NEWSLETTER of June 14, 2024

The following content has been added at finexpert:

IAB | ZEW
GRÜNDUNGSPANEL: UNTERNEHMENSGRÜNDUNGSGESCHEHEN AUF NEUEM TIEFSTAND
The number of start-ups in Germany fell by 13% in 2022 compared to the previous year. The manufacturing industry even slumped by 16%. The figures are also worrying in research-intensive sectors such as chemicals, pharmaceuticals and medical technology. This is the result of an evaluation of the IAB/ZEW Start-up Panel by researchers at ZEW Mannheim based on a representative survey of around 5,000 young companies. >more

UBS
INSIGHTS INTO PRIVATE MARKETS: H2 2024
Savvy investors can by now, thanks to the capital value correction of the last two years, find attractive risk-adjusted returns as the new cycle begins. They are set to benefit from being an early mover as the recovery gathers pace. But some assets are likely to see further capital depreciation before they become attractive on a risk-adjusted basis. >more

Bain & Copmany
SEARCHING FOR MOMENTUM: PRIVATE EQUITY MIDYEAR REPORT 2024
Private equity’s two-year slide in deals, exits, and funds closed slowed in the first half of 2024, but activity remained tentative and momentum scarce. Limited partners, meanwhile, continue to press for an increased pace of distributions and are focusing new commitments on a narrow swath of favored funds. General partners who can’t shepherd portfolio companies to attractive outcomes may face a shakeout. But there are practical ways to get the wheel spinning again. >more

The Brookings Institution | Peterson Institute for International Economics
AN ANALYSIS OF PANDEMIC-ERA INFLATION IN 11 ECONOMIES
We recently proposed a simple model of the inflation process, estimated it on post-1990 U.S. data, and used the results to identify the shocks and transmission mechanisms that have determined U.S. inflation since 2019 (Bernanke and Blanchard 2023, hereafter BB). Ten central banks expressed interest in using our model to study the recent inflation in their own economies, and we agreed to do a joint project. This paper summarizes and discusses in broad terms the results of the project, leaving details to papers and reports produced by staff at the cooperating central banks. The 10 are Belgium, Canada, France, Italy, Japan, Germany, Netherlands, Spain, U.K. and the European Central bank. >more

LIQUID STOCK AS AN ACQUISITION CURRENCY
Sheng Huang, Johan Maharjan, and Vikram K. Nanda
2024
We examine how stock liquidity affects acquisitions. We hypothesize that liquidity enhances acquirer stock as an acquisition currency, especially when the target is relatively less liquid. As hypothesized, we find that more liquid firms have a greater likelihood of making stock acquisitions. Further, the difference in stock liquidity between acquirer and target firms increases payment with stock, reduces acquisition premiums, and improves acquirer announcement returns in equity deals. Consequently, firms take steps to improve stock liquidity prior to stock acquisitions. We use policy initiatives as exogenous shocks to firm liquidity to show that liquidity effects on acquisitions are plausibly causal. >more

HOMOPHILY AND MERGER DYNAMICS
Stefano Bonini, and Meghana Vaidya
2024
We propose a novel multifactor metric of homophily between the CEOs of the acquirer and target firms as a causal determinant of mergers and acquisitions. We find strong evidence that higher homophily among the two CEOs increases the likelihood of M&A deal initiation and completion. When homophily is high, deals are more likely to be paid in cash, exhibit significantly larger long-term value creation and are less subject to ex-ante overpricing as measured by ex-post goodwill write-offs. These effect stem from similarity between CEOs creating trust, reducing information asymmetry and facilitating effective communication. Our approach resolves prior conflicting results on the effect of homophily on large corporate decisions and strongly indicates the need for a multidimensional estimation of homophily to obtain conclusive results. >more