The Future Lawyer Weekly Briefing – W/C 7th October 2024

In this week’s briefing:  

Tuition Fees Increase: Law firms could contribute more to helping students amid these rises in costs by implementing more schemes aimed at students from disadvantaged backgrounds.  

EU, Human Rights and Migration: The political divide threatens the EU’s core value of equality and respect for human rights, undermining and weakening the legitimacy of the European Union as a whole. 

Carlsberg’s Fruit Shoot Dilemma: Common in high-stakes contracts, the “change-of-control” clause allows PepsiCo to terminate the agreement with Britvic if Britvic is sold to a new owner — a disastrous result for Carlsberg.  

 

Carlsberg’s Fruit Shoot Dilemma

The £3 Billion Bid for Britvic and Why PepsiCo Holds the Key 

By Charlie Suzannah Cromwell-Pinder 

Carlsberg, the renowned Danish beer company, has made waves with its bold attempt to acquire Britvic, the UK-based soft drinks maker. With offers reportedly hovering around £3 billion, Carlsberg is eager to diversify its product line and stake a larger claim in the growing non-alcoholic beverages market.  

However, while lucrative on the surface, the deal isn’t as simple as a financial handshake. Carlsberg is facing an unexpected gatekeeper in PepsiCo, the American soft drink giant, who holds the key to Britvic’s most valuable contract. 

Why is Carlsberg Interested in Britvic? 

At first glance, Carlsberg’s move to acquire Britvic seems like an odd match. Carlsberg’s portfolio boasts beer brands such as San Miguel and its namesake brew, while Britvic is better known for soft drinks like Tango and the popular kids’ beverage, Robinsons Fruit Shoot.  

However, behind the scenes, there are strategic reasons for this unexpected union: 

1. Expanding Market Share: Carlsberg is seeking to expand beyond its traditional beer business and tap into the UK’s thriving soft drinks market. With alcohol consumption in decline, the non-alcoholic sector has proven to be a growing and profitable area. By acquiring Britvic, Carlsberg can increase its footprint in a more diversified beverage market.
2. Tapping Into Declining Alcohol Consumption Trends: Alcohol consumption has been on a steady decline in many parts of the world, including the UK. Consumers, particularly younger generations, are increasingly opting for healthier or alcohol-free alternatives. Carlsberg’s acquisition of Britvic would allow it to capitalise on these changing consumer preferences and maintain steady revenue growth.
3. Britvic’s Strong Brands and Financial Performance: Britvic has shown consistent financial growth, making it an attractive target for any suitor in business. Beyond its iconic brands like Fruit Shoot, Britvic has also branched into trendy, modern drinks such as Jimmy’s Iced Coffee, which resonates well with younger, health-conscious consumers.

PepsiCo’s Role: The Deal’s Make or Break Factor

Despite Carlsberg’s enthusiasm to purchase Britvic, the deal faces a significant roadblock: PepsiCo. Britvic holds the exclusive licence to manufacture, sell, and distribute PepsiCo products, including Pepsi, 7up, and Mountain Dew, in the UK and Ireland. This is a lucrative and critical contract for Britvic, but it’s not guaranteed to stay intact if ownership changes. 

This is where PepsiCo’s “change-of-control” clause comes into play. The clause, common in such high-stakes contracts, allows PepsiCo to terminate the agreement if Britvic is sold to a new owner or undergoes significant changes in its ownership structure. This legal safeguard exists to ensure PepsiCo maintains control over the quality and distribution of its products, especially if a new owner is perceived as unreliable or misaligned with PepsiCo’s operational standards. 

For Carlsberg, losing this contract would be disastrous. Some analysts believe that this distribution agreement is one of the primary reasons Carlsberg is even interested in Britvic in the first place. A loss of the PepsiCo partnership could dramatically undercut the deal’s strategic benefits. 

However, Carlsberg has been in talks with PepsiCo and, in a recent breakthrough, successfully convinced PepsiCo to waive its right to terminate the contract. This means that if Carlsberg’s acquisition of Britvic goes through, PepsiCo will allow the licensing agreement to remain intact — a significant victory for Carlsberg. 

The Legal Stakes: the Centrality of Law Firms

With a deal of this magnitude, the role of legal advisers is paramount. Both Carlsberg and Britvic have enlisted top-tier law firms to navigate the complexities of this acquisition. Carlsberg is represented by Baker McKenzie, while Britvic has turned to Linklaters for legal counsel. 

• Negotiating Terms and Securing Contracts: The involvement of law firms is crucial to ironing out the finer details of the acquisition, ensuring compliance with relevant laws and safeguarding the interests of both parties. For instance, Carlsberg’s legal team would have been deeply involved in negotiating with PepsiCo over the “change-of-control” clause, which could have jeopardised the entire deal. 
• Due Diligence and Regulatory Hurdles: Mergers and acquisitions (M&A) transactions, especially those involving international corporations, require extensive due diligence. Law firms help to ensure that all regulatory approvals are met, that financial and operational risks are properly assessed, and that there are no legal barriers to the transaction.  
• Advising on Shareholder Interests: Britvic’s rejection of Carlsberg’s initial £3.1 billion offer suggests that its shareholders and board may be holding out for a better deal. Here, legal advisers on both sides will be working to navigate shareholder expectations, ensuring that the final offer — if one materialises — is fair and in compliance with corporate governance rules. 

Broader Societal Implications

This potential acquisition underscores larger societal and market shifts. As alcohol consumption continues to fall, especially among younger generations, companies that once relied heavily on alcohol sales are now being forced to pivot.  

Carlsberg’s pursuit of Britvic reflects this wider trend toward diversification as the beverage industry responds to changing consumer habits. By expanding into the non-alcoholic sector, Carlsberg is positioning itself for long-term growth, aligning with the preferences of health-conscious consumers. 

However, the success of this acquisition also raises questions about corporate consolidation. If Carlsberg successfully buys Britvic, it will gain significant control over both alcoholic and non-alcoholic beverages in the UK. While this could bring operational efficiencies, it could also stifle competition and innovation in the industry. 

EU, Human Rights and Migration

By Gurdeep Singh

Although the European Union started off as an economic community, it would later become a political union with values such as peace, democracy, and equality. The EU has also become an advocate for Human rights, promoting these regionally and globally.  

To safeguard Human Rights among its member states, the EU has created several legal institutions and legislations, including the Charter of Fundamental Rights of the EU (which covers rights for freedom, citizens’ rights and justice) and the European Court of Human Rights (which the UK continues to follow). Despite these measures, the EU still faces challenges due to migration and discrimination, which have an ongoing impact on modern society.  

Key Human Rights Issues in the EU

One of the most pressing issues today, and one that has deeply divided the European Union, is migration and asylum rights. Asylum rights have been recognized as fundamental since the 1951 Geneva Convention, and the EU has introduced legislation like the Common European Asylum System, created in 1999, to protect these rights. However, EU member states have struggled to maintain a unified response as migration increased significantly, especially due to rising global conflicts. In 2015 alone, 1.3 million people sought asylum in Europe. 

The European Union has failed to create a united front against the challenge as, despite all of the legislation, some EU members have decided to take a different approach to the issue which has resulted in problematic results.  

The problem becomes even tougher for the ‘frontline’ countries such as Italy, Spain (both really close to North Africa) and the Balkans (close to the Middle East). Greece, being the entry point for immigrants and asylum seekers coming from the east, even though it has been condemned by the European Court of Human Rights for its actions, has started to push back migrants from the Aegean Sea back to Türkiye.  

There are also many reports circulating showing the abuse and inhumane conditions migrants have to endure. Italy, in December 2022, created a new law that prohibits the rescue of migrants from charities in its southern islands.  

Furthermore, asylum seekers are often held in detention facilities which usually fall below international standards. The degrading conditions in which migrants arrive upon the continent (and not just through the countries mentioned above) has raised concerns about the violation of human rights.  

Consequences of Human Rights Challenges on Society

The issue of human rights and how migrants and asylum seekers are handled have far-reaching consequences on the EU public and society altogether. The way the European Union has handled not only has led to humanitarian concerts but has also contributed to the rise of nationalism and hatred towards migrants. A stereotype has been created through misreporting and propaganda that immigrants have a negative impact on society.  

This divide not only has created a deeper political gap between European countries, with many standing against the idea of welcoming asylum seekers or migrants. It also threatens society itself, as it finds itself being torn apart between those advocating for upholding human rights and those supporting a tougher and stricter approach. The political divide threatens the EU’s core value of equality and respect for human rights, undermining and weakening the legitimacy of the European Union as a whole.  

Law firms and Human Rights

Many law firms can help with the issue of migration and human rights by representing clients in both national courts and the European Court of Human Rights. They work to ensure that governments and institutions are held accountable for human rights abuses and that individuals’ rights are protected under EU law.  

Furthermore, many law firms engage in pro-bono work, which can include offering free legal services to refugees, victims of discrimination, and those whose human rights have been violated. This legal assistance ensures that marginalised individuals who may otherwise have been ignored have a voice and access to justice. 

Tuition Fees Increase

By Amna Ahmad 

Universities across England have asked for a rise in tuition fees, which are currently capped at £9,250 for domestic students. They argue that this would help ease their financial burden and deal with rising inflation. Recent talks within the Labour party have suggested increasing tuition fees to £10,500.  

Universities UK, a body which represents the interests of 141 Universities, emphasised that this increase is essential amid fears of budget deficits and a fall in the quality of learning. However, young students have expressed their concerns about already rising accommodation fees and other financial costs incurred during their academic career. 

As many law students and law graduates are aware, the journey to becoming a qualified solicitor or barrister can be costly. It is important to understand why these changes are happening, how it is going to affect students pursuing a career in law, and the options that are available to them. 

Why are Universities financially struggling?

Undergraduate tuition fees were once increased to £9,250 in 2018 to gradually manage universities finances. After 2022, however, the world experienced incredibly high inflation, putting pressure on universities as they struggled to manage their finances.  

Many universities express that the increase to £10,500 is still not sufficient, since most graduates do not repay their student loan (although we may see a change in this subject to the changes to student loan changes put into effect in 2023). 

How does this affect law students?

The majority of students wishing to pursue a career in law would take the law-graduate path of a 3-year law degree, and for solicitors, either the LPC or SQE (students beginning their law career after 1st January 2022 must qualify via the SQE), and then qualifying work experience. For barristers, they begin with the bar course and then seek to obtain a pupillage. 

The current fees for most universities would cost students £27,750 plus interest which would be paid back gradually depending on how much they earn. The cost of the SQE exams in total are £3,980. If students take both the SQE 1 and SQE 2 courses, this could range between £4,000 to £11,000 depending on the university. The bar course can range from £12,640 and £20,220.  

Many students feel ‘put off’ from this route due to fears of debt and increasing fees. Students are already struggling under the cost-of-living crisis, and as Alex Stanley (National Union of Students Vice President) has stated, “Students must not be expected to foot the bill for the university funding crisis.”  

This statement signals a major change from Keir Starmer’s previous pledge to scrap tuition fees altogether. Some students say they have even been discouraged or regret going to university because of the burden of student loans. 

What options are available to law students and how can law firms help?

Although this may appear quite daunting to law students, there are ways to manage the financial burden. For instance, the average salary of a lawyer in the UK is between £40,000-£50,000. If the new £10,500 increase comes into effect, roughly £2,250 would be paid back per year. As well as this, many students opt to take a Master’s course alongside their SQE or Bar course which means they would be eligible for a student loan, rather than having to take out a bank loan. 

The most attractive way to get funding for a career as a solicitor would be through training contracts and firm sponsorships. Even though this is extremely competitive with an estimate of 30,000 candidates applying for 5,500 training contracts, a training contract would provide the full 2 years’ worth of qualifying work experience and funds for their LPC or SQE courses. 

Law firms could contribute more to helping students amid these rises in costs by implementing more schemes aimed at students from disadvantaged backgrounds and working with universities to inform students of their options. As well as this, law firms should advise on the best ways to stand out from the competition and exactly what they are looking for in trainees to ease their concerns about their future careers.