NEWSLETTER of February 2, 2024

The following content has been added at finexpert:

M&G Investments
EUROPEAN STRUCTURED CREDIT REVIEW AND OUTLOOK: FROM STRENGTH TO STRENGTH
Structured Credit, and the European ABS market in particular, performed strongly during 2023, aided by attractive valuations, robust underlying collateral performance – despite higher borrowing costs for consumers and corporates – and significant income generation, attributes which have only become more compelling given the uncertain economic outlook. As we enter 2024, we reflect on the key trends that have shaped the asset class over the past 12 months and some of the main themes worth watching over the coming quarters. >more

HSBC
PRIVATE CREDIT MARKET UPDATE
Private credit as an asset class is in demand from a range of investors. The asset class has become a direct substitute for traditional fixed income assets for many investors, which are continuing to increase allocations. A recent investor survey suggested that 51 per cent of existing private credit investors expect to increase their allocations further over the long-term – more than any other asset class. Private credit has generated significant headlines in the global press in recent months. Journalists have commented on the growth the asset class has experienced, as well as risks. >more

Bain & Company
GLOBAL M&A REPORT 2024
History shows that downturns, market lulls, and times of disruption always produce newer, stronger competitors that used the mayhem to make market gains. The M&A downturn of 2023 will likely be no exception, but it is not too late to act. We expect to see more deals get done in 2024 — if for no other reason than there are a lot of assets that should trade. We call it the “big backlog.” For example, while we often talk a lot about private equity (PE) dry powder, we also now have a backlog of PE portfolio companies that need to come to market. Many of these will be bought by strategics; others will be rolled into other financial sponsor portfolios. Likewise, our executive interviews suggest that corporates held on to assets that now should be divested and or spun out. These, too, we expect to come to market. >more

KPMG
VENTURE PULSE Q4 2023
2023 was a particularly difficult year for VC investment globally given the significant economic challenges, geopolitical tensions and conflicts, and ongoing concerns related to the valuations of VC-backed companies. Both annual global VC investment and the total number of VC deals globally fell to levels not seen since 2019 as VC investors continued to show an abundance of caution with respect to their dealmaking activities. >more

DECARBONIZING INSTITUTIONAL INVESTOR PORTFOLIOS: HELPING TO GREEN THE PLANET OR JUST GREENING YOUR PORTFOLIO?
Vaska Atta-Darkua, Simon Glossner, Philipp Krueger, and Pedro Matos
2023
We study how institutional investors that join climate-related investor initiatives decarbonize their equity portfolios. Decarbonization can be achieved either by re-weighting portfolios towards lower carbon emitting firms or alternatively via targeted engagements with portfolio companies to reduce their emissions. Our findings indicate that portfolio re-weighting is the predominant greening strategy by climate-conscious investors, in particular by those based in countries with carbon emissions pricing schemes. We do not uncover much evidence of engagement even after the 2015 Paris Agreement. Furthermore, we find no evidence that climate-conscious investors allocate capital towards firms developing climate patents, but they do re-weight towards firms starting to generate green revenues. Overall, our analysis raises doubts about the effectiveness of investor-led initiatives in reducing corporate emissions and helping an all-economy transition to “green the planet”. >more

NEGOTIATION, AUCTION, OR NEGOTIAUCTION?! EVIDENCE FROM THE FIELD
Tingting Liu, Micah S. Officer, and Danni Tu
2023
We bridge theoretical negotiation and auction literature with real-world practice using a rich, hand-collected bid-level dataset covering high-stakes merger negotiations totaling nearly $5 trillion. Notably, full-scale private auctions are not common in selling firms, and many deals starting as auctions switch to negotiations with a single buyer at a later stage. The process often shifts, highlighting the fluid nature. Initiating bidders typically value the target higher and become the eventual winning bidders. Negotiations take about two-to-four months, involving two-to-six offers, with delays related to information asymmetry and valuation uncertainty. Interestingly, final premiums remain similar regardless of bid frequency. About 44% of targets counteroffer, usually settling at a midpoint between their and the bidder’s price. Our findings call for further developments in theories that consider the inherent interconnectedness between auctions and negotiations in real-world scenarios. >more