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NEWSLETTER of May 17, 2019

 

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Studies > Performance

Deloitte

EUROPEAN CFO SURVEY: EYES ON DEMAND

The flow of worrying economic and political news that characterised the second half of 2018 has dwindled since the beginning of 2019. Yet, according to the results of the latest European CFO Survey, businesses in Europe remain wary. The latest report shows how expectations surrounding the development of key business metrics has deteriorated further from six months ago. Companies are less willing to invest and add to their workforce, and a decline in demand and weak overall economic outlook are now the main concerns for CFOs in Europe. On top of this, the outlook for the evolution of revenues and operating margins over the next 12 months is darker than six months ago. >more

Studies > Performance

Strategy&

CEO SUCCESS STUDY 2018

With 48 new CEO positions to be filled in 2018, companies in the DACH region were faced with a particularly large number of management turnovers, which increased the ratio from 15.3% to 16.0% compared to last year. At the same time, the proportion of turnovers in the German-speaking countries is the third lowest of all regions worldwide. 71% of the resignations were planned, 8% were due to takeovers and 21% were premature resignations. In the 300 largest listed companies in the DACH region, the average length of a CEO's stay increased from 6.2 to 6.6 years. As in the last three years, there was only one newly appointed female CEO in the three German-speaking countries.  >more

Studies > Alternative Investments

Debevoise & Plimpton

THE PRIVATE EQUITY REPORT: SPRING 2019

The environment for private equity is particularly dynamic at the moment. Geopolitical developments are impacting market access and conditions, while regulatory and policy changes bring new — and sometimes more favorable — compliance requirements. And new vehicles and opportunities emerge to allow capital to be put to use under a range of investment strategies. This issue of the Private Equity Report explores several recent developments, changes and opportunities relevant to private equity sponsors, investors, partners and managers. >more

Studies > Alternative Investments

Ernst & Young

REAL-ESTATE-ASSET-MANAGEMENT-STUDIE MAI 2019

The vast majority - 90 percent - of German asset management companies want to increase their holdings in the residential asset class. Nearly 90 percent of the companies are counting on a long-term holding period of more than eight years. These are the results of the current Asset Management Study 2019, conducted jointly by EY Real Estate and Vonovia. For the study, 40 companies were surveyed that represent a cross-section of the German asset management landscape.  >more


Research Papers > Corporate Finance

WHAT'S IN A DEBT? RATING AGENCY METHODOLOGIES AND FIRMS’ FINANCING AND INVESTMENT DECISIONS

Cesare Fracassi, and Gregory Weitzner
2019
In July 2013, Moody's unexpectedly increased the amount of equity credit that speculative-grade firms receive for preferred stock from 50% to 100%. Firms affected by the rule change were suddenly considered less levered by Moody's even though their balance sheets did not change. These firms responded by issuing debt, targeting an leverage ratio as defined by Moody's, and growing their assets. The rule change transferred value from bond to equity holders, and led to an increase in preferred stock issuance. How rating agencies assess risk thus has a significant causal impact on firms' financing, investment, and security design decisions. >more

Research Papers  > Alternative Investments

PRIVATE EQUITY AND TAXES

Marcel Olbert, and Peter Severin
2018
We study companies' tax avoidance behavior after being acquired in a private equity transaction. Using firm-level data from Europe, we analyze target firms' tax payments after the acquisition compared to a carefully selected control group in a matched-sample difference-in-differences setting. We find that target companies' effective tax rate decreases by 16.14% relative to the unconditional mean. This finding is in line with the hypothesis that private equity investors create shareholder value by extracting money from the government. While our evidence suggests that target firms engage more heavily in profit shifting, we do not find direct evidence in support of a tax-motivated leverage channel. We further show that those target firms that become more tax efficient experience significantly lower asset and employment growth than target firms with no or moderate tax savings after the buyout. This finding indicates that tax savings are not used to finance investment but are directly transferred to shareholders. >more