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Companies waiting for a sale to close face their own special challenges in a tricky market.

Pity the betwixt and between.

Companies are engines of ambition — innovating here, expanding there, trying to sharpen a business or break into something new.

But when that ambition leads to a corporate buyout, much of that ambition is put on hold, as companies wait for financing to be finalized, regulators to sign off, for the deal to close and for the new boss to arrive.

That interim period can lead to a lack of immediate direction, causing sales to potentially slump and employees to mull their options.

In a world that prizes agility and the ability to go after the next big thing, it can be a long wait for a big deal to close.

A year ago this week, Capri Holdings agreed to a $8.5 billion buyout by competitor Tapestry Inc. The deal has a little bit of everything — some synergies to be realized, some data savvy to be shared and a long — and now uncertain — timeline.

The deal was set to close this calendar year, but is being challenged by the Federal Trade Commission on antitrust grounds, casting an uncertain light over the agreement.

Meanwhile, Capri, which owns Michael Kors, Versace and Jimmy Choo, has hit a tough stretch, with net losses of $229 million for the year ended March 30 on an 8.4 percent drop in revenues.

While Capri, led by chairman and chief executive officer John Idol, is working on operations day to day, it’s not currently in a position to make the bigger, business-defining moves.

And Capri isn’t the only company on the sidelines.

Neiman Marcus is also awaiting its Hudson’s Bay Co.-arranged marriage to Saks Fifth Avenue, and VF Corp.’s Supreme is waiting to be shuttled off to EssilorLuxottica.

“Management should be expected to operate, maximize quarterly earnings and drive performance in the short term,” said consultant Greg Portell, senior partner and global markets lead at Kearney. “But the longer, strategic growth elements that we expect from management teams really get put on pause [while deals are pending].

“Bold is taken off the table, if you were looking for a management team to really drive change, you’re not going to see it,” Portell said.

While 10 or 15 years ago companies would really plan for integration immediately, Portell said the pace of integration planning has “slowed dramatically” as companies become less certain about regulatory approval.

That leaves employees in wait-and-see mode — and not everybody is going to wait around to see.

“People are being very, very cognizant that they are their own brand,” said Elaine Hughes, managing director of executive search firm E.A. Hughes, a division of Solomon Page. “Every major, any even minor accomplishment, they make sure they post it on LinkedIn, they post it on Facebook. They keep their profiles very relevant and therefore the recruiting community will look to them when opportunities come up. Companies are smart, they’re aware of this.”

So firms waiting to be sold often line up retention bonuses to keep key employees hanging in until the deal is done.

“The truly critical assessment of the individuals has to come from the CEO or whoever the top management is,” Hughes said. “The company has to decide how critical that individual is to the organization and to the success and to maintaining and sustaining that success while the company is in this limbo state.”

Altogether, it can be an unsettling time.

“With any business or certainly with any employee, the worst thing is uncertainty,” said Robert Burke, chairman and CEO of the Robert Burke Associates.

But an unsettled present can also lead to a better future when the deal closes and the business wakes back up, with new energy and new faces and potentially new resources.

Burke said deals can lead to “significant opportunity for some of the existing employees to take on more responsibility, have more experience.”

“[A pending deal] can kind of stall things, it can also be a motivator for employees that are good and creative and see a bigger vision,” he said.

“Every acquisition or sale is different and they can be an incredibly positive opportunity,” Burke said. “Or if it’s just to consolidate and downsize and that’s the motivation behind the acquisition, then of course there’s going to be a level of stress.”

The Bottom Line is a business analysis column written by Evan Clark, deputy managing editor, who has covered the fashion industry since 2000. It appears every other Thursday.

Industry says a bill moving through the state legislature would chill innovation for the young technology

California has become ground zero in the fight over artificial-intelligence regulation.

AI startups and tech giants are rallying to kill a bill ascending through the state legislature that they say would impose impossibly vague constraints in the name of safety. Though some in the industry have called for government regulation, they say it should be done at the federal level with more specificity.

The bill is widely viewed as crucial for how the technology will be regulated across the U.S., as California is home to many AI companies and often has an outsize effect on laws in other states. Proposals to regulate AI nationally have made little progress in Washington.

The California bill, called SB 1047, requires that developers of large AI models conduct safety tests to reduce the risks of “catastrophic harm” from their technology, which it defines as cyberattacks that cause at least $500 million in damage or mass casualties. The developers also must ensure their AI can be shut down by a human if it starts behaving dangerously.

The bill applies to AI models that meet a certain computing-power threshold and cost more than $100 million to train—the estimated cost of training OpenAI’s GPT–4. Any company doing business in California is covered, regardless of where it is based.

SB 1047 has been passed by California’s Senate and two of the state’s Assembly committees with little opposition. Opponents hope to stop it from passing the full Assembly now that the Democratic-controlled legislature is back in session this week. Democratic Gov. Gavin Newsom’s office didn’t respond to a request for comment on whether he would sign the bill if it passes.

“If it were to go into effect as written, it would have a chilling effect on innovation in California,” said Luther Lowe, the head of public policy at startup accelerator Y Combinator, which has played a leading role in lobbying efforts against the bill.

Meta Platforms and ChatGPT maker OpenAI have also raised concerns about SB 1047, while Google, Microsoft and Anthropic have proposed lengthy amendments.

Scott Wiener, a Democratic state senator from San Francisco who drafted the bill, said he is engaging with the tech industry and is open to changes.

“There are people in the tech sector who are opposed to any and all forms of regulation no matter what it is, even for something reasonable and light-touch,” he said.

Colorado and Utah recently passed some of the country’s first laws regulating AI, but they are narrower in scope than California’s SB 1047.

Some 400 bills related to AI are currently in state legislatures across the U.S., according to the Transparency Coalition, a nonprofit that advocates for regulation of the data on which AI models are trained. Some 30 bills are at varying stages in the California legislature, with goals ranging from protecting intellectual-property rights to expanding the definition of child pornography to include images generated by AI.

SB 1047 has received particularly strong industry pushback. The bill’s language says it would mirror a safety-testing framework that OpenAI, Anthropic and other AI companies voluntarily adopted last year. Opponents say the bill doesn’t specify what those tests should be or who would be on a new commission that is supposed to oversee compliance.

“Foundational elements that would underpin the bill’s regulatory architecture are not yet in place, risking misplaced investments, misleading results, and a missed opportunity to focus resources,” Microsoft said in a letter outlining its objections to the bill.

Another concern for opponents is the bill’s prohibitions on releasing large AI models “if there is an unreasonable risk” that they “can cause or enable a critical harm.”

“This vague standard creates a legal minefield,” said Anjney Midha, a partner at venture-capital firm Andreessen Horowitz who focuses on AI. “Current technology simply cannot guarantee against these hypothetical scenarios.”

Midha said the bill would discourage large developers from making their models available to the public, fracturing a startup ecosystem that relies on such openness to innovate.

Wiener said the bill only codifies the safety standards that the industry has set on its own. “It’s not overly prescriptive,” he said.

Several computer science researchers and legal scholars including Geoffrey Hinton and Yoshua Bengio, who developed much of the technology on which the current generative AI wave is based, co-signed a letter to Newsom supporting SB1047.

“It would be a historic mistake to strike out the basic measures of this bill—a mistake that will become even more evident within a year when the next generation of even more capable AI systems is released,” the letter said.

Wiener defended his bill in a room full of startup founders and AI researchers at Y Combinator’s San Francisco headquarters in late July.

“There have been significant exaggerations about the scale of liability for model developers,” he told the audience, including a false rumor that developers would go to prison if a malicious actor misused their technology.

Still, many seemed unswayed.

“There are clauses in there that, honestly as an AI developer, I have no idea what to do,” said Stanford University computer-science professor Andrew Ng, who co-founded Google’s deep-learning research team.

UK property market to feel boost from rate cuts, estate agents say

Rise in surveyors’ optimism comes as separate poll shows jobs sector has yet to strengthen

The UK property market is showing signs of life following the general election and the Bank of England’s first interest rate cut in more than four years, but the jobs market has yet to strengthen, according to data released on Thursday.

The Royal Institution of Chartered Surveyors said its monthly survey of estate agents pointed to “a meaningful pick-up in sales volumes going forward” in July, with more respondents expecting both sales and prices to rise in the near term and over the year ahead than in June.

But no such post-election bounce was visible in a separate poll of recruiters, who reported fewer people placed in both permanent and temporary roles in July, with vacancies still in decline and more candidates looking for jobs after being made redundant.

Rics said that although recent activity in the residential market has also been relatively flat recently, confidence that sales would increase in the next three months was stronger than at any time since 2020.

The professional body’s sales expectations net balance — a measure of the difference between the percentage of estate agents expecting rises and falls — rose from 22 per cent in June to 30 per cent in July.

“The new government’s focus on boosting housing development alongside the recent quarter-point base rate cut does appear to have shifted the mood music,” said Simon Rubinsohn, Rics chief economist.

But he added there would be “significant challenges” in delivering its intended planning reforms, and that it was “far from clear” whether the BoE would follow its August rate cut — which lowered the central bank’s benchmark rate to 5 per cent — with further reductions in the near term.

The cautious optimism of the Rics survey comes after lender Halifax said on Wednesday that house prices had risen by 0.8 per cent in July, following three relatively flat months.

The increase — which came in above analyst forecasts of a 0.3 per cent rise — took annual price growth on Halifax’s measure to its highest reading since January at 2.3 per cent.

Amanda Bryden, head of mortgages at Halifax, said recent reductions in mortgage rates on the back of the BoE’s rate cut were “encouraging” but that prospective homeowners would still struggle with “affordability constraints and the lack of available properties”.

Barclays, HSBC and NatWest are among lenders to have announced cuts to some of their key fixed rate mortgage products this week, leading to hopes that competition will drive down borrowing costs.

“The battle for market share among the large lenders . . . is fantastic news for borrowers,” said Hina Bhudia, partner at broker Knight Frank Finance.  

However, the more upbeat mood in the residential sales market contrasted with gloomy reports from letting agents. Rics said landlords were still exiting the market, with the flow of listings coming on to the rental market “deteriorating”.

Tenant demand was still growing but had softened compared with June. This meant that while rental prices were still likely to rise, letting agents’ expectations were at their lowest since early 2021.

Meanwhile, the monthly report from trade body the Recruitment & Employment Confederation and advisory firm KPMG — which the BoE has watched closely since problems with official jobs data started — showed recruiters had placed fewer candidates in permanent jobs than the previous month in all regions except London.

Recruiters also reported a continuing decline in demand for permanent staff, with vacancies falling more sharply in the public sector, in IT and computing and in executive and professional roles. Meanwhile, more candidates were coming forward for roles after being made redundant.

Jon Holt, chief executive and senior partner at KPMG in the UK, said the figures had been gathered before the BoE’s interest rate cut, but that “despite the stability of a new government and easing inflationary pressures, employer confidence to recruit has not yet returned”.

Year remains on track to be the hottest yet, agency says

The global average temperature for July ended a streak of 13 monthly records by a “whisker”, as climate scientists warned that 2024 was still on track to be the hottest year.

July was the second-warmest month on record at 16.91C, the latest data from the Copernicus Climate Change Service showed, just 0.04C lower than the previous high set in July 2023.

The rise in the July global average temperature was 1.48C above the pre-industrial era, before human activity began to warm the planet, marking the first month in a year that had not breached the key threshold of 1.5C.

But it was also the month when the Earth experienced its two hottest days in the European observation agency’s records, on July 22 and 23. For the year to date, January to July was 0.27C warmer than the same period last year, when the current annual record was set.

“The streak of record-breaking months has come to an end, but only by a whisker”, said Samantha Burgess, deputy director of C3S. “The overall context hasn’t changed, our climate continues to warm.”

“The devastating effects of climate change started well before 2023 and will continue until global greenhouse gas emissions reach net zero,” she noted. Emissions rose last year, while the UN body of scientists says they must be cut by 43 per cent by 2030 to limit global warming to 1.5C.

After 15-months of consecutive records, sea surface temperature levels also plateaued at high levels. Oceans had their second-warmest July, though the difference was marginal at only one 100th of a degree cooler than July 2023 — similar to the level of uncertainty in the data.

This is consistent with the switch from the naturally occurring so-called El Niño warming phenomenon to the cooling La Niña cycle in the equatorial Pacific, which is expected to take over in coming months.

“The end of record-breaking monthly temperatures is not cause for celebration”, said Friederike Otto, senior lecturer in climate science at Grantham Institute. “Even without El Niño, the world continues to experience incredibly dangerous levels of heat.”

Although unusual, a similar length streak was observed during 2015-16, a particularly strong El Niño event, when 15 consecutive months set a new record for the respective month of the year.

However, there would need to be a quite significant drop in temperatures during the remaining months of 2024, for the annual average to fall below that of 2023, which Copernicus scientists said was increasingly unlikely.

Among the regions, Europe experienced its second-warmest July, with Mediterranean countries in particular suffering extreme heat. The continent was 1.49C warmer than its long-term average, a much higher anomaly than the 0.68C above 1991-2020 levels observed globally.

“The planet has heated by about 1.3C since humans first started burning oil, gas and coal,” estimated Otto, a co-founder of the World Weather Attribution research group. “However, some places are heating faster than the global average, including Europe.”

A study by World Weather Attribution found that the persistent July heat across Greece, Italy, Spain, Portugal, France and Morocco, where temperatures above 40C have become the norm, would have been “virtually impossible” without climate change.

Outside Europe, Copernicus said July temperatures were above average in the western region of the US and eastern Canada, most areas in Africa, the Middle East, Asia and eastern Antarctica.

Wetter than usual regions included eastern Asia and southern and central North America, with much rainfall linked to Hurricane Beryl, which swept the Caribbean and Mexican coasts before reaching Texas. Forecasters had predicted that hurricanes would be worsened by La Niña phenomenon this season.

This week, the deluge from Tropical Storm Debby, downgraded from a category one hurricane after it made landfall on Monday, led to a state of emergency being declared in Florida, Georgia and North and South Carolina.

On the Korean peninsula last week, heavy rainfall swamped 4,100 homes and nearly 3,000 hectares of farmland in North Korea, causing an unsubstantiated number of deaths.