NEWSLETTER of September 9, 2022
The following content has been added at finexpert:
ASSET ALLOCATION COMMITTEE OUTLOOK 3Q22
Last quarter, the Asset Allocation Committee (“the AAC” or “the Committee”) adopted an underweight view on global equities and leaned more heavily into cash, commodities and other alternative, diversifying assets. This reflected our anticipation of stickier inflation, tightening financial conditions and heightened volatility—and indeed the second quarter was characterized by hawkish central banks, rapidly rising rates and tumbling equity markets. We expect these volatile conditions to persist as the increasingly difficult inflation outlook raises the probability of recession. Whether or not the U.S. economy falls into a recession, as technically defined, we believe equity investors are going to feel like they’re in one, as the valuation adjustment of the first half of 2022 is followed by downward revisions to earnings forecasts in the second half. >more
2022 BUSINESS LEADERS OUTLOOK GERMANY
Among German business leaders, labour challenges, business costs and supply chain woes are top of mind heading into the second half of 2022. Executives at midsize businesses across Germany believe the continued war in Ukraine will impact the region, energy prices and supply chains. In its second year, the J.P. Morgan Business Leaders Outlook: Germany survey of companies with revenues between €20 million and €2 billion found that German business leaders continue to remain resilient. Our initial survey fielded responses in March 2022, right as Russia’s invasion of Ukraine began. Because the situation has since intensified and continues to create regional and global ramifications, we conducted a follow-up survey in May 2022 to gauge how business owners’ views had changed. >more
MOST TECH DEALS FOCUS ON GROWTH. MOST POST-MERGER INTEGRATIONS DON’T.
The technology sector is entering a downturn, but BCG research and experience has found that these periods are an excellent opportunity for dealmaking — provided that companies can execute their mergers and acquisitions (M&A) strategy and achieve their value-creation objectives. That’s a big challenge, as more than half of all deals across all sectors fail to meet those objectives. Tech companies in particular often confront a common challenge: they primarily buy businesses to fuel growth, but they don’t align planning measures and resources toward that goal until after the deal closes. Even then, the measures aimed at capturing growth are far less rigorous than the approaches companies use to reduce costs. As a result, value creation is delayed by 12 to 24 months—if it comes at all. >more
PROPERTY INDEX 2022
The Deloitte Property Index is one of the most comprehensive surveys of residential real estate markets in Europe and a valuable source of information for industry experts, investors and the general public. The current, eleventh edition of the Property Index analyzes data from 23 European countries and 68 selected major cities to reflect a direct comparison of residential property prices. Furthermore, the report examines the central factors that determine the development of national residential markets in Europe based on the different economic perspectives. >more
PRIVATE EQUITY DEBT FUNDS: WHO WINS, WHO LOSES?
Axel Buchner, Florencio Lopez de Silanes, and Armin Schwienbacher
We exploit a unique data set to provide the first analysis of the structure, performance and gain distribution of deals financed by the same private equity firm on the equity and debt sides (sponsored deals). Most sponsored deals are carried out by a few large and experienced PE firms. In support of the conflict of interest hypothesis, we document a transfer of value from debt to equity funds in sponsored transactions relative to non-sponsored transactions. Yet, the overall value impact of sponsored deals (debt and equity combined) is positive and investors of PE-affiliated debt funds do not loose overall. Sponsored deals end up generating sizable gains for PE firms, most likely through the better ex-post incentives of these structures. >more
RETURN TO VENTURE CAPITAL IN THE AGGREGATE
Ravi Jagannathan, Shumiao Ouyang, and Jiaheng Yu
We measure the aggregate return to all equity investors in various funding rounds of a venture company with the founders' investments valued at their first-round pre-money valuations. We examine 17,242 ventures that had their first funding rounds during 1980 and 2006 and follow them till their exits or 2018 whichever is earlier. Our measure, unlike round to round and round to exit return measures, does not require valuation information for interim funding rounds, which are mostly missing. The potentially large bias in reported post money valuations pointed out by Gornall and Strebulaev (2020) does not affect our return measure. >more