Showing posts with label Lehman Brothers. Show all posts
Showing posts with label Lehman Brothers. Show all posts

Wednesday, April 24, 2013

The road ahead for Asia

The economies of Asia are maintaining their impressive growth trajectories. Yet the global backdrop in 2012 is one of uncertainty: the eurozone is grappling with its sovereign debt crisis; and more generally, stagnation in the major industrial economies is stunting demand for Asia’s products. For these reasons, experts forecasts that growth in Asia will ease to 6.9% in 2012 (from 7.2% in 2011) before coming back to 7.3% in 2013.

More regional than global
From the collapse of Lehman Brothers in September 2008 through the initial stages of the global recovery in 2010, external factors generally dominated Asia’s growth outlook such that countries and subregions largely moved in sync. In contrast, 2011 has seen general factors give way to country-specific factors driving the outlook. For instance, for South Asia, growth in 2011 fell sharply to 6.4% from 7.8% in 2010. The fall was largely determined by the marked slowdown in India where growth fell to 6.9% from 8.4% in 2010, mainly reflecting its marked monetary tightening in the face of persistent inflation and slumping investment. Going forward, while East Asia’s growth will moderate to 7.4% in 2012, growth in Southeast Asia is seen picking up to 5.2% for 2012 and to 5.7% in 2013.

Inflation to moderate in 2013

Across subregions, higher food and fuel prices drove up inflation in developing Asia to 5.9% in 2011 from 4.4% in 2010. In Central Asia, South Asia, and the Pacific, average inflation rates reached around 9% in 2011 while it was more moderate in East and Southeast Asia, where inflation continued to be contained at around 5%. However, inflation in developing Asia is set to recede as economic activity softens. Assuming relatively steady global oil prices and easing food prices in 2012, regional average inflation is forecast to slow to 4.6%. Besides the external price developments, domestic policies may play a role in, for example, South Asia, where some reduction in heavy fuel and power subsidies are expected, and will set a floor for any reduction in inflation.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
 
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Monday, October 15, 2012

M & A

Are companies strategising their inorganic growth any better amid global turmoil? B&E presents an in-depth analyses of some top global and Indian M&As...

Boa: merrill lynch
Weekend fun!
Dine, wine and buy a company

The credit crisis sweeping across the American financial system has helped sound buyers to claim opportunity from ordeal; Bank of America (BoA) happens to be amongst the sound buyers. In a gut wrenching weekend when Lehman Brothers was headed for a possible liquidation and AIG was facing the investors’ wrath, Merrill Lynch (ML) was quick to strike a deal with BoA. In a deal valued at $50 billion ($29 a share with 70% premium over the last traded price of $17.05 a share), BoA acquired ML at about two thirds of its value a year ago and half its all time peak value of early 2007. The dramatic deal, a marriage of a commercial bank and an investment bank, which took less than 48 hours to be finalised, is one kind of a deal that has earned a dubious reputation.

Given the deal’s size, scope, complexity, and the short time in which the deal was completed; even a child could say it is humanly impossible that a thorough due-diligence could have taken place. Analysts argued that it will set a record for merger integration disaster and the fact that BoA’s shares have been massacred by 78% ever since the deal was announced on September 15, 2008, goes on to justify the same. According to Marco Boschetti, Towers Perrin’s Head of Global M&A and Restructuring, “Market turmoil has conjured up the concept of Express M&A… but increased speed brings increased risk and makes prioritisation critical.” The risks associated with the merger were not analysed and the shareholders were kept in dark that Merrill had hemorrhaged $13.8 billion during the final three months of 2008, leave alone the fact that ML had to write down $52 billion of credit related losses.

Ken Lewis, CEO, BoA, can continue to boast on the synergies and that acquiring ML was a great opportunity for BoA’s shareholders, but the reality is that investors have now filed a lawsuit against him accusing him of failing to disclose risks associated with ML takeover. And now after six moths of the deal, the only visible winners are the advisors of the deal, Fox – Pitt Kelton and J. C. Flowers & Co., who just reaped a handsome $20 million for a weekend’s work!


Source : IIPM Editorial, 2012.

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