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NEWSLETTER of April 19, 2019

 

The following content has been added at finexpert:


Studies > Performance

Deutsche Bank Research

HOW TO FIX EUROPEAN BANKING...AND WHY IT MATTERS

The performance of the Eurozone economy is inextricably linked to the health of its banking system. That means the economy will likely stagnate unless European banks can build robust balance sheets, earn a competitive return on equity, and generate adequate capital to support faster growth and innovation. European policymakers must make bold decisions as there are serious doubts as to whether the continent’s banks can compete internationally with US institutions. This paper takes a careful look at the European banking system and suggests a number of remedies to improve the sustainability of its returns for the good of the economy and taxpayers. >more

Studies > Corporate Finance

Alvarez & Marsal

ACTIVIST INVESTORS IN EUROPE: WHO WILL THEY TARGET NEXT?

Shareholder activism directed at European companies is a growing and evolving reality for the Boards of quoted corporates. When such activism turns into a public campaign by one or more investors, there can be very significant financial and reputational risks for the targeted corporate and its Board. A&M has developed the “A&M Activist Alert” or “AAA” to predict which corporates will be the next to be targeted. The AAA is the most comprehensive statistical analysis of its kind. The analysis focuses on 1,473 corporates with a market capitalization of US$200 million or more, listed and headquartered in the U.K., Germany, France, Scandinavia, Switzerland, Benelux, Italy and Spain. The resulting predictive model successfully predicted the majority of corporates publicly targeted by activists since January 2015. The report is published twice yearly. >more

Studies > M & A

Ernst & Young

GLOBAL CORPORATE DIVESTMENT STUDY 2019

Digitization is driving spinoffs from major German corporations: the total value of sales in 2018 rose by almost 63 percent year-on-year to 107.7 billion US dollars. By contrast, the number of transactions fell slightly from 516 to 480. The increase in volume in Germany is more pronounced than on the global market for company divestments. >more

Studies > Alternative Investments

Alix Partners

INVESTMENT SUCCESS ISN'T JUST ABOUT THE NUMBERS. IT'S ABOUT THE PEOPLE: SPECIFICALLY, THE PE-CEO-CFO RELATIONSHIP

In our fourth annual private equity (PE) leadership survey, we take a closer look at the ongoing disconnect between portfolio company (portco) CEOs and their PE owners. This report, part one of two, focuses on three main themes: (1) Proactive management of the triangular relationship between PE sponsors and portco company CEOs and CFOs. (2) Early understanding of major misalignments related to the role of human capital in PE firms’ investment theses. (3) Disconnect between beliefs and behaviors with regard to predeal assessment of prospective portcos. >more


Research Papers  > M&A

RETHINKING MEASURES OF M&A DEAL PREMIUMS

Gregory W. Eaton, Tingting Liu, and Micah S. Officer
2019
Most academic studies use fixed pre-announcement event days (such as -20, -42, or -63) to measure unaffected target-firm stock prices. In this paper, we demonstrate that the use of fixed pre-announcement event days generates downward bias in measured premiums, especially for more recent samples and for transactions with long deal processes (such as target-initiated deals). We take account of this bias by hand-collecting deal initiation dates and demonstrate that using these dates results in measured premiums that give contradictory conclusions to those found in the existing literature. We also offer guidance for measuring M&A premiums if hand-collecting data is impractical. >more

Research Papers  > Alternative Investments

MODIFYING THE CARRIED INTEREST TO DO WHAT IT IS SAID TO DO

Ludovic Phalippou
2019
The carried interest received by private equity fund managers (General Partners; GPs) generates some controversies. The three most debated claims are that carried interest i) aligns incentives, ii) should be treated as a capital gain for tax purposes, and iii) should not be reported as a fee charged to investors. The existence of two key principal-agent relationships within the private equity model might be at the root of these controversies. One relationship links the GP as principal and portfolio company management team as agent. In this first contract, the three claims hold true. The other relationship links fund investors (Limited Partners; LPs) as principal with the GP as agent. I show that modifying that second contract by introducing a first-loss feature and reducing significantly the catch-up rate makes the two contracts equivalent. Hence, the benefits of the limited partnership structure can co-exist in a setting where the three claims about carried interest hold true. >more