Another day, another large privatisation as the swarm of private equity funds scour the globe for deals. Yesterday Flight Centre, today maybe APN, tomorrow who knows?
Just underneath the headlines and rumours inflating share prices, there are some important issues at play pointing to mistakes being made on at least one side of the deals. Either the private equiteers are exploiting the world’s excess liquidity and easy monetary policies in a game that will end in pain as policy tightens, or existing shareholders are being played for mugs. And there’s a little matter of what happens after everything that can be privatised has been privatised.
There has been plenty of comment about the risk of highly-geared deals coming undone if or when rates rise. But there’s far less examination of whether shareholders accepting the takeover bids are short-sighted.
As for the average fund manager – there’s enormous focus on annual and even quarterly performance rather than longer-term value.
Beyond those issues is another one about investors turning their backs on the world’s stock markets. In recent years, American companies have taken more equity off the table than they’ve put on it. Flight Centre could be an example of a company that believes it can do more as an unlisted entity, while Macquarie Bank’s infrastructure machine is changing its usual model of eventually listing its vehicles, claiming the market increasingly doesn’t understand them.
Put it all together and there’s a heady brew beginning to bubble in these days of easy money and record-breaking stock markets.
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