NEWSLETTER of August 16, 2024

The following content has been added at finexpert:

European Central Bank
SURVEY ON THE ACCESS TO FINANCE OF ENTERPRISES
Overall, in this survey round, euro area enterprises signalled more positive developments as regards the supply of bank loans, reflected in a small increase in bank loan availability, fewer obstacles to obtaining loans as well as an improvement in banks’ willingness to lend. At the same time, firms’ need for bank loans has stabilised, albeit it has not yet increased, in part due to high internal funds. Moreover, the share of firms applying for bank loans has also stabilised at a low level. >more

McKinsey & Company
OVERCOMING THE EUROPEAN TECH IPO CHALLENGE
Europe faces the challenge of developing globally significant tech companies, contrasting with the dynamic market environment of the United States. This situation presents an opportunity for Europe to enhance its economic growth and global competitiveness. The primary issue is the relatively modest levels of venture capital investment in Europe compared to GDP, alongside a smaller IPO market capitalization than that of the US. Consequently, European tech companies often consider the US market for their public offerings. >more

ZEW – Leibniz-Zentrum für Europäische Wirtschaftsforschung
M&A REPORT: MAI 2024
Over the past four turbulent years, the M&A Index has leveled off at around 90 points. In 2020 and 2021, economic instability in the wake of the COVID-19 pandemic was the main reason for the low level of mergers and acquisitions. Russia's invasion of Ukraine in February 2022 further contributed to economic uncertainty. Consequently, geopolitical events appear to be a major factor in the lower number of M&A deals with German involvement. Another important event is the war in Israel and Gaza between the State of Israel and Hamas. In view of the partnership between Western countries (e.g. the USA) and Israel, this conflict has further impaired Germany's economic stability. Against the backdrop of the ongoing wars, M&A activity in Germany is likely to remain low. >more

KfW Research
FAST DIE HÄLFTE DER PRIVAT­HAUSHALTE IST OFFEN FÜR GRÜNE FINANZ­ANLAGEN – TRANSPARENZ ÜBER KLIMA­WIRKUNG IST ENTSCHEIDEND
Private capital is an important factor for financing the green transformation. As long as the price of CO2 is well below the social costs and there are no additional regulatory or financial incentives, investors and financiers of climate-friendly projects will have to rely on other motives. A special evaluation of the KfW Energy Transition Barometer provides important insights and shows that around half of households in Germany (44%) are open to green investments and some (14%) are already using them themselves. The survey data also shows that the majority of these households are even prepared to forego a return on investment for the sake of the climate. Important factors for sustainable success are coherent and transparent recording of the climate impact of investment projects. >more

WHY DO STARTUPS BECOME UNICORNS INSTEAD OF GOING PUBLIC?
Daria Davydova, Rüdiger Fahlenbrach, Leandro Sanz, and René M. Stulz
2024
Unicorns are startups that choose to stay private even though they are large enough to go public. We propose an efficiency explanation for their existence. Startups relying highly on organization capital are more vulnerable to expropriation of their organization capital if they go public before their position is sufficiently secure. Our main empirical findings are that shocks to the fragility of organization capital decrease the IPO likelihood, unicorn status enables startups to stay private longer by giving them access to new sources of capital, and unicorns and their industries have higher organization capital intensity than other startups. >more

PRIVATE DEBT VERSUS BANK DEBT IN CORPORATE BORROWING
Sharjil Haque, Simon Mayer, and Irina Stefanescu
2024
This paper examines the interaction between private debt and bank debt in corporate borrowing. Combining administrative bank loan-level data with non-bank private debt deals, we document that about half of U.S. private debt borrowers also rely on bank loans. These dual borrowers are typically larger, riskier firms with fewer tangible assets, lower interest coverage ratios, and higher leverage. When co-financing the same borrowers, private debt lenders typically extend larger but relatively junior term loans with longer maturities and higher spreads, while banks provide more senior loans, typically in the form of credit lines. Once a bank borrower accesses private debt, it often obtains additional bank credit but at significantly higher spreads. During times of market-wide distress, a borrower's reliance on private debt is associated with increased drawdowns and higher default risk of bank credit lines. Our findings suggest that while private debt substitutes for relatively riskier bank term loans, it complements bank credit lines. However, this complementarity may also impose costly externalities on bank loans by exacerbating their drawdown risk. >more