NEWSLETTER of July 4, 2025

The following content has been added at finexpert:

Skadden
EUROPE’S SHARPENED FOCUS ON DEFENSE CREATES M&A AND INVESTMENT OPPORTUNITIES
The war in Ukraine has prompted a historic surge in European defense spending. Governments in the EU and U.K. are stressing the need for innovation. They are increasingly turning to investment in small and medium-sized businesses — including startups — to drive rapid technological advances, rather than relying exclusively on large, established defense firms. This creates opportunities for private equity and venture capital investors, who are increasingly active in the defense sector, and it will likely generate M&A activity. Understanding the focus on sovereign capability, innovation and dual-use technologies will be essential for capitalizing on this dynamic market. >more

McKinsey & Company
A PIVOT FOR GERMANY: CXO SURVEY
Top managers at leading companies in Germany are showing more optimism again despite the major economic challenges. Around 48% of board members expect their companies to expand their presence in Germany over the next five years, compared to a third last year. Overall, the local location is becoming more important again: 42% of managers plan to invest primarily in Germany, compared to 35% in the previous year. >more

Alix Partners
BUY COMPLEXITY, SELL CLARITY: WHY BUYING CARVE-OUTS IS PRIVATE EQUITY’S SMARTEST BET RIGHT NOW
With deal volumes down and exit environments still uncertain, private equity (PE) can no longer rely solely on financial engineering. As corporations offload noncore assets, PE firms have a timely opportunity to buy complexity at a discount and convert it into strategic clarity. The next phase of value creation will depend less on leverage and more on operational excellence, bolt-ons, and business model reinvention. >more

KfW Research
WACHSTUMSSCHWÄCHE DURCH FACHKRÄFTEMANGEL
The baby boomers are leaving a large gap in the labor market. In addition, growth in labor productivity has fallen sharply. A phase of increasing labor shortages and particularly weak economic growth is therefore imminent. The first part of the analysis answers the following questions: What economic development could be expected for Germany by 2050 if current trends in labor force participation, working hours and labor productivity continue? And how realistic is this? To this end, a “business as usual” scenario was calculated, which extrapolates the growth in gross domestic product on the basis of the trends. The second part examines the main options for what Germany can do to stem the shortage of skilled workers. One thing is clear: the consequences of demographic change are revolutionary and the need for action is urgent. >more

THE POLITICAL ECONOMY OF FIRM NETWORKS: CEO IDEOLOGY AND GLOBAL TRADE
Elisabeth Kempf, Mancy Luo, and Margarita Tsoutsoura
2025
We examine how the political ideology of corporate leaders shapes cross-border firm networks. Exploiting changes in ideological alignment between U.S. firm CEOs and foreign governments around close foreign elections, we show that U.S. firms are more likely to terminate trade relationships with countries led by governments whose ideology becomes more distant from that of their CEOs. The impact is concentrated among CEOs holding strong political views, and is particularly pronounced for shorter trade relationships, suggesting ideological alignment is more relevant in more flexible and substitutable connections. Our findings highlight the role of ideology in shaping the formation and persistence of international firm networks. >more

SUSTAINABLE INVESTING
Lubos Pastor, Robert F. Stambaugh, and Lucian A. Taylor
2025
We review the literature on sustainable investing, focusing on financial effects.  First, we examine the effects of investor tastes on portfolio tilts and asset prices in a simple equilibrium setting.  We establish novel connections, including a direct relation between the green portfolio tilt and the greenium.   We also relate our framework to prior modeling of divestment.  Finally, we review evidence related to the main concepts from our theoretical analysis, including the greenium, green tilts, climate risk, and investor tastes.  >more