NEWSLETTER of May 5, 2023

The following content has been added at finexpert:

Amundi
EMERGING MARKETS CHARTS AND VIEWS - SPRINGTIME FOR EMERGING MARKETS
While 2022 was a challenging year for Emerging Markets, amid the Fed’s aggressive response to high inflation, we are more constructive for 2023. The reopening in China is becoming a major catalyst for EM in 2023. The second supportive point is linked to the first as China’s earlier-than-expected reopening and a downturn in US economy should contribute to a widening EM-DM growth differential playing in favour of the former. After significant monetary policy tightening in many EM countries over the past two years, they are in an advanced state compared to DM. The tightening in EM may be behind us in the vast majority of cases, but the EM landscape is very diverse. >more

Vlerick Business School | Moore Global Corporate Finance
CROSS-BORDER MID-MARKET M&A COMPASS 2022
The growing importance of cross-border mergers and acquisitions to mid-market businesses is revealed in the latest edition of Moore’s M&A Compass report. Cross-border deals made up 31% of the 13,554 total mid-market mergers and acquisitions in the past year – defined as those valued between €10 million and €200 million. In the mid-market, the average value of cross-border transactions was 12% higher than similar deals where both parties were based in the same country. There were more than 4,200 cross-border deals involving mid-market businesses over a 12-month period, worth a total of €200 billion. The average value of each transaction in 2022 was around €47 million – which is 17% higher than 2019 before the emergence of Covid. The Compass report, produced by Vlerick Business School in Belgium, offers a unique insight into M&A activity – especially in the cross-border mid-market sector – over a period that is defined by the Covid pandemic. >more

Eight Advisory
BUY-AND-BUILD INTEGRATION: HOW TO DELIVER A BUY-AND-BUILD PROGRAMME WHICH MAXIMISES VALUE
Many, including the European Central Bank, consider different economic scenarios for 2023 and 2024; drying up  of capital, and M&A activity diverting to less traditional means of driving value. One of those means is Buy-and-build. The strategy is attractive; transactions can be de-risked as the platform business perfects the diligence and integration delivery, and arbitrage on deal multiples favours larger businesses and investors can ride the growth wave. However, the strategy isn’t without its risks; platform businesses are a single point of success and failure and are often highly leveraged. Buyers are also now more critical of businesses that have delivered growth through Buy-and-build, as inadequate or incomplete integration erodes value in the eventual sale process. >more

Deutsche Bank Research
2023 HOUSING MARKET OUTLOOK
The boom is over. Five key arguments lead us to expect only a price dip. Negative real interest rates, inflation protection through real estate, rising rental growth and most importantly a high fundamental supply shortage. In addition, real house prices have already fallen very sharply due to the surge in inflation. CO2 emissions from buildings are increasingly coming into focus. Prices have started to diverge between properties with low and high emissions. This divergence is likely to increase. >more

CONNECTED FUNDS
Daniel Fricke, and Hannes Wilke
2023
Mutual funds often invest in other funds. In this paper, we analyze the economics behind such cross-fund investments and investigate their financial stability implications. Using granular data for the German fund sector, our main findings are that cross-fund investments (a) are becoming increasingly important over time, (b) were heavily liquidated during March 2020, and (c) display measurable contagion effects. Overall, cross-fund investments can elevate structural fund sector vulnerabilities. >more

INDIRECT COSTS OF FINANCIAL DISTRESS
Claudia Custodio, Miguel A. Ferreira, and Emilia Garcia-Appendini
2023
We estimate the indirect costs of financial distress due to lost sales by exploiting real estate shocks and cross-supplier variation in real estate assets and leverage. We show that for the same client buying from different suppliers, the client’s purchases from distressed suppliers decline by an additional 13% following a drop in local real estate prices. The effect is more pronounced in more competitive industries, manufacturing, durable goods, less-specific goods, and when the costs of switching suppliers are low. Our results suggest that clients reduce their exposure to suppliers in financial distress. >more