Saturday, February 25, 2006

Odds and ends

A few brief notes that don't deserve their own posts.
  • The latest issue of Economist talks about the buyout boom in Europe. It does look like the boom there is in an advanced stage, and will be over in a year or two. This is Europe's first big merger boom that had private-quity groups playing such a prominent part. While the US has seen larger booms before, the current boom seems to be still in an early stage.
  • Forbes also carried a cover story on private-equity groups, but not a completely positive piece. It does note the callous attitude in some of the deals, ranging from pushing pension liabilities onto PBGC (and hence to tax-payers) and the practice of taking out dividends by adding debt to the acquired companies' balance sheets.
  • The efforts to block Dubai Ports' takeover of some US port operations (via P&O) is unfortunate. As a country that has preached and forced others to become market-friendly, US should be taking a more pragmatic approach. Requiring additional security guidelines is not a harsh requirement, but asking that all the US operations be divested sounds irrational. This is more so when the operator is an extremely professional entity, and the country it is from is a moderate and friendly Arab nation. How will the US react if KKR's activity in Europe is restricted or Icahn gets restrained in Korea ? The security concerns seem misplaced. And what about other countries' rights to retaliate in a similar manner ? After all, haven't US banana companies and telecoms played dirty tricks in Central/South America ? Both Republicans and Democrats are playing the populist card - it is unfortunate that they can still get away with it.
  • Europe also seems to have problems with cross-border takeovers. They have excuses other than national security! Too many people have already opened their mouths in the current Mittal/Arcelor saga, with some of the French comments carrying racist undercurrents. Similarly a German bid for Spain's Endesa has drawn out patriots!
We need less politics and patriotism and more business and enlightenment.


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