Middle Market M&A heating up as Private Equity seeks growth

Global M&A value in the first three quarters of 2014 exploded to US$2.5tr up 52% from US$1.7tr last year, according to Mergermarket.  That points towards returning to the M&A boom levels of 2005-2008.  At the peak of that, global M&A value reached $3.7 tr. (M&A surge in Q3 2014, back to precrisis levels).

US represent around half of global activity with M&A value edging towards US$1.2 tr in the first nine months of 2014, already over the US$965 bn for the whole of 2013 according to Mergemarket and reaching towards 2007-8 territory.  Most of the increase has been fueled by the return of mega deals, ie those over $5bn.  Middle market deals although not following the same explosive pattern, grew as well. North American M&As between $250-$500m reached $54m during the first half of 2014 compared to $70m in all 2013. At the lower bracket $5-250m, M&A value reached $61m in the first half of 2014 compared to $102m for full year 2013.

Activity in the private equity space has lagged behind that of the overall M&A market. The first half of 2014 saw 432 buyouts in North America for US$80bn total worth. That was a 13% decrease from first half of 2013 (US$92bn) according to Mergermarket. Private equities, contrary to the past have stayed away from large LBOs and instead turned their attention to middle market and exiting past investments.

North American M&A Size Split 2008-14

Interesting highlights about middle market M&A and the Private Equity in the US:

  • Middle market matters: According to the U.S. Census, there are 360,000 middle size companies in America (with revenues between $5m – $1bn), 95% of which generate less than $100m but a large number of jobs. Mid-size companies increased revenue by 7.5 percent in the third quarter of 2014, compared with 5.5 percent for Standard & Poor’s 500 Index, according to the National Center for the Middle Market. According to Robert Slee, a researcher specializing in this area, 75% of middle size companies destroy value as they usually produce returns below their cost of capital (The New Math of Middle Market M&A, Robert Slee  The Value Examiner, July/August 2009).  Hence there’s significant potential for growth and value creation.  PEs get increasingly involved in this space and own around 10% of mid size companies, usually the top performers.
  • Middle market definition varies by region: Transactions involving middle market companies are considered those below $1bn in value, and more often below $500mn. Actually a good reference point are deals between $250-$500m and at the lower end between $100-$250m. That is according to US standards. Average deal sizes in Europe and Asia are almost 50% below those in the US. Therefore a deal considered middle market or even small by US standards might be a mega deal in the context of a cross-border transaction and by that attract much more attention from local regulators and communities.  Therefore, it has to be approached with increased level of diligence and sensitivity, reminiscent of that for mega-deals.  Well experienced M&A advisors can make all the difference in these situations.
  • Success is not straightforward in midmarket: Although the large number of targets and potential for value creation, it’s not easy to score a home run. Companies are often the extension of their owners’ lifestyles and not clearly distinguishable and investable (Private Equity 2013 Update and Success Factors for Value Realization).  So PEs often pass. In other occasions certain PEs will be the first time investors that professionalize a company and then sell to a more experienced PE to scale up the businesses.  Other difficulties arise from inefficiencies in locating interesting deals, limited attention span, liability risk, and high pricing. So often advisors and PEs complain that many good deals fall through the cracks.
  • PE changing priorities: go solo, go small, drop past weights and aim for growth

Top PE Investments

  • Exits: Not surprisingly, much of recent PE activity has turned into exiting older investments. This is not that easy. According to Mergermarket, PE firms are having difficulty to recoup boom-era investments (EMEA Deal Drivers 1H2014). Because of that, holding periods have increased to six years compared to around three in 2007 (PE Market Update 2013).  Secondary offerings are the most common form of exit nowadays, a change from the IPO heavy past, and represent a large part of middle market transactions as well. Seventy-three percent of PE managers in a 2014 poll expected to exit investments through secondary buyouts in the next year. More than half of respondents expected the industry to sell to a strategic buyer, with 39% choosing IPOs (Global Private Equity Outlook 2014-2015, Duff&Phelps, Shearman &Sterling, Mergermarket).

Private Equity Exits-Buyouts 2007-14

  • M&A Industry focus: much about niches. Certain sectors are more represented in middle market M&A such as consumer products, business services and manufacturing, while mega deals are more concentrated around healthcare, energy and tech, even though mid size deals also take place involving niche players. Private Equities in particular focus on consumer, TMT, biotech and subsectors in industrials, business services and technology.  Notable PE transactions this year: Red Lobster’s acquisitions by Golden Gate Capital ($2.1bn), First Data’s by KKR ($3.5bn), Ortho-Clinical Diagnostics’ and Industrial Packaging Group’s by Carlyle for $4.2bn and $3.2bn respectively (Preqin Quarterly Private Equity Update 1Q, 2Q 2014).
  • Middle market valuations rising: As middle market deals grow in popularity there’s increasing competition between buyers, be it PE firms or strategic investors and hence valuations are rising (with corporate acquirers having the advantage of synergies). This reduces the number of desirable targets and deals are becoming more expensive. Multiples (EV/EBITDA) for the $50-250m bracket went from 6.5 in 2010 to 8.5 in 1Q2014 another sign of increased market activity (Axial Forum, Valuation Inflation: Middle Market Multiples on the Rise, John Slater, Focus Investment Banking, July 9, 2014).  Multiples in larger middle market transactions ($500m to $1bn) have risen to 12x in 3Q14 according to Factset (US M&A Trends & News Oct 2014).
  • Future PE trends and the middle market: Even though the loss of spotlight to mega deals, the overall trend is positive.  PE managers polled by Mergermarket expect increased activity in 2014-15 (Global Private Equity Outlook 2014-2015, Duff&Phelps, Shearman &Sterling, Mergermarket). On average, cross-border transactions are expected to make up 30% of activity.  Main drivers will be consolidation, changing demographics and consumer tastes, technology, debt financing, PE exits, globalization and value creation. Success planning will create a wave of liquidity events as baby boomers that own mid size companies will retire. At the same time, although the consumer sector is cautious there’s always creative destruction and opportunity from new products. For example the Greek yogurt mania in the US created a new segment with explosive growth in less than ten years with a startup, Chobani, being the market leader. Finally, technology is creating ample startup opportunities.
  • Dry powder is at record levels but is not for free. The amount of available capital for Private Equity investment hit a record high of $1.14 tr in June 2014 globally, even higher than in 2006-2008, according to Preqin (Private Equity Has More Than It Can Spend). However the landscape has changed. PE deals are becoming more competitive and considering some boom era failures, managers have to prove their merits by bringing returns. Working only through sourcing inefficiencies, financial engineering or IPO exits are not enough to generate alpha.  Value creation has become more important (Private Equity 2013 Update and Success Factors for Value Realization). In this sense a secondary offering might make sense when the buyer has experience in a particular sector.  Actually there’s even talk about outright acquisitions of PE firms as well.
  • PE regulatory pressures and fair value adjustments: Another interesting development over the last years is that private equity companies now have to fair value their portfolios on a continuous basis for reporting purposes. According to SFAS 157 (a.k.a. ASC 820) under US GAAP as well as IFRS 13 under International Accounting Standards these equity investments should be recorded at market values, when listed or based on comparables listed companies if not and in the absence of both conditions on financial modeling. PE managers were not used to this level of scrutiny in the past.  This, apart from creating a lot of work for valuation professionals and back offices, it is also a source of frustration for deal makers who now have to support book values many of which were made under better times.  But it also adds transparency.


By Pete Chatziplis, CFA, ACCA, MBA. The articles published here do not necessarily reflect the views of the Transatlantic Business Forum.

NYC Urbanomics Part 2: The New York City Food Sector – Market Overview and Investment Parameters

This post is part of a series of posts about the Economics of Urban Centers as illustrated within the context of global metrolpolis New York City.  In this we will cover premium food, and how NYers choose it.


Dining is considered an essential fabric of urban centers. Food in the 21st century is part of lifestyle, an experience, a city attraction and eventually big business. These dayts urban planners have to create a variety of dining options to attract professionals and commercial activity in a city.  Food operators have to go the extra mile and offer uniqueness celebrated in the likes of art, to the high end consumer.  And the consumer has to eventually shell out more for all of this.

Food has become part of the individual’s identity a statement same as clothing, housing, cars (just to remember French philosopher and sociologist Bourdieu). For example there’s green, biological, vegan, vegetarian, ethnic cuisine. Food producers provide information on whether protected origin, photos of people producing the food, whether renewable energy used in production or other environmentally friendly process, whether handpicked or other.  They stay in touch and interact with consumers online.

NYers take pride in having one of the best dining options around the world in terms of variety and quality. The total value of the New York food industry is around $ 19 billion (US Census) and covers a large number of companies and flavors. It is also one of the big income earners for municipal and state coffers and a big employer that caters for the millions of residents and tourists.

On the other hand, considering the cosmopolitan character the population increase, high incomes and many tourists it’s not strange that there’s so much interest in investing both from domestic and international investors and businesses.  Operating here can offer apart from significant return in its own right, visibility across the US and world and hence brand projection and as springboard for expansion.

Below we provide some basic information for aspiring market participants, this is not a complete market study, while we are open to discuss further.

  • Large size: total population of the extended NYC metro area is estimated at 20 million. New York has the highest population density in the US.  Manhattan’s population at around 2 million more than doubles during the day with the influx of work commuters, visitors and tourists.  NYC boasts some of the highest family incomes.  Outside locals tourists are estimated at 52 million with an average spending of $ 700 ($37bn total influx).
  • The bigger picture: The American food industry in total is a $1.1 trn market of which retail food (at home) accounts for $650 bn and foodservice (away from home food) for $ 450 billion of which fast food is $ 184 bn. Sales of specialty food is estimated at $70 nm and or organic food at $30 bn growing at high rates. New York City because of its position as probably the largest business center in the world is the necessary point of presence for global brands. Often NYC, with its international population and tourism serves as testing ground for many ideas and creates trends. Although the overall food market is mature, there is potential for explosive growth in sub-sectors as evidenced by the meteoric rise of Greek yogurt much of which started in NYC. It’s not uncommon for tourist to visit certain stores they’ve seen in movies, (for example the Boathouse or the Serendipity or to try products made famous here like the cronut or the cupcake). You may refer to our earlier post in this series regarding NYC’s redevelopment into an attractive investment destination and a consumer mega-center here: NYC Urbanomics Part 1: NYC Redevelopment, a template for urban renaissance and commercial boom.
  • Demographics: New York City has a strong international/cosmopolitan character. One in three New Yorkers are foreign-born.  Nearly 400,000 millionaires live in New York, mostly Manhattan.  Each borough has a different character with Manhattan being the more affluent and the big corporate, retail and tourist center.  There’s a higher percentage of prime age professionals (20-50) in Manhattan compared to the boroughs and lower percentage of children.  Families and small businesses are more common in the outer boroughs and incomes are generally lower there. However real estate prices have recently been increasing in Brooklyn and Queens even there (Long Island City).  Much of these increases have been due to gentrification and population inflow mainly from foreigners but as well Americans especially the young that have stormed the Brooklyn  All that is important in selecting the locations that are a good fit for a particular concept and then estimate traffic and consumption.

NYC Age Breakdown by Borough and Income Map

  • Spending Patterns: The average household income in most of Manhattan exceeds $100,000 (some of the richest areas in all America) with 12.4 % of that spent on food. In the other boroughs average family income is much lower (the poorest receive food aid). Manhattan residents, where the center of the dining industry, have high educational level and are very sensitive to service quality and healthy, biological and gourmet aspects of food. New Yorkers are characterized by lack of time and small household size factors that favor fast food consumption (40 % of Americans eat 4 times a day) with snacking being more common among the younger. The majority of Manhattan residents are actually single.  On top of that one has to appreciate the huge spending by the more than $50 million tourists, much of which goes to food. With so many commuters and tourists flocking the streets what’s more natural than a quick snack, especially with all the so many intriguing options?  Manhattan is becoming a sort of an urban theme park, a Disneyland for the well off and the many tourists. All these factors create an ideal environment for food away from home.
  • Food retail – Competition: NY is characterized by the absence of large national grocery chains (ie WalMart). The market is fragmented, there’s a large number of establishments divided between supermarket chains, convenience store, discount stores and specialty store. Supermarket chains are upscale, mainly in Manhattan such as Whole Foods, Food Emporium, D’Agostino or more affordable/middle class in the suburbs.  Real estate in NYC is expensive. That means that supermarkets are smaller and more cramped compared to those in the suburbs.  It also means that shelf space is costly which sets the bar high for product sales.  Trader Joe’s, the fast moving product chain, that is also present in Manhattan, has nationwide an average estimated revenue per square foot of $1,750 in 2010, more than double that for Whole Foods (Inside the secret world of Trader Joe’s).  Prices can be high but upscale consumers have as well high expectations from product quality and branding.  There are also many specialty stores (ethnic, deli, organic etc) where prices and margins are higher but they have to make up for lower volumes too.  Outside that, for many busy NYers small specialty and convenience stores are the grocery stores of choice.  Many ethnic stores in the boroughs cater to immigrants communities within which they are located and to their spending power.  Discount stores (like family dollar) serve lower income consumers; although prices there are low, profit margins are significant.

NYC Grocery Store Photos

  • Foodservice — Competition: establishments are divided into fast food, fast casual, casual dining and fine dining. The market is fragmented as well. There is a large number of establishments with most of restaurants being independent and to a much lesser extent franchised/multi establishment.  Apart from the large number of fine restaurants and celebrity chefs, mainly in Manhattan, NYC also offers all other options, from international cuisine, diners, ethnic food and very common street food (food trucks).

NYC Fast Food Store Photos

  • Foodservice segmentation: There’s everything in NYC, something for everybody. If NYC doesn’t have it, then probably you don’t want it, or maybe it’ll not going to be long until it has it…! Here are the main dining categories:
  • Casual and fine dining: Virtually all types of cuisine are available in good supply. Outside typical cuisines and styles (French, Chinese, Italian, American etc) variety extends to hybrids, for example vegan sushi and other; it’s up to innovation. Apart from being distinguished based on type of cuisine, establishment are also classified according to character/setup such as lounges, bistros, brasseries, gastropubs, etc A foodie paradise!
  • Fast food and Fast casual (both not offering full table service but the second being more expensive with upscale/unique design and most of food prepared in the store): The New York City fast food sector includes chains selling the traditional burgers (along traditional ones new specialty are gaining popularity: Bareburger, Five Guys), chicken (KFC), sandwich (Subway), international such as Mexican (Chipotle, Taco Bell), Asian(noodle) and other ethnic options, Bakery/Coffee (ie Panera, Starbucks), Pizza (Papa John’s, Domino’s) and other specialty stores (for example salad (Chop’t), seafood (Red Lobster) etc). The most popular type of fast food is the burger, followed by sandwiches and chicken. The fast casual niche is very promising especially in NYC.  It generates $21−22 bn nationally and is not only growing fast but also setting trends.  It’s more suitable for today’s consumer character same as original fast food chains revolutionized the industry in the 20th  Lately even McDonald’s said it will allow customization.

US Fast Food Store Breakdown

  • Foodmarkets: These are new arrivals to the NYC scene. They are very large stores that combine multiple restaurants and groceries usually centered around a theme. Eataly was the first one, offering all sorts of Italian products and cuisines, capitalizing on famous chef’s Mario Batali reputation and TV persona. It is very successful although the high investment. It has since expanded in other cities and locations. What’s interesting for Eataly is that it promoted the Italian culture through its store and eventually Italy as a destination. It is to be followed by a French themed foodmarket called Le District of the Poulakakos group, in the lower tip of Manhattan.  There are other such projects discussed or coming such as European themed Hudson Market and a global themed one discussed by famous chef and TV persona Bourdain.
  • Consumer profile: High end consumers in NYC are more interested in service, décor and experience; in fact maybe more than food. According to certain surveys this is a general trend.  As René Redzepi, the much celebrated Danish Michelin awarded chef puts it: “Our main mission at the restaurant and what I tell the staff when they leave here is, give your guests a sense of time and place. Whether it’s the product range, which is a big part of us, but also the whole atmosphere, the way that the restaurant is set. That’s how we give our guests a sense of time and place”. A Nielsen survey regarding wine consumer profiles’ is very revealing in this respect: almost half of wine sales are performed by wine enthusiast and image seekers that perceive the product as sort of a hobby or projection of them selves.  They spend a lot of time on research and to get educated on the product so the retailers have to cater by providing variety, good service and information.  Off course price is not their main concern.  Uniqueness, customization is key.



Given that there’s significant interest for investment in the NYC food sector lately we present below some basic information useful in evaluating the feasibility of such an endeavor.  There’s no doubt that operating in New York City offers many benefits in terms of return and visibility but at the same time the capital required is significant and so are the risks. Hence a very careful evaluation is necessary.   You may also refer to our earlier post in this series regarding NYC’s redevelopment into an attractive investment destination and a consumer mega-center here: NYC Urbanomics Part 1: NYC Redevelopment, a template for urban renaissance and commercial boom.

The information below is only indicative based research we have carried out for international chains and importers of upscale foods and opportunity evaluation regarding expansion in the NYC area.  We are able to discuss in more detail with investors and operators the feasibility of their ideas, entry barriers, get-to-market approach, business plan, operating, labor and tax issues, marketing plan and provide consulting services in this respect. We also have successful operating concepts to present to investors as well as proposals for greenfield developments.

  • Concept: As mentioned before upscale consumers are all about character and information, so customization is the name of the game. Fast casual chains offer this possibility (Bareburger, Chipotle etc) as well as premium service. It doesn’t hurt as well to center everything around an environmental/socially sensitive aspect something quite important for the millenials. There are various ways to create product differentiation for upscale pricing but let us keep this for our clients. On the other hand there are opportunities in the lower end of the market just as long keeps limitations into perspective.
  • Location: Manhattan or certain areas in Brooklyn and maybe Queens offer the highest incomes and favorable traffic and consumption patters. The location depends on the type of concept vs the area’s demographics, ie whether it’s more appealing to young or professionals or families.  Traffic also depends on location and whether this is a location with 24 hour traffic, business center with lunch snacking or nightlife spot.  Rents will also be higher for busy areas except if somebody is able to be ahead of the curve although the market has pretty much priced in these days future gentrification, subway expansion, new office and commercial development etc.  Although vacancy rates are low there is new store development as well. Furthermore supply can be crated from a large number of expiration of old leases or stores closing to make way to new concepts. A good real estate agent and lawyer can help a lot in this respect.

Financial Parameters:

  • Sales targets: McDonald’s still sets the standard in fast food. It has one of the highest sales per store at $2.6 million and successful fast casual chains are not far from that (Panera, $2,3m, Chipotle at $2,1m at 2012). Sandwich, coffee and pizza stores are lower than that.  Fine dining/small restaurants will have to aim for as high as $100 per person or higher while lower margin establishments survive on the high traffic/low price concept.  Regarding food import/wholesale we have already noted high shelf cost for retailers something that calls for low risk products ie products with brand awareness (ie marketing support), sales rep expenses and off course administrative and distribution.
  • The rent can be as high as over $100-150/ft per year in Manhattan and moving towards these directions in popular, up and coming locations in the boroughs, although generally lower there. By comparison average retail rent sought in Manhattan in spring 2013 was $116/sq.ft but in prime locations can go well into four digits (Street’s Sunny Side Costs Retailers More in Rent)
  • Wages: The minimum NYC wage is $8.75 per hour (end of 2014) and to be raised to $9 but wages can be higher depending on experience. National accommodation and food industry wages are about $13 an hour on average for all employees and $11.50 for nonsupervisory employees (Six industries that can’t find workers fast enough)  There’s ample labor supply in NYC although unemployment is getting low so good workers have options. There’s also a large number of undocumented immigrants working in the food sector in NYC; that’s a common secret. Healthcare insurance may be avoided if small business, but other business insurance is advised in a very litigious environment.
  • People: Taking into consideration the level of sophistication and competition as well as the lofty economic parameters it’s not strange that stakes are high in the NYC food sector. NYC retailers and restaurateurs have to invent ways to persuade their customer about their distinctive experience something that will justify higher prices. Yes there are new trends, new diets, molecular gastronomy, and other tantalizing tastes but in the end who cares about food? Who wants to eat after all? Actually people are trying hard not to eat and limit calorie intake. But they care about other issues such as the atmosphere, the concept.  There’s a large number of professional going into the product that may have nothing with food, for example architects, designers, concept consultants, marketers, digital/social media professionals not to mention dieticians, food safety and productions experts and other. Customer analytics and other marketing tools are important in analyzing client profiles.  As a result more money goes on sales & general expenses, what’s called customer acquisition, rather than product cost.  No misunderstanding, quality has to be there, this is a common denominator, a prerequisite.  But it’s the branding that feeds into the mind of the self-actualized consumer.  So the money to buy so many brains is important.  See for example the level of expenses going into design vs production for luxury products. This level of professionalism and investment is often mind-blowing for traditional operators.  In some occasions however some of the operators are able to realize trends and come up with fresh concepts on their own (for example Bareburger).
  • Regulations: Establishments have to comply with local food safety regulations and the NYC environment can be unforgiving due to humidity and large number of rodents. Food importers have to check for import quotas and other limitations.  Trading and selling alcoholic drinks require special licensing.  There are also zoning regulations regarding permitted commercial activities in a specific area as well as construction costs and procedures that have to be taken into consideration in the case of new endeavors, which can be lengthy. Setting up a legal entity is quite straightforward though.

Let us know about questions. We are happy to discuss your project or to present proven business concepts to invest (as franchisee or shareholders) or proposals for new projects.


This post is part of a series of posts about the Economics of Urban Centers as illustrated within the context of global metrolpolis New York City.  In this we cover premium food, and how NYers choose it.  You may refer to our earlier post in this series regarding NYC’s redevelopment and how it manage to take distance from a past of urban decline and turn into a consumer mega-center here: NYC Urbanomics Part 1: NYC Redevelopment, a template for urban renaissance and commercial boom.  In this post we also present some of the reasons NYC is an attractive investment destination as well as of the consumer profile there.


By Pete Chatziplis, CFA, ACCA, MBA. The articles published here do not necessarily reflect the views of the Transatlantic Business Forum. For more information on our consulting services please refer to our website at Transatlantic Business Forum..


NYC Urbanomics Μέρος 2: Ο Τομέας Τροφίμων της Νέας Υόρκης – Επισκόπηση Αγοράς και Παράμετροι Αξιολόγησης Επενδύσεων


Ο τομέας τροφίμων και εστίασης θεωρείται βασικό στοιχείο των μεγάλων σύγχρονων αστικών κέντρων. Η εστίαση στον 21ο αιώνα είναι μέρος του τρόπου ζωής, εμπειρία, τουριστικό αξιοθέατο, έκφραση κουλτούρας και τελικά μεγάλη επιχειρηματική δραστηριότητα. Στη σημερινή εποχή οι σχεδιαστές πόλεων πρέπει να προνοήσουν την ύπαρξη μεγάλης ποικιλίας επιλογών εστίασης για να προσελκύσουν επαγγελματίες και εμπορική δραστηριότητα σε μια πόλη. Οι εταιρίες εστίασης πρέπει να παρέχουν υψηλής ποιότητας φαγητό από σεφ που αντιμετωπίζονται σαν καλλιτέχνες. Και οι τελικά οι απαιτητικοί καταναλωτές καλούνται να ξοδέψουν αρκετά για αυτή την εμπειρία.

Τα τρόφιμα έχουν γίνει μέρος έκφρασης της ταυτότητας του ατόμου όπως τα ρούχα, το σπίτι, τα αυτοκίνητα (για να θυμηθούμε και τις θεωρίες του Γάλλου φιλόσοφου και κοινωνιολόγου Bourdieu). Για παράδειγμα, σήμερα υπάρχουν πολλοί τρόποι διατροφής όπως από βιολογικά τρόφιμα, vegetarian, vegan, έθνικ ή άλλα. Οι παραγωγοί τροφίμων παρέχουν πληροφορίες σχετικά με το εάν το τρόφιμο είναι προστατευόμενης προέλευσης, φωτογραφίες των παραγωγών, εάν έχουν χρησιμοποιηθεί ανανεώσιμες πηγές ενέργειας ή άλλες φιλικές προς το περιβάλλον διαδικασίες, εάν είναι χειροποίητα, ποιος είναι ο τρόπος εκτροφής και άλλα. Οι εταιρίες παρακολουθούν τις απόψεις των καταναλωτών και είναι σε συνεχή επικοινωνία με τους πελάτες τους μέσα από τα μέσα κοινωνικής δικτύωσης.

Η Νέα Υόρκη θεωρείται ότι έχει μια από τις καλύτερες αγορές τροφίμων και εστίασης παγκοσμίως λόγω της μεγάλης ποικιλίας και ποιότητας. Η συνολική αξία της αγοράς αυτής είναι περίπου $19 δισ (US Census) και καλύπτει ένα μεγάλο αριθμό εταιρειών και γεύσεων. Συνεισφέρει σημαντικά φορολογικά έσοδα στον δήμο και εκτός αυτού απασχολεί μεγάλο αριθμό ατόμων και παρέχει κρίσιμες υπηρεσίες στα εκατομμύρια των κατοίκων και των τουριστών.

Λαμβάνοντας υπόψη το κοσμοπολίτικο χαρακτήρα της πόλης, την αύξηση του πληθυσμού, τα υψηλά εισοδήματα και τον σημαντικό τουρισμό δεν είναι τυχαίο το γεγονός ότι υπάρχει τόσο μεγάλο ενδιαφέρον για επένδυση στον χώρο τροφίμων, τόσο από το εσωτερικό όσο και από διεθνείς επενδυτές και επιχειρήσεις. Δραστηριοποίηση στην Νέα Υόρκη μπορεί να προσφέρει, εκτός από σημαντική απόδοση, προβολή σε όλη την ΗΠΑ και τον κόσμο και ως εκ τούτου εφαλτήριο για διεθνή επέκταση.

Παρακάτω παρουσιάζουμε κάποιες βασικές παραμέτρους σχετικές με επενδύσεις στην Νέας Υόρκη, κάτι για το οποίο υπάρχει μεγάλο ενδιαφέρον τελευταία και από Ελληνικά συμφέροντα. Αυτό δεν είναι παράλογο δεδομένου ότι οι Ελληνικές εταιρίες έχουν φτάσει σε υψηλό επίπεδο υπηρεσιών και προϊόντων αρκετά από τα οποία θα μπορούσαν να σταθούν στην αγορά της Νέα Υόρκης, κάτω από σωστές προϋποθέσεις. Τα στοιχεία που δίνονται εδώ δεν αποτελούν μια πλήρη μελέτη αγοράς, απλά ενδεικτικά βασικά μεγέθη. Είμαστε διαθέσιμοι για να συζητήσουμε εκτενέστερα την ιδέα σας εάν υπάρχει σοβαρό επενδυτικό ενδιαφέρον και να δημιουργήσουμε ένα πλάνο δρασταηριοποίησης προσαρμοσμένο στα δεδομένα σας.

Μέγεθος αγοράς: ο συνολικός πληθυσμός της ευρύτερης μητροπολιτικής περιοχής Νέας Υόρκης υπολογίζεται στα 20 εκατομμύρια. Η περιοχή αυτή καλύπτει εκτός από την καθεαυτό πόλη της Νέας Υόρκης (η οποία χωρίζεται σε πέντε περιοχές: Μανχάταν, Μπρούκλυν, Κουινς, Μπρονξ και Στεϊτεν Αϊλαντ) αλλά και τις γειτνιάζουσες περιοχές των πολιτειών του Νιου Τζέρσευ, Κοννεκτικατ, Πενσυλβάνια και του Λονγκ Αϊλαντ πολλοί από τους κατοίκους των οποίων εργάζονται ή επισκέπτονται συχνά την Νέα Υόρκη. Η Νέα Υόρκη έχει την υψηλότερη πληθυσμιακή πυκνότητα στις ΗΠΑ. Ο πληθυσμός του Μανχάταν, που αποτελεί το κέντρο της Νέας Υόρκης και την πιο ακριβή περιοχή, ανέρχεται σε περίπου 2 εκατομμύρια αλλά υπερδιπλασιάζεται κατά τη διάρκεια της ημέρας λόγω των εργαζομένων, των επισκεπτών και των τουριστών. Η Νέα Υόρκη περιλαμβάνει ορισμένες από τις ακριβότερες συνοικίες στην Αμερική όπου τα μέσα οικογενειακά εισοδήματα ξεπερνούν τα $100,000 τον χρόνο. Οι τουρίστες εκτιμώνται σε 52 εκατομμύρια από τους οποίους το 80% είναι Αμερικανοί με μέσο όρο ημερήσιων δαπανών τα $700 ($ 37 δισ το συνολικό τουριστικό εισόδημα).

Η ευρύτερη αγορά/επενδυτική ευκαιρία: Η συνολική αγορά τροφίμων των ΗΠΑ ανέρχεται σε $ 1,1 τρις από τα οποία η αγορά λιανικής είναι περίπου $ 650 δις και της εστίασης $ 450 δις με $ 184 δις να αποτελούν το ταχυφαγητό. Οι πωλήσεις ειδικών τροφίμων (specialty foods δηλ gourmet κ.α.) υπολογίζεται σε $ 70 εκατ και των βιολογικών τροφίμων σε $ 30 δισ και αυξάνονται με υψηλούς ρυθμούς. Παρά το γεγονός ότι η συνολική αγορά των τροφίμων είναι ώριμη, υπάρχουν δυνατότητες για εκρηκτική ανάπτυξη σε επιμέρους τομείς, όπως αποδεικνύεται από τη επιτυχία του ελληνικού γιαουρτιού που μέσα σε λιγότερα από δέκα χρόνια έφτασε τα $3δις συνολικής αξίας κάτι το οποίο ξεκίνησε σε μεγάλο βαθμό από τη Νέα Υόρκη. Η Νέα Υόρκη λόγω της θέσης της ως το μεγαλύτερο επιχειρηματικό κέντρο στον κόσμο, είναι απαραίτητο σημείο παρουσίας για διεθνή εμπορικά σήματα. Επίσης η Νέα Υόρκη, με τον κοσμοπολίτικο χαρακτήρα της, τον πολυεθνικό πληθυσμό και τον τουρισμό, χρησιμεύει και ως βάση δοκιμής για νέες ιδέες και δημιουργία τάσεων. Είναι επίσης πολύ συνηθισμένο οι τουρίστες να επισκέπτονται καταστήματα που έχουμε δει σε ταινίες, (για παράδειγμα, το Boathouse ή το Serendipity) ή να δοκιμάζουν διάσημα φαγητά που έγιναν διάσημα στην Νέα Υόρκη όπως το cronut ή το cupcake. Για περισσότερα στοιχεία για την Νέα Υόρκη, την αναμόρφωσή της τα τελευταία χρόνια σε υπέρτατο εμπορικό κέντρο και την φυσιογνωμία των καταναλωτών εκεί μπορείτε να διαβάσετε και το προηγούμενο άρθρο μας της σειράς αυτής NYC Urbanomics Part 1: Αστική Αναμόρφωση της Νέας Υόρκης και Μεταμόρφωση στο Απόλυτο Εμπορικό Κέντρο.

Οι συνολικές Ελληνικές εξαγωγές τροφίμων στις ΗΠΑ ανέρχονται σε περίπου $200 εκατ πολύ χαμηλά σε σχέση με το αντίστοιχο σύνολο της ΕΕ (17δις). Τα σημαντικότερα Ελληνικά εξαγώγιμα προϊόντα είναι ελιές, ελαιόλαδο, τυρί φέτα και τυποποιημένα φρούτα. Οι περισσότερες εισαγωγές προωθούνται στην ομογένεια κυρίως στις πολιτείες της Νέας Υόρκης, New Jersey και Πενσυλβάνια ενώ η διείσδυση και προβολή στο Αμερικανικό κοινό είναι μικρή. Η Ελληνική κουζίνα είναι γνωστή μέσω των μεταναστών ενώ διατίθενται και αρκετά τυποποιημένα Ελληνικά τρόφιμα σε σουπερμάρκετ ή καταστήματα εστίασης (όπως πχ σπανακόπιτες, γύρος (αν και όχι ο αυθεντικός) τα οποία όμως επι το πλείστον έχουν χαμηλές τιμές, χαμηλή προστιθέμενη αξία και προωθούνται ως εθνικ και όχι ως γκουρμέ που απολαμβάνουν υψηλότερες τιμές. Βέβαια η δημιουργία γκουρμε προφίλ απαιτεί οργανωμένη πολιτική μαρκετινγκ και πωλήσεων και διαφημιστική υποστήριξη ίσως και σε συλλογικό επίπεδο. Η αγορά είναι κατακερματισμένη (fractured) αφού δραστηριοποιούνται μεγάλος αριθμός εισαγωγικών εταιριών και χονδρεμπόρων. Γενικά είναι δυνατή η είσοδος μικρών και νέων εταιριών αλλά τα κεφάλαια που απαιτούνται για προώθηση, κεφάλαιο κίνησης και ανάπτυξη είναι σημαντικά. Επίσης υπάρχουν κάποιοι κανονισμοί που πρέπει να λαμβάνονται υπόψη από νέους εισαγωγείς όπως η ύπαρξη ποσοστώσεων για ορισμένα προϊόντα (import quotas) και ειδικών αδειών (πχ για άδεια αλκοολούχων ποτών).

Πληθυσμιακά στοιχεία: Η Νέα Υόρκη έχει έντονο διεθνή / κοσμοπολίτικο χαρακτήρα. Ένας στους τρεις Νεοϋορκέζους έχει μεταναστεύσει από το εξωτερικό δηλ. είναι μετανάστης πρώτης γενιάς ενώ πολλοί άλλοι είναι δεύτερης ή τρίτης. Σχεδόν 400.000 εκατομμυριούχοι ζουν στη Νέα Υόρκη, ως επί το πλείστον στο Μανχάταν. Κάθε δημοτικό τμήμα έχει διαφορετικό χαρακτήρα με το Μανχάταν να είναι το πιο εύπορο και το μεγάλο επιχειρηματικό, εμπορικό και τουριστικό κέντρο. Οι κάτοικοι του Μανχάταν είναι σε μεγαλύτερο ποσοστό επαγγελματίες παραγωγικής ηλικίας (20-50 ετών) σε σύγκριση με τα άλλα διαμερίσματα όπου υπάρχουν αναλογικά περισσότερες οικογένειες και παιδιά. Τα εισοδήματα εκτός Μανχάταν είναι επίσης χαμηλότερα και οι εμπορικές επιχειρήσεις μικρότερου μεγέθους και δυνατοτήτων. Ωστόσο, οι τιμές των ακινήτων έχουν αρχίσει πρόσφατα να αυξάνονται και εκεί όπως στο Μπρούκλιν ακόμα και σε περιοχές του Κουίνς (πχ Long Island City). Ένα μεγάλο μέρος από τις αυξήσεις αυτές οφείλονταν στις προσπάθειες καλλωπισμού (gentrification) και την πληθυσμιακή εισροή κυρίως από αλλοδαπούς, αλλά και Αμερικανούς, ειδικά νέους, που έχουν πλημμυρίσει κυρίως το Μπρούκλιν τα τελευταία χρόνια. Όλα αυτά είναι σημαντικά όσο αφορά την επιλογή των κατάλληλων τοποθεσιών για συγκεκριμένα είδη καταστημάτων (concepts) και στη συνέχεια, την εκτίμηση της κυκλοφορίας και των πωλήσεών τους.

NYC Age Breakdown by Borough and Income Map

Στοιχεία καταναλωτικών δαπανών: Όπως ειπώθηκε το μέσο οικογενειακό εισόδημα σε μεγάλο μέρος του Μανχάταν υπερβαίνει τα 100 χιλιάδες δολάρια, το 12,4% του οποίου δαπανάται στη διατροφή. Στις άλλες περιοχές της Νέα Υόρκης το μέσο οικογενειακό εισόδημα είναι πολύ χαμηλότερο (οι πιο φτωχοί όμως λαμβάνουν και επισιτιστική βοήθεια). Οι κάτοικοι του Μανχάταν, που αποτελεί και το επίκεντρο της αγοράς φαγητού, εκτός από υψηλό εισόδημα έχουν και υψηλό μορφωτικό επίπεδο και είναι πολύ ευαισθητοποιημένοι σε θέματα ποιότητας υπηρεσιών και προϊόντων και προτιμούν μεταξύ άλλων υγιεινά, βιολογικά και γκουρμέ τρόφιμα. Οι Νεοϋορκέζοι χαρακτηρίζονται από έλλειψη χρόνου και μικρό μέγεθος νοικοκυριών κάτι που ευνοεί την κατανάλωση ταχυφαγητού (40% των Αμερικανών γευματίζουν 4 φορές την ημέρα) με τους νέους να είναι πιο επιρρεπείς στα συχνά μικρά γεύματα (snacking). Η πλειοψηφία των κατοίκων του Μανχάταν ζουν μόνοι τους κάτι που επίσης ευνοεί το ταχυφαγητό. Επίσης πολύ σημαντικός παράγοντας για την εστίαση είναι η παρουσία περισσοτέρων των 50 εκατομμυρίων τουριστών κάθε χρόνο και της συνεπακόλουθης τουριστική δαπάνης μεγάλο μέρος της οποίας καταλήγει στο φαγητό. Με τόσους πολλούς περαστικούς και τουρίστες στην πόλη τι πιο φυσικό βέβαια από ένα γρήγορο σνακ ή ένα γεύμα, δεδομένου ότι υπάρχουν και τόσες πολλές και ενδιαφέρουσες επιλογές. Θα μπορούσε να πει κάποιος ότι με τόσους τουρίστες και επιλογές το Μανχάταν τείνει να γίνει ένα είδος αστικού θεματικού πάρκου, ένα είδος Ντίσνεϊλαντ όπου επαγγελματίες υψηλού εισοδήματος, εύποροι κάτοικοι και τουρίστες σπεύδουν να απολαύσουν τις πολλές συγκινήσεις που προσφέρει. Όλοι αυτοί οι παράγοντες δημιουργούν ένα ιδανικό περιβάλλον για τη εστίαση και το τρόφιμο γενικώς μεταξύ άλλων.

Λιανικό εμπόριο τροφίμων – Ο ανταγωνισμός: Η Nέα Yόρκη χαρακτηρίζεται από την απουσία των μεγάλων Αμερικανικών αλυσίδων σουπερμάρκετ (πχ WalMart). Η αγορά μπορεί να χαρακτηριστεί κατακερματισμένη, αφού δραστηριοποιείται μεγάλος αριθμός μεγάλος αριθμός επιχειρήσεων λιανικής όπως αλυσίδες σουπερμάρκετ, μίνι-μάρκετ, εκπτωτικά καταστήματα (discount stores) και εξειδικευμένα κατάστημα (πχ gourmet, deli, οργανικά). Τα σουπερμάρκετ του Μανχάταν είναι σε μεγάλο ποσοστό ακριβά και υψηλής ποιότητας, όπως πχ το Whole Foods, το Food Emporium, το D’Agostino και άλλα ενώ πιο προσιτά στα μέσα εισοδήματα είναι τα σουπερμάρκετ που βρίσκονται στις τριγύρω περιοχές. Τα ακίνητα στην Νέα Υόρκη είναι ακριβά. Αυτό σημαίνει ότι τα σουπερμάρκετ είναι μικρότερα και πιο περιορισμένα σε χώρο σε σύγκριση με εκείνα άλλων πόλεων. Σημαίνει, επίσης, ότι ο χώρος στο ράφι κοστίζει πολύ στην επιχείρηση και για αυτό τον λόγο έχουν υψηλές απαιτήσεις όσο αφορά τις πωλήσεις και την κερδοφορία των προϊόντων. Το Trader Joe’s για παράδειγμα, μία αλυσίδα με λίγους κωδικούς και υψηλή κυκλοφορία αποθεμάτων, που δραστηριοποιείται και στο Μανχάταν, παρουσιάζει μέσο εκτιμώμενο όρο εσόδων ανά τετραγωνικό πόδι $1.750 δολάρια σε όλο το δίκτυό της το 2010, κάτι που αποτελεί κορυφαία επίδοση για την Αμερική και υπερβαίνει σχεδόν κατά το διπλάσιο το αντίστοιχο ποσό των Whole Foods (Inside the secret world of Trader Joe’s). Μπορεί οι τιμές των προϊόντων στο Μανχάταν να είναι υψηλές, αλλά υψηλές είναι επίσης και οι προσδοκίες από τους καταναλωτές όσο αφορά την ποιότητα και την όλη εικόνα (branding). Αν και οι πωλήσεις σε ορισμένα προϊόντα είναι υψηλές αυτό δεν σημαίνει ότι μπορούν από μόνες τους να υποστηρίξουν κάποια επιχείρηση αφού οι όγκοι πωλήσεων είναι περιορισμένοι (πχ για πολύ ακριβά ελαιόλαδα). Κατά το ίδιο τρόπο υπάρχουν πολλά εξειδικευμένα καταστήματα όπου διαθέτουν ενδεχομένως και μικρότερης επωνυμίας προϊόντα όπου οι τιμές και τα περιθώρια κέρδους είναι υψηλότερα, αλλά επίσης και οι όγκοι πωλήσεων είναι χαμηλότεροι. Έκτός αυτών πολλοί πολυάσχολοι και εργένηδες Νεοϋορκέζοι καταλήγουν να πραγματοποιούν πολλές αγορές σε μίνι-μάρκετ και ψιλικατζίδικα της γειτονιάς. Τα καταστήματα που έχουν φαγητά συγκεκριμένης προέλευσης (πχ Ελληνικά) βρίσκονται κυρίως στις περιφερειακές του Μανχάταν περιοχές κοντά σε κοινότητες μεταναστών και ανταποκρίνονται στην αγοραστική τους δυνατότητα. Τα εκπτωτικά καταστήματα εξυπηρετούν καταναλωτές με χαμηλότερα εισοδήματα (πχ προϊόντα των 99 σεντς κλπ) και παρόλο που οι τιμές τους είναι χαμηλές, τα περιθώρια κέρδους τους είναι σημαντικά.

NYC Grocery Store Photos

• Τομέας Εστίασης – Ο ανταγωνισμός: οι κύριες κατηγορίες καταστημάτων είναι το ταχυφαγητό που διακρίνεται στο κλασικό/τυποποιημένο ταχυφαγητό (fast food) και στο σχετικά νέο είδος του προσαρμοσμένου/θελκτικού ταχυφαγητού (fast casual)*, τα κοινά εστιατόρια και η εκλεπτυσμένη κουζίνα. Η αγορά και εδώ είναι κατακερματισμένη, καθώς υπάρχει μεγάλος αριθμός καταστημάτων με την συντριπτική πλειοψηφία τους να είναι ανεξάρτητα ενώ πολύ μικρός αριθμός ανήκει σε αλυσίδες (franchise). Εκτός από το μεγάλο αριθμό των εστιατορίων εκλεπτυσμένης κουζίνας και τους πολλούς διάσημους σεφ, τα οποία βρίσκονται κυρίως στο Μανχάταν, η Νέα Υόρκη προσφέρει κάθε είδους φαγητού και σε κάθε είδους ποιότητα όπως μικρά ταχυφαγεία, καντίνες (food trucks), διεθνή κουζίνα (κινέζικα, Μεξικανικά, Ελληνικά κλπ) και τα γνωστά diners τα οποία συχνά λειτουργούν όλο το 24ωρο.

NYC Fast Food Store Photos

Τομέας Εστίασης – Καταμερισμός αγοράς: Όπως είπαμε υπάρχει κάθε είδους τρόφιμο και τύπος εστιατορίου στην Νέα Υόρκη. Ακολουθεί περιγραφή των κυριοτέρων κατηγοριών:

– Κοινά εστιατόρια και εκλεπτυσμένη κουζίνα: Υπάρχει μεγάλη ποικιλία και σε σημαντικές ποσότητες. Εκτός από τις κλασσικές κουζίνες (πχ γαλλική, κινεζική, ιταλική, αμερικανική, ιαπωνική κλπ) η ποικιλία πλέον επεκτείνεται σε συνδυασμούς πχ vegan σούσι κ.α., υπάρχουν δηλαδή περιθώρια καινοτομίας. Εκτός από το είδος της κουζίνας, τα εστιατόρια κατατάσσονται ανάλογα και με το χαρακτήρα του εσωτερικού τους σχεδιασμού πχ lounge/bar, μπιστρό, μπυραρίες, gastropubs, κ.λ.π. Πραγματικά είναι ένας παράδεισος για τους καλοφαγάδες (ή όπως αποκαλούνται στο εξωτερικό: foodies)!

– Τυποποιημένο ταχυφαγητό και προσαρμοσμένο ταχυφαγητό (fast casual): και τα δύο είδη fast food διακρίνονται από το γεγονός ότι είναι self-service (δεν υπάρχει σερβίρισμα) αλλά η διαφορά τους έγκειται ότι στο προσαρμοσμένο το οποίο έχει αρχίσει να εμφανίζεται τα τελευταία χρόνια, το φαγητό σε μεγάλο βαθμός παρασκευάζεται μέσα στο κατάστημα, έχουν υψηλού επιπέδου/διακριτή αισθητική και η μέση δαπάνη ανά πελάτη είναι υψηλότερη (παραδείγματα αποτελούν το Panera (αρτοζαχαροπλαστική), Chipotle (μεξικάνικο) κα). Όσο αφορά το είδος των τροφίμων ο χώρος του ταχυφαγητού περιλαμβάνει τα κλασικά χάμπουργκερ (όπου όμως κερδίζουν δημοτικότητα νέα εξειδικευμένα concept όπως το Bareburger, το Five Guys, το Shake Shack), το κοτόπουλο (πχ KFC), τα σάντουιτσάδικα (πχ Subway), το τοπικό/διεθνές ταχυφαγητό (πχ μεξικάνικα (Taco Bell), ασιατικά (είδη noodle) κ.α), ζαχαροπλαστεία/καφέ (πχ Dunkin’ Donuts), πιτσαρίες (Papa John’s, Domino’s) και άλλα εξειδικευμένα είδη (για παράδειγμα σαλάτες (Chop’t), θαλασσινά (Red Lobster) κλπ). Τα τελευταία χρόνια παρατηρείται και ενδιαφέρον για τον κλασσικό γύρο (όχι το είδος που ανέκαθεν έχει συνδεθεί με το όνομα gyros στην Αμερική (δηλ το πολτοποιημένο μίγμα) αλλά το αυθεντικό που αποτελείται από κομμάτια κρέας και το οποίο διατίθεται σε μεγάλο βαθμό από Αραβες (είναι κυρίως από πρόβειο κρέας και λέγεται shawarma (σουάρμα)) αλλά και τελευταία από Έλληνες και ειδικά από την Μεγα Γύρος (Mega Yeeros) του Γ. Νίκα και άλλων επενδυτών που έχει δημιουργήσει την αλυσίδα GRK στο Μανχάταν και λειτουργούν και μονάδα παραγωγής στο γειτονικό New Jersey όπου προμηθεύει και τρίτους (σημειώνεται ότι οι υπάρχουσες διακρατικές εμπορικές συμφωνίες Ελλάδας-ΗΠΑ δεν επιτρέπουν την εισαγωγή νωπού κρέατος). Η Μεγα Γύρος έχει καταφέρει να διακινεί περισσότερο από 12 τόνους αυθεντικό γύρο στην Αμερική μέσα σε σύντομο χρονικό διάστημα και έχει προοπτικές περαιτέρω ανάπτυξης**. Να σημειωθεί εδώ ότι ένα εμπόδιο για τον γύρο από χοιρινό, αποτελεί και το ότι το κρέας αυτό απαγορεύεται από την Ιουδαϊκή και Μουσουλμανική θρησκεία οι οποίες έχουν πολλά μέλη στην Νέα Υόρκη. Πάντως τα περιθώρια ανάπτυξης εκτός των κοινοτήτων αυτών είναι σημαντικά.

Το πιο δημοφιλές είδος ταχυφαγητού στην Αμερική είναι το μπιφτέκι (burger) με περίπου 2 στα 5 καταστήματα να παρέχουν αυτό το κλασικό για τους Αμερικανούς φαγητό, ακολουθούμενο από το σάντουιτς και το κοτόπουλο (βλέπε σχήμα US Fast Food Segments). Ο κλάδος του προσαρμοσμένου ταχυφαγητού (fast casual) εκτός από ισχυρή παρουσία στην αγορά της Νέας Υόρκης είναι ανερχόμενος και σε όλες τις ΗΠΑ όπου οι συνολικές πωλήσεις του εκτιμώνται στα $21- $22 δις δολάρια, αυξανόμενες με ταχείς ρυθμούς αλλά και ταυτόχρονα πρωτοπορεί στη δημιουργία τάσεων. Το είδος της εστίασης αυτής είναι πιο κατάλληλο για τον χαρακτήρα των σημερινών καταναλωτών κατά τον ίδιο τρόπο που οι κλασικές αλυσίδες έφεραν την επανάσταση και πρωτοστάτησαν στην εστίαση πιο παλιά, στο δεύτερο μισό του 20ου αιώνα. Θέλοντας να παρακολουθήσουν τις νέες τάσεις, ακόμη και τα McDonalds ανακοίνωσαν τελευταία ότι θα παρέχουν σε κάποιο βαθμό δυνατότητα παραλλαγών στα προϊόντα. Η ποικιλία του τελικού προϊόντος δηλ. προσαρμογή στα γούστα του πελάτη είναι βασικό χαρακτηριστικό της εποχής μας και παρέχεται από τις αλυσίδες προσαρμοσμένου ταχυφαγητού (πχ στα Chipotle ο πελάτης διαλέγει συστατικά, στα Bareburger υπάρχει δυνατότητα διαφοροποίησης τους τρόπου ψησίματος και είδους κρέατος κλπ).

US Fast Food Store Breakdown

– Παντοπωλείο/Εστιατόριο(Foodmarkets): Τα καταστήματα αυτά αποτελούν νέο σχετικά είδος για την Νέα Υόρκη. Συνδυάζουν παντοπωλείο και εστιατόριο κάτω από ένα κοινό θέμα. Ουσιαστικά η μόδα αυτή ήρθε με την δημιουργία του Eataly το οποίο παρέχει όλως των ειδών τα Ιταλικά τρόφιμα. Διαθέτει πολύ μεγάλους χώρους, σε άκρως εμπορική περιοχή, και στεγάζει διαφορετικών ειδών κουζινών (δηλ. ζυμαρικά, ψητά, ψάρια, μεζέ, ζαχαροπλαστείο κλπ) καθώς και προϊόντα όλα γύρω από το Ιταλικό θέμα. Τα μαγαζιά αυτά απαιτούν μεγάλες επενδύσεις, συνεπώς έχουν αυξημένο ρίσκο, και προσεκτικό σχεδιασμό. Το Eataly επίσης εκμεταλλεύεται την ύπαρξη του πολύ γνωστού σέφ Mario Batali ο οποίος έχει πολλές εκπομπές στην τηλεόραση. Το ενδιαφέρον με το είδος(concept) αυτό είναι ότι μέσα από το φαγητό με την πληροφόρηση που παρέχεται στο κατάστημα προωθείται και η εικόνα της Ιταλίας στους πολλούς τουρίστες που επισκέπτονται την Νέα Υόρκη. Το κατάστημα έχει μεγάλη επιτυχία και επεκτείνεται και σε άλλες πόλεις της Αμερικής. Σε αυτή την τάση βαδίζει και το foodmarket με γαλλικό θέμα Le District του γκρούπ Πουλακάκου, στο κάτω άκρο του Μανχάταν κοντά στους άλλοτε δίδυμους πύργους μια περιοχή που αναβαθμίζεται. Άλλα ανάλογα επιχειρήματα θα αποτελέσουν Hudson Market με Ευρωπαϊκό και Βρετανικό θέμα και ένα ακόμα με θέμα διεθνές φαγητό του ποδιού (international street food) που συζητάει ο επίσης γνωστός από την τηλεόραση σεφ Anthony Bourdain.

Καταναλωτικό προφίλ: Για τους απαιτητικούς καταναλωτές της Νέας Υόρκης οι ανωτέρου επιπέδου υπηρεσίες, ο διάκοσμος η όλη εμπειρία, ίσως είναι πιο σημαντικά από το ίδιο το φαγητό. Όπως λεει ο βραβευμένος με Michelin διάσημος Δανός σεφ René Redzepi: “Κύρια αποστολή μας στο εστιατόριο και ότι λέω στο προσωπικό όταν φεύγουν από εδώ είναι, να δίνεται στους πελάτες μια αίσθηση του χρόνου και του τόπου. Είτε αυτό αφορά την ποικιλία των προϊόντων, το οποίο είναι ένα μεγάλο μέρος αυτού που κάνουμε, αλλά και η όλη ατμόσφαιρα, ο τρόπος που το εστιατόριο έχει διαρρυθμιστεί. Αυτό δίνουμε στους επισκέπτες μας μια αίσθηση του χρόνου και του τόπου ». Σύμφωνα με ορισμένες έρευνες αυτό είναι μια γενικότερη τάση της εποχής. Ερευνά της Nielsen σχετικά με τα προφίλ των καταναλωτών κρασιού υπογραμμίζει ακριβώς την διάσταση αυτή: σχεδόν το ήμισυ των πωλήσεων κρασιού πραγματοποιούνται από ενθουσιώδεις οπαδούς του κρασιού (wine enthusiasts) και αυτούς που αποσκοπούν στην αυτοπροβολή τους (image seekers). Δηλαδή για τους μισούς καταναλωτές το προϊόν είναι ένα είδος χόμπι ή καταξίωσης και όχι τρόφιμο. Οι καταναλωτές αυτοί αναλώνουν πολύ χρόνο στο να συλλέξουν κάθε πληροφορία για το προϊόν, πρωτίστως για λόγους ενδιαφέροντος και για αυτό τα καταστήματα πρέπει να τους παρέχουν ποικιλία, καλή εξυπηρέτηση και πληροφόρηση ώστε να κεντρίζουν το ενδιαφέρον τους. Φυσικά η τιμή δεν αποτελεί το κύριο μέλημά τους. Είναι αυτό που θα λέγαμε αυτο-πραγματωμένοι καταναλωτές (self-actualized) οι οποίοι έχουν ικανοποιήσει τις βασικές τους βιολογικές ανάγκες αναζητούν εμπειρίες που τους κάνουν να νιώθουν μοναδικοί. Μιλάμε φυσικά για την κορυφή της κοινωνικοοικονομικής πυραμίδας. Η μοναδικότητα της εμπειρίας και η προσαρμογή στις προτιμήσεις του πελάτη είναι το κλειδί.


Με δεδομένο ότι υπάρχει σημαντικό ενδιαφέρον τα τελευταία χρόνια για εξαγωγές στην Αμερική ή και για απευθείας δραστηριοποίηση παρακάτω παρουσιάζουμε κάποια βασικά λειτουργικά μεγέθη που συνήθως ερωτούν ενδιαφερόμενοι επιχειρηματίες. Οι πληροφορίες αυτές είναι γενικές και θα πρέπει να θεωρηθούν μόνο ως μία αρχική ένδειξη η οποία θα πρέπει να ακολουθηθεί από λεπτομερή έρευνα σε βάθος για το συγκεκριμένο προϊόν ή είδος εστίασης. Η πληροφόρηση βασίζεται σε έρευνες αγοράς που έχουμε πραγματοποιήσει τα τελευταία χρόνια για εταιρίες εστίασης και εισαγωγείς ποιοτικών τροφίμων στην περιοχή της Νέας Υόρκης. Είμαστε σε θέση να συζητήσουμε πιο λεπτομερώς με ενδιαφερόμενους επενδυτές και επιχειρηματίες τη δυνατότητα υλοποίησης των ιδεών τους όπως πχ στρατηγική εισόδου στην αγορά, ενδεχόμενους κινδύνους, καταρτισμό επιχειρηματικού σχεδίου, λειτουργικά, εργασιακά, φορολογικά θέματα, στρατηγική προβολής και μάρκετινγκ κ.α.. Είμαστε επίσης σε θέση να προτείνουμε σε επενδυτές επιτυχημένες ήδη λειτουργούσες επιχειρηματικές ιδέες ή να παρουσιάσουμε προτάσεις για νέες επιχειρηματικές δραστηριότητες. Όπως έχουμε ήδη αναφέρει εκτός από την απόδοση που μπορεί να αποφέρει μια επένδυση από την Νέα Υόρκη και μόνο, παρέχει και την δυνατότητα προβολής στην υπόλοιπη Αμερική και διεθνώς κάτι το οποίο είναι σημαντικό για διεθνή σήματα. Τα μεγέθη επένδυσης είναι βέβαια μεγάλα στην Νέα Υόρκη και ανάλογα είναι τα ρίσκα. Για περισσότερα στοιχεία για την Νέα Υόρκη, την αναμόρφωσή της τα τελευταία χρόνια σε υπέρτατο εμπορικό κέντρο και την φυσιογνωμία των καταναλωτών εκεί μπορείτε να διαβάσετε και το προηγούμενο άρθρο μας της σειράς αυτής NYC Urbanomics Part 1: Αστική Αναμόρφωση της Νέας Υόρκης και Μεταμόρφωση στο Απόλυτο Εμπορικό Κέντρο.

Επιχειρηματικό Θέμα (Business Concept): Όπως προαναφέρθηκε ειδικά για το ανώτερου επιπέδου καταναλωτές πολύ βασικά ζητούμενα είναι η μοναδικότητα του χαρακτήρα (concept) της υπηρεσίας εστίασης και η παροχή επιλογών στον πελάτη. Εταιρίες προσαρμοσμένου ταχυφαγητού (fast casual) προσφέρουν τη δυνατότητα αυτή (πχ Bareburger, Chipotle κλπ) καθώς και υψηλής ποιότητας υπηρεσίες. Δεν βλάπτει, επίσης να υπάρχει και μία παράμετρος του θέματος που να έχει να κάνει με την οικολογία ή άλλα κοινωνικά θέματα (πχ υποστήριξη αδυνάτων μέσω προσφορών κλπ) καθώς ειδικά για την νεότερη γενιά των ΗΠΑ (20-35) τέτοια θέματα αποτελούν πολύ σημαντικό στοιχείο της κουλτούρας τους. Υπάρχουν διάφοροι τρόποι για να δημιουργηθεί μια ξεχωριστή ταυτότητας ή ενός προϊόντος και συνεπακόλουθα δυνατότητα υψηλότερης τιμολόγησης αλλά επιτρέψτε μας να κρατήσουμε τη συζήτηση αυτή για τους πελάτες μας. Από την άλλη πλευρά, φυσικά υπάρχουν δυνατότητες να απευθυνθεί κάποιος και στα μέσα και χαμηλότερα τμήματα της αγοράς και να επιτύχει καλές αποδόσεις, με την προϋπόθεση ότι έχουν ληφθεί υπόψη οι δυνατότητες και ιδιομορφίες των αγορών αυτών.

Τοποθεσία: Το Μανχάταν και ορισμένες περιοχές στο Μπρούκλιν και ίσως τελευταία και του Queens προσφέρουν τα υψηλότερα εισοδήματα και ευνοϊκότερες συνθήκες από πλευράς κυκλοφορίας και κατανάλωσης. Η τοποθεσία για κάθε είδους καταστήματος εξαρτάται από την θεματολογία/ταυτότητα του (concept) τις πληθυσμιακές ομάδες που απευθύνεται (δηλ. επαγγελματίες, νέοι, οικογένειες κλπ) και άλλα. Υπάρχουν περιοχές που έχουν κίνηση καθ’όλο το 24ωρο (πρωινό, γεύμα στην εργασία, νυχτερινή διασκέδαση, περαστικοί κλπ) και άλλες όχι. Τα ενοίκια έχουν εκτιναχθεί τελευταία για τις πολυσύχναστες και ακριβές περιοχές. Ενδεχομένως να υπάρχουν κάποιες ευκαιρίες σε ανερχόμενες περιοχές, αλλά η αγορά συνήθως τις προεξοφλεί γρήγορα. (πχ περιοχές που εξευγενίζονται (gentrification), όπου επεκτείνεται το μετρό, περιοχές με νέα γραφεία και καταστήματα κ.λ.π). Αν και υπάρχει μικρός αριθμός ξενοίκιαστων μαγαζιών και αυτά για μικρό διάστημα στις δημοφιλείς περιοχές υπάρχουν και δυνατότητες εγκατάστασης σε νέα καταστήματα που δημιουργούνται ή σε παλαιά όπου λήγουν παλαιότερα/χαμηλότερα ενοικιαστήρια ή ακόμα και στη θέση μαγαζιών που κλείνουν για να κάνουν χώρο σε νέα. Ένας καλός κτηματομεσίτης και δικηγόρος μπορούν να βοηθήσουν πολύ σε αυτό το τομέα.

Οικονομικές Παράμετροι:

Στόχοι πωλήσεων: Τα McDonald ‘s παρά τις ανακατατάξεις της αγοράς εξακολουθούν να θέτουν τα πρότυπα στο χώρο του ταχυφαγητού. Παρουσιάζουν από τις υψηλότερες πωλήσεις ανά κατάστημα οι οποίες ανέρχονταν σε $2,6 εκατ το 2012. Παρά το διαφορετικό μοντέλο, οι επιτυχημένες αλυσίδες προσαρμοσμένου ταχυφαγητού (fast casual) δεν είναι και πολύ μακριά από το νούμερο αυτό (Panera, $ 2,3εκ, Chipotle $ 2,1 εκ. το 2012). Τα καταστήματα σάντουιτς, καφέ και πίτσας έχουν χαμηλότερες πωλήσεις. Εστιατόρια ποιοτικής κουζίνας/μικρά εστιατόρια, όπου δηλαδή η ταχύτητα εναλλαγής της πελατείας είναι χαμηλότερη θα πρέπει να στοχεύουν ενδεχομένως σε υψηλό μέσο έσοδο ανά πελάτη, της τάξης των $ 100 ή περισσότερο, για να επιβιώσουν. Όποιος επισκεφτεί το Μανχάταν θα αντιληφθεί ότι τέτοιες τιμές παρατηρούνται συχνά. Καταστήματα με χαμηλότερες τιμές επιβιώνουν ακολουθώντας το μοντέλο υψηλή επισκεψιμότητα/χαμηλή τιμή εκτός κι αν βρίσκονται εκτός Μανχάταν και όπου τα κόστη είναι χαμηλότερα.
Όσον αφορά τα εισαγόμενα τρόφιμα έχουμε ήδη αναφερθεί στο υψηλό λειτουργικό κόστος στο λιανεμπόριο το οποίο συνεπάγεται και υψηλές απαιτήσεις κερδοφορίας. Για να τοποθετηθεί κάποιο νέο προϊόν θα πρέπει να παρέχει κάποια εχέγγυα ως προς τις πωλήσεις δηλ να είναι γνωστό προϊόν, σε σωστή τιμή για την συγκεκριμένη πελατεία, με καλό περιθώριο κέρδους και υποστήριξη από μάρκετινγκ, πωλητές και φυσικά διανομή. Τα έξοδα πωλήσεως και προβολής είναι σημαντικά. Δεν γίνεται να χτυπάει κανείς φλέβα χρυσού κάθε μέρα όπως έγινε με τη Ελληνικό γιαούρτι που καθιερώθηκε σχεδόν τυχαία και ακόμα και εκεί την πρώτη θέση δεν κατέχει Ελληνική εταιρία.

Ενοίκιο: οι τιμές μπορεί να είναι υψηλές ίσως και να ξεπερνούν τα $100-150 ανά τετρ. πόδι ανά έτος στο Μανχάταν ενώ αρχίζουν να κινούνται προς αυτές τις κατευθύνσεις και σε δημοφιλείς περιοχές κοντά στο Μανχάταν. Γενικά όμως οι τιμές είναι χαμηλότερες εκτός Μανχάταν. Αναφέρουμε ενδεικτικά ότι για εμπορικά καταστήματα στο Μανχάταν το μέσο ενοίκιο το 2013 ήταν $ 116 / τετρ.πόδι αλλά σε προνομιούχες περιοχές μπορεί να φτάσει σε τέτραψήφια νούμερα (Street’s Sunny Side Costs Retailers More in Rent ) (Για παράδειγμα: ενοίκιο $100 ανα τετρ. πόδι ετησίως μεταφράζεται σε $1.000 ανα τ.μ. (1 τ.μ. έχει περίπου 10 τετρ. πόδια, ή 10,76 για την ακρίβεια) το οποίο σημαίνει περίπου $90/μήνα δηλ για ένα κατάστημα 500 τ.μ το νοίκι μπορεί να φτάνει και τα $44,500 (ή €35,500))

Μισθοί: το κατώτατο ωρομίσθιο στην Νέα Υόρκη είναι $ 8.75 ανά ώρα (από αρχές 2015) και πρόκειται να αυξηθεί περαιτέρω στα $ 9. Βέβαια οι μισθοί εξαρτώνται από την εμπειρία. Το μέσο ωρομίσθιο σε παναμερικανικό επίπεδο στον χώρο τουρισμού και τροφίμων είναι περίπου $13 για όλους τους εργαζόμενους και $ 11.50 για την βασική βαθμίδα/nonsupervisory (6 industries that can’t find workers fast enough). Υπάρχει άφθονη προσφορά εργασίας στη Νέα Υόρκη, αν και η ανεργία είναι χαμηλή σχετικά με άλλες περιοχές, λόγω της οικονομικής ανάπτυξης και έτσι οι καλοί εργαζόμενοι έχουν επιλογές. Είναι κοινό μυστικό επίσης ότι υπάρχει ένας μεγάλος αριθμός παράνομων μεταναστών που εργάζονται στον τομέα εστίασης στη Νέα Υόρκη. Δεν είναι απαραίτητη ακόμα η παροχή ασφάλισης υγείας για μικρές επιχειρήσεις, αλλά από την άλλη συνίσταται η ασφαλιστική κάλυψη για άλλους επιχειρηματικούς κινδύνους μια που υπάρχει το περιβάλλον είναι εξαιρετικά δικομανές.

Ανθρώπινο Δυναμικό και Πνευματική Εργασία: Δεδομένου του υψηλού επιπέδου μελέτης που απαιτείται για νέες επενδύσεις όπως και του σημαντικού κόστους και ανταγωνισμού η δραστηριοποίηση στην αγορά δεν πρέπει να θεωρείται εύκολη υπόθεση. Οι επιχειρήσεις εστίασης και τροφίμων χρειάζεται να εφεύρουν τρόπους για να πείσουν τους πελάτες για την μοναδικότητα της εμπειρίας που προσφέρουν έτσι ώστε να δικαιολογήσουν τις υψηλότερες τιμές. Ναι, υπάρχουν νέες τάσεις, νέες δίαιτες, μοριακή γαστρονομία, και άλλες εξεζητημένες γεύσεις, αλλά τελικά ποιος έχει ανάγκη να φαει στην σημερινή εποχή; Στην πραγματικότητα οι άνθρωποι προσπαθούν περισσότερο να μην τρωνε και να μειώνουν τις θερμίδες που λαμβάνουν. Ειδικά στην Νέα Υόρκη το θέμα της εμφάνισης, της υγείας και της άσκησης είναι εμμονή. Αλλά από την άλλη οι καταναλωτές ενδιαφέρονται για ην μοναδικότητα, την ατμόσφαιρα, την φιλοσοφία μιας υπηρεσίας και αν τους κάνει να νιώθουν ξεχωριστοί (δηλ. όπως έχουμε ήδη αναφέρει αυτο-πραγματωμένοι/self-actualized) δεδομένου και ότι μιλάμε για την ανώτερη κοινωνική βαθμίδα με υψηλό επίπεδο εισοδήματος και μόρφωσης. Συνεπώς υπάρχει ένας μεγάλος αριθμός επαγγελματιών που απασχολούνται στον χώρο οι οποίοι μπορεί να μην έχουν να κάνουν τίποτα με το τρόφιμο καθεαυτό αλλά με την εικόνα. Για παράδειγμα, αρχιτέκτονες, σχεδιαστές, σύμβουλοι θέματος (concept), σύμβουλοι μαρκετινγκ, επαγγελματίες ψηφιακών μέσων και μέσων κοινωνικής δικτύωσης για να μην αναφέρουμε διαιτολόγους, τεχνικούς ασφάλειας και παραγωγής τροφίμων ή οικονομικούς συμβούλους (κοστολόγηση, προϋπολογισμός και διαχείριση κλπ). Ο κύκλος των επαγγελματιών αυτών ολοένα αυξάνει με την εξέλιξη των τεχνολογιών όπως π.χ. αναλυτές του προφίλ των πελατών (customer analytics). Ως αποτέλεσμα, περισσότερα χρήματα μπορεί να πηγαίνουν στην υποστήριξη των πωλήσεων και τα γενικά έξοδα, αυτό που αποκαλείται κόστος απόκτησης του πελάτη, παρά στο καθεαυτό κόστος του προϊόντος. Δεν θέλουμε να παρεξηγηθούμε ότι η ποιότητα του προϊόντος δεν μετράει. Αυτό εξυπακούεται, είναι δεδομένο, κοινός παρονομαστής. Αλλά είναι η εικόνα που τροφοδοτεί το μυαλό του σύγχρονου αυτοπραγματωμένου (self-actualized) καταναλωτή. Συνεπώς και η δαπάνη για να αγοραστεί η πνευματική συνεισφορά τόσων επαγγελματιών είναι σημαντική. Ας δούμε για παράδειγμα το ύψος των δαπανών που πηγαίνει στο σχεδιασμό προϊόντων πολυτέλειας σε σχέση με το κόστος παραγωγής τους που είναι πολύ χαμηλότερο (γι’αυτό άλλωστε και η απομίμηση είναι κερδοφόρα). Το λέμε αυτό γιατί το επίπεδο της πνευματικής εργασίας που απαιτείται είναι πολύ σημαντικό και κάτι το νέο σε σχέση με το παρελθόν. Αυτό ξενίζει κάποιους επιχειρηματίες. Το βλέπει κανείς αυτό στην πράξη με την αλλαγή του επιχειρηματικού τοπίου. Οι καιροί αλλάζουν και απαιτούν ανάλογες επιχειρηματικές προσαρμογές. Παράλληλα δεν είναι δυνατό να προωθηθούν νέες ιδέες και προϊόντα από επιχειρηματικές υποδομές του παρελθόντος χωρίς βέβαια να υποτιμούμε την εμπειρία και τις επιτυχίες τους. Νέα προϊόντα και υπηρεσίες μπορούν να ευδοκιμήσουν συ συνεργασία με ανάλογες επιχειρήσεις και όχι να προσπαθούν επι ματαίω να συνεταιριστούν με παρωχημένες πρακτικές. Σε ορισμένες περιπτώσεις, ωστόσο, ορισμένοι καινοτόμοι επιχειρηματίες είναι σε θέση να αντιληφθούν τις τάσεις από μόνοι τους και να προχωρήσουν σε σύγχρονες επιτυχημένες ιδέες (όπως για παράδειγμα το Bareburger).

Κανονισμοί: Τα καταστήματα τροφίμων και εστίασης πρέπει να συμμορφώνονται με τους τοπικούς κανονισμούς λειτουργίας όσο αφορά την ασφάλεια των τροφίμων. Κάτι τέτοιο εκτός από υποχρέωση αποτελεί και συνετή πρακτική, μια που η υγρασία της Νέας Υόρκης και τα πολλά τρωκτικά μπορούν εύκολα να δημιουργήσουν υγειονομικά προβλήματα. Νέοι εισαγωγείς τροφίμων πρέπει να ελέγξουν τις ποσοστώσεις εισαγωγής και άλλους περιορισμούς που μπορεί να υπάρχουν. Συνιστάται η συνεργασία με πράκτορα εκτελωνισμού. Για την διακίνηση υπάρχει δυνατότητα συνεργασίας με κάποια αποθήκη αλλά θα πρέπει κάποιος να λάβει υπόψη τα σημαντικά έξοδα προώθησης (πωλητές, προσφορές κλπ) ενός προϊόντος τα οποία ειδικά για νέα προϊόντα μπορεί να είναι σημαντικά και να μη καλύπτονται από τις προμήθειες επί των πωλήσεων. Ειδικά για την εμπορία και πώληση αλκοολούχων ποτών απαιτείται ειδική άδεια και το πλαίσιο είναι αυστηρό. Υπάρχουν, επίσης, προκαθορισμένες ζώνες δραστηριοτήτων στην πόλη όπου επιτρέπονται συγκεκριμένες εμπορικές χρήσεις το οποίο θα πρέπει να λαμβάνεται υπόψη για νέα καταστήματα ή αποθήκες όπως και το κόστος κατασκευής και οι σχετικές διαδικασίες οι οποίες μπορεί να είναι και χρονοβόρες. Η ίδρυση εταιρικής οντότητας είναι αρκετά απλή υπόθεση. Τέλος, θα πρέπει να ληφθούν υπόψη και θέματα άδειας εργασίας σε περίπτωση που το προσωπικό δεν είναι Αμερικανοί.

Αυτά αποτελούν σε γενικές γραμμές κάποιες από τις πιο συχνές ερωτήσεις ενδιαφερόμενων επενδυτών στο χώρο της εστίασης ή και εξαγωγέων. Όπως είπαμε μπορούμε να συζητήσουμε πιο λεπτομερώς σε περίπτωση που κάποιος σοβαρός επιχειρηματίες ενδιαφέρεται να δραστηριοποιηθεί καθώς και να παρέχουμε συμβουλευτικές υπηρεσίες σε αυτή την κατεύθυνση. Είμαστε επίσης σε θέση να σας προτείνουμε έτοιμες δοκιμασμένες επιχειρηματικές προτάσεις για επένδυση (με franchise ή ως μέτοχοι) όπως και προτάσεις για νέες επιχειρήσεις.


Αυτό το άρθρο είναι μέρος μιας σειράς δημοσιεύσεων που αφορούν τις οικονομίες των μεγάλων αστικών κέντρων όπου ως βάση ανάλυσης χρησιμοποιείται η Νέα Υόρκη, ένα από τα μεγαλύτερα και ίσως πιο σημαντικό κέντρο διεθνώς.  Σε αυτό το άρθρο καλύπτουμε το χώρο του ποιοτικού τροφίμου και πως οι Νεοϋορκέζοι το προσεγγίζουν.  Δείτε προηγούμενο άρθρο αυτής της σειράς σχετικά με τον τρόπο που έχει αναμορφωθεί και αναπτυχθεί η Νέα Υόρκη τα τελευταία χρόνια διαφεύγοντας από την υποβάθμιση του παρελθόντος (NYC Urbanomics Part 1: NYC Redevelopment, a template for urban renaissance and commercial boom). Στο άρθρο αυτό αναφέρονται και κάποια δεδομένα σχετικά με την ελκυστικότητα της Νέα Υόρκης ως χώρος επένδυσης καθώς και το προφίλ των καταναλωτών εκεί.

Συντάχθηκε από τον Παναγιώτη Χατζηπλή, CFA, ACCA, MBA.

Το άρθρο αυτό βασίστηκε με βάση μελέτη αγοράς του υπογράφοντος.  Το Transatlantic Business Forum δεν μπορεί να θεωρηθεί ότι συμμερίζεται τις απόψεις των άρθρων που φιλοξενεί.  Για μια λεπτομερή ανάλυση των υπηρεσιών και των εκδόσεών του Transatlantic Business Forum μπορείτε να ανατρέξετε στο website μας


* Σημειώνουμε εδώ ότι διαλέξαμε τον όρο προσαρμοσμένο για την απόδοση στην Ελληνική του όρου fast casual σε σχέση με το οικείο, φιλικό ή ευπροσήγορο που υποδηλώνει ο όρος casual, γιατί για εμάς η διαφορά του είδους αυτού είναι ότι προσπαθεί να προσεγγίσει τις προτιμήσεις συγκεκριμένων υποομάδων καταναλωτών και να τους κάνει να νιώσουν πιο κοντά στο προϊόν και στο concept δίνοντας τους την δυνατότητα να επιλέξουν συστατικά και έχοντας και ένα πιο ζεστό διάκοσμο που εξυπηρετεί το συγκεκριμένο concept}.

** Επιτρέψτε μας εδώ να κάνουμε μια παρεμβολή και να δώσουμε συγχαρητήρια σε τέτοιες προσπάθειες οι οποίες «βάζουν τα πράγματα στη θέση τους» σχετικά με το τι είναι και τι δεν είναι Ελληνική γαστρονομία, ακόμα και για τον ταπεινό γύρο. Κυρίως όμως τέτοιες προσπάθειες τολμούν να δείξουν την πρόοδο της Ελληνικής επιχειρηματικότητας στο κέντρο της Αμερικής σε μια απαιτητική αγορά που δεν καλύπτεται με «ταξίδια Σαββατοκύριακού» από την Αθήνα αλλά χρειάζονται πλέον σχεδιασμό και επένδυση σε οργανωτική αυτοτέλεια και κεφάλαιο. Ελπίζουμε ότι το γνωστό επιχείρημα ότι η Ελλάδα είναι μικρή για να παράγει, να εξάγει και να δραστηριοποιείται διεθνώς με τέτοιες προσπάθειες θα αρχίσει να ξεθωριάζει έστω και αν αυτό γίνεται σε κάτι σχετικά ταπεινό όπως το τρόφιμο (ίσως κάποτε αυτό να φτάσει να συμπεριλάβει και επιχειρηματικές δραστηριότητες σε τεχνολογία και αλλού που να μπορέσουν να απορροφήσουν τους πάρα πολλούς αξιόλογους Έλληνες επιστήμονες-ερευνητές σε Ελλάδα και εξωτερικό). Για την ώρα περιμένουμε συνέχεια και από άλλους φιλόδοξους ενδιαφερόμενους στο χώρο του τροφίμου όπως καθώς και την προσπάθεια πιστοποίησης των εστιατορίων που διαθέτουν ελληνικά τρόφιμα. Μια προσπάθεια που συζητιέται αρκετό καιρό αλλά κάπου σκοντάφτει και θα μπορούσε να στηρίξει την Ελληνική παραγωγή αλλά και να ισχυροποιήσει την Ελληνική γαστρονομία δεδομένης της δημοτικότητας της μεσογειακής δίαιτας στην Αμερική, η οποία όμως γίνεται αντικείμενο εκμετάλλευσης στη βάση της γεωγραφικής/προσχηματικής διάστασης αλλά όχι της πραγματικής έννοια της λέξης.

***Σχετικά με το ελαιόλαδο το οποίο συγκεντρώνει από τα μεγαλύτερα ενδιαφέροντα για εισαγωγή στην Αμερική μπορείτε να διαβάσετε και ένα προηγούμενο άρθρο σχετικά με τις αντιξοότητες όσο αφορά τον ανταγωνισμό στις ΗΠΑ: Virginity; a dubious virtue when it comes to olive oil and the overlooked costs for consumers and the economy.

NYC Urbanomics Part 1: New York City Redevelopment, a template for urban renaissance and commercial boom

—————————————————————————————————-This is the first of a series of posts about the Economics of Urban Centers as depicted by trends in economy and society in one of the most important globally: New York City. In this first post we’ll cover how NYC has emerged over the last decades into a thriving commercial and real estate center, taking distance from a depressed past. We’ll present facts and thoughts on how this transformation was brought about in what may serve as inspiration for others. The analysis will also highlight some of the reasons for which NYC is a prime consumer market for existing and new businesses and products.


According to the 2012 Economist Intelligence Unit, New York City is ranked on top of the competitiveness list of all cities globally.  New York is characterized as an Alpha ++ world center, sharing this highest title only with London. Although not the most populous globally, NYC is considered of immense importance as developments there can have an effect around the world.  Its importance is also demonstrated by ability to attract capital, businesses, talent and visitors. For these reason NYC, is the necessary point of presence for global businesses and brands but can also serve as launching pad for new products and concepts.

Some interesting NYC highlights:

  • NYC’s population is estimated at 8.3 million, spread over its five boroughs (Manhattan, Queens, Brooklyn, Bronx and State Island). It is growing and expected to surpass 9 million by 2020.  The broader NYC metropolitan area, includes parts of Long Island, Connecticut, New Jersey, even Pennsylvania. This area has a total population of 20 million.  Many of them commute to NYC’s center daily where population almost doubles during the workday.  Manhattan is the most densely populated in the US; as illustrated by the many high-rises that keep on spreading there as in the surrounding boroughs.
  • NYC’s GDP stands at $1.4 trn or 11% of the whole US. If taken separately, this could place it in the top 20 countries worldwide, close to Australia.  In the same way NYC’s theoretical GDP per capita is estimated at $57,000 by the Brookings Institute which could place it higher than countries such as Japan, France or Germany.  NYC differs from the rest of the US in terms of demographics, character and economy. For all these factors NYC can be approached as a separate market on its own comparable to those of Belgium or Switzerland.
  • New York boasts some of the most expensive neighborhoods in all America with family incomes exceeding $100,000 for a large part of Manhattan. Other high income areas are located in New Jersey, Long Island and Connecticut Nearly 400,000 millionaires live in New York. Retail space is one of the most expensive in the world. Multimillion apartments are sold to international investors and new residential skyscrapers go up as fast as ever to cater for this demand.

NYC Population and Tourism 1900-2010

  • NYC’s economy has recovered well after the 2007-2008 financial crisis and is being diversified away from overreliance to the financial sector, assisted by tourism as well as investment in real estate, education, new media and technology. Population is increasing driven by internal and international immigration. New York City has evolved from the tumultuous ‘70s of urban decay and population decline to a magnet for tourism and expensive real estate investment.  There are currently 52 million tourists each year steadily growing, contribution $37bn to the economy. Who would imagine that as recent as in the 90’s?

So how did this happen?


Much has been attributed, sort of a cornerstone, to the increase in safety and gentrification. Back in the ’70s-‘80s, NYC was a dangerous place, even in its iconic Times Square, as depicted in this era’s movies.  It’s almost hard to imagine that today, same as it’s hard to envision the tenement era misery.  Much of the crime reduction has been attributed to Mayor Giuliani and his heritage of tough handed policing such as the ambiguous “broken windows” concept.  There were 2,245 murders in 1990 but have fallen by 90% to 240 in 2013.  Other crime statistics have also been in decline. That off course it’s making it safe for people to live there or visit and spend on retail and entertainment. And that in turn is building confidence for real estate and other business investment.

42nd street in 70s and 2010

Urban landscaping

This has to do with architecture and creating communities that promote certain consumer, leisure or business activities. For example, much of the Times Square turnaround has been attributed to the arrival of high profile business offices, starting with advertising firm Conde Nast a move considered odd at that time.  In this context whole neighborhoods have been redeveloped, often changing names to take distance from their past. The process is well documented: first avant-garde artists and youth move in driven by low prices and inspiration from disenchanted surroundings.  NYC being liberal and welcoming assists to that. Soon others flock in for this unique character and to rub shoulders with the famous. Prices start to go up with preexisting residents moving out and eventually the artists themselves.  That’s what happened, with some variations, to SoHo, Village, Tribeca, DUMBO, Lower East Side, Meatpacking.  The trend has been assisted by rezoning policies. During Bloomberg’s administration almost 40% of New York has been rezoned, changing use for large blocks and transforming once industrials sites. Meatpacking or the Brooklyn river side parks are such examples.  Once industrial uses are phased out, new businesses step in to support residential development.

City branding

This we would say involves the development of a city image that promotes a place as a destination. A tool for enhancing NYC’s image and establishing it as a magnet internationally is through arts such as movies, music and fiction. “If you can make it there, you can make it anywhere” the saying goes that has stuck with many, even probably if it’s probably harder to make it in other places.  On the local radio and TV, New York is called “the greatest city in the world”. This might be true under some metrics but it’s quite subjective isn’t it? In any case saying it, is believing it; it sticks.  This image development didn’t happen accidentally either. Filming in NYC has been benefited from a municipal program instigated some 40 years ago (see NYC’s Mayor’s Office of Film, Theatre & Broadcasting (MOFTB)). This has also created many jobs such as film crews, catering and other support not to mention celebrity coverage.

Population increase and Urbanization

As traditional economic thought has it, an economy is growing where population is growing and vice versa. NYC’s population has considerably increased during the last 30 years both from domestic and international immigration.  Apart from the quest for opportunities this is also attributed to an attitude shift among younger generations that now favor urbanization and city centers over suburbs. According to the 2013 Urban Land Institute Survey, 62% of Americans planning to move in the next five years, would prefer to settle in mix-use communities (they offer entertainment, shops, offices).  Indeed in 2011, for the first time, population growth outpaced suburban growth.  As Michael Bloomberg put it in his last speech as Mayor: “It’s clear that the golden age of the suburb is over, and it’s being replaced by a new urban renaissance”.  

Urban trends by generation

The younger generation in particular, called the Millenials (or Generation Y) are the ones favoring urban centers. The Millenials (estimated at 80 million in the US) are more individualistic, challenge status quo, drive less, are more sensitive to civic issues and activism such as ecology. They are more attached to technology and online communities, less committed to employers than previous generations and more interested in work-life balance that allows for free-time.  They not only change city planning but marketing as well.

Technology and startups

Among the most critical parts of NYC’s population increase have been the influx of the young and the brightest.  This has been assisted by high paid jobs in finance and law but more recently from a lively startup scene that is now compared to that of the West Coast.  Silicon Alley in Manhattan or the Brooklyn Navy Yard are such startup and tech hubs. Business sectors are been reinvented. The loss of print media is counterbalanced by the rise in online and social media.  Technology growth is supported by conscious political decisions such as expansion of Columbia’s Engineering School and the development of the Cornell-Technion Graduate School at Roosevelt Island.  Another critical component is availability of financing.  Venture Capital funds invested in the New York City area were valued at $1.2 billion, in the fourth quarter of 2013 according to PWC research. This marked a 49% increase over the same period the year before, surpassing Boston for the first time since 2001. NYC is now only trailing Silicon Valley in this area, the undisputed leaders, that raised $3.2 billion during the same period.

The special character

The saying goes that NYers are a special breed.  May be this is a myth may be not. It’s still an intriguing thought. But who are the NYers? Those born there or the ones that immigrated? The NYers of the tough past? The high net worth investors? The aspiring artists? The young transplants searching for urban thrills? Those searching a break? The yuppies? The old school? Probably all of them.  So it’s probably difficult to pinpoint to a common denominator. NYers seem rude by American standards but then again coexist in a multiethnic, multiracial, multidenominational environment, they are self-consumed but civic, and although liberal they coexist with the highest income inequalities. Manhattan is one of the most densely populated American cities yet over 50% of its residents live alone. (Going Solo: The Extraordinary Rise and Surprising Appeal of Living Alone, 2013, Eric Klinberg). In a way living together in isolation This is not typical for the US and may illustrate differences in character. Back in 1957, a University of Michigan survey showed that 80% of respondents believed that people who preferred being unmarried were “sick,” “immoral,” or “neurotic.”  Something like a Scorcese or Woody Allen movie character or if you subscribe to the notion that media create stereotypes or reflect them popular series like Seinfeld, Girls, Sex and the City, Friends etc.  Back in the 50’s more than 70% of US adults were married something that although changing now still from the norm in NYC.  So what are the implications? No matter what the NY character is allowing for so much variety, freedom of expression but also privacy probably fuelled population growth mainly by singles. It would have been more difficult for families to move in Manhattan let alone afford it.  Living alone doesn’t come cheap even when sharing apartments.  This in turn supports or justifies high real estate prices.

Real Estate boom

NYC real estate prices have soared over time. Median sales price in Manhattan has reached $1,050,000 ($3,500,000 for townhouses) in 2013 according to Trulia and Douglas Elliman more than doubling over the last decade with average price per sq. ft at $1,260. Median rental price reached $3,100 with a vacancy rate of just 2.8%.  Brooklyn has also developed rapidly with prices reaching those of Manhattan especially at the neighborhoods close to it such as Williamsburg and more lately downtown Brooklyn that have attracted a crowd of young professionals, startups and hipsters, a self-contained community. Although the other boroughs have not followed at the same pace there are pockets of interest developing in Long Island City in Queens that has seen spectacular development with high-rises lately.  Proximity to Manhattan also counts in this migration as higher prices there are pushing people further and further. There’s even talk about South Bronx. It’s now called SoBro…

NYC avg price per sq feet 2000-2013

And if you’d think that was it, then wait to see the new wave of megastructures currently under development such as Hudson Yards, 432 Park (89floors, the tallest residential at least building in NYC, penthouse sold for $95m), One57, 30 Park Place (68 floors), 225 West 57th Street (88 floors), 220 Central Park South (41 floors).

Chinese buyers invested $22 bn on real estate between March 2013-2014 up from $12.8 billion the year before according to the National Association of Realtors. It’s something more than simple pied-à-terre; it’s trophy investment. New expensive buildings on 57th with views on Central Park have earned it the name Billionaire’s Belt. The retail sector is booming.  Seventyone fashion stores opened in 2012, one every 5 days and even this metric can hardly illustrate the level of activity. Prime retail rents go for as high as $3,500 per square foot.

We shouldn’t forget mentioning the office space coming in the market with the World Trade Center development. Conde Nast has left Times Square to occupy One World Trade Center and the nearby former World Financial Center is turning into a dining wonder. Development in Hudson Yards and subway expansion coming in line for first time after many years, accommodate coverage over wider areas.

Eventually NYC real estate has developed into a coveted, safe investment. An interesting aspect is that with so much foreign investment a risk of recession for the city is not purely dependent on the US economy. On the other hand a crisis could be just as easily triggered by overseas economic instability. And at the same time problems here will be felt far away.

There’s the other side too

Closing we wouldn’t like to ignore some negative effects from development. Gentrification and tough police practices don’t come without complaints. The financially weaker suffer from housing prices. They have to leave their neighborhoods or pay a higher percentage of salary to rent than in other US cities, pretty much living month to month.  Until the ‘70s in most US metro areas average median homes worth roughly three times median income; in New York now the ratio reaches 6 or 7 and during the housing boom at 10 (How Can We Be So Dense?, Forbes). In NYC the average rent to income ratio is 50% in 2012 while in Miami at 29% (Priciest Cities to Rent, CNBC). Many have to move out, whole communities and lives change. But the social effects are a discussion we won’t cover in this post; we only focused on the business/commercial aspect of the development.

The NYC self-actualized consumer profile

NYC, or at least Manhattan, is pretty much run as a business; companies go there to hire the best, access high returns and promote their global image. Through that they provide income for the city directly as well as through their employees that bear a high living cost for all the amenities offered. Tourists flock in to see the numerous NYC attractions promoted by media while new ones are continuously created (such as the High Line and other parks, new museums etc). Capital flows into high-end real estate, clothing, luxury goods and gourmet food creating many jobs.  But earning these consumer dollars is not straightforward.  Consumer preferences in such upscale markets tend to satisfy not some basic needs but self-actualization or projection of status, , it’s maybe what Veblen called “conspicuous consumption” and Bourdieu “identity statement”.

Marketers have to adopt new techniques to cater for the self-actualized consumer psyche. We will cover the economics and characterizes of the self-actualized consumer in other posts as it applies in doing business in retail, food or other.

Closing: NYC a template for urban redevelopment and economic growth but at what cost?

New York always was a great business center. But during the last couple decades NYC has gone a long distance from the rough ‘70s and ‘80s to evolve into a coveted real estate investment destination and a consumer Mecca. Global brands can’t afford not to be present there and new concepts are tested and spread out globally. This transformation couldn’t have happened accidentally.  Certain policy decisions as well as intelligent urban planning have been critical in promoting the city’s image and in attracting immigration and the type of business activity that can favor growth.  We tried to identify some of these policies in order to provide food for thought for other urban development attempts elsewhere.  Off course there are always positive and negative effects in such situations.  There are complaints for NYC’s loss of character and high cost of living especially for the weakest.

Some may call it a global center, some a business, some playground of the rich or Theme Park for grown ups. A type of Disneyland, a Manhattan-land if one could coin this term, for urban consumers and tourists.  Probably Travis Bickle (the Taxi Driver protagonist) wouldn’t recognize NYC any more; he would have found it very hard to fit in anyway….


By Pete Chatziplis, CFA, ACCA, MBA. The articles published here do not necessarily reflect the views of the Transatlantic Business Forum.

We predicted it! M&A Activity Surge in Q3 2014 back to precrisis levels

Alongside the stockmarket, there’s another sector now starting to erase recession losses: Mergers & Acquisitions. Activity in the US has surged in the first nine month of 2014 helping uplift global volumes towards precrisis levels.

In the first three quarters of 2014 global M&A value reached US$2.5tr up 52% from US$1.7tr in the same period last year, according to Mergermarket (Monthly M&A Insider 3Q 2014 edition). By comparison global M&A volumes have hovered around $2.3 tr following the 2009 crisis, so we have already covered that ground in three quarters. It seems that 2014 will end strong contrary to 2013 when the US government shutdown slowed the market. By comparison in 2006-2007 M&A spiked to $3.7 tr. We have actually predicted this breakthrough in our last year’s post (M&A 2013 Activity Update, the Middle Market and Critical Success Factors) by analyzing US GDP, stockmarket and economical cycle patterns. It seems that at least in the last couple of cycles M&A breaks out towards the end of the cycle while GDP growth stays strong and the stockmarket starts to level out. As we noted last year, “looking at the latest two economic cycles, the fact that we’re four years in the current one, the economy keeps on growing and the stockmarket is breaking new highs could one bet, just even by looking at the graphs(below), that M&As will come back with a bang in 2014 or most probably 2015?” Admittedly there’s a heavy US weight on this argument but then again North America is the largest M&A market and hence barometer of global activity. In any case there’s no need for a question mark anymore.

7. M&A DJIA and GDP %yoy and Points synthesis_Corrected
Based on that, we can very well be looking now at a few good years of M&A activity, assuming that nothing happens to end the trend prematurely. The discontinuation of QE, robust corporate profitability and sound balance sheets all point towards that. We can expect the M&A boom to persist even as stockmarket growth tapers off or even reverse since M&A activity to some extent lags behind it. M&A may even persist during the first years into a downturn when companies rush to acquire weaker competitors.

M&A Motivations: growing, expanding and the taxman

Main drivers behind M&A have been buying resources or market share to consolidate presence. In a tepid GDP environment this is preferred to organic growth. Access to technology and IP play also a part especially in internet and pharmaceuticals while resources and consolidation is mainly a driver in energy, consumer, pharmaceuticals and telecoms. Another recent motivation has been US tax benefits arising from inverse transactions and headquarter relocation although this practice has attracted attention and was criticized by the US Treasury. The main however factor behind the M&A explosion is the return of large transactions involving listed companies same as in the 2006-2008 boom period. The difference this time around is that the main driver is strategic investing rather than LBOs and PE activity.

Geography breakdown: US in the center with strong cross border M&A

The highest M&A activity has been reported in North America rising to $1.2tr from around $950bn the same period in 2013, ie a 25% increase! The region’s comparative attractiveness increased both for foreign and domestic investors, something precipitated by US$ strengthening and some re-shoring. Europe, amid challenging economic conditions, has seen good growth especially in the first half of 2014 reaching $722bn in the first three quarters, 12.5% up compared to full year 2013 according to Mergermarket. UK has been leading the charts there. Asia continues to grow and gaining weight in global M&A reaching almost 19% of global value in 3Q 2014 with significant activity in China, Japan and recently South Korea.

2. Global M&A Value

Cross-border M&A volume surged 132% so far this year to account for 39% of global activity according to Reuters (Global M&A at seven-year high as big corporate deals return), assisted to a large extent by inversion deals. U.S. cross-border M&A saw record volumes, both inbound and outbound. There were $205 bn in outbound deals during first nine months of 2014, with UK companies being the top targets. The U.S. was also a top destination for inbound M&A at $305 billion, led by Canadian and German acquirers according to FoxBusiness (Deal Frenzy: 2014 Sees Record M&A Volume). Transatlantic dealmaking i.e. that involving American and European companies more than doubled in the first half of 2014 to €128 bn, a 156% increase according to Mergermarket (EMEA Deal Drivers 1H 2014). Asian companies are also investing in the US to gain market access. Main drivers for cross border transactions are access to consumers and IP Although human capital is the primary driver for only a small number of transactions (8%) and that mainly in search of a lower cost base, it is nevertheless one of the most important considerations (25%) for M&A success. Other concerns are employee retention, cultural barriers, politics and regulatory framework. Cross-border acquirers are mainly shopping for consumers in emerging markets, resources in Africa, intellectual property in US and Japan, manufacturing assets in Europe or for lower cost production elsewhere (Baker McKenzie, Going Global: Strategy and Execution in Cross-border M&A, June2014).

Industry breakdown: Oil, drugs and streaming

Energy has seen the highest activity both globally (18% of deal value) and in the US, followed by pharmaceuticals (16%) and then consumer and industrials. Below we briefly cover trends and notable deals in these sectors in US and Europe, which are the main focus areas of this blog.

Energy: Activity has been driven by consolidation and access to resources. The largest transaction in the energy sector involves the consolidation of the Kinder Morgan group for a total value close to $70bn. Recently Halliburton announced an offer for Baker Hughes for $35b. Falling oil prices may accentuate consolidation trends.

Healthcare has seen high activity in 2014 even though some large announced transactions were later aborted. Pfizer unsuccessfully bid for AstraZeneca ($116bn) and Abbvie for Ireland-based Shire ($54bn), at least as this is written. After a long drama Dublin based generics drugmaker Actavis succeeded in its $66 bn pursuit of promising botox maker Allergan. It has been speculated that tax benefits were part of some of these transactions and that may have affected their prospects since they cannot alone substantiate a transaction. On the other hand a much more credible driver are operational efficiencies especially when it comes to realigning business lines. For example Bayer AG bought Merck’s consumer business for $14bnn and Eli Lilly bought Novartis’ Animal Health division (€3.9bn). Other than that Walgreen acquired UK’s Alliance Boots for $24bn to expand internationally and Actavis bought US’s specialty producer Forest Laboratories (€16.8bn) in its quest to grow. In the medical device sector Medtronic Inc bought Dublin based Covidien Plc (€34bn). Apart from large deals there’s also activity in the lower end of the market, especially with biotech companies where PEs also participate. There’s also interest in the convergence of software and healthcare services to increase operating efficiencies and patient treatment.

Consumer: notable deals so far are the $16bn acquisition of US’s Beam distiller by Japan’s Suntory, increasing coverage in the premium spirits sector as well R.J. Reynolds’ acquisition of Lorillard Tobacco for $27.4 bn seeking consolidation in a highly regulated sector. Burger King proceeded with the $11 bn purchase of Canada’s coffee-and-doughnut chain Tim Horton which although denied, some speculate can offer tax benefits. Note as well of acquisition underperforming Red Lobster casual dining chain by private equity.

TMT: M&A activity in telecoms is driven by consolidation and convergence between the various TMT sub-sectors (wireless, broadband, content, cable). It’s interesting to see how technology and market developments in broadband cost and content delivery will shape up the industry going forward. Notable transactions in the US are Comcast’s proposed takeover of Time Warner Cable at $45.2 bn to build scale and AT&T’s $48.5 bn purchase of DirecTV. Let’s not also forget Murdoch’s Twenty-First Century Fox $75bn aborted offer for Time Warner. In Europe Altice acquired mobile operator SFR from Vivendi ($17bn) to complement its telecom services. Oi SA, Brazil’s biggest phone company, agreed to merge with Portugal Telecom (€8.6bn) to form a large transatlantic operator. On the technology side, high margin revenue growth is the main driver for M&As in big data, social media, mobile computing and Software-as-a-Service (SaaS) sectors. Technology and internet saw significant activity in the US notably with Facebook’s $19bn WhatsApp acquisition.

Financial services: activity is subdued compared to the years before the crisis. Regulation, legacy issues, capital restrictions have decreased appetite in banks. Regulators are wary of further consolidation in the sector. The financial technology space however is much more attractive and evolving and will see a number of deals (for example in payments and IT infrastructure). M&A is also sluggish in insurance with some activity arising possibly from international expansion such as Japan’s Dai-ichi Life’s acquisition of Alabama-based Protective Life (US$5.7bn). It’s interesting to see as well how new healthcare coverage laws in the US will play out. Finally there’s consolidation in asset management with smaller or underperforming managers in a difficult fundraising environment being absorbed. There’s even talk of acquisition between private equity companies.

• Apart from the above, interesting transactions involved European cement makers Holcim and Lafarge (€29b) while Volkswagen acquired Swedish truckmaker AG Scania for €6,6bn to further consolidate its presence.

Deal Size: Return of the mega deals and Middle Market heating up

As already mentioned mega deals are currently the main factor behind M&A growth. Mega deals in the US where they are more frequent, accounted for 42% of the overall M&A value in the first three quarters of 2014 up from around 28% in the years following the 2009 crisis. As a matter of fact, mega deals, those of over $5b in value have reached 2007-2008 boom levels, another indicator of the M&A market returning to precrisis territory. Average deal size in North America in Q3 2014 is at its highest since Q2 2007 at US$371mn, mainly due to some high value transactions (Mergermarket Monthly Insider 3Q 2014). Mega deals are less frequent outside the US though. Average deal size Europe and Asia is generally smaller. In the first nine months of 2014 average deal size there was almost 40%-50% below the US.

We have a specific interest in middle market transactions in this blog. Although the mega deals are taking up the spotlight, there’s large volume of deals taking place in the background with significant value created or lost and alongside significant effects for local economies. Middle market deals offer room for significant value creation as we argued in our past posts and require significant input by management and advisors to bring fruit (Private Equity 2013 Update and Success Factors for Value Realization). Furthermore a deal considered middle market or even small by US standards might actually be a mega deal in another region and by that attract much more attention by local regulators and communities so have to be approached by increased level of diligence and sensitivity, reminiscent of that for mega-deals. For that special attention and M&A advisory requirements we do not view middle market deals from a US size standpoint in the global context. Well experienced M&A advisors can make all the difference between success or failure in the context of cross-border transactions both in the pre-acquisition and post-acquisition phase in the same way as for highly visible mega deals.

Total value of US Middle market deals in the $250-500m range amounted to $54m during the first half of 2014 compared to $70m for all 2013. In the higher $500-2bn bracket value reached $143m in the same period in the first nine months of 2014, compared to $233m in full year 2013. So activity here is satisfactory even if not at the same level as for larger transactions and off course there’s a high volume due to smaller deal sizes. Certain sectors maybe more represented in middle market M&A such as consumer products, business services and manufacturing while mega deals are more concentrated around healthcare, energy and tech, even though mid size deals also take place there involving niche players. Deals here can be driven by value creation, consolidation (you may call that scaling up), succession or financial distress. There’s significant room for value realization in the presence of experienced strategic investors or operating partners. For that, specialized funds with a middle market focus have lately been setup. PEs are more keen in the middle market especially in niche subsectors in industrial, business services and technology. For more information on middle market M&A and value creation you can refer to our past posts: M&A 2013 Activity Update, the Middle Market and Critical Success Factors, Private Equity 2013 Update and Success Factors for Value Realization, Middle market cross-border M&As set to grow.

3. NAmerican M&A Split 1H2014

Even though the loss of the spotlight to mega deals, the overall trend is positive in middle market and deals are becoming more expensive. Multiples (EV/EBITDA) for the $50-250m went from 6.5 in 2010 to 8.5 in 1Q2014 another sign of market health (Axial Forum, Valuation Inflation: Middle Market Multiples on the Rise, John Slater, Focus Investment Banking, July 9, 2014). Multiples in larger middle market transactions ($500m to $1bn) have risen to 12x in 3Q14 according to Factset (US M&A Trends & News Oct 2014). The outlook is positive for middle market considering among others the exit planning for the many baby boomer business owners in this part of the economy. Other drivers are consolidation, changing demographics and consumer tastes, technology, debt financing, PE exits, globalization and value creation as we have covered in the past.

Private Equity: Home-cleaning

Activity in the private equity space has not followed the overall M&A market’s explosive growth. The first half of 2014 saw 432 buyouts in North America for US$80bn total worth. That was a 13% decrease from in H1 2013 (US$92bn) according to Mergermarket, but then again last years there were a couple of mega deals that made the difference. Apart from large deals, those over $1b, the bulk of buyouts are valued at less than US$100m, so we are really talking middle market here. As a matter of fact that makes more sense as we covered on past posts (for example Large Private Equity Deals-that 800 pound gorilla). Most of the PE focus is on consumer, TMT, biotech and manufacturing.

It’s worth noting that much of the latest PE activity is not in buyouts but in working through the backlog of prior investments. According to Mergermarket PE firms are having difficulty to find trade buyers to pay the premiums necessary for sellers to recoup boom-era investments (EMEA Deal Drivers 1H2014). Because of that, as we noted last year, holding periods have increased to six years compared to around three in 2007. You can also refer to our last year’s update for more information about PE trends: Private Equity 2013 Update and Success Factors for Value Realization.

4. PE Activity 3Q2014

Secondary offerings are the most common form of exits nowadays, contrary to the past. Seventy-three percent of PE manager in a 2014 poll expect to exit investments through secondary buyouts in the next year. More than half of respondents either plan to or expect the industry to sell to a strategic buyer, with 39% choosing IPOs (Global Private Equity Outlook 2014-2015, Duff&Phelps, Shearman &Sterling, Mergermarket).

The landscape has changed in PE investing. Although capital is available one has to prove its merits by bringing returns. Working through sourcing inefficiencies, financial engineering or IPO exits are not enough to generate alpha. Value creation has become more important. In this sense a secondary offering might make sense when the buyer has experience in a particular sector. Actually there’s even talk about outright acquisitions of PE firms as well. Outside that however the sector’s outlook is positive. Based on the previous poll PE managers expect increased activity in 2014-15. On average, cross-border transactions are expected to make up 30% of activity.

There were no large private equity transactions in 2014, such as those for ketchup maker HJ Heinz or computer company Dell in 2013. Actually most of large transactions were secondary offerings. On the buyout side we can note Red Lobster’s acquisitions by Golden Gate Capital from Darden Restaurants ($2.1bn), First Data’s by KKR ($3.5bn), Ortho-Clinical Diagnostics’ and Industrial Packaging Group’s by Carlyle for $4.2bn and $3.2bn respectively (Preqin Quarterly Private Equity Update 1Q, 2Q 2014).

Another interesting development over the last years is that private equity companies now have to fair value their portfolios on a continuous basis for reporting purposes. PE managers were not used to this level of scrutiny in the past. This, apart from creating a lot of work for valuation professionals and back offices, it is also a source of frustration for deal teams who have to support book values many of which were made under better times. According to SFAS 157 (a.k.a. ASC 820) under US GAAP as well as IFRS 13 under International Accounting Standards these equity investments should be recorded at market values, when listed or based on comparables listed companies if not and in the absence of both conditions on financial modeling. That’s where the fun begins.

Market values were considered unreliable during the big recession, the theme then was “market dislocation”. Finding comparable companies may sound simple in theory but in reality not many companies are really the same. Although they may operate in the same sector they may differ in product lines, profitability, leverage or other. In fact much can be said and many adjustments made, hopefully well-indented, in the process of selecting a reference sample. Finally, as a last refuge one would revert to financial modeling usually cash flow models. Although this approach is ordinarily used in M&A deals and security analysis, quite justifiably so as it captures future benefits and conceptualize business paths and aspirations, it was initially faced with skepticism in the context of fair value reporting. That is may be due being a novice in the traditional compliance space and because it extensively relies on business assumptions that are open to manipulation or difficult to be verified and substantiated for compliance purposes. In any case the market is adjusting to that and it may be another motivation behind secondary activity besides the fact that funds have a certain horizon, they are setup and closed to make room for new capital raising and new focus as market opportunities change.

Outlook: M&A world is looking up!

We are expecting M&A growth to persist in 2015. After all, as we mentioned last year “as optimism keeps settling in among at least the investment community, this is an environment that buyers will feel comfortable or even compelled to make a move or otherwise feel pressure for stock buybacks and dividend payoffs by activist investors”. We’ll stick to that reasoning.

As a consequence we expect significant demand for M&A and management consulting professionals. Interesting to see how this play out with the market pretty much doubling up quickly, coming from a leaner, lower headcount period. M&A professionals are not only necessary but also critical for the execution and success of a transaction. They carry out the deal structuring and execution and then the due diligence, financial reporting and post merger integration. Noone wants to spend significant time and money only to get tangled with unseen liabilities and unrealized synergies; and this happens more often than not as we have covered in the past. Consulting professionals are also important in identifying and carrying out performance improvements, compiling strategic plans, monitoring and executing integration and reporting while assisting management teams through transition.

But the jobmarket is not only improving for M&A professionals but across the board; it’s only that this rebound has been slower compared to previous US recessions. Lower unemployment and increased labor confidence is reflected in the numbers of people switching jobs and in consumer spending. According to the latest US Labor Department data the number of people who quit their jobs jumped to 2.75 million from 2.5 million which is the highest in more than six years while US companies had accelerated their hiring. More than 5 million people were hired in September 2014, the most since December 2007 when the last crisis started to unfold. Off course the overall decrease in unemployment, doesn’t capture differences across skill levels and industries or long-term unemployment and underemployment. However, gradually, increasing labor participation will lead to income improvement and consumer spending. Figures in this area are also looking up. Off course this trend will persist as long as not interrupted by unexpected developments. Challenges to the global economy are seen for example in Europe and Asia. We just prefer to stay optimistic for the near term for this cycle.


By Pete Chatziplis, CFA, ACCA, MBA. The articles published here do not necessarily reflect the views of the Transatlantic Business Forum.

M&A 2012-13 Activity Update, the Middle Market and Critical Success Factors

M&As have to some extent bounced back from the 2009 lows, however they are pretty much hovering around pre-crisis levels. Activity during the last three years seems to be quite out of sync compared to the precrisis highs or the stockmarket comeback. Then again one could argue that this is just the normal way of things and that the stockmarket hike is due to the QE or the 2006-2007 mergermania to the abundance of leverage. On the other hand M&A cycles move in 5-7 years intervals so we may just be waiting for the next big story that will spark a boom.

Global M&As reached $ 2.2 tr in 2012, barely posting any growth from 2013 with North American deals at $943bn up 5% from the year before. These figures amount to 2/3 of the 2006-7 deal value. We have to go back to 2004 to note an increase of a mere 2.3% CAGR which actually lags even GDP growth, at least when it comes to the US. There’s always talk of growth but for the time being it pretty much sounds like Beckett’s “Waiting for Godot” play: it’s unclear what the next big thing will be and when will come, let alone if it’ll come, but then again that’s always the case.

1. Global M&A 2006-2012

In the first three quarters of 2013 global M&As reached $1,607 bn according to Mergermarket; a 5.5% increase over the same period in 2012. US at roughly $535bn accounted for 40% posting a 22% increase while Europe for 30% at roughly $480bn and a meager 2.4% growth. Taking into consideration that 2012 had a quite strong M&A finish, it’ll be interesting to see how things will evolve at year end as there are fears that the US government shutdown may have cooled the market. Total global PE buyout reached $259bn in 2012 with US representing almost half of that. PE activity has grown at 25% post 2009 lows in Europe and Asia but in the US, where PEs are more prominent, growth was double that at 50%, according to Bain. In the first three quarters of 2013 PE buyout activity reached $ 194bn a 11.6% increase over 2013. For more information about recent PE activity you may refer to our post here.

The M&A increase in the US is attributed to the existence of cash, return of mega deals but also public to private deals. Bigger US deals were those of Verizon Wireless ($124bn), Heinz ($27bn) and Dell ($20bn) the latter two being PE driven. In Europe that has been going through fiscal crisis and recessionary pressures, among the most prominent deals were this for Virgin Media ($25bn).

So, where is the M&A market heading? Let’s try be a bit inquisitive in this blog by looking at the connection between GDP and stockmarket; apologies to academics and analysts who thought of this before. Looking at GDP, DJIA and M&A trends in the last 10-15 years we see that the stockmarket has overreacted to the crisis and didn’t keep pace with GDP growth, only recently catching up. So probably things are just starting to look up. Despite talk of exuberance, the average P/E ratio at the NY Stock Exchange (Dow Industrial) is 17.95 compared to 14.45 a year ago. S&P500 P/E is at 18.85 compared to 16.5 according to WSJ data. Although valuations seem quite hefty they as well depend on what point in the cycle we stand and what’s the ability to generate extra profits. Still valuations are much lower than during the crisis when average stockmarket P/Es reached three digit figures, so exuberance may still be kept in bay. On the other hand when DJIA growth patterns exceed those of GDP such as in 2001 and 2007, it doesn’t turn out that well, with the exception maybe of the post great recession era. On the other hand M&As are usually slow to follow the other two upward trend; often lagging by a couple of years.

2. US and Global M&A DJIA and GDP

Cross Border M&As: Focus on Emerging Markets

True to our focus in this blog let’s see what happened to cross-border deals especially in the transatlantic space. Cross-border M&As are almost half of global activity compared to much lower importance a decade ago, an indication of today’s interwoven globalised world. During the last years there has been some decrease, especially when it comes to outbound activity from Europe, while US interest in Asian and emerging markets remains strong. Main cross border inbound/outbound deals in the Americas last year were Grupo Modelo’s acquisition by Anheuser-Busch ($20bn) and Sprint by Japan’s Softbank ($35b). Among the more significant outbound deals were Liberty Global’s acquisition of Virgin Media ($21.8b) and Alliance Boots by Walgreens ($6.7bn). Cross-border deals are more evident in the energy sector.

In the transatlantic space activity has been pretty much subdued, staying below the precrisis highs. Total transatlantic deals amounted to $180bn in 2012 ending lower than in 2011, with an average size of around half billion US$. By comparison during 2008 transatlantic deals reached $ 270 bn (see our past blogpost about Transatlantic M&As in 2008). NorthAmerican buyers took the reigns over European, reversing an earlier trend that saw European companies being the ones most often making the leap across the Atlantic, trend especially profound in the aftermath of the latest US crisis. UK and Ireland were the most active markets for inbound activity in Europe.

Although international expansion makes sense for large companies we have argued here that it’s also the obvious move for middle market companies that can this way grow to global niche players once a product and operating model is tested in their domestic market. However the challenges are in analyzing and executing the deal and finding qualified advisers with global exposure and experience with middle market peculiarities that are able to be profitable at this level of fees and challenging global regulatory framework. The Big4 along with a handful of boutique investment banks and consultancies may be able to carry out this role, but one has to research their value proposition before committing.

Industry Sector Activity: The Return of Tangibles: TMT, Energy, Industrials

Sectors with particular M&A interest in US are TMT, Energy, Industrials and Pharmaceuticals. Industrials along with Business Services tend to have more activity due smaller deal size and higher frequency. In a change of times Financial Services have been lagging in importance, a far cry from mid 2000’s, but then again the sector has had its fair share of troubles post crisis (Source: The Future of M&As in America, Merrill Datasite and Mergermarket, 2013).

There are different drivers for transactions across industries. Low growth and interest margins as well as technology and compliance burdens drive M&As in financial services, same with insurance. Consolidation is the theme in TMT, especially when it comes to digital and mobile transition. In pharmaceuticals is about getting access to smaller companies with promising drugs. In consumers is about cash rich companies using reserves and expansion, same with energy where buyers are looking for smaller targets with resources. Industrials are looking for expansion to new markets as well as consolidation benefits. The affordable healthcare act changes the competitive landscape in the healthcare sector and is expected to increase consolidation between insurers, hospitals and independent practices (Source: NA Deal drivers 2012-13).

M&A Pricing: kept lower for now

Global multiples have decreased post crisis from the low teens to well into single digits. In 2012 the average EBITDA multiple was at 8.8X down from 9.1X in 2011. Multiples further fell in Q1 2013. US multiples were at 9.3X in 2013. Tax cuts expiring in 2012 pushed down multiples as US shareholders rushed to realize investments before capital gains rates shot up. In Europe multiples were much lower at 8.6X, down from 10X in 2011 but let’s bear in mind that Europe is going through a recessionary phase and fiscal crisis that puts pressure on earnings. Most of activity is intraEuropean continuing a long consolidation trend. Multiples in Asia fell because of economic slowdown.

3. M&A Multiples

When it comes to industry specific valuations higher prices are currently offered for energy companies. Can’t resist however to bring up here Al Gore’s reservations over these valuations arguing that they are based on reserves that will never be probably extracted. Better IRRs are offered in TMT rather than energy or industrials as well as better EBITDA. Valuations are low in financial services, less than 1.25 book value. Latin America with favorable demographics and growth prospects for many even better than those in Asia, offer good M&A prospects, hence a solid base for higher valuations. In this context Modelo brewery was bought in 2012 at a 14.1 multiple. Private equity multiples are low as IPOS are down and many exits are realized thought secondary offerings. PE financing multiples are currently at the 7-8 range with average exit multiples at 11 according to Mergermarket. Refer to our post on PE activity in 2012-13 for more info. American Appraisal expects M&A multiples to increase in 2013 as US economy will continue to fair well, Eurozone sort out its problems while Asia continue to grow (Global M&A Valuation Outlook 2013).

M&A Value Realization: Not always getting what you paid for

In order to realize value from M&As it is important to get valuation right as well as due diligence and post merger integration. We are not getting tired to remind Graham’s saying that Warren Buffet goes by: ‘Price is what you pay; Value is what you get’. Getting price and value to meet is not always easy, in fact most of times it doesn’t happen. An example of that comes from a KPMG analysis of stocks of certain companies’ engaged in M&As during 2007-2008. Average size for those deals was at $2.3b with the median at $620m. What KPMG found is that companies announcing deals in 2007 saw prices fall by 8.4% 24 months later, while those during 2008 increased by only 2.5%. As expected those targets with the highest PEs at acquisition offered the worst returns. According to KPMG deals “during exuberant 2007 may not have received the same level of due diligence as those in 2008 when it was much more difficult to complete transactions” (Source: The Common Determinants of M&A Success, KPMG 2011). This disappointing performance may well have to do to some extend, with the overall stockmarket trend. On the other hand one can’t deny the importance of getting the valuation right.

Aside from valuation, critical factors for successful M&As are carrying out an efficient due diligence that will unearth issues and proceed according to a well designed post-merger integration plan that focuses on effective communications, quickly establishing goals (usually under a 100 day timeframe), having a post acquisition plan in place, well before closing and selecting key people. That’s at least according to a survey of M&A practitioners, carried out by Deloitte and Mergermarket in 2012.

4. Critical Factors in Deals-Triplex

Middle Market: the next big thing? Not that straightforward

Although expectations about middle market activity arising from the sector’s massive size and pockets of underperformance, it hasn’t picked up the slack left by the eclipse of mega deals. The market simply seems to lack direction. Activity across segments is moving in tandem. Middle market activity in 2013 (ie deals between $500m-$2b) was at over $800 bn according to Mergermarket or around one third of total global M&A value, posting a small increase over 2011. During 2013 Q1-Q3 middle market deals in the US were valued at $400bn, down 7.7% compared to the same period in 2012. That was mainly due to decrease in Europe and US; Asia shows much more resilience in this segment. Looking at the European-US combined space in the lower middle market ($250-500m) we see that deal value is not that much different from the pre-crisis levels of $150b in 2004 and only at 2/3 of the 2006-2007 highs. What’s important at least is that middle market has recovered compared to after the crisis when it fell to almost 20% of global M&As.

5. M&A Deal Size in Europe and US Doublex

According to Citizens Bank’s 2013 Middle Market Survey, around 80% of middle market companies (defined as those with $5mn-2bn revenue) are currently open in making an acquisition with 20% actively engaged. Acquisitions in this space are of smaller size and more frequent. Buyers tend to buy smaller firms that can absorb more easily. Most of the deals are below $10m in value. Their main M&A motive is to increase revenues. Geographic expansion, adding products or putting cash to work come up frequently too.

Other reasons are buying-out underperforming customers or taking out competitors; objectives may differ in middle market compared to big business. Small firms and tech companies especially are looking at acquisitions as means to add talent and know-how while manufacturing companies as an opportunity to add distribution. Although post crisis there’s better availability of debt financing only about 20% of companies are currently looking at raising capital.
A quarter of the market is also looking at selling to upload outperforming segments, raise capital or create liquidity for their owners. As a common theme, many baby boomers will be looking at monetizing their holdings and retire in the near future.

There is a good case for M&As in this space, as it has depth and room for improvement but also some factors inhibiting it. We have covered middle market and PE activity as well as success factors on earlier posts: Private Equity 2012-13 Update and Success Factors for Value Realization, Middle market cross-border M&As set to grow, Large Private Equity Deals-that 800 pound gorilla.

Critical Success Factors in Middle Market M&As

According to Citizens’ Bank, the main concern when undertaking a middle market M&A is undetected liabilities. Information is more difficult to gather and audit in this segment. Conducting adequate due diligence, losing key employees or clients and off course valuation of the company are other frequent concerns. It seems that most of the middle market executives are aware of the process and don’t shy away from getting involved in them. Almost 70% deals are managed internally with advisors coming in for valuation or due diligence; however the devil is in the details.

6. Middle Market M&A Issues

The “detail” in this context is that traditional valuation techniques might not hold as reliability of earnings, cash flows and attainability of synergies may come into question. This is more often the case than in larger deals. Reliability of information as well as operational rigidities that limit the businesses’ scalability have a direct effect on value. Critical factors potential acquirers should consider before committing to a middle market deal, according to Deloitte, include:
• Strategic fit when it comes to products, markets and culture
• Root cause of depressed or bloated earnings
• Probability of improved financial performance
• Identification and attainability of potential synergies
(Factors for Mid-market Companies to Consider When Evaluating M&A Targets, 2012 Deloitte, Making the Deal Work, 2007 Deloitte)

Another “detail” is that traditional finance theories such as the CAPM may not completely hold in this segment. Cost and access to capital and investor profiles may differ than for large public companies (see Robert T Slee, Private Capital Markets: Valuation, Capitalization and Transfer of Private Business Interests, 2004). There are certain adjustments to be made. Market participants can go by gut feeling or rule of thumbs but often that may not suffice or hold in the eyes of auditors and regulators that come to review them. And the list of details can go on.

Even if however the buyer’s management has dealmaking experience we would argue that the challenge comes in the form of bandwidth availability. Buyers should mind to preserve the value of the business while analyzing the deal or later merging the two organizations. So it’s all about whether management can handle the workload at the same time that doesn’t take their eye from the ball ie, day-to-day operations and customer service. It’s also usually not always possible to leverage the acquired companies’ management as prior leaders may create political or loyalty conflicts that cause more harm than good, let alone not able to perform under the new playbook. Actually as discussed in previous posts, in most cases prior management is replaced.

Best practices approach calls for delegation of the M&A process to external experts or devoted teams, albeit with clear senior management endorsement and commitment. Other specific challenges with middle market M&As arise in the context of cross-border transactions. Knowledge of foreign economic circumstances, business practices, cultures, regulatory and tax regimes is not easily attainable without local expertise. In these cases it is better not to try reinvent the wheel but simply look for competent local or global advisers; problem is that there are not that many middle market advisers with true global reach.

Future Trends: Dare a comeback prediction for 2015?

M&A activity is expected to increase as the economies and stock market recover. In a survey of more than 150 investors and corporate executives performed by Mergermarket in 2013 (The Future of M&As in America, Merrill Datasite and Mergermarket, 2013). Almost 2/3 of respondents expected activity to increase, at least when it comes to the Americas. US companies turn to M&As as means for expansion (access to new markets) vertical integration and synergies. Asian Pacific economies keep on exhibiting strength and local companies see opportunity to acquire targets in US or Europe to gain access to markets and technology. It is expected, in this poll at least, that most of transaction activity will happen in the lower middle market i.e., $250-500m and below. Then again that may primarily indicate frequency and not overall value.

So where will it be the next big thing for M&As if there will be one, and when? Will it be middle market, emerging markets, technology, energy, cross-border, public to private, PE or stock-market driven? We’ll have to wait and see. It seems that after all what the market is missing is leadership, as the popular saying goes, that mainly comes from mega deals and the availability of leverage. That’s what moves the needle.

Looking at the latest two economic cycles, the fact that we’re four years in the current one, the economy keeps on growing and the stockmarket breaking highs could one bet, just even by looking at the graphs, that M&As will come back with a bang in 2014 or most probably 2015? After all, as optimism keeps settling in among at least the investment community, this is an environment that buyers will feel comfortable or even compelled to make a move or otherwise feel pressure for stock buybacks and dividend payoffs by activist investors as lately often happens.

7. M&A DJIA and GDP %yoy and Points synthesis_Corrected

So shall we wait for Godot for a couple more years?


By Pete Chatziplis, CFA, ACCA, MBA. The articles published here do not necessarily reflect the views of the Transatlantic Business Forum.

Private Equity 2012-13 Update and Success Factors for Value Realization

M&A activity has recovered since the 2009-10 lows albeit not mirrored the Stock Market rebound with the Dow hitting and surpassing all-time highs. M&As as well as PE activity on the other side seem to be hovering around pre-crisis levels. During full year 2012 global M&As reached $2.2tr, barely posting any growth from 2013. North American deals reached $943 bn, a 5% increase over previous year. These figures stand at 2/3 of the 2006-7 total deal value. We have to go back to 2004 to note an increase of a mere 2.3% CAGR, which should be in line with GDP growth patterns.

PE Overview: A new Paradigm or Trough?

These lower levels of activity may be just the normal state of things, a new paradigm away from the mega-deals facilitated by excessive leverage in 2006-7. On the other hand PE and M&A cycles move in 5-7 years intervals with PE buyouts representing a sliver of total M&A activity, at around 10%, slightly increasing as a percentage during the last decade. Taking this into consideration we may just be waiting for the next big story that will spark a boom. Furthermore as textbook financial planning has it, a proportion of private assets should be allocated to alternative investments for diversification and excess return purposes. This may as well spark, at some point, PE growth. We will cover M&A trends, segmentation and valuations on another topic. In this we will focus on PE activity as well as ways to increase value and returns by operational means, more so since financial engineering and exits are not that easy.

PE buyouts reached $259bn in 2012 with US representing almost half of that at $118bn, up from $112bn in 2011. Outside US, around 35% of PE buyouts took part in Europe, 11% in Asia excluding Japan, with the balance spread around the world. Although fiscal problems, Europe has been a source of dealflow due to integration, cross-border deals, bottom fishing and privatizations. Average deal size is around $100mn in Europe but 50% higher in the US. PE activity has grown at 25% post 2009 lows for Europe and Asia but in US, where PEs are more prominent, growth was double that at 50%, according to Bain. In the first half of 2013 global PE buyouts reached $144bn (according to Mergermarket) up by 17% from the respective period in 2012.

Global PE Market 2012 - TBF

Sectors of interest for PE investment at least in the US are consumer (B2C businesses), computers/IT, followed by pharmaceuticals and health. Energy is also attractive both in resources and equipment. Biggest PE deals in 2012-13 were: Heinz ($27b by Berkshire Hathaway and 3G Capital Partners), Dell ($20b by Silver Lake partners and Michael Dell), BMC Software ($6b). The Dell deal also underlines the increasing interest for public to private transactions.

Exits: Can I cash my chips please?

Investments don’t worth much more than what you get paid for. Much of the PE activity currently is not in buyouts but working through exiting the backlog of prior investments. As a result holding periods have increased to 6 in 2013 compared to around 3 in 2007 according to Pitchbook. Secondary investments have been gaining attention over IPOs due to difficult conditions there. According to Bain, sponsor-to-sponsor deals tend to historically fair better than other deal types. Almost half of exits in 2012 were realized through secondary buyouts vs. 25-30% five years ago. Other more unique methods such as dividend recaps are gaining traction, especially in uploading large investment. KKR and Bain for example geared up HCA prior to refloating, to take some money out of the table.

Exits by type

Middle Market: Ample opportunity but where’s the value?

PE activity has been affected by the absence of leverage and the eclipse of the 2006-2007 mega-deals (such as Energy Future Holdings (TXU) for $44b, HCA for $32.7b, Equity Office Properties for $39b, first Data $29b, Harrah’s $27b, Alltel $27b, Hilton $26b to name the biggest). In this environment middle market deals (between $250-$1bn ) are fairing much better. It’s easier to maneuver such investments, turnaround and even exit as we have discussed in this blog before (see Middle market cross-border M&As set to grow, Large Private Equity Deals-that 800 pound gorilla). For example the largest ever LBO of TXU has not turned out very well with the company heading to bankruptcy and the PEs that led it, even prominent, such as Goldman Sachs Capital Partners, KKR and TPG Capital, standing to almost write-off their investment (Business Week, Buyout firms clash over energy biggest ever LBO).

Middle market investments also offer benefits when planning exits through aggregating/consolidating companies into larger units and ripping benefits of scale and better valuations. It’s what we’d call “riding up the multiples curve”, ie pretty much scaling up a business by adding activity around a tested operating model and get higher valuations with size. A small company might have good products but what makes or brakes a company is the structure, that’s the reason so many wonderful ideas fail. Access to distribution channels, capital and talent is easier for larger companies.

TEV-EBITDA multiples

There are an estimated 300,000 middle size companies in the US of which PEs own around 35,000 (The New Math of Middle Market M&A, Robert Slee The Value Examiner, July/August 2009). According to Robert Slee, who is probably one of the very few if not the only finance theorist in the context of small/private businesses, 75% of middle size companies destroy value as they usually produce returns below their cost of capital. Cost of capital for small/private businesses according to his calculations is in the high 20s. That is after taking into consideration risk, cost of financing and bypassing CAPM theory that arguably is more suitable for capital markets. These low return patterns can be more accentuated by the fact that much of the owner’s investment is not recorded, such as unpaid/underpaid management time as well as other resources. Although the ample availability of opportunities, it’s not easy to score a home run in the sector. Companies are often the extension of their owners’ lifestyles and not purely an investment. Owners are not willing or not equipped to realize value for their businesses. In these cases it’s simply better to pass. As Graham put it ‘Price is what you pay; Value is what you get’ and in these cases the two diverge significantly. Slee estimates top performers in middle market an additional 9,000 over the ones already owned by PEs. So numbers are not that good, hence PEs prefer to go international where there’s higher demand for capital.

Valuation Multiples: Buying low and selling high, at some point..

Current M&A multiples are below those of the last crisis, although edging higher. PE buyout multiples are usually lower than those for strategic acquisitions but during the crisis spiked over them; another sign of those times. Currently, MA multiples are at the 8 range, having reached low teens, around 12, in 2007 according to American Appraisal. Financing multiples are currently at the 7-8 range with average exit multiples at 11 according to Mergermarket. This is rather low if compared to multiples of low 20s during 2006-2007. Median exit multiples are even lower, close to 8 times, according to Pitchbook. Considering the backlog of rich investments from previous years and challenging exit multiples this is not the best situation. All these indicate a much narrower space for realizing returns which stress the importance of operational gains.

GLobal Exit multiples

PE Turnaround Strategies; It’s more than theory

PE investing is not a straightforward success. Currently one year PE IRR is at 5%, much fueled by mark to market valuations, the change brought about with IFRS and SFAS fair value accounting rules. The five year IRR is at 10% having fallen from almost 30% in 2006-7 and much higher in the 40s, at end of 90s, according to Bain. Hence the academic discussion now centers around the PEs’ elusive alpha.

5 year PE IRRs

So how do PEs create value? We can’t go over the secret sauce in detail here but in general PEs work with performance indicators that are tied to financial performance, which is how they measure their own performance after all. For example ROE based models focus on increasing factors such as Asset Utilization, Profitability and Leverage which pretty much center around sales strategy, cost of capital, cash flow management, cost cutting and getting rid of underperforming assets and units. Asset stripping is a well documented strategy that frees up capital and unrealized value. Pricing is another important value creator. Bain estimates that 1% rise in price results in 15% boost in pretax profits while an increase in sales volume only has half the effect (due to variable costs incurred). This can be achieved with specially targeted sales and marketing strategies.

An example of a recent turnaround story is Kodak. The once blue-chip giant has filed bankruptcy two years ago as its core business gradually failed. The company had been criticized for denying industry changes and remaining attached to its once dominant film business, passing over the digital revolution. After emerging from a private equity backed restructuring plan it just recently returned to the stock market. Under the restructuring plan Kodak sold its film business to its UK pension fund, as well as various patents and inevitably downsized. It now focuses on high-end market segments of packaging, graphic communications and digital imprinting.

Turnarounds though are not easy. Many investments fail, same as for TXU, even if some of the best PEs are involved. According to a survey of M&A practitioners, carried out by Deloitte and Mergermarket in 2012, factors critical for successful M&As, were communicating effectively, quickly establishing goals (usually this is under a 100 day plan), having a post acquisition plan in place before closing and selecting key people.

Deloitte Survey Resuts X3-2b

Value creation starts however with information. This is the foundation and more; without it doing business is like sailing without a compass. Information is important both at the pre-acquisition phase during due diligence, as well as after that through value buildup. An accurate due diligence that will reveal the target’s true operational and financial position as well as a well-planned post integration plan are of paramount importance. Especially with smaller companies due diligence may be more challenging as information may not be there. According to the Deloitte survey, almost half of buyers would spend more time on due diligence. That’s where PE consultants are particularly useful as they bring to the table specialized knowledge and readily deployable bandwidth. Pursuing an M&A is nothing to be taken lightheartedly; it’s a specialized, stressful task that requires detailed planning and execution. Don’t take us wrong, it’s possible that buyers can carry this on their own, but trying to reinvent the wheel while keeping eyes on running own business might turn out particularly costly (ie, don’t text and drive). So when in this situation do yourself a favor and turn to external M&A experts.

Collecting the information is one thing and acting upon it in a timely manner is another. In many cases companies are not ready to operate under PE professionals’ standards that often have blue chip corporate or consulting background; hence high expectations in terms of strategic planning. Urgency and efficiency in implementation is important, otherwise problems tend to linger and front loaded value/cash flows wasted. According to a SolomonEdwards survey, part of the grievance and inefficiencies result from poor communication between target CFOs and PEs. We could add here that communication can’t work if the two speak difference languages. What we mean by that: traditional CFO roles in small-middle companies fall more within the controller/bookkeeper domain. Their primary focus is keeping eye on expenses and cash levels. Planning is not a known quantity. Little is done in collecting information for strategic decision making. CEOs/owners pretty much flow with past norms or gut feeling. Getting to perform at strategic level and communicate with the finance/MBA types of PEs is just about similar to learning another language; a change one may not be prepared for, let alone able to make. Increasing financial literacy or management training is useful. Just clocking in and out may not be enough anymore; consciousness of value factors throughout the organization and even equity in them might help (ie management by objectives models). However that is not always easy if people have not been used to. That’s where PE consultants are again useful. They are called to support these CFOs both at the pre-acquisition/due diligence phase as well as after that in streamlining operations and coordinating communications. Companies like Accordion or Solomon Edwards are building successful business models around that by providing specific resources, bandwidth and knowledge. Accordion has also established a specific service for facilitating information collection and dissemination. Operational partners are also used in improving performance. PEs also usually work with tested interim managers who have industry specific experience and are posted to targets to perform specific functions.

We want to point out here to Peer-to-Peer networks that can also support executives. These are however more useful for independent companies that want to up their game as there can be a duplication with the PEs. Midas Managers or Michael Milken-backed Vistage are such networks. Midas Mentors take a cut of returns they create while in Vistage there’s a cost for participating in meetings. Other formal or informal groups, associations and NGOs exist for the same reason. After all there’s good supply of resources as the recession changes has created a slew of experienced middle managers and executives to tap into. However without being able to control implementation, results can be dubious. Moreover is also difficult to find listening ears that are appreciative of intellectual contributions and able to afford them before it’s too late or for owners to connect with experience that is right in the money.

Finally turnarounds come down to people. On the outside management theories make sense to all but the real challenge is implementation. Many can spot shortcomings in an underperforming company; what’s differentiates the makers is the effectiveness in pursuing and implementing changes. Humans mostly resend change, let alone if those changes challenge a favorable status quo. New PE owners may be in a better position to change things due to the power they are versed with, but this is not always adequate. In fact it can as well backfire. Most of the times however the main problem is, as one of practitioners bluntly put it, “what’s behind the manager’s desk”. According to the Deloitte research, around 2/3 of acquirers state that key personnel is one of the main success factors in M&As. It’s one thing not to be able to do, or don’t want to do something and another ignore its existence (and contrary to Socrates, still believing that you know everything). In these cases it’s fair to make a decision and move on with a management change. A high percentage of executives, especially CFOs are eventually replaced when PEs step in. The CFO role has become indeed quite challenging and tenures have shrunk significantly over the last decades.

PE Outlook

In closing, let’s discuss PE trends going forward. As already mentioned this is not a great environment, at least as practitioners would like, however the picture is not that bleak. One good thing is that there’s a lot of capital available for investing. Bain estimates that the PEs’ dry powder can last for up to 3 more years. Main focus of activity will be North America along with middle market and emerging markets. Fundraising is pretty satisfactory as fund managers are seeking diversification, rebalance their appreciated portfolios as well as the elusive alpha. However capital doesn’t come easy. What’s important in selecting GP teams is consistency of performance as well as having “skin in the game”. After all everybody makes mistakes, it’s how many vs. successes that differentiate the leaders. Stock markets are also getting stronger to facilitate exits. On the reverse route public to private deals, such as Dell’s, are gaining attention and may contribute to the sector’s comeback as did in 2007 (ie the HCA deal). After all however buyouts are justified when the underlying business is healthy, valuation is correct and there’re promising exit prospects. As Warrant Buffet put it: “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price”.

By Pete Chatziplis, CFA, ACCA, MBA. The articles published here do not necessarily reflect the views of the Transatlantic Business Forum.

Effectiveness in the Implementation of European Bailout Plans and the Cultural Perspective; Individualism vs Collectivism in the Greek Case

Much has been said about European periphery’s economic problems and how they led to economic crises and the IMF intervention. Much of the discussion centers on overleverage, lost competitiveness and other macroeconomic figures. This is what one could call technical analysis. On the other side much of the “softer” or at times irresponsibly “casual” analysis gravitates towards cultural traits some of them being well-indented and some not so.

Let’s look at the Greek crisis in particular: The Troika(lenders) are complaining about inefficient public administration, corruption, opportunistic political system and the absence of civic society as manifested through tax evasion and other. On the other side Greeks are complaining about the recovery plan being unrealistic, recessionary, insensitive, flawed. The bailout plan supporters may jump into what’s called in psychology attribution bias error confirming their prejudices while the subjects find painful gratification in self fulfilling prophecies: since we are not up to par why bother trying improve after all? But then again and allow this parenthesis why Greeks or other nationalities perform much better in well structured economic systems such as that the immigrant communities in the US, Australia or Germany prosper? Is it because of the existence of institutional framework in these countries as argued by the work of Daron Acemoglou (Why Nations Fail: The Origins of Power, Prosperity, and Poverty)?

Whatever the cause of the economic malice, the slow implementation or failure of the bailout plans may be attributed to mistakes in analyzing the problem in the first place both from technical but equally importantly from cultural and sociological perspective ie the doctor has to prescribe the right treatment before complaining that the patient didn’t respond, as well as not well managed expectations and communications if that was the case. In this article we will focus on the sociological/cultural perspective. Before proceeding however we have to caution that culture can become an uneasy topic as such discussions may raise concerns over stereotyping. However, cultures do exist and do interfere with life and business decisions same as corporate cultures, a much celebrated principle in management, that has been coined for many company successes or failures. It’s not that new of invention, after all the saying goes: “when in Rome do as the Romans do”.

Culture, when it refers to ethnographic aspects is a rather new addition to management topics mainly gaining attention with the rise of multinational companies. In such environments people from different ethnic backgrounds, often painfully, realize that what’s considered the norm in one culture is not so in another. Stories about egalitarian Americans using first name or hierarchy conscious Asians hesitating to ask questions or challenge a position have been abundant. The result is miscommunication and inefficiencies. Other instances in the context of cross-border M&As, are equally amusing but painfully costly. Once somebody mentioned a story about an investment in Eastern Asia; after closing a deal the Westerner went with signed contract in hand to plan implementation; the local executive laughed took out a bottle of wine and invited to start the real discussion about what’s to be done now that the legal part was out of the way…. In another instance in Eastern Europe Westerners and local investors were planning an investment. The tender called for cash and follow-up investment as part of the consideration. The local partner laughed: “that’s good. We can surely outbid anybody by promising a high follow-up investment”. But this is not possible” replied the buyers, “we can’t afford that”. “Don’t worry, we’ll just promise and never do it….” he replied. Off course the judicial system plays a role in enforcing such documents but sometimes it also seem to be accommodating or follow the traits of the surrounding cultures.

So how could culture play a role in the European economic crisis and the success or failure of the restructuring plans? Let’s analyze the theoretical background to that. To do so we will refer to the work of Max Weber, Geert Hofstede and even Samuel Huntington to name a few. To some extent they have used religion as a paradigm for peoples’ social psyche. In this respect European societies could be distinguished between:

a. Northern Europe that follow Protestantism/Calvinism/Lutheranism that lean towards individualism and embrace free market or regulated capitalism. North American and certain Commonwealth cultures follow these patterns too.
b. South and Eastern Europe that follow Roman Catholicism and Orthodoxy, which are characterized as collectivist in nature and lean towards corporatism.

According to Weber for example the Calvinist teaching calls for hard work as the road to business success while profits should be reinvested rather than spent in frivolous pleasures. The Protestant endorsement of usury, contrary to Roman Catholicism at the early ages might have affected economic development in some extent. Same effects mat be attributed to Orthodoxy’s mysticism and its apprehension towards materialism as also manifested in Greek philosophy’s Stoicism and Epicureanism.

According to Geert Hofstede’s famous Cultural Dimensions Theory (not accidental that was developed within multinational IBM) there are 5 traits upon which cultures can be characterized:

– Power distance (we’d call that in other words “respect towards hierarchies”)
– Individualism (or the “degree of interdependence” within the society)
– Masculinity/Femininity (we’d prefer to call that “materialism vs. spiritualism” )
– Uncertainty avoidance (we’d prefer to call this “adaptability” or “resistance towards change”)
– Long term orientation (pretty much self-explanatory: long term versus short term society focus)

In our case now: Greece is a collectivist culture where although business is conducted in a rather relaxed way, power distance is high and respect is important. In collectivist cultures more important than anything are relationships and accountability towards the person’s immediate social grouping be it immediate family, extended family, locality, ethnic group, company, union etc. Next to relationships, written communications might fade (especially when mandated by an outsider to the group). A Greek minister once even admitted that have not even read the bailout plan. There was no time for that or no purpose considering its supposed inevitability or stakes in hand. Obviously the details could be envisioned negotiable later, even after signing. Actually objections started soon after signing. It’s also well documented that statistics were falsified to achieve EU admission. Pretty much the same as ticking the box on Important Terms and Conditions before downloading a software. Who bothers? On the other hand Northern European cultures are in large individualistic where power distance is also high but relationships are not that important and communication can often be blunt. Written communications are respected and highly valued. There’s also a strong avoidance over uncertainty, which may be exacerbated with current financial problems and extremely high unemployment. These differences as illustrated by different scoring in Hofstede’s parameters are shown in the diagram below for Greece and a group of Northern European individualistic cultures.

Blog Graph Greece and Individualists

But let’s set aside the major manifestations of individualism and collectivism and focus, for the interest of brevity, to the issue of how decisions are taken and communicated in these cultures. For example in our case, what went wrong, at least in the beginning, with the restructuring plan? The EU officials have been frustrated with the low pace and erratic implementation. When shortcomings occur they note with disdain their discontent: the plan has been agreed and signed departures from its wording are not expected. In AngloSaxons societies it’s normal for written agreements to be kept; that’s why negotiations are long. On the other hand in societies such as Greece’s, written agreements are of limited value. These are places where one can hear more often the phrase “that’s how we do things here” or these things are not possible here” versus the expression “that’s the law” that explains actions in individualistic countries.

Blog Graph Greece and Collectivists

In individualistic countries is quite straightforward, even to the not educated, of how they should operate within the society. In collectivist cultures however it’s not always possible to understand how things work if not through upbringing and subconscious. Locals mostly can adjust to that it’s just an outsider that might feel lost. It takes empathy and inquisitiveness to prosper. As one said don’t get distracted with what the law says but what the people really do.

So what’s the conclusion, the moral meaning from this analysis regarding enforcement of the restructuring plan? For Troika: should place more attention to what people think than what say or sign. Monitor implementation. Identify power brokers, decision-makers and involve them. Respect sensitivities, be introspective, try figure out motives and hidden messages and agendas. For Greeks: don’t hope for leniency, for lenders giving up or being intimidated. Not that they don’t have feelings; it’s just that they keep them away from work and don’t let them affect the goal. Be upfront and clear on intentions and concerns. Discuss and argue constructively.

This article has been in the making for quite a while. In the meantime it’s good to see that Troika is pretty much adjusting their approach now monitoring evaluation setting gradual landmarks and acting based on progress. Communications from North has been toned down a bit too, it’s so much of an unnecessary distraction anyway. Greeks have also given up on talking, bluffing and protesting and doing more. But then again most people know what’s right or wrong, large parts of what’s happening in the past was illustration of Mental Exit (something that Hirschman refers to in his famous book Exit, Voice, and Loyalty). Mental or Physical Exit by playing along, evading, immigrating and much of the frustration is also put up for other purposes. Once a football(soccer) player was asked why complaining so vividly to the referee for a decision since there was little chance to change opinion. Well, he said, this decision is lost but I may make him think twice about the next one and even if that doesn’t happen and we loose then I’ll put up a good excuse to the fans in bad refereeing…”.

For sure the story unfolds on this crisis and it’s quite early to jump into conclusions. The purpose of the article is just to contribute towards decision making and action taking from a cultural perspective both in this or other instances.

By Pete Chatziplis, CFA, ACCA, MBA. The articles published here do not necessarily reflect the views of the Transatlantic Business Forum.

Pete Chatziplis, a finance and management consultant, is the creator of the Transatlantic Business Forum. Drawing on global work-experience he has been part of the Cultural Detective Organization (Intercultural Effectiveness, Increase Productivity-Strengthen Relationships) contributing to the development of a training manual about intercultural understanding.

A European Tale: the debt crisis in other words; Select your ending…

Once upon a time there was a European family… Their life was all happy and mellow and everybody looked up to them. However times changed and they were struck by a terrible crisis. The following story might be true and might be an allegory for something else happening right now in real life… It’s also an unfinished story; you can vote for the outcome right at the end of it. But let’s take it from the start…

Family Background

The mother came from an aristocratic family of intellectuals. You could notice that in her elaborate and polite manners, style and often flamboyant ways. She had rich education in humanities and sciences something evident in her discussions. She was working in fashion, everything that had to do with quality of life but was also very active with civic organizations, charity and arts. She would give grace to whatever she set her eyes on. Then there was the father, a busy, laborious, industrialist; diligent and hard working. It’s not that he didn’t have many intellectuals in his family but he took more pride in discipline, practicality, moderation and self-restraint. He had few words to waste; he often expressed himself without much tact which often got him misunderstood.

It was a rather odd couple some would say but for others it seemed that they complemented each other very well. But it was not always like that. Their families didn’t get along very well in the past. They had many disputes which caused great distraught and pain to them and others. These were tough times, with violence and poverty. However, through much pain they realized it was much better to put all that behind and instead of hating, care about things they shared, cherished and valued. So they concentrated on making their lives better which brought them much happiness and wealth.

As time went by and the wedding grew stronger they also decided to grow their family; so they had kids. It was a happy family they had, full of respect and ideals but little time did they have for each other. The parents were busy and even when they had some time, they wouldn’t seriously care about their kids; they would even find their kids’ mischiefs amusing. The kids were independent-minded though and felt perfectly fine to stay away from their parents’ attention. They were pretty much growing up on their own as the product of circumstances, handouts and serendipity. You see they were receiving a monthly stipend and had nannies and all the care in the world. You could say that they were spoilt.

When they grew up and became adults their parents gave them credit cards. It was supposed to mark their coming of age. Kids could now plan their future; take a loan to study and grow professionally or start a business. Instead kids however rolled down to the easy life. After all they didn’t care much about growing up and making a life for themselves; actually they were not even prepared for doing so.

When parents were asking how they were doing in school or their businesses the kids would say that everything was going well. That was a blatant lie and they were surprised to pull it through; they guessed their parents were probably turning the blind eye. Nonetheless they were afraid that this couldn’t go on for ever and at some point they would get in trouble; but then again it was too difficult to stop. There were so many distractions. There were cars, trips and nice clothes, all easy within their reach; why bother change after all? Dazed from their easy life at times they felt gifted, they felt that they deserved having things coming easy to their way. At other times, when targets seemed tough to accomplish they would feel incompetent and helpless as ambitious targets where out of their reach; after all, their family’s haven was enough.

Crisis breaks out

But nice stories at sometime come to an end. Times changed and the family business was not doing that well anymore. The parents were starting to age and worry about the future and their finances. The world was also changing; it was becoming a more competitive, a less forgiving place. So they started to pay more attention to their family and business. Their kids’ mischiefs were not that amusing anymore. They started to worry more about them and ask questions. It was not long before they realized that things were not going well, but they would postpone taking action. In the end it was a call from the bank telling that credit cards were maxed out and asking for money transfers to cover overdrafts…. It was the last drop in the bucket, they were infuriated…

As a matter of fact the parents assumed that something was not going well, but they were too busy and too distant. . In a way they might even be buying their “silence” for being absent, so that they could go on with their lives undistracted. They didn’t want to face their responsibilities and would blame it to each other or on the kids’ character. On the other hand they knew they just had to bring them to the point of no return to get them on the right track. As somebody said; a crisis is too good of a thing to go wasted. And now it was exactly that time. This situation couldn’t go on for anymore. It was time for everybody to sober up and carry their share of family responsibilities. Yes, the party had to stop one way or the other; but it was not easy.

The kids at the begging denied everything; they tried mislead their parents that everything was still going well. But the parents looked around the home and found expensive clothes and motorbikes and other things that they were hiding that couldn’t be explained. That was not the life they have earned or they could sustain on their own. That was not a life of responsibility that the father was brought up with or wanted for his family.

Parents also asked around and stories started to come out about the ways kids spent their money; they felt embarrassed from what they heard. Everybody thought something seemed wrong with the kids’ way of living, however nobody tried do anything about it; they just looked the other way. The kids would also always have excuses for everything. For example when asked about their expensive cars they would say that they were test drives, or gifts or other funny excuses. In the end the kids started to confess everything.

Stories came out about people giving them loans as they’d assume that their parents would pay for them in the end. A local banker even occasionally reversed some credit card charges or moved them to other ones to erase some debt so that it didn’t hit the credit limit. When they asked him what he was doing he mentioned three letters, showed some lengthy documents and off course asked for a good commission. Kids didn’t understand much but didn’t even bother about it as long as it kept things going.

Not all the kids were the same however. While the younger ones maxed out their credit cards by spending in good life the older ones were a little more responsible but made some bad investments. People started to question everybody anyway. In the end, none of the kids could survive without their parents’ help and now this help was questioned. Even one of their uncles, a bon viveur, with great education and property but extravagant ways fell into disbelief and had to cut down his expenses too. In a way it was him that everybody was worrying about if he’d come to the point of asking for help too. Therefore parents had to sober up everybody, starting from kids. They had to put up a tough face; it was time for action…

Crisis Deliberations

At the beginning kids accepted their fault but said it was impossible to change at once; they asked for more money to give them time. Off course they promised they have learned their lesson and they’d now use their money for good. But they said that before… The parents didn’t buy it.

Then the kids pointed out to some of their friends that when they racked up too much debt they didn’t pay. They argued they were fooled by shop owners and banks; transactions were erroneous, debts were phony; they were simply tricked in. With all this these kids saved face in some way, they said. Even if they managed to walk out of their obligations however little talk was made about these kids been grounded, changed school and losing their club memberships and amenities. These losses would have been unbearable to the European family’s kids. They knew that.

Some of their friends told them that their parents are suppressive and insensitive. They told them they would be better off if they left home, break up with the past life and live ascetically in a communal. All this sounded t romantic, even though they haven’t tried something like that before. Impulsively, a part of them wanted to go this way, but that was merely an impulse.

Then kids thread their parents they’d leave home and family if not having it their way. They didn’t really mean it nor did their parents want them too; however after some initial surprise and frustration parents shrugged their shoulders and told them they were free to go if they’d wish and if they left behind all their goodies. Parents wanted to keep the family together albeit not at any cost, not if the family had no meaning. Kids thought parents were bluffing about sending them away but they couldn’t say for sure; in the end maybe they both were bluffing.

Outside the family, everybody the kids knew, the banker, the nightclub promoter, the shop owners, argued that the parents were unfair for treating their kids this way, for cutting down their stipend and credit cards. They said that this was not a way for kids to grow. Deep inside they were worrying about losing the kids’ business. Some others were saying that kids are incompetent; unable to stand on their own feet. They should be either sent away (and not worry about them) or sustained for ever. It was the parents that have failed in their roles; they were the ones that destroyed the kids and now enjoy torturing them; it was a mockery of a family. Some even remembered the father’s bullying past something left behind but still hurt him to remember.

The father’s family thought kids were useless and that the wedding was a mistake all from the start; a crazy idea, too much of a trouble. The mother, the kids were different people from the father; they were hopeless due to their upbringing. It is probably what you would call in psychology group attribution error. Off course they ignored their positive sides too and the many benefits this wedding brought everybody such as stability and complementary aspects but it was not a good time to bring this up.

An odd aunt that they were not seeing that often and never liked the idea about the marriage, started to throw her poison too. She had good ideas always but never really showed any sincere interest to family issues. You know it’s this kind of aunt that always has an idea about everything but doesn’t do anything about it. She would just love to draw attention on her as in her glory days so that she didn’t feel overshadowed and an odd loner.

The Rehabilitation Plan

After much talking, true to the family’s traditions, the parents came up with a detailed action plan. They said that kids should either leave home and make their living the hard way or stay and embark on a long “rehabilitation process”. They would have to study and at the same time work and contribute to the family’s expenses to the extent they can. They should also pay back their debt. The father was relentless; he said credit was over, they would have to start living within their means. He was strict and absolute while the mother was trying to show some tenderness and flexibility to keep some balance. Parents also hired a strict personal trainer with experience in such “rehabilitations”. They said he had to be tougher with the younger kids so that they motivate the older ones and set a good example for the community around them too.

The kids accepted and to formalize that signed an agreement but without even looking at it. Reality is kids dreaded the rehabilitation idea and they could find a lot of theories to argue on that. But in the end they just wanted to keep on with their ways or if they had to work they would rather work in some office in the family business; but they had no such experience or skills. The parents never worried about equipping them with such skills; or give them jobs in their companies, but that’s another story… In the end kids thought it made sense just to take it easy as parents made enough money for everybody. So they proposed to work in their local club. They ended up however spending most of the time socializing if they would even ever go to work. Kids also said they were taking evening classes but they often skipped and went on partying. In the end they just cared about getting through another day; a vane, meaningless pursuit to others.

So in the end their rehabilitation was failing. They claimed it was due to the plan which was not realistic. They said they were unable to contribute to the family; a self-fulfilling prophecy or what you would probably call in psychology a self-serving bias. The kids thought that parents would be forgiving, fed-up and ignore them so that they could go back to their own busy lives. The single aunt off course said it’s wasted time; the kids were a lost case; will never get in the right truck. But parent were not the sort of giving up. They asked around and found out about their kids’ ways. They were furious about their cheating. They assumed that kids would do what they were asked and signed to do.

The Rehabilitation Plan gets serious…

So the parents said that we’ll have to follow up with what kids were doing every day. At least parents were becoming more involved this time. Issues were to be discussed together and decisions were also taken jointly. They also emphasized to the personal tutor to be extra vigilant. They’d also have to work at a really tough job not like the easy ones they were having up to now. They should start working at a factory. They braced for a long “rehabilitation process”. It was not going to be easy

Story Ending?

Let’s say this story is a metaphor; depicting the European debt crisis. You can try guess parallels between figures here and in the crisis. On the other hand it might just be a simple story on a common family and any resemblance to facts, real persons is purely coincidental:). Let’s also say that this story is stil developing. Taking this in mind feel free to guess potential outcomes (left open as there are so many views on such matters these days..).

So here are some possible endings we could think for this European tale (or add yours):

1st Tale Ending:

Kids kept on failing. The family didn’t pull it together. It broke apart. Kids were sent away from home and:
i. became criminals.
ii. sobered up but never got where they could had they stayed in their family.
iii. they excelled surpassing even their parents’ successes. They probably struck a lottery or came up with a great invention (ok crazy things happen in fairy tales…)

2nd Tale Ending:

Kids and the family stayed together. Kids sobered up and became responsible citizens and successful professionals.

3rd Tale Ending:

Kids and the family stayed together. The kids never really sobered up; they grew up always dependent on their parents but at least they didn’t get into trouble and wrack up debt. They were always dependent on handovers; after all their parents were too possessive to turn over some of their businesses to them. They all just muddled through.

The articles published here do not necessarily reflect the views of the Transatlantic Business Forum.


Virginity: a dubious virtue when it comes to olive oil and the overlooked costs for consumers and the economy

Conventional wisdom has it that virginity is a binary issue. It either exists or not. Not so it seems when it comes to olive oil. There’s extra virgin olive oil, simply virgin olive oil and even if that is not confusing enough some suggest that for most commercially available olive oils, virginity is a questionable virtue altogether. But let’s first start with the definitions: what does virginity stands for when it come to olive oils?

Olive Oil Classifications

The EU, the largest producer and consumer of olive oil globally and US, the second largest consumer have come up with elaborate regulations on classifying olive oils that include both chemical and taste characteristics (EU directive 796 and US Standards for Grades of Olive Oil and Olive-Pomace Oil). These are similar to regulations introduced by the International Olive Council (IOC), the large global organization representing olive oil and table olive producers and consumers. The German and Australian Oil Associations have come up with additional tests (known as DAGs and PPPs). Unfortunately apart from tasting, it’s almost impossible for the average consumer to verify an olive oil’s quality; instead has to rely on representations by manufacturers, public authorities and retailers. But what can the everyday consumer make out of the olive oil’s classification alphabet soup and why does it matter?

Broadly speaking virgin olive oils are those that are extracted directly from olives through only mechanical means i.e. excludes oils that go through any chemical treatment. Extra virgin is the olive oil with lower than 1% acidity, while a grade lower, simple virgin olive oil’s acidity cannot exceed 2%. Oils with higher acidity are not edible. These oils are called lampante as they would only be used as lamp fuel in the past. High acidity olive oils have to go through refining processes and blending with virgin oils to go through the food chain. These chemical processes are perfectly acceptable just as long as product labels indicate so and consumers are aware of what they are buying. Olive oils resulting from these processes are called refined, fine, light or simply olive oil. Pomace olive oil, is a different creature in that is extracted from the first olive pressing pulp refuge, with chemical processes.

Olive Oil Chemistry and Health Benefits

Acidity is just one measure of olive oil’s quality but alone doesn’t guarantee virginity and doesn’t capture all of olive oil’s health features. There are at least ten more criteria, namely concentration in certain chemical substances, used for olive oil classification. Let’s see some of these chemical substances and what one is buying in them. First of all fatty acids: olive oil is rich in monounsaturated and polyunsaturated fats versus saturated and trans-fats who are present in animal and processed fats. Monounsaturated and polyunsaturated fats lower cholesterol levels and risks of heart disease. Olive oil also includes polyphenols. These are natural antioxidants that protect against cell damages, have anti-inflammatory properties, reduce blood pressure and the risk of coronary disease. It’s not accidental after all that in the Mediterranean olive oil is often drunk as medicine or aphrodisiac. Olive oil is also used for skin treatment from healing sunburns to cleansing and conditioning. Non irrigated trees, unripe handpicked olives as well as special varietals give higher percentage in polyphenols. The bitter taste in high quality olive oils, indicate a high percentage of polyphenols. Unfortunately, polyphenols same as monounsaturated and polyunsaturated fats, are sensitive substances that can decay over time or destroyed after chemical treatment or exposure to light and air. Hence oil has to be carefully stored and consumed within one to two year time frame. Olive oil, contrary to wine is not getting better with time. Apart from chemical characteristics sensory tests ensure the right color and absence of unpleasant odors and flavors such as muddiness or fustiness. Only accepted flavors by olive oil connoisseurs are bitterness, fruitiness and pepperiness.

These olive oil qualities are hard to find. Extra virgin olive oils are made from the best quality olives and milled at low temperatures (hence the term cold pressed) to preserve their health features, which however decreases output. If something goes wrong during growing, harvest or production they have to go through chemical treatment and refining to correct flaws and then marketed as refined oils; hence they are not virgin anymore. To secure superior characteristics such as high concentration in antioxidants and intense taste, olives have to be at best handpicked from the tree when just start maturing, sorted out and milled within forty-eight hours or less. Other reasons for manual harvesting is that oil plantations in much of the Mediterranean comprise of sensitive, often ancient trees grown on rocky hillsides and in such spacing that are not suited for modern intense mechanical harvest (SHD plantations).

The Good Scenario for Market Efficiency: The price is right

From all of that it seems that virginity is not easy to find and if so it costs, or to put it better: it should cost. The good scenario would be that in the age of healthy eating and slow food, consumers are well aware of and appreciate qualities of extra virgin and various other oils. Consumers are using extra virgin olive oil, preferably raw in salads or dressings, for its antioxidant and other healthy aspects and may turn to other oils either lower grade olive oils or vegetable oils that still offer lower cholesterol levels for cooking, frying or other uses. That doesn’t mean that extra virgin olive oil could not be used for cooking; this is typical in the Mediterranean but maybe it’s not that economical. But whatever the preferences are, the point is that these consumers are prepared to pay the right price for every type of oil and as a consequence demand and supply adjust accordingly.

A Bad Scenario for Market Efficiency: Information Asymmetry

Then there’s the bad scenario: i.e. consumers don’t differentiate between olive oils or just trust the label in their quest for the more highly appreciated extra virgin olive oil, whatever that means. These are the type of consumers that may be taken advantage of. After all it is perfectly natural that between two extra virgin olive oils and in the absence of any other perceived difference, one would opt for the cheaper one. Higher prices would simply be considered a rip-off. But maybe that’s not so.

UC Davis that has developed expertise in olive oil, carried out a research of large number of commercially available olive oils in California in 2010 which found that most of them do not deserve the term “extra virgin”. In other words contrary to their intentions, consumers are not buying extra virgin olive oils in the many bottles with colorful pictures that proliferate supermarket shelves. At the same time more expensive extra virgin olive oils and their producers are unfairly driven out of the market even if certain consumers have the ability to cover their cost.

This pretty much reminds the “Market for Lemons”, professor Akerlof’s famous paper that studied the damaging effect of information asymmetries in the used car market (lemon is a slang term for defective used cars) and lead to his 2001 Nobel prize in economics. Very briefly, Professor Akerlof argues that used car buyers have difficulty in knowing the exact condition of a used car and in the absence of such knowledge they’d assume that the car is of average quality and be prepared to pay nothing more than average price. At this price owners of superbly maintained used cars will not place their cars in the market, which evidently will bring the overall quality of supply down. This is sometimes summarized as “the bad driving out the good”. In another manifestation of such phenomenon; security market regulators are eager to protect against suspicions of “insider trading” as this would drive away investors that have no access to such information. This could collapse capital markets.

Same as with olive oils: in the absence of reliable information, in the absence of product differentiation, buyers will go for the cheaper product or at least an average priced “extra virgin olive oil”. In vain producers will use superlatives, fancy adjectives, exclamation marks, certifications, nice bottles, emblems and picturesque images to persuade they are “more virgin” than others, hence deserve a higher price to cover their cost. Words have lost their meaning. Many will shrug their shoulders to olive oil producers’ problems. But the problem goes beyond that. It’s not farmers that are doing that bad after all. Instead of going the extra mile to produce high quality extra virgin olive oil the average farmer can sell a descent product at wholesale prices and then pocket some EU subsidy (most olive oil is produced in the EU) to make up for the difference. It is visionary producers of high quality extra virgin olive oil that can’t survive. According to Tom Mueller’s book Extra Virginity, manual harvesting, that is the standard for high quality extra virgin olive oils, costs as much as $3 per liter of the end product. Even outside this segment costs are high. Italian extra virgin olive oil wholesale commodity prices range between $3-4/liter; it is a wonder how it can then retail at $6-8 even $10 and cover bottling, customs, transportation, wholesale and retail margins. Many producers of premium extra virgin olive oils will throw the towel, sell below cost or not produce at these levels. But off course consumers are not aware of all these intricacies. Unfortunately it seems that even retailers don’t know sometimes what they are selling, or at least that’s what it seems like based on the UC Davis report (UC Davis’ report as expected hasn’t gone unnoticed; see NAOOA’s reply for example). One could be safe by selecting upscale retailers or specialized online stores for extra virgin olive oil. These businesses have the ability to sell at higher prices and at these price levels can’t afford to disappoint their patrons.

Making sure that products are correctly labeled doesn’t also mean that lower quality olive oils should be expelled from the market. Beyond free consumer choice, fair markets are about demand and supply. Food is largely considered a commodity, at least up to now. Although supply for some foods like caviar or fillet-mignon is limited hence prices are high, a tomato for example is pretty much the same for everybody. That has started to change with the introduction of organic food, the highest growth food segment in the US and elsewhere. In a world of six billion and counting, for good or for bad, there’s no much room for organic food or free range meat. What would happen though if ordinary products sell for organic without being so? This would register significant profits but it would be fraud. Same with olive oil, be it organic or other premium oil.

Another Bad Scenario for Market Efficiency: Adulteration & Counterfeiting

The other bad scenario behind market inefficiencies is the existence of counterfeit or adulterated olive oils. It’s useful here to briefly outline market economics to put into perspective the extend as well as consequences of such practices.

Global olive oil production varies per year but can be estimated at around 3,000 tons based on 2010 figures, of which EU produces 70% and consumes 64%. In the US alone, olive oil is a $700 million market which amounts to around 9% of global consumption of which more than 90% is imported. The overall US edible oil market (includes all sorts of oils such as canola, sunflower, corn, soya, palm, sesame, avocado, coconut, peanut, cottonseed even margarine and animal fats) is estimated in the tens of billions and grows at 10%, an especially high rate. To complicate things more some oils are also used as biofuels which also affects prices in relation to what’s happening in energy markets. If most of products in a $700 million market are counterfeit to some extend, as the UC Davis report indicated, then profits and foregone taxation must be significant. So the stakes are high. But let’s examine on what’s involved in counterfeiting or adulteration.

Adulteration: Mixing Substances

Adulteration is as old as olive oil trade. It went on in ancient times and through history in 19th and 20th century Europe and US. In 1997 and 1998, olive oil was the most adulterated agricultural product in the European Union, prompting the EU’s anti-fraud office to establish an olive-oil task force. Tom Mueller in a 2007 article quotes one investigator saying: “Profits were comparable to cocaine trafficking, with none of the risks” (Slippery Business, Tom Mueller, The New Yorker, August 13, 2007).

Adulteration can take many faces: from mixing different types of oils to adding dangerous chemical substances. When mixing different types of oils one could add cheaper oils such as rapeseed, sunflower or olive pomace oil to expensive extra virgin olive oil and sell at the higher price pocketing the difference and avoiding taxes. Although mixing different kinds of oil can be harmless to human health; this is not the case when mixing with chemical substances and colorants to arrive at a product whose chemistry, taste and appearance resembles olive oil. In 1981 in Spain, in what’s know as Toxic Oil Syndrome, rapeseed oil was denatured by adding aniline, a dangerous chemical substance and then sold as olive oil. This resulted in over 600 deaths. In April 2008, the Italian police impounded seven olive oil plants and arrested 40 people for adding chlorophyll to sunflower and soybean oil and selling it as extra virgin olive oil, both in Italy and abroad; 25,000 liters of the fake oil were seized and prevented from being exported.

Counterfeiting: Masking Origins

Another possibility is misrepresenting the olive oil’s origin such as country of origin or region (ie if it is of protected designation of origin (DOP)). In 2008 Italian police, in what was called “Operation Golden Oil“, arrested 23 people and confiscated 85 farms after an investigation revealed a large-scale scheme to relabel oils from other Mediterranean nations as Italian. It’s like putting together fake parts to create a Rolex watch.

Let’s go back to global market figures to illustrate the dynamics behind this practice. Of all global olive oil production, Spain is the largest producer with 40%-45% that along with Italy at 15-20% and Greece at 10-15% form the top three producers and consumers, followed by other Mediterranean countries such as Tunisia, Turkey, Israel, Morocco Syria as well as Portugal and Australia down under. Olive oil wholesale prices from the various varietals and regions have different prices. Italian olive oils are usually the most expensive. Although Italy’s production doesn’t cover domestic production it is a major export country controlling more than 50% of US imports. This paradox is explained by sizeable imports to Italy, with the question being which part of Italian olive oil is consumed locally and which exported. At the same time, Greece the third largest olive oil producer and probably one of the first ones, represents only 2% of US imports.

Blending olive oils from various origins is perfectly legal as long as labels indicate so. For example, large circulation brands often mix various olive oils to reach their production quotas at the same time that maintain relatively consistent taste and stable cost basis. On the other hand small producers’ production, same as for wine production, varies in quantities and taste from year to year depending on weather and other circumstances. Much of olive oils sold in the US are blends of olive oils coming from Greece, Italy, Spain, Tunisia and other Mediterranean countries. True to fair representations, US Customs regulations on “country of origin” state that if a non-origin nation is shown on the label, then the real origin must be shown on the same side of the label and in comparable size letters so as not to mislead the consumer. It is interesting though to come across consumers that don’t go beyond the flashy letters and images on the bottle’s front side to check the label on the back side and see what exactly they are buying. On the flip-side some producers argue that there is nothing wrong with blends as one is really buying the bottler’s know-how and guarantees rather than the country of origin. It’s like buying a car assembled in one country whose all parts are manufactured overseas, in the end it’s up to consumer’s choice again.

If mixing is acceptable, nobody can argue in favor of counterfeit products; not at least among WTO members. Unfortunately record shows that there’s still room for better market monitoring when it comes to extra virgin olive oil as well as not the same level of respect. There are numerous experts, magazines, food shows, specialty distribution chains (liquor and wine stores) promoting wine and its uniqueness. Olive oil, sadly though, still lags behind. Maybe producers are not strong enough to enforce a better environment. For example Luis Vuitton has 30 in-house lawyers and 250 outside private investigators and spends $18m to fight counterfeiting (Deluxe: How Luxury Lost Its Luster, Dana Tomas, 2007).

It is amusing and disappointing to come across disbelief for a $50 per liter extra virgin olive oil. At the same time very few would be surprised for a $50 per bottle wine or a $1,000 suit. Nobody is wondering why cars worth more than $200,000 when one only wants to get from A to B, or why a handbag should worth $5,000 for carrying the essentials. It’s often a vain discussion try justify extra virgin olive oil prices by referring to ancient trees, rare varietals, plant densities, non irrigated hillsides, terroirs and labor costs. One would think twice before arguing against the purpose for high wine prices or differences between Cabernet Sauvignon, Merlot, Shiraz, Rioja, Chianti or Pinot Grigio even if not aware of their qualities. It could be embarrassing. Yet in a world where the objective would be to just “drink wine” there’s a good possibility we would only end up with Two Buck Chuck (the two dollar a bottle Charles Shaw wine often synonymous with mass consumption). At the same time very few people can appreciate olive oil from Alberquina, Picual, Mission, Picholine, Frantoio, Leccino, Koroneiki, Taggiasca, Ladoelia and other varietals let alone distinguish between extra virgin or refined. Large retailers and importers would prefer to launch their own branded products than source from independent producers. This may provide a better profit margin and control over quality but in the end it’s product degeneration at its best. And if some argue that fine wine or haute couture or other luxuries is something more than a answers to biological needs, that very understandably, are a statement of art or passion, then what one can say about harvesting century-old olive trees some as old as the civilizations they fed and inspired?

Epilogue: It’s the economy!..

Beyond romanticism, olive oil’s luck will probably change once economic stakes get higher. Americans only consume 1lt of olive oil per person while in the Mediterranean (Spain, Italy, Greece) more than 10 times as much. Olive oil consumption is growing fast in the US and globally along with growing populations, incomes and health awareness. In the US for example trans-fat oils are being phased out. Just imagine the potential if consumption moves closer to that in the Mediterranean. To cater for increased consumption more areas should be cultivated. Olive tree could flourish in California and elsewhere in the US with mildly warm climate as it also does in Australia, South America and South Africa. Production can further increase in the Mediterranean too where the tradition already exists. Higher production can create new jobs and boost local communities both in the US but also in Mediterranean countries that face economic problems. At the same time higher consumption will benefit public health. So there’s great potential and a strong economic case even allowing for some product cannibalization with other kinds of oil. However all these benefits cannot materialize if the economic return to farmers and manufactures is killed with practices such as those already mentioned.

In the end in a large and efficient market there will be ample room for everybody, both at the low and high end. There will be room for mass and premium producers and after all there will be room for teroirs and the sacred tree that threw its shade over Plato’s Academy, provided the winner wreaths in ancient Olympics and the liquid for religious rituals, throughout times, from ancient altars, to christenings and menorahs. And after all virginity, for all what it is worth, will regain its meaning again.


By Pete Chatziplis, CFA, ACCA, MBA. The articles published here do not necessarily reflect the views of the Transatlantic Business Forum.