The Great Debate UK
English divorce law is recipe for financial strife
–The author is a Reuters Breakingviews columnist. The opinions expressed are her own–
It’s hard to feel sympathy when millionaires divorce. But after some mega-payouts in recent English court cases, a review of the law is welcome. While marriage isn’t a business transaction, the wealthy in particular could benefit from being able to agree legally enforceable pre-nuptial agreements.
England’s divorce laws are a mess. That creates huge uncertainty as to the division of assets when couples separate. Unlike the formulaic divisions of continental Europe, a London divorce can seem like a crapshoot. That really matters when the numbers involved are huge.
To anyone in business and finance accustomed to dealing with big money and thick contracts, pre-nuptial agreements look like the obvious solution. But until recently, these had little force. That changed in October, when a dispute between German heiress Katrin Radmacher and her French ex-husband, a former banker, led to a Supreme Court ruling that pre-nups would be decisive so long as they were “fair”.
When our biggest challenge is ourselves
-Carol Hall is a partner and new Head of Walkers’ Investment Funds Group in Hong Kong where she specializes in hedge funds and private equity funds and advises on general corporate matters. The opinions expressed are her own.The opinions expressed are her own. Reuters will host a “follow-the-sun” live blog on Monday, March 8, 2010, International Women’s Day. Please tune in.–-
Seeing women succeed in management positions is uplifting and empowering. But I think it is fair to say that the challenges women face in the workplace depend very much on the profession. There are certainly some professions that view women and men as equals at all levels, but some professions present more of an obstacle to women. As a general rule, women are still underrepresented in the senior management level of most professions, particularly related to finance.
“Green growth” strategy viable for African economy
-Michael Keating is director of the Africa Progress Panel. The opinions expressed are his own.-
After a decade of solid progress Africa is now facing the daunting task – at a time of economic crisis – of maintaining stability, economic growth and employment, addressing food security and combating climate change. No country on the continent is escaping the impact of volatile fuel and commodity prices, the drop in global demand and trade.
Europe votes conservative in crisis
– Paul Taylor is a Reuters columnist. The opinions expressed are his own –
Europe’s voters trust conservatives more than the left to handle the most severe financial and economic crisis since World War Two.
Liquidity & inflation, lessons from the 1940s
– John Kemp is a Reuters columnist. The views expressed are his own –
LONDON, April 24 (Reuters) – Comparisons between the current downturn and the Great Contraction of 1929-33 have multiplied as commentators and investors have tried to forecast the recession’s likely depth and duration. But as the U.S. economy shows signs of stabilising and attention switches to future inflation the more useful comparison is actually with the 1940s.
The massive build up of highly liquid assets (cash and bank balances) during the Second World War is the closest parallel to the current escalation of bank reserves as a result of quantitative easing programmes in the United States and elsewhere around the world. The relatively modest pick up in consumer prices after the war ended may hold lessons for the outlook for inflation over the next five years.
There is a risk the commodity markets may have over-estimated the speed with which excess liquidity will be transformed into higher inflation and higher prices.
The outbreak of war was accompanied by an unprecedented build up of liquidity in the U.S. financial system. Deficit-financed spending on armaments and the war effort finally eliminated the persistent under-employment of the previous decade and ensured strong growth in corporate revenues and household incomes.
At the same time, households and firms had little opportunity to spend the money. The Federal Reserve imposed strict limits on consumer credit from September 1941 onwards. Consumer durables disappeared from the shops as the government first restricted then banned production of motor vehicles, refrigerators, washing machines and other electrical appliances for civilian use to conserve output capacity for the war effort.
The result was a massive increase in cash and bank balances. After having been flat for the previous 20 years, the amount of cash in circulation quadrupled from $6 billion to $25 billion between 1939 and 1945. Bank deposits more than doubled from $43 billion to $101 billion (https://customers.reuters.com/d/graphics/POSTWARADJUSTMENT.pdf). But while inflation rose when wartime price controls were lifted, the increase was nowhere near as much as expected given the massive overhang of liquidity which had built up.
To paraphrase Arthur Conan Doyle about the dog that did not bark at night time, the surprise was not that inflation rose so much after the war, but that it rose so little.
Consumer prices rose just 8 percent in 1946, 14 percent in 1947 and 8 percent in 1948, and actually declined in 1949 — and this was after the removal of extensive price controls that had limited increases for 5 years. There was no inflation outbreak.
Look to deal numbers for M&A green shoots
LONDON, April 23 (Reuters) – Volumes may be down, but there are green shoots appearing in the M&A market after the frozen winter of financial distress.
This doesn’t mean a return to the boom years of a few years ago. It could take years for deal values to reach the dizzy heights of the second quarter of 2007, given falls in asset prices. But the number of deals is recovering fast. This fell off a cliff in Q1 of 2009 and at just over 8,000 deals was the lowest global tally since Q3 2004.
The week starting March 29 was the busiest of the year in terms of deals announced, with 821 transactions, and the 5th busiest since Sept. 2008, according to Thomson Reuters data.
There are still some complications (the disappearance of loan-funding, equity market volatility to name just two), but investors seem to be back on the hunt for bargains.
M&A deals may tend to be pretty hit and miss (indeed the failure rate is high) but historically the best returns from deals have been achieved on those struck during economic downturns, when activity is low.
True, M&A has been fuelled so far this year by a spate of large deals in the pharmaceuticals sector, an area that has been least affected by the crunch, with healthcare accounting for 27 percent of the total of $472 billion of announced deals during Q1. Pfizer’s <PFE.N> $68 billion acquisition of Wyeth <WYE.N> and Merck’s <MRK.N> $41 billion takeover of Schering-Plough <SGP.N> were the blockbusters.
But this was only just ahead of the distressed financials sector at 25 percent. And it is this area of activity which will grab a significant share of deals (by volume if not by value) as banks, insurers and fund management companies rejig their portfolios and vulture investors pick off the walking wounded.
The restructurings resulting from the meltdown in financial services are just getting underway. Look at the businesses UBS <UBSN.VX> is selling, Barclays’ <BARC.L> disposal of iShares, or indeed the auctions of Citigroup <C.N> and Royal Bank of Scotland <RBS.L> units in Asia.
Banking groups are under pressure to offload non-core businesses to strengthen weakened balance sheets and therefore are less sensitive to value. Add the assets which governments will have to repackage or offload once they have feel confident they have stabilised the sector and the deal pipeline starts to look positively healthy.
No wonder some investment bankers — especially those in boutiques and which thus have no conflicts with mainstream financial businesses — are rubbing their hands.
The main constraint on buyers (other than those lucky or sensible enough to still be sitting on cash) is obtaining financing. It is possible for companies to raise money for deals that seem to investors to make strategic sense. Roche <ROG.VX> of Switzerland, for instance, tapped the bond markets for a whopping $39 billion to fund its Genentech buy-out.
But stock market investors aren’t flush with cash and are wary of giving companies a free hand. UK’s Pearson <PSON.L> recently had to pull a small share issue that was designed to give it a cash pile from which to make opportunistic acquisitions. Meanwhile, it is still difficult to obtain loan finance from banks, and the bond markets are only really available to larger companies.
Even so, with debt-strapped companies being forced to sell off assets to meet covenants and prices relatively low, there should be plenty of action this year.
– At the time of publication Alexander Smith did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund.
(Edited by David Evans)
