NEWSLETTER of December 11, 2020

The following content has been added at finexpert:

Oliver Wyman
BANKENREPORT DEUTSCHLAND 2030
Consolidation in the German banking landscape has accelerated significantly: While the number of German banks declined by -2% annually from 2008 to 2016, their number fell by -4% p.a. to just over 1,400 from 2016 to 2019. The physiognomy of consolidation is essentially unchanged: The majority of consolidation is occurring within the two associations at the regional bank level. However, the last three years have also seen a marked increase in rumors and speculation about mergers at the central institutions of the associations and the major German banks. The discussion about cross-border mergers is also gaining further momentum. >more

BCG
THE DURABLE BENEFIT OF CORPORATE VITALITY
Why do some companies relentlessly explore, innovate, reinvent, and thrive while their peers stagnate? In partnership with Fortune magazine, we developed an index of corporate vitality to understand and quantify the factors predictive of long-run growth. This index, the result of a multi-year research effort, powers our fourth annual Fortune Future 50 — a ranking of the world’s 50 most vital large, public companies. Today’s leading companies face an increasingly dynamic and uncertain business environment. Accelerating product lifecycles and technological advancement drive a relentless pace of change, and aging demographics are driving a long-term decline in global growth. As a result, long-run, sustainable corporate growth and value generation appear more elusive than ever. To overcome these challenges, leaders must build the organizational capacity for innovation and reinvention to find the new opportunities that will drive tomorrow’s success. >more

Mergermarket | West Monroe
HIGH-TECH M&A DEFIES THE ODDS
Despite disruption and economic upheaval, the appetite for deals in the high-tech & software sector has not waned during the pandemic. Private equity and corporate buyers expect deal activity to remain strong: 70% said they plan to acquire as many as two software/high-tech companies over the next 24 months, and 27% intend to make three or four acquisitions. These are among the principal findings in this new report by West Monroe and Mergermarket. The report explores the demand, strategy, diligence, and post-close process for buyers of high-tech & software companies. As a basis for the report, West Monroe and Mergermarket surveyed 100 private equity and corporate/strategic buyers during the third quarter of 2020. >more

PwC
KLIMABERICHTERSTATTUNG BÖRSENNOTIERTER UNTERNEHMEN
More than 95 percent of the listed companies surveyed in Germany, Austria and Switzerland now report on climate issues. However, given the huge challenges posed by climate change, the depth and quality of reporting on climate issues leaves much to be desired. For example, while most companies communicate about their climate goals, few have developed a concrete plan with milestones and a roadmap detailing how they will achieve these goals and measure progress. And the analysis and management of climate risks and opportunities is still in its infancy. >more

THE MORE THE MERRIER? DIVERSITY AND PRIVATE EQUITY PERFORMANCE
Benjamin Hammer, Silke Pettkus, Denis Schweizer, and Norbert Wuensche
2020
This paper explores how diversity among lead partner teams (LPTs) of private equity (PE) funds affects buyout performance. We argue that there is a trade-off between the “bright side” of diversity, i.e., improved decision-making due to a broader set of perspectives, and the “dark side”, i.e., deteriorated decision-making due to a potential for clashes and a lack of cooperation. Our theoretical framework suggests that the net effect on performance depends on whether LPTs are diverse in socio-demographic or occupational aspects. To test this hypothesis, we develop a comprehensive index that measures LPT diversity along six dimensions. Using a sample of 241 buyouts and 547 involved PE partners, we find that higher scores in the socio-demographic component (gender, age, nationality) are associated with higher deal returns and multiple expansion. The opposite is true for higher scores in the occupational component (professional experience, educational background, university affiliation). Further results suggest that the “bright side” of diversity gets relatively more important in case of complex buyouts and uncertain deal environments. >more

AN INCONVENIENT FACT: PRIVATE EQUITY RETURNS & THE BILLIONAIRE FACTORY
Ludovic Phalippou
2020
Private Equity (PE) funds have returned about the same as public equity indices since at least 2006. Large public pension funds have received a net Multiple of Money (MoM) that sits within a narrow 1.51 to 1.54 range. The big four PE firms have also delivered estimated net MoMs within a narrow 1.54 to 1.67 range. Three large datasets show average net MoMs across all PE funds at 1.55, 1.57 and 1.63. These net MoMs imply an 11% p.a. return, which matches relevant public equity indices; a result confirmed by PME calculations. Yet, the estimated total performance fee (Carry) collected by these PE funds is estimated to be $230 billion, most of which goes to a relatively small number of individuals. If all vintage years are included to 2015, Carry collected is $370 billion, with a performance similar to that of small cap indices, but higher than that of large cap stock indices. The number of PE multibillionaires rose from 3 in 2005 to 22 in 2020. Rebuttals from the big four and the main industry lobby body are provided and discussed. >more