors possible into account and forecasting potential areas of risk, long-term stability, etc. While you are not expected to work at the same level in that sense, it is crucial to still maintain an understanding of how these numbers come together.
This deal currently values 7-Eleven at 20% higher than its pre-bid price on the stock market in Japan. The context of the Japanese stock market in itself is crucial here – having experienced a record slump (the Nikkei 225 fell by 12% in a day back in early August) and then a huge spike back up in recent weeks. In short, then, the market is very volatile at the moment – consider how that could affect the valuations present in this deal.
There are, in addition to the more financial points, many legal angles to think about too.
First, this is obviously a potentially huge M&A deal – this is one of the most profitable practice areas for corporate law firms, with industry heavyweights like Slaughter and May often leading the way on such transactions. Demonstrating an understanding of how all the components of this deal could come together, then, will be crucial.
As already mentioned, this deal brings together two titans of the industry – this will inevitably lead to fears of a potential monopoly, so competition lawyers will likely be called in at some point. This is something both sides will already be aware of, and will likely have already taken some preliminary legal advice on before the watchdogs enter the picture. The concern is naturally that this could increase prices for consumers, which would be hugely detrimental considering how widespread these stores are in so many territories, and the aggressive expansion techniques already employed by both sides in the past.
There are also more niche practice areas likely to be involved here. For example, we have already outlined how deliberate both sides have been about managing their intellectual properties in recent times (see Circle K’s constant rebranding of names, a cost and labour-intensive process). How would this takeover affect the branding of both sides? There are likely to be significant decisions to be made here (and for IP lawyers to execute).
In short, then, this deal is clearly a useful mining source for the kind of application discussions that aspiring lawyers are likely to encounter.
Loading More Content