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STUDIES | CORPORATE FINANCE


Debt-Equity-Swap

I-Advise
DEBT-EQUITY-SWAP: GESTALTUNG, BEWERTUNG UND VERHANDLUNGSSPIELRÄUME IM SANIERUNGSFALL
The highly important issue of debt-equity swaps is the subject of our comprehensive article in the M&A Review, in which we discuss the structuring options, valuation and negotiating scope of the conversion of debt to equity. Particularly in and after a crisis, the strengthening of equity through a debt-equity swap comes into focus. Although the overall capitalization remains unchanged for the time being, the improved balance sheet structure opens up further financing options and the company is relieved of debt service. On the other hand, the debt-equity swap also allows creditors to participate in the opportunities of the restructured company. >more
 


IPO

Bain & Company
REVERSING THE WINNER'S CURSE OF THE IPO
According to the bain analysis, two out of three new issues perform weaker than their respective peer group - regardless of region, sector or previous owners. However, there are significant differences between different industries and countries. Healthcare and retail stocks, in particular, lag well behind their benchmarks. Commodity and energy stocks, on the other hand, suffer only relatively small losses on average. >more


Shareholder H1 2020

Lazard
REVIEW OF SHAREHOLDER ACTIVISM - H1 2020
Year over year activity is down in spite of a busy end to H1. 100 campaigns were launched in H1 2020, down 10% from the prior year period, as COVID-19 continued to mute pace of new activity. After April activity dipped to just 8 new campaigns, May and June saw an uptick to 16 and 17 new campaigns, respectively. Capital deployed (~$25.8bn) in H1 relatively in line with 2019 levels, in spite of reduced campaign activity. Industrials, technology and financial companies alone accounted for three-quarters of all capital deployed. >more


German IPO Q2 2020

PwC
EMISSIONSMARKT DEUTSCHLAND: Q2 2020
After almost eight months without an initial public offering, two companies in Germany ventured onto the trading floor again in the second quarter of 2020: In May, the Nuremberg database provider Exasol managed to make it into the scale segment of the Frankfurt Stock Exchange despite the corona crisis; this was followed in June by the pharmaceutical manufacturer PharmaSGP, which launched a new issue in the Prime Standard. The two debuts together generated an issue volume of 187 million euros. The annual IPO volume is thus at its lowest level since the financial crisis. >more


Divestment 2020

May21, 20

EY
2020 GLOBAL CORPORATE DIVESTMENT STUDY: KEY FINDINGS
Like so much else, shareholder activism has felt the economic impact of COVID-19; campaigns globally have fallen 25% to 238 in the first quarter of 2020, compared to the same period a year ago. This decreased level of activity may be why only 25% of global companies say activism will influence their divestment plans in the next 12 months. But while activist investors may appear to be down now, they’re not out. Some may have their own difficulties to deal with, but other hedge funds are raising multi-billion-dollar funds to capitalize on market dislocation. And many, including the larger well-established firms, are thriving with large war chests, ready to deploy as we move into the next phase of the pandemic response. >more


Government Bailouts

GOVERNMENT EQUITY INVESTMENTS IN CORONAVIRUS BAILOUTS: WHY, HOW, WHEN?
William L. Megginson, and Veljko Fotak
2020
Governments around the world are attempting to support individuals’ incomes, rescue distressed businesses, and preserve employer-employee relationships damaged in the coronavirus pandemic by adopting fiscal stimulus programs of unprecedented scale. Although the bulk of this spending will involve direct payments to individuals or some type of direct lending or loan guarantees to businesses, large sums will (and should) take the form of government purchases of equity in distressed firms — either by direct purchase or by exercising warrants attached to rescue loans. We discuss why we think these equity injections will be necessary, but only in a limited number of cases; how they should be structured; when investments should be made and, almost as important, exited. We summarize (and tabulate) both the modest recent history of governments rescuing non-financial firms with equity injections and the voluminous research examining the efficacy of governments rescuing failing banks using equity investments. We highlight the dangers that would likely arise if governments permanently retain and vote the equity stakes purchased during the current crisis. >more


COVID-19 and Corporate Liquidity

Bank for International Settlements

COVID-19 AND CORPORATE SECTOR LIQUIDITY

The Covid-19 shock is placing enormous strains on corporates cash buffers. Corporate financial statements from 2019 suggest that 50% of firms do not have sufficient cash to cover total debt servicing costs over the coming year. Credit lines could provide firms with additional liquidity. On average undrawn credit stood around 120% of debt servicing costs at end 2019. However, access is uneven and banks may be reluctant to renew or extend them in the current environment. Sticky operating expenses result in many firms running operating losses, placing an additional burden on cash buffers. Estimates indicate that following a 10% drop in revenues, operating expenses only fall by 6% on average. >more


Shareholder Activism Q1 2020

Lazard

QUARTERLY REVIEW OF SHAREHOLDER ACTIVISM - Q1 2020

Prior to the public health crisis, global activism activity in 2020 was off to a strong start with 42 campaigns initiated at 42 companies and total capital deployed of $13.1bn in January and February. The surge in January and February was driven by Europe, which experienced record activity in terms of campaign initiations and capital deployed. Local activists are increasingly initiating campaigns in Europe, accounting for 71% of activity in Q1 2020, compared with 58% in 2019. >more


Capital Raising in Biotech and Pharma

Baker & McKenzie

THE FUTURE OF CAPITAL RAISING IN BIOTECH AND PHARMA

Despite a decline in overall global activity and a wariness from investors toward pre-profit companies in some industries, the biopharma sector continues to see significant levels of interest and investment. This is being driven by a number of factors, including a strong pipeline of innovative technology and new drugs in advanced R&D stages, robust demand from investors, who seek to leverage the higher returns on investment associated with the industry and the need for pharma companies to replenish their pipeline to secure future revenue. >more


Working Capital

PwC

WORKING CAPITAL REPORT 2019/20

The handling of working capital and cash flow of companies from the DACH region and the Benelux countries deteriorated again: In 2018, net working capital (NWC) increased by 8.7 percent compared to the previous year, while sales increased by only 4.0 percent on average. In particular, companies are performing less well in terms of receivables and inventories, while a positive trend is emerging in the handling of liabilities. >more


European Leveraged Finance Market

White & Case

EUROPEAN LEVERAGED FINANCE: A BIFURCATED BALANCING ACT

As we enter the new decade, the resilient European leveraged finance market continues to grow and mature. The market is agile and has continued to deal with significant changes, ranging from the mix of leveraged loans and high yield bonds to the impact of direct lenders, sectoral and regional changes, as well as politics across Europe, including considerations relating to Brexit. >more


Shareholder Review 2019

Lazard

2019 ANNUAL REVIEW OF SHAREHOLDER ACTIVISM

Lazard's annual review of shareholder activism compiles and analyzes data on key activism trends globally. Overall European activity decreased in 2019 (48 campaigns, down from a record 57 in 2018), driven primarily by 10 fewer campaigns in the U.K. A record 147 investors launched new campaigns in 2019, including 43 “first timers” with no prior activism history. >more


IPO Index 2019

Baker McKenzie

CROSS-BORDER IPO INDEX 2019: GLOBAL IPO MARKET CONTRACTS UNDER POLITICAL UNCERTAINTY

Geopolitical tensions combined with overoptimistic valuations on a number of high-profile listings have constrained activity in the global IPO market during 2019. This is according to our Cross-Border IPO Index 2019, which presents an evolving market. While listings were down this year, there were a number of bright spots in all regions. Most notable was a ramp-up in competition among stock exchanges, each vying for a bigger market share by creating bespoke products to tempt IPOs, which would otherwise have gone elsewhere. >more


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