INTERNATIONAL MERGERS AND ACQUISITIONS SURGE IN 2011
Michael Gestrin
International M&A investment has shown resilience in the face of recent economic turmoil, including the unfolding sovereign debt crisis in Europe and persistent economic weakness in the
United States.
International M&A investment in 2011 reached $822 billion as at 21 October. If this pace can be sustained, international M&A will top $100 billion by the end of the year, a 32% increase over 2010.
This would match the third highest level ever reached in 2006. Even if M&A activity were to come to a stop in Q4, 2011 levels will still be 7% higher than those reached in 2010.
Most international investment continues to originate from either North America or Western Europe. However, the emerging markets have become important new sources of international investment in recent years.
China (including Hong Kong) in particular has become a major international investor, ranking as the fourth largest source of international M&A in 2011, with 7% of the world total (figure 2). In 2010 it ranked second with 10%.
The full report can be accessed at http://www.oecd.org/dataoecd/26/23/48946357.pdf
DIWALI GIFT FOR YOU: BUY "VENUS POWER VENTURES (INDIA) LIMITED" (BSE CODE: 531874) AT 8.5/- TRG 39/- & 99/-
STOCK : VENUS POWER VENTURES(INDIA)LIMITED Trading in BSE CODE : 531874
CMP : 9/-
Target : 33/- to 90/- in Short term and Medium terms
Just Buy 1,000 Shares with 8,000/- to 9,000/- Rupees will get 1,00,000/- in 6 Months or before. Any time will start Upper circuit. If Starts Nonstop UC to 50/- to 100/-.
Venus Power Ventures (India) Limited doing Power Related and Infra Business and company going to Expand.
Equity : 5 Cr (Recently Promoters given Preferential shares for 1 Cr share to Promoters and Friends) So Equity now 15 Cr but 10 Cr is lock in in 1 year so Now we can calculate 5 Cr only.
Promoters Holding : 9% ; But preferential allotment to Promoters friends and companies for 93 laksh shares so Total including this Promoters Holding is (9% +63% = 72%)
Promoters Friends and Relatives :
Cementex India Pvt Ltd : 13.16%
Dhana Energy Pvt Ltd : 13.6%
Individual Friends : 36%
So Total Promoters Holding is 72% Public Only 27%
In Market shares is 35 Lakhs only some one buy this 39 Lakshs at 7 to 8/- company major Share holder of this company will get powers.
Face Value : 10/-
Book Value: 16.5/-
Reserves : 15 Cr (Per share = 10 Cr / 0.5 Cr Shares = Rs. 20/-)
Debt : Free (No Debts).
VENUS POWER VENTURES (INDIA) LIMITED provide the following services
• Development of Power Projects
• Turned Key Power Projects
Power Projects:
In the year 2009-2010 company has taken the decision to enter into Power Projects. Company name is changed from M/S. VENUS VENTURES LIMITED to "M/S. VENUS POWER VENTURES (INDIA) LIMITED".
VENUS POWER VENTURES (INDIA) LIMITED is one of the upcoming Power Infrastructure Development, Power Project Management Companies in South India with rich and varied experience in execution of land market power projects across the length and breadth of the country.
With established credentials in executing complex and challenging projects in all kinds of environment, VENUS has repeatedly delivered projects on time and of the highest quality.
An abundance of resources like People, Plant & Equipment, Finance etc., have enabled Venus Ventures Limited establish enviable record in infrastructure sphere. Venus Ventures Limited Committed to the highest standards of quality.
Turned Key Projects:
Venus Power Ventures (India) Limited proposed 50MW Gas power plant in Godavari District of Andhra Pradesh.
And also Venus Power Ventures (India) Limited proposed to 175 Acres land converted into 350 MW Thermal Power plants in Nellore District which was nearest location to Krishnapatnam Port.
Venus Power Ventures (India) Limited Planning to Expanding Business in Power and Infra very Aggressively.
Venus Power Ventures (India) Ltd Having Good Land Bank and Valuable Assets.
In this Market Correction Time Buy Good Fundamental Stocks Like Venus Power Ventures (India) Ltd and hold it will get good return No risk at all like this stocks.
Venus Power Ventures (India) Ltd having Lot Expansion Plans in Future. Its a Multibagger stock. Just buy and hold 1 year will get 10 times to 14 times Returns minimum.
All Investors can keep 5,000 to 50,000 shares in Portfolio for 3 Months to 1 Year Hold You will get good return from 500% to 1000% return.
Why the decline of the West is best for us and them By PROF. R.VAIDYANATHAN PROFESSOR OF FINANCE, INDIAN INSTITUTE OF MANAGEMENT , BANGALORE
Ten years ago, America had Steve Jobs, Bob Hope and Johnny Cash. Now it has no Jobs, no Hope and no Cash. Or so the joke goes.
Only, its no joke. The line is pretty close to reality in the US . The less said about Europe the better. Both the US and Europe are in decline. I was asked by a business channel in 2008 about recovery in the US . I mentioned 40 quarters and after that I was never invited for another discussion.
Recently, another media person asked me the same question and I answered 80 quarters. He was shocked since he was told some sprouts of recovery had been seen in the American economy.
It is important to recognise that the dominance of the West has been there only for last 200-and-odd years. According to Angus Maddisons pioneering OECD study, India and China had nearly 50 percent of global GDP as late as the 1820s. Hence India and China are not emerging or rising powers. They are retrieving their original position.
In 1990, the share of the G-7 in world GDP (on a purchasing power parity basis) was 51 percent and that of emerging markets 36 percent. But in 2011, it is the reverse. So the dominant west is a myth.
Similarly, the crisis. It is a US-Europe crisis and not a global one. The two wars which were essentially European wars were made out to be world wars with one English leader commenting that we will fight the Germans to the last Indian.
In this economic scenario, countries like India are made to feel as if they are in a crisis. Since the West says theres a crisis, we swallow it hook, line and sinker. But it isnt so. At no point of time in the last 20 years has foreign investment direct and portfolio exceeded 10 percent of our domestic investment. Our growth is due to our domestic savings which is again predominately household savings. Our housewives require awards for our growth not any western fund manager.
The crisis faced by the West is primarily because it has forgotten a six-letter word called saving which, again, is the result of forgetting another six letter word called family. The West has nationalised families over the last 60 years. Old age, ill health, single motherhood everything is the responsibility of the state.
When family is a burden and children an encumbrance, society goes for a toss. Household savings have been negative in the US for long. The total debt to GDP ratio is as high as 400 percent in many countries, including UK . Not only that, the West is facing a severe demographic crisis. The population of Europe during the First World War was nearly 25 percent and today it is around 11 percent and expected to become 3 percent in another 20 years. Europe will disappear from the world map unless migrants from Africa and Asia take it over.
The demographic crisis impacts the West in other ways. Social security goes for a toss since people are living longer and not many from below contribute to their pensions through taxes. So the nationalisation of families becomes a burden on the state.
European work culture has become worse with even our own Tata complaining about the work ethic of British managers. In France and Italy , the weekend starts on Friday morning itself. The population has become lazy and state-dependent. In the UK , the situation is worse with drunkenness becoming a
common problem. Parents do not have control over children and the Chief Rabbi of the United Hebrew Congregation in London said: There are all signs of arteriosclerosis of a culture and a civilisation grown old. Me has taken precedence over We and pleasure today over viability tomorrow. (The Times: 8 September ).
Married couples make up less than half (45 percent) of all households in the US , say recent data from the Census Bureau. Also there is a huge growth in unmarried couples and single parent families (mostly poor, black women). Society has become dysfunctional or disorganised in the West. The government is trying to be organised. In India , society is organised and government disorganised. Because of disorganised society in the West the state has to take care of families. The market crash is essentially due to the adoption of a model where there is consumption with borrowings and no savings. How long will Asian savings be able to sustain the western spending binge?
According to a recent report in The Wall Street Journal (10 October 2011), nearly half of US households receive government benefits like food stamps, subsidised housing, cash welfare or Medicare or Medicaid (the federal-state health care programmes for the poor) or social security.
The US is also a stock market economy where half the households are investors and they have been hit hard by bank and corporate failures. Even now less than 5 percent of our household financial savings goes to the stock market. Same in China and Japan .
Declining empires are dangerous. They will try to peddle their failed models to us and we will swallow it since colonial genes are very much present here. You will find more Indians heading global corporations since India is a very large market and one way to capture it is to make Indian sepoys work for it.
A declining West is best for the rest and also for the West, which needs to rethink its failed models and rework its priorities. For the rest like us the fact that the West has failed will be accepted by us only after some western scholars tell us the same. Till then we will try to imitate them and create more dysfunctional families.
We need to recognise that Big Government and Big Business are twin dangers for average citizens. India faces both and they are two asuras we need to guard against. The Leftists in the National Advisory Council want all families to be nationalised and governed by a Big State and reform marketers of the CII variety want Big Business to flourish under crony capitalism.
Beware of the twin evils since both look upon India as a charity house or as a market and not as an ancient civilisation.
I came across a very gud article on bloomberg (mentioned hereunder) which states that bonds outshines equities in a 30 year race, this article considers this point as nadir and concludes the culmination of the bear phase indicating a point to buy. Also this has happened since 19th Century, hence marking a note in history. I hope you will find it useful and relevant.
http://www.bloomberg.com/news/2011-10-31/bonds-beating-u-s-stocks-over-30-years-for-first-time-since-19th-century.html
http://www.bloomberg.com/news/2011-10-31/bonds-beating-u-s-stocks-over-30-years-for-first-time-since-19th-century.html
Are ETFs Hurting Your Stock?
A boon to investors, exchange-traded funds may dampen demand for small-cap shares and pose systemic risks.
Investors have poured money into exchange-traded funds by the bucket load in the past decade. But regulators are beginning to question what kinds of systemic risk these investment vehicles - which trade like stocks - harbor. They are also trying to understand how ETFs affect the share prices of the companies whose stocks they index. Both issues should be of concern to CFOs.
Similar to a mutual fund, an ETF tracks a basket of securities, like the Russell 2000. But ETFs are also highly liquid, because they trade like stocks, the price fluctuating throughout the day. ETFs had $1.2 trillion of assets under management as of 2010, up from less than $75 billion 10 years ago, said the Financial Stability Board (FSB) in an April 2011 paper, "Potential Financial Stability Issues Arising from Recent Trends in Exchange-Traded Funds." There were 2,379 ETFs as of 2010, up from 92 in 2000, according to a comprehensive report on ETFs last year by the Ewing Marion Kauffman Foundation.
For the month of September, the trading volume of ETFs and their debt-market cousin, exchange-traded notes, reached $2.1 trillion, about 36% of all U.S. equity-trading volume, according to the National Stock Exchange, an electronic stock market.
The market has exploded. But ETFs may inhibit the proper functioning of the capital markets and rob individual stocks - small-cap ones - of liquidity. The evidence for the first charge: the rising correlation of stock price movements during the decade of the ETF boom. Securities of different companies are more often moving in the same direction at the same percentages - as much as 60% of the time, according to some studies.
A high correlation in common-stock performance, the authors of the Kauffman Foundation paper write, is a signal that the markets are "paying no attention to the performance of individual companies" and are not "properly allocating capital between different assets of financial instruments in such a way as to properly discipline risk and reward success."
ETFs also harm small-cap stocks, the foundation paper says, because hedge funds and other investors have turned to small-cap ETFs to get exposure to the sector. Trading an ETF is cheaper and allows the investor to enter and exit the exposure instantaneously. Meanwhile, many of the small-cap stocks in these indices are illiquid. If there is a massive sell-off in an ETF, the ETF provider may have to unwind the instrument by selling the underlying securities. "Who will buy the underlying instruments when this happens?" the Kauffman Foundation asks.
Consider an analogous situation that could occur with an ETF based on gold. The SPDR Gold Shares ETF holds more than 1,280 tons of bullion, "more than most central banks," says the Kauffman Foundation. The ETF gives investors a way to easily trade gold, but gold is normally not easily tradable. "Once retail investors decide to sell gold, will sovereign funds stand there with outstretched hands saying, 'Let me take this off your hands'?" asks the foundation paper.
Sophia J.W. Hamm, an assistant professor at Ohio State University's Fisher College of Business, says the tendency of less-informed investors to put their money into ETFs rather than individual stocks is hurting liquidity. At the top level - the market for all individual stocks - "we don't really know what the net effect of [ETFs] is," says Hamm, who published a paper on the subject in August. "But on the markets of individual stocks, yes, [ETFs] are a negative. They decrease liquidity."
The systemic-risk issue with ETFs comes from the growth of "synthetic" ETFs. Highly prevalent in Europe, synthetic ETFs don't generate investor returns by holding a basket of stocks. Instead, they enter into an asset swap - an over-the-counter derivative - with a counterparty to replicate some kind of securities index, like the S&P 500.
The ETF provider, often a bank, has to back the ETF with a basket of collateral. That collateral, however, doesn't have to match the assets of the tracked index. Indeed, it usually consists of less-liquid instruments, such as unrated corporate bonds and small-business loans. According to a letter to European regulators from the CFA Institute, an association of investment advisers, "there is an incentive for banks to sell synthetic ETFs through their asset management branches in order to raise funding against illiquid portfolios of securities which could not otherwise be financed in the repo market, or at a significant haircut."
If the performance of a synthetic ETF falters and investors want their money back, the ETF provider could face problems liquidating the collateral, or finding other means of funding it, forcing the provider or bank to suspend investor redemptions, the FSB says. If the ETF provider honors investor redemptions, it could face a liquidity shortfall institutionwide.
A lot of the proposed solutions to the ETF problem focus on transparency for ETF investors - particularly important where the ETF has counterparty and collateral risk. But the Kauffman Foundation paper suggests that issuers of small-cap stocks examine what they get from being indexed in an ETF. Formerly, a company's executive management wanted its stock to be included in broad indices because it was seen as enhancing the company's stock price. But now that the benefits are questionable, according to the Kauffman paper, issuers should reconsider.
The SEC needs to "restore the balance of power relative to ETFs" by allowing companies to "opt in" to inclusion in an ETF, the Kauffman paper suggests. That might slow the indexation of stocks, especially thinly traded ones "for which the unwind risks in the event of a major sell-off are much greater," the paper concludes.
© CFO Publishing Corporation 2009. All rights reserved.
Can IFRS 9 prevent Greek tragedy?
IFRS 9, the global accounting standard on financial instruments, is among the most heavily scrutinised projects of the International Accounting Standards Board.
Recent events in Greece have dragged it further into the spotlight as some claim early adoption will help ease the burden of EU members' sovereign debt, while others insist changing accounting rules is not the answer.
Speaking at a recent conference, new chairman of the IASB Hans Hoogervorst said the standard - which is not yet finished - would "give us a little bit more leeway in terms of Greek government bonds", claiming for this reason, many at the European Commission "think we should adopt it quickly".
IFRS triptych
IFRS 9 Financial Instruments is made up of three parts, of which impairment accounting is most relevant for sovereign debt. During the financial crisis, the current incurred loss model attracted much criticism, as it was felt only recognising losses after the event crippled banks' ability to make provision for bad assets, effectively meaning there was no early warning system in place.
As a result, some called for a move to an expected loss model, a more forward-looking plan that takes into account current financial positions, as well as what can reasonably be expected to happen in the future.
An IASB spokesman said since the crisis, there has been great pressure on the standard setters to resolve the issue, and Hoogervorst's call for adoption of IFRS 9 is one part of their response.
However, some stakeholders have balked at a straight switch to IFRS 9, despite a recent survey by Deloitte indicating the majority of big banks think the global standard is an improvement on its predecessor, IAS 39.
Policymakers in Europe are loathe to officially adopt the standard before it is completed; the hedge accounting and asset/liability offsetting arms have yet to be finalised, and these two issues are in themselves among the knottiest problems in accounting standards.
In late 2009 Charlie McCreevy, then European Commissioner for internal market and services, wrote to the IASB saying "changed financial outlook and market improvements" meant IFRS 9 would not be adopted at that time. With sovereign debt tightening its stranglehold on member states, will politicians reconsider?
Barnier says no. Successor to McCreevy, he told a recent meeting: "I do not believe this will be the first solution to the problems we face in Europe at the moment," insisting that the Commission must see the other components of IFRS 9 before making a decision.
Transparency fears
Investors will be relieved, according to the CFA Institute, which warned Hoogervorst's plan will allow account preparers to avoid recognising losses and is "antithetical to the objective of transparent information".
The proposed IFRS 9 would allow some assets to be held at cost price and some at fair value - known as a mixed model - and proponents say this could support stricken banks that would otherwise see the value of their assets go through the floor.
The CFA Institute wants accounts to be prepared solely under fair value, otherwise known as mark-to-market, which would see assets valued at current market prices. For Greece and similar struggling economies this could be disastrous, as today's asset prices can be significantly lower than cost, leading to a "cliff effect" where balance sheet bottom lines plummet alarmingly.
CFA senior policy analyst Vincent Papa said investors want to see losses when they occur, and the proposed mixed model of impairment accounting "gives preparers too much freedom to present accounts as they see fit - a pure fair value model will take away this freedom".
Papa warned current proposals would present a "false plateau" and undermine investor confidence in the numbers, concluding: "The only way to solve this crisis is to tell it as it is."
Unsurprisingly, the IASB does not agree. Where IAS 39 used fair value measurement, IFRS 9 is based on expected cash flows, meaning if the holder of an asset is confident it will continue to bring in cash over its lifetime, it might not have to be written down to the extreme lows dictated by market prices.
To trade, or not to trade
Here, the purpose of the asset also comes into consideration. If, for example, a bank plans to hold a loan for its full term, it makes more sense to value it at cost, thereby avoiding recording huge losses derived from a current market price that is irrelevant to an asset that will never be sold.
Assets that will be held to full term and never sold are entered into the banking book, while those intended for sale go into the trading book. Under the IASB's mixed model, banking book assets (such as mortgages) would be valued at cost price, while trading book assets would be marked to market, and therefore run the risk of devaluing.
Here, the accounting standards become still more complicated. While banking book assets are recorded at cost price, which does not change, they may nevertheless be marked down (impaired) if the holder suspects they will not achieve the returns they hoped for when buying the asset.
In the case of Greece, this means lenders can value loans to the country at cost price - thereby avoiding the cliff effect of marking them to market - but may still be forced to write their value down if they think the debtor will not be able to repay the full amount.
Recent emergency meetings on sovereign debt indicated that the appropriate credit impairment might only be 21%, meaning lenders could reasonably expect to recover 79% of the value of loans to Greece. Under mark to market, this figure might be closer to 50%, illustrating Hoogervorst's point on IFRS 'easing the pain' of the current crisis.
Impair Vs. market
However, there are some who say the difference between IFRS 9 and IAS 39 is academic, given that the jury is out on the level of Greek debt that will be recoverable. If, for example, markets decide little debt will be recoverable, lenders would be forced to record significant impairment on it, and the cliff edge would still be precipitous.
Kathryn Cearns, technical accountant at Herbert Smith, said banks must remain convinced the debt is recoverable to justify valuing it at or near cost price. If they decide the asset return will be poor, they must write down its value (impair it) accordingly, and set aside provisions to cover expected losses. Additionally, bank regulators can choose to force a full write-down to market value simply for regulatory purposes, again meaning capital could be lost.
Iain Coke, head of financial services at the ICAEW, had similar words of warning. "There is much market uncertainty surrounding sovereign debt and impairment," he said. Many people believe Greek debt is heavily impaired and should be written down. This would hit balance sheets hard and could potentially have a similar effect as marking to market, if the impairment is so great as to wipe 50% off asset value.
Coke said holding assets at cost could in fact create a bigger one-off hit for banks as they would be forced to impair assets in one lump sum, rather than tracking a more gradual decline as market prices fall.
Mixed model
Despite this, the institute supports the IASB's mixed model, as do many other prominent voices in the market. Cearns said accounting under IFRS 9 is "simpler", while Coke described it as "more intuitive" and most respondents to Deloitte's survey think it will improve financial statements.
A dogmatic response to the complexities of sovereign debt has few fans, it would seem. While rushing headlong into adoption of the unfinished IFRS 9 could potentially alleviate sharp shocks, it might do little to stem Greece's freefall if the market has made up its mind that impairment is inevitable. At the same time, sticking with the old fair value-friendly IAS 39 has made it harder for banks to recognise the impact of recent developments in the Eurozone, even though some investors consider it a more truthful representation of market reality.
One thing is for sure - the IASB has a few months left to complete the standard, as no debt crisis seems to be enough to nudge the EU into adopting IFRS 9 in its half-baked state.
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