NEWSLETTER of May 29, 2020

The following content has been added at finexpert:

Bakertilly
FINTECHS: INNOVATION ODER REVOLUTION AUF DEM GEBIET DER UNTERNEHMENSFINANZIERUNG
After years of lived aversion between FinTechs on the one hand and traditional banks and savings banks on the other hand, both sides have now come to accept the other party. Competition has largely been replaced by cooperation. FinTechs can neither displace the traditional banking and financial sector, nor are they a temporary phenomenon that will soon resolve itself due to the capital strength, market power or long-standing customer access of the banks and savings banks. >more

BCG
NAVIGATING MERGER CLEARANCE DURING THE CRISIS
Dealmakers should anticipate that the COVID-19 crisis will add to the complexity of regulatory approval. They should prepare for a slower clearance process in the near term and expanded regulatory scrutiny of deals over the long term. The pandemic has, understandably, affected the operations of regulatory authorities. The impacts vary by jurisdiction and include temporary closures, slower processing times, changes to mandatory deadlines, and requests to delay merger filings. Moreover, key factors that affect merger clearance for large deals — anticompetitive concerns, national security issues, and geopolitical considerations — have become more important. >more

KfW Research
GERMAN VENTURE CAPITAL BAROMETER: Q1 2020

The uncertain consequences of the coronavirus pandemic have unsettled the German VC market. Business confidence has plummeted to an all-time low. In the first quarter of 2020, the business climate indicator of the early-stage segment nosedived by 72.3 points to -61.3 balance points – an unprecedented decline. VC investors’ assessments of both the current business situation and expectations have deteriorated dramatically. >more

KfW Research
GERMAN PRIVATE EQUITY BAROMETER: Q1 2020
The coronavirus pandemic has hit the private equity market hard. The German private equity market has experienced a massive loss of confidence. In the first quarter of 2020, the sentiment indicator of the later-stage segment plunged by 94.3 points to -86.7 balance points. Never before have later-stage investors been more pessimistic about both their current business situation and their expectations. The indicator for the current business situation dropped to -82.2 balance points, while the indicator for business expectations fell to -91.2 of -100 possible balance points. The fund-raising climate has now fallen from a record-high level in the previous quarter to just above its previous lowest level. >more

WHAT IS DIFFERENT ABOUT PRIVATE EQUITY-BACKED ACQUIRERS?
Benjamin Hammer, Heiko Hinrichs, and Denis Schweizer
2020
This paper investigates whether private equity (PE)-backed acquirers have a “parenting advantage” in the mergers & acquisitions (M&A) market. We employ a sample of 788 PE-backed firms and a carefully matched control group of 6,652 non-PE backed peers, for which we observe the entire acquisition history over a 19-year time span. Difference-in-differences estimates suggest that PE backing induces a sizeable but short-lived boost to acquisition activity, whereas type and complexity of these acquisitions are not different. These results are consistent with the idea that PE backing enhances execution and speed in the M&A market. We find that portfolio firms benefit from this acquisition boost through improved valuations and margins on average. The extent to which this holds true, however, depends on the institutional setting of the PE owner. When there is not enough time for learning gains due to an approaching end of the fund lifetime, or when knowledge cannot diffuse due to limited attention of the PE owner, acquisitions may even be detrimental. >more

MERGERS UNDER THE MICROSCOPE: ANALYSING CONFERENCE CALL TRANSCRIPTS
Sudipto Dasgupta, Jarrad Harford, Fangyuan Ma, Daisy Wang, and Haojun Xie
2020
About half of all merger deals between public US acquirers and targets involve a conference call within two days of the deal announcement, in order to communicate information to both acquirer and target shareholders to garner voting support and mitigate legal liability. Calls are associated with positive market reactions and a higher likelihood of deal completion. However, for public targets, only the latter result holds after correcting for endogeneity. Using a probabilistic topic modelling approach, we identify 20 highly interpretable topics as prevalent in the presentations and discussions recorded in the transcripts. The relative importance of several of these in a deal transcript is associated with target characteristics (e.g., whether the target is a private or a public firm), the method of payment, and acquirer characteristics (e.g., governance). The importance of several topics is associated with significant abnormal returns on deal announcement, and with deal completion likelihood. >more