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Enfield-Neorion 8000: a Greek-British electric car, forty years ago. Can it be brought back to life?

Enfield-Neorion 8000 in Syros Island, Greece

More than forty years ago, long before Elon Musk and Tesla, there used to be a small electric car that was produced in a Greek island: The Enfield-Neorion 8000. Who would knew?

Many people surely won’t believe that Greece produced cars, let alone electric ones. But Greece was indeed producing cars in the near past, before Euro unification, that were mainly foreign designs assembled under license. The main such producers were ELBO (or ELVO, fka Steyr Daimler Puch – Hellas) with military and commercial vehicles , a company that still exists today, TEOKAR-Theocharakis that assembled Nissan models between 1980-1995, before the UK Sunderland factory was established and NAMCO that produced a very popular light commercial vehicle derived from Citroën 2CV called Pony (around 17,000 Ponys were built between 1972-1992 and the company is still active and trying to restart production if it gets state approval). There were also a few less well-known, smaller producers.

The Enfield-Neorion 8000 was developed in the early 1970’s by Enfield Automotive, a British company with history in production of rifles, motorcycles and boats (hence the canon in its logo).  The motivation behind its development was a competition set up by UK’s Electricity Council which Enfield won over Ford and Leyland designs (the latter was producing the popular Mini at that time). This prototype was then redesigned for commercial launch (the prototype Enfield 465 was a 2+2 seater with plastic body and sliding doors features that were not retained).  Probably the daft decision to launch must have been motivated by the oil crisis of the time.

Enfield was owned by the Greek shipping mogul John Goulandris. After production was proven too expensive to be carried out in England (due to salary raise demands amid an era of labor protests; by the way isn’t it strange how such demand happen when something ambitious is under way? same thing brought down the Pony production in Greece, can’t help draw parallels..). In any case, Goulandris decided to move production to the Greek island of Syros where he owned the Neorion shipyard (hence the Enfield-Neorion name). This move might not have been as crazy as it sounds to the unbeknown. Shipyards are a key heavy industry of Greece (yes there is some heavy industry in Greece, even less so today, and it’s got nothing to do with tourism, contrary to an unfortunate if not mischievous saying of populists politicians…). Syros also had a long industrial background. Greek shipyards of which there are a few, have built railcars, commercial vehicles and other machinery apart from ships. Shipyards are at the core of technological and industrial groups in other countries too, such as in Japan (Mitsubishi), China (CSSC) and Korea (Huyndai). Greek shipyards possess ample experience in welding and engineering and also significant work floor facilities; after all the Greek owned commercial fleet is among the largest globally and use them regularly.

A specialized car factory was set up with the equipment moved from England. Shipyard staff transferred there had to be trained while additional auto workmen were hired.  What the staff lacked in experience they made up by enthusiasm for what they were going to produce.

Production started in late 1973 and lasted until early 1976 when it was discontinued. During this period around 120 cars were produced. Almost half of them were purchased by the Electricity Council in England and the rest were sold around the world to various individuals that must have been quite eccentric for the time, more so than the initial Tesla owners. That is because the car had limited capabilities being strictly a city car and its price was 2.5 times that of a comparable sized vehicle such as the popular Mini (2,800 GB pounds). And off course environmental sensitivities should have been running much lower than today.

The car was made with aluminum panels for anti-corrosion protection and lighter weight (which eventually was not that small considering the humongous batteries of the time). It could carry two passengers at a maximum speed of 40mph (with only 8hp engine power which however was tested to cope with the challenging terrain of the Greek island). It had a range of 35-55 miles depending on driving conditions. It used components of other cars (brakes and suspension) to reduce development and production cost. It could be recharged at a typical household 220V power outlet.

The production was organized in a rather atypical setup for the time, utilizing, we may say, lean production techniques that were later introduced by the Japanese in the ‘80s, revolutionizing car manufacturing. In this setup there were six independent teams, each one producing a complete car. They used wooden molds, some presses and machine tools but mostly parts were handmade and assembled manually. Production in a way resembled that of a custom car and as a result it was slow and expensive. Probably it was a stepping stone until the company had large orders to move into a larger scale production. In any case by using the numbers produced during this time, one can estimate that on average it took a bit more than a month to produce one car.

Maybe the actual cycle was not that long considering the learning curve as well as some downtimes and parallel activities such as the production of a couple more prototypes. Somewhere it is mentioned that producing a car took a week. Still that is a lot, considering that it took just a couple hours for a Ford Model T, the line production champion, many years before or the typical lean production cycle of around 20 hours or so in the ‘80s. So it was not an efficient process by any means and resulted into loss making albeit unknown by how much. It is also not known whether that is due to the labor component, it shouldn’t have been that high, or the material one. Reportedly, components were expensive and their cost did rise during production, while there were also logistical problems as production was based at an island where materials were shipped from England through Greek customs and then transferred back to the Isle of Wight, for some reason, for battery mounting before being delivered to buyers…. So over all there were many inefficiencies that could have been avoided in another setting.

Apart from the typical 8000 version (produced in bright colors (white, orange, blue, yellow) a couple more versions were designed but didn’t go into production; the open top (Bicini), the buggy (Olympic Airways version; Olympic was owned by another Greek shipping mogul Onassis, at the time) and the van (Miner).

As only around 120 cars were produced those that exist today are extremely collectible. However it would be a pity to be treasured for that and not for the technological breakthrough they represented. If you are curious to see one, there are some in Greece at the Industrial Museum of the island of Syros as well as at the Hellenic Motor Museum in Athens and lately at the Hellenic Motorcycle Museum.

These cars were recently acquired from collectors after some interest in the car was ignited through a 2014 documentary “A TALE OF TWO ISLES” by Michalis Stavropoulos.

Indeed a very entertaining documentary. It would probably make a great movie too, one about visionary owners, passionate designers and employees, conflicting interests and challenging market conditions that were not ripe for the time. Indeed it was too far in front of its time; even Tesla some years ago was mired with doubt. And there are the usual conspiracy theories about the oil industry’s reaction.

John Goulandris allegedly believed that a car that was owned by Greeks, and designed by Greeks should also be produced in Greece. Romantic. And even if so, it was not even possible for the car to be driven in Greece… due to licensing obstacles by the Greek state.  How strange is that?  Bureaucracy is the easy excuse (“bureaucracy” is what you call when the establishment doesn’t want to do something and uses excuses to slow things down; on the other hand “corruption” is what you call when it wants to do something by all means…). A more realistic view however of Enfield’s General Manager was that the car had to be produced where it was sold and where the know-how and suppliers were located. There was some interest to move production to the US for example, when Ronald Reagan was the California governor and showed some interest in it. Three cars were actually sent to California for that (an idea was floated to be used by residents of the Santa Catalina island). Probably this option wouldn’t have gone far either judging from the fate of GM’s Electric Car.

Now the proposition:

How about bringing the Enfield-Neorion 8000 back to production?

My idea would be to use it primarily as rented car in the Greek islands or other such environments and in the cities (could be used by ride-sharing startups). The car could fit well and support the Greek tourist brand (same as the distinct image of NYC or London cabs) and offer low cost operation (hopefully) and easiness to service (both in terms of standardized know-how and access to spare parts). High speeds are not necessary in the islands, if not avoidable (50km/h is more than enough) and a 70 km range could give a couple of days of use without recharging. Off course a release for the Greek public could be possible too.  There is recently some nostalgia as well as discussion over ways to increase manufacturing in Greece and help the economy out of the debt crisis.

There are also some other advantageous market conditions. Environmental sensitivities are high now and subsidies are provided for electric cars. Countries such as France have announced their intention to move into all-electric cars by 2040 and research on electric cars is increasing. There are technological advancements in batteries (Tesla is working on bringing down cost) and there is even possibility for wireless charging even while moving.  There are also ongoing initiatives for sustainable development and energy sufficiency in small islands in Greece (so called Green Islands such as Tilos. There is also ample renewable energy in the islands (solar, wind, wave, geothermal, biomass and other).

I’d believe that the car wouldn’t need to change much. The existing design would suffice (even though some new designs have surfaced). I think that the original design is amongst the car’s strong points as it gives it a distinct character with simplicity and elegance, let alone that it is aerodynamic. Why change a good thing? Some additions in safety (such as airbags?) and comfort may be needed though.  But not many probably, as this would be a drag on energy consumption (ie air-conditioning). In the end of the day if we are talking about summer holidays or city traffic you just want to get from point A to point B quickly and park easily plus at low cost. It’s also much safer and comfortable for the majority of people compared to the scooters that are rented in the islands or even worse the unstable 4-wheel bikes. It is also the same size as other popular mini models (the Smart is probably smaller).

Improvements in batteries would also be useful if not necessary and by that, range and speed could be improved. There are actually already owners (collectors) that replace the heavy original lead acid batteries with lighter lithium ones. It is also possible to upgrade or replace the motors. Actually there is a car enthusiast and presenter in England (Johny Smith) that installed an 800 hp motor giving it a 140 mph (1-60 miles in less than 3 sec) albeit with serious reinforcements in moving parts, brakes and stabilizers to handle the torque (see Flux Capacitator ).

One wouldn’t advise something like that but what’s more astonishing, is that this particular dragster-type car can be driven legally in the UK! So there’s room for improvements…..On the other hand one could just install some software that would measure 100mph top speed and 250 miles range when wheels not moving something like the #Dieselgate case. Ok, that’s a joke and probably the #ElectricCar wouldn’t get away with it but you got the hint….

Some more production parameters: a lot of positive ones..

Infrastructure: Greece provides some interesting if not fortunate conundrum of favorable production components for this car:

  • Strong metal processing industry: existing aluminum production (in mining and processing) (for example ELVAL , Alluminium of Greece (quite vibrant industry in aluminum panels as well) Greece also has ample know-how and capacity in the steel industry (for example HalyvoyrgikiViohalcoSidenorHelliniki Halyvourgia,Hellenic Steel (cold rolling) and others)
  • Existing battery production (such as Systems Sunlight S.A.
  • Idle car production (as mentioned above)
  • Modern infrastructure and logistics (modern highways, railways (soon to be completed) and ports to ship everywhere in the world and Europe highlighted by China’s investment in the Piraeus Port, a part of the Belt & Road initiative)
  • Part of the EU and of Eurozone (for good or for bad… ) so the car could be sold across Europe (if it manages to get the licenses…)

Workforce: Greece has ample and enthusiastic engineering talent:

  • Large number of Greek engineers work as auto designers and engineers in top European and American car manufacturers. Note for example that one of the senior Tesla engineers, Konstantinos Laskaris (Tesla’s Principal Motor Designer) was entirely educated in Greece
  • Workmanship (good supply in various industries such as metallurgical, shipyards, defense, shipyards, auto maintenance)
  • Low wages and a good labor framework for EU standards. Labor supply has increased as the debt crisis has reduced employment opportunities

Market/Use: Let’s start small here. Sure the car doesn’t’ have the amenities or performance that consumers are used to but as said it could be used in special occasions and certain niches:

  • Rented car in the Greek islands. Let’s assume that the rent-a-car fleet in Greek island is around 10,000 units and most of that could be claimed. The usual life of rented cars is 7-8 years or less.
  • Domestic car market: even if it has been decimated during the debt crisis to below 100,000 units per year or one third of its highs). However most of the cars are located in Athens which is a congested city. The Greek public has also turned to smaller and more economic cars because of the loss in purchasing power.
  • Other markets and niches outside Greece with the same characteristics could be export or co-location candidates as well.

Cost and Return: Now the difficult part. I can’t say what the production cost can be and neither the return… But if somebody is interested then it can be studied. I can see though that there’s significant room when it comes to retail price. Small electric cars (Nissan Leaf, BMW i3 sell for well over 30,000 Euro and are subsidized by as much as 25%). Probably one would aim for a much, much lower price to fit with the car’s modest design and at the same time spur demand in the recession stricken Greece.  Obviously it would be very difficult for one to compete with top of the range models of established manufacturers.

Let’s see some of the challenges:

  • Set up production: Apart from facilities and staff, one would have to find the molds or make new as well as select new components and suppliers (brakes, transmission, motor, batteries, suspension) or reproduce old ones (if possible). Also create procedures and train staff (some automation would be probably needed too).


  • Licensing: Greece is now part of the EU so vehicles have to abide with demanding EU regulations (which is actually a problem and the main reason blocking the return of the Pony model back to production). It’s quite unfortunate if this turns to be impossible to overcome as now local production in Greece is necessary to create jobs, add value and take the country out of recession with the ability to repay some of its debt.

By closing, as much as this might sound as a crazy idea, it is still a tempting one. Isn’t it? Imagine how much more unlikely or risky it was back then. One can’t help admire those people courage (although some might see it differently). Drawing some parallels and putting it into today’s era the story would have gone like this: the young entrepreneur gave up his established line of business to take a bet on this innovation that poses a major disruption in the market.  In a gutsy move and contrary to all odds has managed very quickly to put together a team of gifted engineers and motivated staff at a remote island location for this purpose. They are aiming for product launch within a year, something that would be an unlikely achievement on its own. Round A financing is secured through own funds. Once proof of concept is established this startup will definitely be the next unicorn with an estimated market in the billions of dollars globally. Current order book includes more than 100 orders from around the world.

But now we are not in the 70s and people may more easily throw money in some obscure startups and look at this car with disbelief.  And there are not so many Elon Musks’ around.  Still something like that can inspire people and offer a platform for research for universities and technical schools.  Let alone the environmental angle. At least, the writer can speak from his own experience as cars were the motivation to pursue mechanical engineering. And eventually this can provide much needed jobs in Greece (directly and indirectly) and if it is proven so, some profits for its owners too and the economy.

Who could be up for such a journey though?


By Pete Chatziplis, CFA, ACCA, MBA. The articles published here do not necessarily reflect the views of the Transatlantic Business Forum. The writer has no relation to the companies and persons mentioned here. Information is based on publicly available information and comments or correction are welcome.


Common fallacies about the Greek economy and business: how defamation affects investment / Πλάνες σχετικά με την Ελληνική Οικονομία: Μια δυσφήμηση που επηρεάζει αρνητικά τις επενδύσεις και πρέπει να σταματήσει

Greece has been in the news constantly over the last eight years due to its sovereign debt crisis and the subsequent recession that has decimated the economy. Most of the talk has been about the Greek economy’s prospects (40% of GPD lost since 2008 and is now at pre Euro levels), the sustainability of its government debt (175% of GDP) and the need for investment and growth that can put to work the 1 million unemployed Greeks (25% unemployment of which over 50% for youth) as well as reduce the brain drain (more than 400,000 have left since the beginning of the crisis, most of which highly educated).

Many that are trying to explain the causes behind the problems of the Greek economy are pointing out to labor and public administration deficiencies and even expand to cultural traits. There is actually a book where many of these articles have been collected (“Greeks: Corrupted, Lazy and Disobedient” by Thomas Tsakalakis, (in Greek) 2016 and “The Greek Crisis in the Media: Stereotyping in the International Press” by George Tzogopoulos, 2013).

You would expect with all this negative talk that nothing is working in Greece. However Greece ranks 86th in World Economic Forum competitiveness ranking (down from 81st). It has comparable rankings to the European and North American average when it comes to health, education, infrastructure and lags in institutions, business sophistication and innovation as well as in sectors affected by the economic crisis ie the macroeconomic environment and financial markets (truth is economy mainly depending on banks that are now facing liquidity problems).

On the other hand negative talk doesn’t offer a solution and often escalates into defamation, bigotry, defamation and stereotyping, no different to what you’d expect in a bar talk (ECOFIN president Dijsselbloem recently went as far as stating that Southern Europeans have spent their wealth on money and women (!!).

Even if one can ignore the demoralizing aspects of this it’s difficult to ignore how it hurts investment. Which reputable investors wants to get involved in such a situation and have to justify to its shareholders? It’s when this talk becomes criminal as it affects peoples’ lives and prospects of economic reversal. At the same time it distracts investors’ attention and costs them opportunities.

The purpose of this post is to examine the main argument behind this negative talk and discover how much is truth and how much pure fallacy. The posts will cover the arguments regarding Labor, Business Environment and overall Investment. Although it relates to Greece, the same analysis could apply in other economies.

The following fallacies will be examined:

  1. Laziness
  2. Labor problems
  3. High Labor Costs
  4. Low Productivity
  5. Tax evasion
  6. Shadow Economy
  7. Corruption
  8. Inefficiency, Bureaucracy
  9. Overall conclusion: Who’d want to invest?

A. Greek Fallacies and Foreign Investment: Labor Issues

  1. Greek Fallacies: Laziness
  • How can you measure laziness? Lazy is somebody that’s not working. Greeks work the most hours among OECD or EU countries; 42 per week on average. The typical workweek in Greece is 40 hours (8 hours daily for 5 day workweek) but probably the 42 number is based on aggregate data (which is one of the highest globally too).
  • It is also common for people to work two or more jobs and sometimes this additional work goes unreported so the number might even be higher (skip to the shadow economy fallacy regarding the economic aspect). Greeks also have less vacations days compared to other countries in the EU (four weeks of vacation compared to five in Austria). Now what they do while working is another question. It depends on the work they have to do (for that go to productivity fallacy)

  1. Greek fallacies: Labor/Union problems
  • The Greek labor framework is similar to that of other European countries (which are generally characterized by strong social aspects). This framework has been relaxed lately with the reforms that are taking place under the IMF restructuring program. This is captured by OECD metrics (Employment Protection Legislation Index), as well as the Labor Competitiveness Index of the World Economic Forum (2016). Greece’s ELP Index for full-time workers (2.4) is below both that of developed Western economies (i.e Germany 3) and similar to that for Emerging/Eastern Europe (ie Poland 2.4, Czech Republic 2.7)
  • Much of the low grading in the WEF Competitiveness analysis arise not from labor characteristics but by low productivity (this is due to low value added of output as discussed), as well as the quality of management (ie extend of reliance on professional management). The latter can be attributed to the large number of small or family businesses (discussed under shadow economy) and can certainly be rectified with training, the utilization of recent graduates and ultimately by the rationalization and concentration of some of the activity in larger companies (refer to the shadow economy fallacy regarding size of businesses).

  1. Greek Fallacies: High Labor Costs

Some might say that salaries in Greece are high. That depends on what you compare them too. Based on 2012 data Greece has one of the lowest salaries in the OECD. Since then wages in Greece have further decreased as a result of the crisis, GDP shrinking and spike in unemployment rates but also because of some regulatory action (decreasing the minimum wage, drop collective bargaining and other).

According to IMF, there’s not a room for further decreases in salaries or disposable income (this has been affected as well through higher taxation). The economy and the people well-being is already too stretched. Furthermore continuous decreases will result in a vicious cycle of contraction with continuously decreasing consumption. On the other hand existing salary levels already constitute an attractive cost point for greenfield investments especially when combined by the fact that Greeks work many hours and are increasingly well educated. And of course besides all that Greece provides a base within the EU.

  1. Greek Fallacies: Low productivity

To examine this fallacy we first have to define productivity. It’s quite unfortunate that productivity in public speech/common talk is related to how much work one gets done. However what the economists refer to in reality is probably a misnomer. In economic terms productivity represents the amount of goods and services produced in one hour of labor. This labor productivity is calculated as real gross domestic product (GDP) divided by total labor hours. That doesn’t say much. If you produce olive oil it doesn’t matter how fast you collect the crops, it’s about the selling price. If you produce gold watches or automobiles on the other hand you can allow yourself some breaks and still appear more productive, right?  To be fiar labor productivity should probably be measured in the engineering way: ie how much output is achieved per labor hour but to do that one has to know a lot more information so this is not realistic.

It is true that the (economic) labor productivity is low in Greece but why? That is because Greek GDP value added are low or working hours are too many.

  • Could it be that working hours are more because there’s less automation? It is probably not the case as most of the activity is in services that are not that much automated anywhere. It might be that there’s a lot of idle time then. If so, to the extent that this work (the GDP in the nominator) can be completed with less hours of work (coming to what the work is about) then by just reducing working hours the labor productivity would increase, isn’t it? Eureka! Question is whether employers would agree with reduced working hours but the same pay…
  • On the other hand, to raise the GDP and GDP per capita high-value output is needed (ie luxury/branded products, high tech etc). That’s a matter of planning and management decisions. High value added is related to branding (requires marketing expenditure) and technology (requires R&D expenditure) among others. And this cannot also be achieved overnight. Branding has worked quite well in tourism but Greece hasn’t done much to promote opportunities elsewhere. On the same time it lags in terms of R&D or manufacturing altogether. Greece can certainly increase R&D as it has a large number of PhDs and graduates (1,600 per year, similar to let’s say Israel), a lot of whom are forced to leave the country to work abroad. More than 400,000 Greeks have left Greece since the beginning of the crisis, most of them highly educated (a brain drain). A lot of them are also unemployed (20%) or underemployed. A tragedy and a waste of resources!

Some further points on that:

  • Know-how: Greece has not always been without manufacturing production. Between 1950-1975 manufacturing activity had increased exponentially and GDP at a 7% rate (it is widely accepted that manufacturing creates more value for an economy and better paid jobs than services. During this time Greece was producing electrical appliances, textiles, fast moving consumer goods even assembling automobiles! It’s since 1980 that manufacturing activity has stagnated and since 2005 dropped off the charts with many bankruptcies as well. Won’t expand on possible reasons for this or search for the culprits. In any case Greece still has significant manufacturing abilities in shipbuilding, defense sector, mining, metallurgy, energy generation, construction, pharmaceuticals, agribusiness/food processing).

  • R&D potential: Greek scientists are well respected and accomplished globally. According to Stamford’s Professor Ioannides (3% of global top researches is Greek, 85% of which live abroad). The Greek universities have respectable rankings according to the QS world university rankings six of them are among the world’s best. All these scientist could develop a global networks of distributed learning and R&D utilizing their local contacts as well.
  • Finally, a frequent argument that Greece has small size and can’t develop the necessary economies of scale for competitive advantage in manufacturing can be easily countered by pointing out to same size economies but most importantly to recent technological advances. The production of the future (Manufacturing 4.0) is not be same as that of the past (without long labor and capital intensive production lines). It will be automated and enable small batch production locally vs large production lines of the past. It is estimated that in the near future most of repetitive manual tasks will be taken over by robots with mainly highly educated employees working in factories; in the UK alone it has been estimated that 57% of manufacturing jobs will be eliminated.


B. Greek Fallacies and Foreign Investment: Business Issues

  1. Greek Fallacies: Tax evasion

There are multiple articles regarding Greeks’ alleged dislike for paying taxes and propensity to avoid them, as if that is a Greek only phenomenon (without expanding here on complex corporate transfer, transfer pricing, tax havens etc etc). Let’s see in any case how much of the tax evasion issue is reality and how much a myth:

  • Greece’s total tax income represent 33% of GDP which is similar to the OECD average. Therefore it appears that there’s no abnormality (differences may exist on whether taxes are direct or indirect). However some might say that tax-evasion arises from not declared income (for that you’d have to jump to the shadow economy fallacy)
  • Currently Greece has probably among the highest tax rates in the EU and even outside that (Corporate rate 29%, Individual up to 42%, VAT 23%/13%, real estate 15% see table). Especially during the crisis, tax income has increased significantly to cover inflexible budgetary uses. This gets us to the other reason regarding the difficulty in collecting taxes: deposit drain, GDP shrinking and eventually fatigue and resistance ie. what the Laffer Curve illustrates (the more the tax rates increase the higher the propensity to avoid and for the tax revenue to decrease)

Greek Tax Framework (highlights)

  1. Greek fallacies: Shadow Economy

Shadow economies exist in all countries. In Greece it is estimated at 24% of GDP; it is high but is actually not the highest in the EU or OECD (the respective averages are 19.7% and 17.6% respectively). As a comparison the US has a rather low number of 7% (probably the lowest globally) and on the other end Russia over 40%. The shadow economy results in uncollected taxes (referred to as tax-evasion).

  • There are certain factors contributing to the creation of shadow activity such as fragmented business landscape as well as large number of transactions carried out in cash (hotels & restaurants, retails, transport). The latter has been reduced since the introduction of capital controls with more Greeks now using digital money.
  • On the other hand Greece has an amazingly high number of self-employed professionals (gig economy, services, lawyers, accountants, consultants and other) as well as a higher proportion of small companies. Almost 35% of Greek labor force is self-employed compared to 7% in the US. On the other hand 58% of companies in Greece are very small (up to 9 employees) while the respective figure in the EU is 29%. It’s generally, difficult to collect taxes from these two sectors. The logistics are just incredible; it may not pay in terms of a cost/benefit analysis considering compliance and supervision expenses. That’s the same everywhere. Small companies are crucial irrespective as they generate a large number of jobs. On the other end in other countries there enough large companies that, to the extent that they don’t use creative tax practices, can provide the funds necessary to run the governments (33% of companies are large in the EU (over 250 employees) compared to only 13% in Greece). Apart from that large companies can also invest in R&D and product and people development and move the needle for the whole economy and society the way that smaller companies can’t as they are usually barely surviving.
  1. Greek Fallacies: Corruption deters Investment

Corruption in Greece: that’s a big topic that has been overly discussed, and the most often excuse for inactivity when it comes to investments (along with bureaucracy). Let’s see however how much of that is exaggeration and how corruption affects investment.

Corruption is measured by the Corruption Perceptions Index (CPI) that is published by the Transparency International. The index ranges from 0 to 100. According to this:

  • Greece has a CPI of 44 in 2017. It has ranged between 36-46 over the last five years
  • Greece has better ranking in terms of corruption (CPI) compared to China (40), Mexico, Vietnam (33), Philippines (35), Peru (35), Bangladesh (26) etc. However these countries attract a higher level of Foreign Direct Investment (FDI) (see Table based on 2015 data). So at first sight the argument that corruption matters in investment doesn’t hold.
  • Taking it a step further by running a regression analysis between CPI values and FDI in various countries the result come back indicating that there’s no real correlation. In case that you are aware of any other analytical data that support it, please let me know.

Some further thoughts:

  • Corruption is illegal, let’s not be misunderstood: USS’s FCPA guidelines have resulted in heavy fines to companies that use briberies to conduct business (for example Siemens and ongoing investigations for Novartis, Petrobras). However outside the moral question of legality, Bill Gates, in his $38 billion Gates Foundation 2014 annual letter, said that “corruption isn’t nearly the barrier to development that most people think it isbut kickbacks and bribes are an inefficiency that amounts to a tax on aid”.
  • Talking is branding: Even if corruption is not a deterrent for investment discussing about it creates a negative image for the Greek economy and eventually a vicious cycle and a self-fulfilling prophecy. Who want to be associated with corrupted practices? Therefore when coming to these issues the press should be very careful.
  • Discussing corruption without proof might be irresponsible: the public often overreacts in corruption rumors and this can even lead to unrest, violence and hysteria (for example in cases that affect public health). Even if a system is “rigged” is it responsible to shake people’s trust in it without trying to correct it? Wouldn’t one be opening the Pandora’s Box by promoting mistrust?
  • Defaming: how fair is it to draw conclusions over an entire population based on certain incidents? At best this would be considered stereotyping in the US and is unfair to say the least. It is what the Association fallacy in reasoning describes: when guilt or merit can be attributed to somebody based on its relation to a particular group. It may appeal to emotion or prejudice. There are two types of this fallacy:
    • Guild by association: John is a con artist. John has black hair. Therefore, all people with black hair are con artists
    • Honor by association: country X has higher GDP compared to Country Y. Therefore, John who is a citizen of Country X is superior to Mark, a citizen of Country Y
  • The definition of corruption and the public’s attitude towards it could also vary from one country to the other and this can involve cultural aspects too (we could refer to the work of Weber, Hofstede etc). For example individualistic cultures rely on written laws while collectivist on societal norms. When certain actions are not in accordance with written laws then this is corruption or criminal as per the individualistic cultures, however it might not appear as in a collectivist culture if it is in accordance with unwritten norms that for any reason are not reflected in the law. It’s a rather iconoclastic point of view but you may think about it.
  • The Corruption issue – a case of double standards?: finally, while there’s a lot of talk about corruption, scandals, inefficiencies in Greece. At the same time there are many large scandals in the news that do not result in a long-lasting negative image; often these negative news fade away quickly or bushed off as extraordinary incidents (isn’t this some type of double-standards?). For example:
    • Volkswagen dieselgate ($15bn fine)
    • Siemens bribery scandal ($1.6 billion fine)
    • Deutsche Bank (MBS contracts ($7.2 billion SEC fine)
    • Wall Street banks (as part of their role in the 2008 crisis (total fines estimated at $160 billion)

Does this mean that all the system in Germany or US is corrupted as the association fallacy in Greece’s case would imply?

  1. Greek Fallacies: Inefficiency, Bureaucracy deters Investment

Outside corruption another issue of grave importance and a frequent excuse for abstaining from investment in Greece are shortcomings in public administration, legislation and the legal system such as inefficiency and bureaucracy. These factors can be captured by the Index of Economic Freedom (EFI) that is published by The Heritage Foundation. Taking it a step further one could also look at the all-encompassing Global Competiveness Index (GCI) that is published by the World Economic Forum. The latter covers all aspects of competitiveness of the economy (12 parameters that involve labor, infrastructure, institutions and innovation aspects)

Running again a regression analysis between Foreign Direct Investment (FDI-World Bank) vs the EFI and GCI one could see whether there’s a connection between the two.

This analysis comes back again indicating no significant/visible correlation! If somebody thinks different or if I am missing something I would be interested to know. Therefore the discussion of whether efficiencies affect investment is open to debate; one can’t decide other by looking on a case by case basis.

However I wouldn’t disqualify these indicators completely. If there’s one that appears to be more helpful in linking/predicting investment levels this should be the GCI. Just by observing the data in the Table with all the rankings and using empirical judgement it seems, at least to me, that high levels of FDI appear in countries that offer:

  • Convenience; ie favorable tax or legal regime: for example Ireland, Honk Kong, Switzerland, Luxembourg, Cyprus, Malta
  • Development/size: such as G7 and other Western EU, BRIC, Australia
  • Emerging Economies and/or Low Labor Cost and/or Resources: such as Mexico, Central/Eastern Europe(Czech Republic, Poland, Hungary), Asia (Vietnam, S. Korea, Indonesia, Turkey, Thailand, Singapore), large S. American (Colombia, Argentina, Chile), resource rich African (Nigeria, S. Africa)
  • Capabilities/know-how in a particular area (let’s say startups in California even if not the cheaper location)

Any other observations/opinions are welcome.

FDI vs GCI, EFI and CPI in selected countries (2015 and 1990-2015)

Source: Transparency International (CPI), The Heritage Foundation (EFI), World Economic Forum (GCI), World Bank (FDI)

The questions is whether Greece offers any of these features that attract investment. The answer is that it does or it may do as it will be covered in the next part.


C. Greek Fallacies and Foreign Investment

  1. Greek Fallacies: Who’d want to invest there

There are various reasons that may be given for not investing in Greece. How much of that is true (not much based on the preceding analysis) and how much simply just an excuse (for not investing). The latter is respected when the investor is not familiar with the country or with the industry or doesn’t have the resources to analyze and manage or the funds. The purpose of this is to reduce the instance that this refusal is a matter of disinformation or apprehension as other people may be abstaining (herd mentality). In case that you are convinced about the fallacies that exists as well as the opportunities then the remaining purpose is to highlight investment areas. Some facts regarding who is investing in Greece:

  • FIDI amounted to $1.7 billion in 2014 according to World Bank and 39.5 billion between 1990-2015; Top investors are from European countries (Germany, France, UK and Netherlands) ie western economies. Geopolitics and distance may be a factor for European investment compared to the US that is not a major investor. Lately China is being investing heavily too as Greece through the Piraeus port is a critical part in the One Belt One Road initiative.

  • Investment has fallen of the cliff lately, obviously due to the crisis and its consequences in business climate, economy, consumption etc
  • There is luck of financing: the Greek banks are facing liquidity problems and operate under capital controls so they are giving loans sparingly. There are no other financing options (other from probably EU subsidies). The use of Private Equity or Venture Capital domestically is very low, if any, compared to western economies. Some foreign Private Equity funds have been quite active though.

Indicatively notable foreign investments in Greece over the recent period include:

  • Blackstone (Lamda) $40million
  • Oaktree (Ikos Resorts, $280m)
  • KKR-Pillarstone ($1.2 billion of NPL portfolio)
  • Cosco (OLP- Piraeus Port) $1.7 billion
  • Fraport (regional airports) ($1.1billion)
  • Deutsche Telecom (Hellenic Telecom- OTE, $5.5 billion)
  • PSP Investments- Canadian Pension Fund (Athens airport, $1.7 billion)
  • John Paulson (shareholdings in Alpha Bank, Piraeus bank)
  • Wilbur Ross (shareholding in Eurobank)
  • Fairfax/Prem Watsa (Shareholdings in Eurolife, Eurobank)
  • Olayan group (Costa Navarino, $150m)
  • Jermyn, Dogus, Kuwait funds (Astir Palace Hotel Complex, $440 million)
  • Dogus, Temes (Hilton Athens, $190 million)
  • Italian Railways (Greek Railways/Trainose) $50mllion)
  • Thassos Grand Resort (Bulgarian investor $28million)
  • Kassiopi Corfu Resort (NCH Capital (NY), $83million)


As indicated, investment is strong where there is a strong/proven case (ie tourism), strategic issues (ie logistics and Cosco) or fundamentals (telecom, airports). Apart from this the country needs, and in my opinion can support, investment in other value added sectors where the young more educated generation can be employed without having to move abroad.


In my personal view investment in Greece can involve:

I. Established FDI target areas:

  • Tourism/Real Estate: large number of hotels houses at low prices that can be used for tourism purposes or even investment (such as trophy investment or new developments such as the Hellinikon project). Greece is a top 20 tourist destination. There are also new forms of tourism that can be developed that will expand the tourist season and target audience such as City Break tourism, food tourism (wine and other), experiential/alternative tourism.
  • Infrastructure & Logistics: Greece can be a hub for transporting to Europe (China’s COSCO acquired the Piraeus port). The route from the East to Western Europe through the Suez Canal and Greece is faster by four days compared to following the Atlantic route. Furthermore the infrastructure of highways, railway, airports are being modernized (to be completed by 2017-18). The Piraeus port is part of China’s One Belt One Road initiative.

  • Financial Services: large international investors (Paulson, Wilbur Ross, Fairfax) have invested in the Greek banking sector. Use of fintech applications are quite limited but expanding especially as the market is trying to find ways to operate around the capital controls imposed on use of cash and fund transfers. The Private Equity industry is also negligible and could be a source of financing while realizing significant returns in a not contested dealmaking space.

II. Established market sectors:

  • Energy: there’s activity in conventional energy resources (a gas pipeline (TAP connecting Azerbaijani gas fields through Turkey to Italy) is under construction and others are under discussion (East Med), there’s offshore gas and oil exploration as well). Renewable energy accounts for 18% of energy consumption and has great potential although activity has come to a stall lately. The electricity market is being liberalized too.

  • Agribusiness/food sector: the Mediterranean cuisine is increasing in popularity. There’s potential for exports; at the same time domestic consumption can absorb much of production as a large part of food products is imported. Furthermore there’s room for automation and intensification of production.

  • Healthcare and Medical Tourism: there’s spare capacity in private sector hospitals as well as great human capital. Capacity can be utilized in medical tourism as well (IVF, dental, physiotherapy/spa among others). This is a service that hasn’t been developed yet. There are 6,000 doctors of Greek origin in the US only and many in Europe that could act as ambassadors. At least 18,000 Greek doctors have found work abroad since the beginning of the economic crisis.

  • Pharmaceutical & Personal Care: the Greek pharmaceuticals sector (generics) possess significant capacity and knowhow. There’s potential in the generics sector where use is limited (18% market share compared to 37% in Germany, according to OECD). There’s also potential in natural products taking advantage of the traditional healing methods (the birthplace of Hippocrates after all) as well as of pharmaceutical R&D that could absorb the large numbers of graduates

III. Emerging/Developing Industries and Promising FDI Targets:

  • R&D and technology/manufacturing: as discussed there’s a large number of Greek PhDs in Greece and abroad and a large number of them are among the top researches. EBRD and the Greek state are sponsoring research programs to keep these scientists at home. At the same time salaries are low compared to other EU countries. Why not develop manufacturing facilities? As seen the modern production of tomorrow will not require large scale production or large labor force. Greece would not have to go through the adjustment phase but rather jump into the new high value added automated future right away. Note that large investment can now take advantage of fast track application procedures that have been lately put in place by the Greek state. Production could cover a wide array of products from fast moving consumer goods to household goods and high tech products as Greece is importing much of these goods not to mention that could also be used as an export base to the EU or other countries.

  • Business Process Outsourcing: there are already companies taking advantage of the highly educated young workforce in Greece as well as of lower salaries by outsourcing IT work or other BPO services to Greece
  • Arts, culture and education: there’s a lot to say about cultural activities and education in Greece. Classical tourism hasn’t even been developed to the extend it could. Arts like filmmaking, apart from shooting revenues from can also create revenues indirectly through promoting the country for tourism or business activities (see such effect in New York City from the huge filming industry there).

There may be more areas but I’m personally not very familiar/able to support the case but I’m open to research.

In any case it is imperative to use advisors that are familiar with the investment environment and can navigate. Becoming making presumption based on investors’ own business environment, inconveniences from differences in legal system or culture or inability to tame bureaucracy can’t be a reason for failure. It’s just an excuse for those that are not prepared well. The difference between success and failure, between generating return or losing money depends on having a knowledgeable advisor to navigate through troubles.  And in the end there are no shortcuts. If you don’t want to invest in advice and research you’ll have to live with the consequences…..

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


Απόδοση στα Ελληνικά του ανωτέρω αρθρου (κατά ένα μεγάλο ποσοστό το περιεχόμενο είναι το ίδιο με κάποιες διαφοροποιήσεις) 

Πλάνες σχετικά με την Ελληνική Οικονομία: Μια δυσφήμηση που επηρεάζει αρνητικά τις επενδύσεις και πρέπει να σταματήσει

Η Ελλάδα είναι συνεχώς στην διεθνή ειδησεογραφία τα τελευταία χρόνια λόγω της κρίσης του χρέους και της συνεπακόλουθης ύφεσης που έχει αποδεκατίσει την οικονομία και την κοινωνία. Tο 40% του ΑΕΠ έχει χαθεί από το 2008 και τώρα βρίσκεται σε επίπεδα προ Ευρώ, το δημόσιο χρέος, παρά τις τόσες προσπάθειες έχει εξακοντιστεί στο 175% του ΑΕΠ και το ΔΝΤ αμφιβάλλει για τη βιωσιμότητά του, οι επενδύσεις έχουν κατακρημνιστεί. Σύμφωνα με μελέτες, €100 δις χρειάζονται για να έρθει επιτέλους η ανάπτυξη και να αποροφηθούν το 1 εκατομμύριο άνεργοι Έλληνες (ποσοστό ανεργίας 25%, εκ των οποίων πάνω από 50% για τη νεολαία) και να μην μεταναστεύει ο κόσμος (πάνω από 400.000 έχουν φύγει) για να μη μιλήσουμε για τα ποσοστά φτώχιας.  Εν τω μεταξύ οι μαθητευόμενοι μάγοι της Τρόικας και των διαφόρων κυβερνήσεων συνεχίζουν να κατακρίνουν και να νομοθετούν χωρίς αποτέλεσμα. Να σε κάψω Γιάννη να σ’αλείψω λάδι…

Θα περίμενε λοιπόν κάποιος που δεν έχει επαφή με την Ελλάδα και ακούει όλη αυτή την καταστροφολογία ότι τίποτα δεν λειτουργεί. Ωστόσο, η Ελλάδα κατατάσσεται στην 86η θέση στην λίστα ανταγωνιστικότητας του Παγκόσμιου Οικονομικού Φόρουμ (World Economic Forum) το 2017 (πέφτοντας από την 81η το 2016) σε σύνολο 137 χωρών που αξιολογήθηκαν και 193 διεθνώς.  Έχει συγκρίσιμες βαθμολογίες με τον μέσο όρο της Ευρώπης και της Βόρειας Αμερικής όσον αφορά την υγεία, την εκπαίδευση, τις υποδομές και υστερεί σε θεσμούς, επιχειρηματικές πρακτικές και καινοτομία καθώς και σε τομείς που πλήττονται από την οικονομική κρίση, όπως το μακροοικονομικό περιβάλλον και τις χρηματοπιστωτικές αγορές. Δηλαδή η κατάταξη θα ήταν πολύ καλύτερη άμα υπήρχε ρευστότητα στην οικονομία!! Κάτι που επαφίεται σε άλλους..

Η αρνητική δημοσιότητα για την Ελλάδα όμως συνεχίζεται και επικεντρώνεται στην αναποτελεσματικότητα, τη διαφθορά τη γραφειοκρατία, τα εργατικά θέματα, τη νομοθεσία, τη φοροδιαφυγή και εν τέλει την Ελληνική νοοτροπία. Ως απόδειξη έχουν γραφτεί και βιβλία με τα άρθρα που έχουν συλλεχθεί από τον διεθνή τύπο («Έλληνες: Διεφθαρμένοι, Τεμπέληδες και Απείθαρχοι: Στερεότυπα του Βρετανικού τύπου για τους Έλληνες στα Χρόνια της Κρίσης» Θωμάς Τσακαλάκης, 2016 και «Η Ελληνική Κρίση στα Μέσα Ενημέρωσης: Στερεότυπα στον Διεθνή Τύπο» (The Greek Crisis in the Media: Stereotyping in the International Press), Γιώργος Τζογόπουλους 2013). Πολλές φορές τα άρθρα αυτά είναι άδικα, υποτιμητικά, υπερβολικά, ίσως κατευθυνόμενα και εν τέλει καταστρεπτικά. Είναι απορίας άξιο πως οι πρωτοπόροι της πολιτικής ορθότητας (political correctness) στη Δύση οι οποίοι πλέον δεν μπορούν ούτε ανέκδοτο να πούνε για εθνότητες χωρίς να στοχοποιηθούν ως ρατσιστές, ανερυθρίαστα λένε τόσα αρνητικά για τους Έλληνες και πολλοί δυστυχώς τα ανέχονται και σε ορισμένες περιπτώσεις επικροτούν χωρίς τουλάχιστον κάποια έρευνα. Φτάσαμε στο σημείο ο πρόεδρος του ECOFIN Νταισελμπλουμ να πει ότι οι Νότιοι Ευρωπαίοι έχουν ξοδέψει τα χρήματά τους σε ποτά και γυναίκες οπότε δεν μπορούν μετά να ζητάν την Ευρωπαϊκή αλληλεγγύη!!!! Τέτοια απλούστευση και προκατάλλειψη μόνο σε συζήτηση καφενείου θα μπορούσε να ειπωθεί και όχι από έναν υψηλά ιστάμενο. Αλλά και να ήθελε να κάνει μια αναφορά στις σπατάλες των τελευταίων χρόνων παρέλειψε να αναφερθεί και στα λεφτά που χορήγησαν Ευρωπαϊκές τράπεζες και εν συνεχεία ξοδεύτηκαν σε εισαγόμενα από την Ευρώπη αυτοκίνητα και καταναλωτικά αγαθά ή διακοπές εκεί με τα περίφημα διακοποδάνεια!). Βέβαια αυτό είναι αντικείμενο για άλλη συζήτηση.

Όλα αυτά βέβαια έχουν δημιουργήσει μεγάλη δυσπιστία και από τις δυο πλευρές, της Ελλάδας καθώς και της υπόλοιπης Ευρώπης. Έχουν ενδεχομένως εξάψει παλαιότερες προκαταλήψεις με αποτέλεσμα η αρνητική ψυχολογία να θέτει σε κίνδυνο την Ευρωπαϊκή ιδέα και την προοπτική λύσης.

Το θέμα αυτής της αρνητικής δημοσιότητας είναι πολύ σημαντικό ειδικά στο εξωτερικό όπου το κοινό δεν έχει άμεση επαφή με την πραγματικότητα με αποτέλεσμα να φέρνει σε άσχημη θέση τους ομογενείς αλλά και όλους αυτούς που προσπαθούν να δραστηριοποιηθούν στην Ελλάδα ή να προσελκύσουν επενδύσεις.  Πολλά από αυτά τα έχουμε αντιληφθεί και μέσω σχολίων από τουρίστες.  Το άρθρο αυτό γράφτηκε αρχικά για αυτό το κοινό αφού ο γράφων ζει εδώ και πολλά χρόνια στο εξωτερικό. Μπορεί όμως να παρέχει τα «πολεμοφόδια» στον κάθε πατριώτη ώστε να κρίνει από μόνος και να αντικρούσει την προπαγάνδα που μεταδίδεται από τα διάφορα ΜΜΕ αλλά και από άλλους κακοπροαίρετους ή παραπληροφορημένους συμπολίτες. Βλέπετε, συχνά το κοινό που δεν έχει τις γνώσεις ή το χρόνο να τα αναλύσει τα δέχεται όλα αυτά παθητικά και σε αυτό ποντάρουν οι διάφοροι «ειδήμονες» των ΜΜΕ. Εν τέλει το άρθρο αποσκοπεί στην υπεράσπιση της Ελληνικής τιμής και της κοινωνίας χωρίς όμως και να θέλει να εξωραΐσει ή να προσφέρει άφεση αμαρτιών.

Ταυτόχρονα όμως αποσκοπεί να παρέχει και μια πιο σφαιρική άποψη σε επενδυτές ώστε να μην απέχουν από καλές επιχειρηματικές προτάσεις οι οποίες καταλήγουν σε αετονύχηδες. Ίσως και αυτός να είναι ένας από τους σκοπούς που γίνεται.  Από την άλλη βέβαια υπάρχουν και πολλοί οι οποίοι δεν επενδύουν απλά επειδή δεν θέλουν ή δεν μπορούν δηλαδή δεν έχουν τα λεφτά, τις γνώσεις ή τον χρόνο. Όποιος δε θέλει να ζυμώσει πέντε μέρες κοσκινάει… Δεν θα πρέπει όμως να κρύβονται πίσω από δικαιολογίες και να επηρεάζουν και άλλους. Για να γίνει μια επένδυση χρειάζεται υποστήριξη από συμβούλους που έχουν καλές γνώσεις της πραγματικότητας. Αν π.χ. κάποιος έχει τη φαεινή ιδέα να αγοράσει ένα κεντρικό οικόπεδο μιας πόλης και να κάνει ουρανοξύστη και εμπορικό κέντρο ή εργοστάσιο σε μια παραλία σίγουρα θα βρει αντιδράσεις. Ακόμα και στο Μανχάταν της Νέας Υόρκης που είναι γεμάτο ουρανοξύστες υπάρχει αντίδραση σε χτίσιμο νέων οικοδομών γιατί υποστηρίζουν ότι ρίχνουν σκιά στην υπόλοιπη πόλη.  Γιατί όμως κάποιοι εξανίστανται σε αυτές τις περιπτώσεις;  Μήπως γιατί προσπαθούν να υπερκεράσουν τους νόμους; Ας είμαστε λίγο κριτικοί σε αυτές τις κραυγές. Μη ξεχνάμε ότι οι μεγάλοι επενδυτές πάντα έχουν εταιρίες δημόσιων σχέσεων δουλειά των οποίων είναι να καταχωρούν άρθρα στα ΜΜΕ. Για αυτό είναι χρήσιμο να εξετάσουμε όλα αυτά τα παράπονα.

Οι ακόλουθες «κατηγορίες»/πλάνες θα καλυφθούν εδώ:

Α. Εργατικά Θέματα

  1. Τεμπελιά
  2. Αρνητικό εργασιακό καθεστώς
  3. Υψηλά ημερομίσθια (μη ανταγωνιστικότητα)
  4. Χαμηλή παραγωγικότητα

Β. Επιχειρηματικό περιβάλλον

  1. Φοροδιαφυγή
  2. Παραοικονομία
  3. Διαφθορά
  4. Γραφειοκρατία και Αναποτελεσματικότητα
  5. Κανένας λογικός άνθρωπος δε θέλει να επενδύσει στην Ελλάδα..

A. Εργατικά Θέματα

1. Τεμπελιά

Πώς μπορεί να καταγραφεί η τεμπελιά με νούμερα; Τεμπέλης είναι κάποιος που δε δουλεύει. Οι Έλληνες εργάζονται τις περισσότερες ώρες μεταξύ των χωρών του ΟΟΣΑ και των χωρών της ΕΕ: κατά μέσο όρο 42 ώρες εβδομαδιαίως σύμφωνα με συγκεντρωτικά στοιχεία επί της συνολικής απασχόλησης. Μάλιστα όσο αφορά τις συνολικές ώρες εργασίας οι Έλληνες τοποθετούνται στις κορυφαίες θέσεις και διεθνώς. Είναι επίσης σύνηθες να δουλεύουν δύο ή περισσότερες δουλειές και μερικές φορές κάποιο μέρος αυτής της εργασίας δεν απεικονίζεται στα επίσημα στοιχεία λόγω της παραοικονομίας. Συνεπώς μπορεί το νούμερο να είναι και μεγαλύτερο. Ένας ακόμα λόγος για αυτό το υψηλό νούμερο είναι και η μικρότερης διάρκεια άδειας στην Ελλάδα (τέσσερις εβδομάδες το χρόνο όταν στην Αυστρία και στη Δανία δίνονται πέντε).

Φυσικά αυτό που θα πούνε κάποιοι είναι τι σημασία έχει το πόσες ώρες είναι κάποιος στη δουλειά άμα δεν κάνει κάτι? Μα αυτό εξαρτάται από την δουλειά που του δίνεται και θα αναλυθεί στην πλάνη για την παραγωγικότητα παρακάτω. Για την ώρα όμως κανένας δεν μπορεί να πει ότι οι Έλληνες είναι τεμπέληδες και τουλάχιστον για τους πολλούς Έλληνες όπου έχουν μεταναστεύσει στο εξωτερικό δεν υπάρχει τέτοια κατηγορία, το αντίθετο μάλιστα.

2. Εργασιακό Καθεστώς

Συχνά ακούγονται παράπονα ότι τα συνδικάτα στην Ελλάδα είναι μη συνεργάσιμα και ότι ο εργατικός νόμος είναι άκαμπτος. Κατ’αρχας η Ελλάδα έχει ένα εργατικό καθεστώς το οποίο ακολουθεί τα δεδομένα της ηπειρωτικής Ευρώπης που διακρίνονται για τις κοινωνικές ευαισθησίες τους και σε αυτό το πλαίσιο είναι σίγουρα πιο φιλεργατικό από το αγγλοσαξονικό/ατομικιστικό (individualist) σύστημα της Αμερικής (όπου και εκεί όμως υπάρχουν συνδικάτα) ή της Ασίας.  Το εργατικό πλαίσιο της Ελλάδας χαλάρωσε επίσης πρόσφατα με τις μεταρρυθμίσεις που πραγματοποιούνται κάτω από τις απαιτήσεις της Τρόικας. Σύμφωνα με στοιχεία αλλά και με εμπειρίες του υπογράφοντα το πλαίσιο αυτό είναι ελαστικότερο από αυτό άλλων χώρων της Ευρωπαϊκής Ένωσης οι οποίες όμως έχουν υψηλότερους απολαβές και απασχόληση (όπως πχ η Γερμανία). Είναι π.χ. σύνηθες σε πολλές Ευρωπαϊκές χώρες να είναι δύσκολες ή αδύνατες οι ομαδικές απολύσεις.

Το εργατικό πλαίσιο μπορεί να καταγραφεί από τον Δείκτη Νομοθεσίας για την Προστασία της Απασχόλησης- Employment Protection Legislation-ELP Index) του ΟΟΣΑ καθώς και από τον Δείκτη Ανταγωνιστικότητας της Εργασίας ((Labor Competitiveness Index) του Παγκόσμιου Οικονομικού Φόρουμ.  Η τιμή του δείκτη ELP για την Ελλάδα όσο αφορά την πλήρη απασχόληση είναι 2,4 η οποία είναι χαμηλότερη από αυτόν των αναπτυγμένων δυτικών οικονομιών (πχ για την Γερμανία είναι 3) και παρόμοιος με αυτόν της Αναδυόμενης/Ανατολικής Ευρώπης (π.χ. Πολωνία 2,4, Τσεχία 2,7). Συνεπώς η κατάσταση είναι συγκρίσιμη ή και καλύτερη της υπόλοιπής Ευρώπης.

Επίσης όπως και με την ανταγωνιστικότητα, η χαμηλή βαθμολογία δεν οφείλεται στα εργατικά δεδομένα αλλά στη χαμηλή παραγωγικότητα (δηλαδή στη χαμηλή προστιθέμενη αξία της παραγωγής που θα αναλυθεί παρακάτω) καθώς και στην ποιότητα της διοίκησης, δηλαδή λείπουν τα στελέχη με υψηλή κατάρτιση όπως πχ σε κάποιες μικρές και οικογενειακές επιχειρήσεις . Αυτοί είναι εξωγενείς παράγοντες από το θεσμικό πλαίσιο και τους εργαζόμενους άρα κάτι που εναπόκειται στους επενδυτές για να βελτιώσουν.

3. Εργατικό Κόστος

Κάποιοι μπορεί να λένε ότι οι μισθοί στην Ελλάδα είναι υψηλοί. Αυτό εξαρτάται από το με τι συγκρίνονται. Αν συγκρίνονται με κάποιες αναπτυσσόμενες χώρες της Ασίας με χαμηλότερο βιοτικό επίπεδο ίσως να είναι. Αν συγκρίνονται με την Ευρώπη δεν είναι. Το θέμα είναι που τοποθετείται κανείς, ποιους ανταγωνίζεται και που θέλει να φτάσει. Με βάση τα δεδομένα του 2012 η Ελλάδα έχει από τους χαμηλότερους μισθούς στον ΟΟΣΑ. Από τότε δε οι μισθοί μειώθηκαν περαιτέρω. Μειώθηκαν ως αποτέλεσμα της ανεργίας, της μείωσης της κατά κεφαλή δαπάνης, την υποαπασχόληση(για να μη μιλήσουμε για την μη καταβολή μισθών) αλλά και λόγω νομοθετικών ενεργειών (μείωση του κατώτατου μισθού, έλλειψη συλλογικών διαπραγματεύσεων κ.λπ.).

Σύμφωνα με το βιβλίο του Μιχάλη Ιγνατίου «Τρόικα, Ο Δρόμος προς την Καταστροφή» σε απόρρητο εσωτερικό έγγραφο του ΔΝΤ της 16 Απριλίου 2010, τον καιρό δηλαδή που συζητιόταν παρασκηνιακά η υπαγωγή στα μνημόνια, αναφέρεται ότι «Η ανταγωνιστικότητα μειώθηκε κατά 25% μετά την υιοθέτηση του Ευρώ, καθώς ο εγχώριος πληθωρισμός αυξανόταν περισσότερο από τον μέσο όρο της αύξησης της ισοτιμίας τους Ευρώ». Δηλαδή εδώ γίνεται παραδοχή της αισχροκέρδειας που δημιουργήθηκε κατά την μετάβαση στο Ευρώ με συνεπακόλουθη αύξηση των μισθών. Αυτό είναι κάτι που δεν συζητιέται όσο αφορά την περίφημη αύξηση των μισθών και το περίφημο «μαζί τα φάγαμε» δηλαδή που πήγαν τα χρήματα αυτά (μεταξύ άλλων). Αλλά εν πάσει περιπτώσει έχει πλέον υπάρξει εσωτερική υποτίμηση με μείωση των μισθών πλέον του 25% αλλά η ανταγωνιστικότητα δεν έχει επανέλθει, μάλιστα μειώθηκε αφού μειώθηκε και το ΑΕΠ (βλέπε παρακάτω ορισμό της παραγωγικότητας). Δηλαδή κάτι πάει στραβά εδώ …


Κατά το ΔΝΤ, δεν υπάρχει περιθώριο για περαιτέρω μειώσεις των μισθών ή του διαθέσιμου εισοδήματος (αυτό έχει μειωθεί επίσης από την υψηλή φορολογία). Τα ποσοστά φτώχιας έχουν αυξηθεί και η κοινωνία είναι σε οριακό σημείο. Επιπλέον, οι συνεχείς μειώσεις θα έχουν ως αποτέλεσμα έναν φαύλο κύκλο ύφεσης με τη συνεχή μείωση της κατανάλωσης και άρα των εσόδων για επιχειρήσεις λιανικής. Αναφερόμαστε δηλαδή στη συζήτηση για τους μισθούς στο Δημόσιο, απουσία άλλων δυνατοτήτων απασχόλησης (και χωρίς να παρεξηγηθούμε ως κρατικιστές). Για να μην μιλήσουμε και για το Brain Drain (δηλαδή την φυγή των διπλωματούχων σε υψηλότερες αποδοχές τους εξωτερικού) και τη γενικότερη μετανάστευση η οποία στερεί εργατικούς πόρους αλλά και το μέλλον της χώρας μέσω της απώλειας ενεργού πληθυσμού και ασφαλιστικών εισφορών. Είναι επίσης μια απώλεια της εκπαιδευτικής δαπάνη που έχει καταβληθεί για τα άτομα αυτά τόσο από το κράτος μέσω της δωρεάν παιδείας όσο και από τις οικογένειές μέσω της εξωσχολικής παιδείας, για να μην επεκταθούμε στο ανθρώπινο μέρος.

Από την άλλη πλευρά, τα υπάρχοντα επίπεδα μισθών αποτελούν ήδη ένα ελκυστικό κόστος για νέες επενδύσεις, ιδίως όταν συνδυάζονται με το ότι οι Έλληνες εργάζονται πολλές ώρες και είναι καλά μορφωμένοι. Και βέβαια, εκτός αυτού η Ελλάδα παρέχει μια βάση εντός της ΕΕ και του Ευρώ. Αν αυτό δεν είναι θέλγητρο τότε ποιο το όφελος ένταξης στην ΕΕ και στο Ευρώ;

4. Χαμηλή Παραγωγικότητα

Για να εξετάσουμε αυτήν την πλάνη πρέπει πρώτα να καθορίσουμε τι εννοούμε παραγωγικότητα. Είναι ατυχές πραγματικά το ότι το μέγεθος αυτό χρησιμοποιείται λανθασμένα. Παραγωγικότητα στη κοινή λογική σχετίζεται με το πόση εργασία/προϊόν παράγεται από έναν εργαζόμενο σε συγκεκριμένο χρόνο. Αυτό δεν είναι εύκολο να μετρηθεί στο σύνολο της οικονομίας παρά μόνο σε μια επιχείρηση οπότε αναφερόμαστε στην παραγωγικότητα όπως την εννοούν οι μηχανικοί. Αυτό που οι οικονομολόγοι ή οι πολιτικοί εννοούν όταν αναφέρονται στην παραγωγικότητα είναι το κλάσμα του ακαθάριστου εγχώριου προϊόντος (ΑΕΠ) ως προς τις συνολικές ώρες εργασίας. Αυτό δεν λέει πολλά. Εάν παράγετε ελαιόλαδο δεν έχει σημασία πόσο γρήγορα μαζεύετε τις ελιές η σκαλίζετε γιατί αυτός που παράγει πιο ακριβά προϊόντα όπως π.χ. αυτοκίνητα θα παράξει στον ίδιο χρόνο κάτι που θα αποφέρει υψηλότερο έσοδο το οποίο είναι και αυτό που καταγράφεται στο ΑΕΠ.

Για να εξετάσουμε αυτήν την πλάνη πρέπει πρώτα να καθορίσουμε τι εννοούμε παραγωγικότητα. Είναι ατυχές πραγματικά το ότι το μέγεθος αυτό χρησιμοποιείται λανθασμένα. Παραγωγικότητα στη κοινή λογική σχετίζεται με το πόση εργασία/προϊόν παράγεται από έναν εργαζόμενο σε συγκεκριμένο χρόνο. Αυτό δεν είναι εύκολο να μετρηθεί στο σύνολο της οικονομίας παρά μόνο σε μια επιχείρηση οπότε αναφερόμαστε στην παραγωγικότητα όπως την εννοούν οι μηχανικοί. Αυτό που οι οικονομολόγοι ή οι πολιτικοί εννοούν όταν αναφέρονται στην παραγωγικότητα είναι το κλάσμα του ακαθάριστου εγχώριου προϊόντος (ΑΕΠ) ως προς τις συνολικές ώρες εργασίας. Αυτό δεν λέει πολλά. Εάν παράγετε ελαιόλαδο δεν έχει σημασία πόσο γρήγορα μαζεύετε τις ελιές η σκαλίζετε γιατί αυτός που παράγει πιο ακριβά προϊόντα όπως π.χ. αυτοκίνητα θα παράξει στον ίδιο χρόνο κάτι που θα αποφέρει υψηλότερο έσοδο το οποίο είναι και αυτό που καταγράφεται στο ΑΕΠ.

Είναι λοιπόν αλήθεια ότι η (οικονομική) παραγωγικότητα εργασίας όπως μετράται από το αυτό το κλάσμα είναι χαμηλή. Ακόμα πιο ενδιαφέρον ότι μετά από οκτώ χρόνια κρίσης και τόσων μεταρρυθμίσεων η παραγωγικότητα έχει πέσει και κατά τα λεγόμενα των πολιτικών χρειάζονται ακόμα περισσότερες…. Η στραβός είναι ο γιαλός ή στραβά αρμενίζουμε… Αλλά γιατί; Με βάση τα μαθηματικά και μόνο αυτό μπορεί να συμβαίνει επειδή είτε η προστιθέμενη αξία στο ελληνικό ΑΕΠ είναι χαμηλή είτε οι ώρες εργασίας είναι πάρα πολλές.

  • Μπορεί να είναι πολλές οι ώρες εργασίας επειδή υπάρχει λιγότερη αυτοματοποίηση; Μάλλον δεν είναι αυτός ο λόγος, καθώς το μεγαλύτερο μέρος της δραστηριότητας είναι σε υπηρεσίες που δεν είναι και τόσο αυτοματοποιημένες γενικά. Ίσως τότε να υπάρχει πολύς αδρανής χρόνος δηλ. κάποιος κόσμος πάει στη δουλειά αλλά δεν κάνει πολλά. Αν ναι, στο βαθμό που αυτό το έργο (δηλ. ΑΕΠ στον αριθμητή) μπορεί να ολοκληρωθεί με λιγότερες ώρες εργασίας ή να αυτοματοποιηθεί τότε μόνο με τη μείωση του χρόνου εργασίας θα αυξηθεί η παραγωγικότητα της εργασίας. Εύρηκα! Το ερώτημα είναι αν οι εργοδότες θα συμφωνούσαν με μειωμένο ωράριο εργασίας αλλά με την ίδια αμοιβή ή αν θα γινόντουσαν απολύσεις. Οπότε το θέμα θα ήταν τι θα γίνουν αυτοί οι «πλεονάζοντες» εργαζόμενοι…
  • Από την άλλη πλευρά, η αύξηση του ΑΕΠ απαιτεί παραγωγή υψηλής αξίας (π.χ. προϊόντα πολυτέλειας, επώνυμα και υψηλής τεχνολογίας). Αυτό είναι θέμα επιχειρηματικής στρατηγικής, αν και μπορεί να επηρεάζεται και από τις δεξιότητες του προσωπικού. Η υψηλή προστιθέμενη αξία όμως απαιτεί και σημαντικές επενδύσεις σε διαφήμιση (branding και marketing), τεχνολογία (δηλαδή Έρευνα και Ανάπτυξη E&A (Research &Development – R&D)) και εκπαίδευση προσωπικού μεταξύ άλλων. Αυτό δεν μπορεί να συμβεί από τη μια στιγμή στην άλλη. Η Ελλάδα μπορεί να είναι γνωστή για τον τουρισμό, το οποίο ίσως να έχει γίνει και τυχαία, αλλά είναι πολύ δύσκολο να συμβεί για άλλα προϊόντα όπως πχ τεχνολογίας όπου δεν υπάρχει παράδοση και αντιμετωπίζει και μεγάλο ανταγωνισμό. Την ίδια στιγμή η Ελλάδα υστερεί σε επίπεδο Έρευνας και Ανάπτυξης (Ε&Α) ή και μεταποίησης. Η δαπάνη για Ε&Α ανέρχεται σε 0.8% του ΑΕΠ σε σχέση με 4.2% στο Ισραήλ, 2.8% στις ΗΠΑ, 2% στην Κίνα και 1.9% στον μέσο όρο της ΕΕ. Στις ΗΠΑ και αλλού μεγάλο μέρος της δαπάνης καλύπτουν επίσης ιδιωτικά κεφάλαια και μεγάλες εταιρίες που δεν υπάρχουν στην Ελλάδα. Αυτά είναι τα λεγόμενα startup τα περισσότερα από τα οποία αποτυγχάνουν αλλά εν τω μεταξύ έχουν απασχολήσει κόσμο και συνολικά έχουν παράξει αξία (καλή είναι η έρευνα αλλά μέχρι να αποδώσει κάποιος πρέπει να πληρώνει το νοίκι και το φαγητό….). Για όλα αυτά χρειάζονται κεφάλαια.

Κάποια άλλα σημεία σχετικά με την προστιθέμενη αξία και την βιομηχανική παραγωγή:

  • Δυνατότητα Ε & Α: η Ελλάδα διαθέτει μεγάλο αριθμό πτυχιούχων και κατόχων διδακτορικών πολλοί από τους οποίους αναγκάζονται να εγκαταλείψουν τη χώρα για να εργαστούν στο εξωτερικό. Περισσότεροι από 400.000 Έλληνες έχουν εγκαταλείψει την Ελλάδα από την αρχή της κρίσης, οι περισσότεροι από τους οποίους είναι μορφωμένοι (το λεγόμενο Brain Drain). Πολλοί από αυτούς που μένουν στην Ελλάδα είναι άνεργοι (20%) ή υποαπασχολούμενοι. Οι Έλληνες επιστήμονες είναι σεβαστοί και επιτυχημένοι παγκοσμίως. Σύμφωνα με τον Καθηγητή Ιωαννίδη του περίφημου Πανεπιστημίου Stamford της Καλιφόρνιας το 3% των κορυφαίων ερευνητών παγκοσμίως είναι Έλληνες, το 85% των οποίων ζει στο εξωτερικό. Παρά την καταστροφολογία τα Ελληνικά πανεπιστήμια έχουν επίσης αξιοσέβαστη κατάταξη σύμφωνα με την παγκόσμια βαθμολογία πανεπιστημίων QS, έξι από αυτά είναι μεταξύ των καλύτερων στον κόσμο. Κι αν οι κατατάξεις δεν φτάνουν μπορεί κανείς να δει πόσοι απόφοιτοι των Ελληνικών πανεπιστημίων είναι σε περίοπτες θέσεις στο εξωτερικό. Όλοι αυτοί θα μπορούσαν να αναπτύξουν ένα παγκόσμιο δίκτυο επιστημονικής συνεργασίας με συναδέλφους τους στην Ελλάδα δρώντας ως συνδετικός κρίκος με τις τοπικές τους ερευνητικές κοινότητες ώστε να πολλαπλασιαστούν οι δυνατότητες Ε&Α στην Ελλάδα.

  • Τεχνογνωσία: Η Ελλάδα δεν ήταν πάντα χωρίς μεταποιητική παραγωγή αλλά ακόμα και τώρα έχει σημαντική τεχνογνωσία σε ορισμένους τομείς. Μεταξύ 1950-1975 η παραγωγική δραστηριότητα αυξήθηκε εκθετικά συμπαρασύροντας σε αύξηση και το ΑΕΠ με ρυθμούς 7% (είναι ευρέως αποδεκτό ότι η μεταποίηση δημιουργεί περισσότερη αξία για μια οικονομία και καλύτερα αμειβόμενες θέσεις εργασίας από τις υπηρεσίες). Κατά τη διάρκεια αυτής της περιόδου η Ελλάδα παρήγαγε ηλεκτρικές συσκευές, υφάσματα και ρούχα, καταναλωτικά αγαθά, ακόμη και αυτοκίνητα! Μερικοί ίσως θυμούνται επιχειρήσεις όπως η αυτοκινητοβιομηχανίες Namco(Pony) και Teokar (Nissan), το πρώτο ηλεκτρικό αυτοκίνητο Enfield8000 που κατασκευάστηκε στο Νεώριο Σύρου, τα Zita Hellas, χαρτοβιομηχανίες Softex και Diana, τα παιχνίδια ElGreco, τις συσκευές Ιzola και Pitsos (συνεχίζουν να υπάρχουν ως επωνυμίες αν και με αβέβαιο μέλλον) ακόμα και πολυεθνικές που παρήγαγαν φάρμακα και άλλα προϊόντα στην Ελλάδα. Από το 1980 όμως, με την είσοδο στην ΕΕ χωρίς να θέλουμε να επεκταθούμε εδώ και χωρίς να είναι ο μόνος λόγος, η μεταποιητική δραστηριότητα άρχισε να κάμπτεται. Τότε εμφανίστηκε και η καταστρεπτική, ανεύθυνη ρήση ότι «ο τουρισμός είναι η βαριά βιομηχανία της Ελλάδας….» Από το 2005 και μετά η παραγωγή κατακρημνίστηκε λόγω και της κρίσης και έχουμε και πολλές χρεοκοπίες. Σε κάθε περίπτωση η Ελλάδα εξακολουθεί να έχει σημαντικές ικανότητες και προοπτικές στις κατασκευές, στη ναυπηγική, τον αμυντικό τομέα, τη μεταλλουργία, στην παραγωγή ενέργειας, τη φαρμακοβιομηχανία, την αγροτοβιομηχανία και μεταποίηση τροφίμων. Και φυσικά υπάρχουν και τόσοι Έλληνες που δουλεύουν σε βιομηχανίες στο εξωτερικό.

  • Μέγεθος αγοράς: Το συνηθισμένο επιχείρημα ότι η Ελλάδα έχει μικρό μέγεθος και δεν μπορεί να αναπτύξει τις απαραίτητες οικονομίες κλίμακας στον τομέα της μεταποίησης, μπορεί εύκολα να αποκρουστεί αν κοιτάξουμε χώρες του ίδιου μεγέθους οι οποίες παράγουν (πχ Τσεχία). Κυρίως όμως, με τις τεχνολογικές εξελίξεις η παραγωγή του μέλλοντος κατά τη λεγόμενη τέταρτη βιομηχανική επανάσταση (Manufacturing0) δεν θα είναι ίδια με εκείνη του παρελθόντος. Θα είναι αυτοματοποιημένη και θα επιτρέπει την μικρού μεγέθους τοπική παραγωγή σε αντίθεση με τα μεγάλα εργοστάσια του παρελθόντος. Εκτιμάται ότι στο κοντινό μέλλον οι περισσότερες χειρωνακτικές εργασίες θα αναληφθούν από ρομπότ και οι υπάλληλοι θα είναι υψηλότερου μορφωτικού επιπέδου για να τα διαχειριστούν. Στο Ηνωμένο Βασίλειο π.χ. εκτιμάται ότι το 57% των θέσεων εργασίας στον τομέα της μεταποίησης θα εξαλειφθεί στο κοντινό μέλλον λόγω αυτοματοποίησης.
  • Τέλος η πτώση της παραγωγικότητας έχει πέσει γιατί απλά έχει μειωθεί ο αριθμητής του κλάσματος, δηλ. το ΑΕΠ. Μήπως θα πρέπει να σκεφτούμε μια πορεία αύξησης του ΑΕΠ με τόνωση της εγχώριας παραγωγής με υποκατάσταση πολλών εισαγομένων προϊόντων από τοπικά παραγόμενα και συσσώρευση κεφαλαίου και τεχνογνωσίας; Η Ελλάδα εισάγει εκτός από πετρέλαιο και προϊόντα υψηλής τεχνολογίας ακόμα και αγροτοκτηνοτροφικά προϊόντα. Η τοπική παραγωγή θα συνέτεινε στην αύξηση του ΑΕΠ. Αλλά κάτι τέτοιο θα απαιτούσε ενδεχομένως και μια προσπάθεια προστασίας της δραστηριότητας αυτής τουλάχιστον στα αρχικά στάδια κάτι που ίσως δεν είναι δυνατό στο παρόν Ευρωπαϊκό πλαίσιο. Αλλά είναι μια σκέψη για μια άλλη ανάλυση.


B. Επιχειρηματικό Περιβάλλον

5. Φοροδιαφυγή

Υπάρχουν πολλά άρθρα σχετικά με την απροθυμία των Ελλήνων να πληρώνουν φόρους και τα τεχνάσματα που βρίσκουν για να τους αποφεύγουν σαν να είναι ένα μοναδικό φαινόμενο διεθνώς (ας μην επεκταθούμε εδώ σε πρακτικές των πολυεθνικών και τα ιδιωτικά κεφάλαια σε φορολογικούς παραδείσους που αποκαλύπτονται κάθε μέρα). Ενδεικτικά ο διευθύνων σύμβουλος της Pfizer, Ian Read είχε πει πρόσφατα ότι είναι καθήκον ενός διευθυντικού στελέχους ως προς τους μετόχους να βρίσκει τρόπους να μειώνει τους φόρους. Αυτό φυσικά γίνεται και με τη βοήθεια διάσημων συμβουλευτικών εταιρειών (φοροτεχνικοί, νομικοί κλπ).

Αλλά ας δούμε σε ποιο βαθμό το πρόβλημα της φοροδιαφυγής είναι πραγματικό η μύθος:

  • Το συνολικό φορολογικό εισόδημα της Ελλάδας αντιπροσωπεύει το 33% του ΑΕΠ, το οποίο είναι παρόμοιο με το μέσο όρο του ΟΟΣΑ. Επομένως, δεν εμφανίζεται κάποια ιδιαιτερότητα (διαφορές υπάρχουν ως προς το εάν οι φόροι είναι άμεσοι ή έμμεσοι το οποίο δημιουργεί και κάποια κοινωνική αδικία). Ωστόσο, κάποιοι μπορεί να λένε ότι η φοροδιαφυγή προέρχεται από το μη δηλωμένο εισόδημα κυρίως των μικρών επιχειρήσεων και των ελεύθερων επαγγελματιών (αυτό αναλύεται στην πλάνη περί παραοικονομίας). Τώρα όσο αφορά στους φόρους των εφοπλιστών για τους οποίους η ΕΕ/ΔΝΤ έχουν ζητήσει αύξηση, κάποιος θα μπορούσε να πει ότι οι εφοπλιστικές εταιρίες είναι δύσκολο να φορολογηθούν λόγω του πολύπλοκου νομικού τους καθεστώτος που ξεφεύγει της εθνικής δικαιοδοσίας (θα μπορούσαμε να πούμε ότι είναι από τις πρώτες διδάξασες πολυεθνικές οι οποίες είναι δύσκολο να φορολογηθούν χωρίς συντονισμό μεταξύ κρατών). Από την άλλη όμως θα μπορούσε και να είναι δυνατή η προνομιούχα φορολογική μεταχείριση σε έναν κλάδο (στο βαθμό που κάποια χώρα έχει ανεξάρτητη πολιτική) αν αυτός ο κλάδος μπορεί να παρέχει με άλλο τρόπο στην οικονομία (π.χ θέσεις εργασίας ή επενδύσεις).

  • Σήμερα, η Ελλάδα έχει πιθανώς από τους υψηλότερους φορολογικούς συντελεστές στην ΕΕ και ακόμη και εκτός αυτής (φορολογικός συντελεστής επιχειρήσεων 29% όσο περίπου και στην Γερμανία (συμπεριλαμβανομένων κεφαλαιακών κερδών), προσωπικών εισοδημάτων έως 42%, ΦΠΑ 23%, 13% και 6%, Μερίσματα 10%, επιτόκια 15%, εργατικές εισφορές που είναι ανάλογου ύψους με της Γερμανίας και τελευταία εισήχθηκε και η φορολογία των ακινήτων. Ιδιαίτερα κατά την κρίση, τα φορολογικά έσοδα αυξήθηκαν σημαντικά για να καλύψουν τις ανελαστικές δημοσιονομικές ανάγκες. Αυτό μας οδηγεί στον άλλο λόγο όσον αφορά τη δυσκολία είσπραξης των φόρων: μείωση καταθέσεων, συρρίκνωση του ΑΕΠ και τελικά κόπωση και αντίσταση, δηλ. αυτό που επιστημονικά απεικονίζει η καμπύλη Laffer (κατά αυτή την θεωρία όσο περισσότερο αυξάνονται οι φορολογικοί συντελεστές τόσο μεγαλύτερη είναι η τάση για φοροδιαφυγή και μείωση των φορολογικών εσόδων). Τελευταία υπάρχουν και παράπονα για υψηλή αδήλωτη εργασία που επιβαρύνει τα ταμεία. Η υψηλή φορολογία είναι όντως ένα μεγάλο πρόβλημα το θέμα είναι κανείς θεωρεί ότι οφείλονται στις δαπάνες για τα χρέη ή στο κοινωνικό κράτος (και συνεπακόλουθα αν πρέπει να γίνει κούρεμα των χρεών ή κούρεμα του Δημοσίου και των κοινωνικών αγαθών. Οι φόροι πάντως σίγουρα αποτελούν τροχοπέδη για τις επενδύσεις. Για την ώρα όμως αρκεί να πούμε ότι η συζήτηση περί της φοροδιαφυγής είναι υπερβολική ή τουλάχιστον μονόπλευρη στο βαθμό που δεν καταγράφει και τα διαφυγόντα κεφάλαια στο εξωτερικό σε offshore και φορολογικούς παραδείσους το οποίο αποτελεί ένα μεγάλο θέμα συζήτησης επίσης. Υπολογίζεται ότι τα κεφάλαια των Ελλήνων που βγήκαν στην επιφάνεια με το σκάνδαλο Luxleaks μόνο είναι $115διs (δηλαδή όσο το 60% του ΑΕΠ και το 35% του Χρέους!)

6. Παραοικονομία

Παραοικονομία υπάρχει σε όλες τις χώρες. Η παραοικονομία συνήθως θεωρείται πρόβλημα επειδή οδηγεί σε μη εισπραχθέντες φόρους (δηλαδή φοροδιαφυγή) και ανισότητα. Στην Ελλάδα υπολογίζεται στο 24% του ΑΕΠ (δηλαδή αυτή είναι η οικονομική δραστηριότητα που δεν απεικονίζεται επίσημα). Το ποσοστό αυτό είναι υψηλό αλλά στην πραγματικότητα δεν είναι το υψηλότερο στην ΕΕ ή τον ΟΟΣΑ (οι αντίστοιχοι μέσοι όροι είναι 19,7% και 17,6% αντίστοιχα). Συγκριτικά, οι ΗΠΑ έχουν μάλλον χαμηλή παραοικονομία της τάξης του 7% (πιθανότατα το χαμηλότερο σε παγκόσμιο επίπεδο) και από την άλλη μεριά τη Βραζιλία και τη Ρωσία πάνω από 40%. Συνεπώς η παραοικονομία δεν είναι κάτι στο οποίο διαφέρει σε μεγάλο βαθμό η Ελλάδα.Αλλά ας δούμε τους παράγοντες που συμβάλλουν στη δημιουργία παραοικονομίας. Κατά γενική ομολογία αλλά και τη μελέτη του Αυστριακού Καθηγητή Οικονομικών Friedrich Schneider (Πανεπιστήμιο Λιντζ) που έχει μελετήσει το θέμα επί μακρόν, σημαντική αιτία ή σύμπτωμα είναι ο μεγάλος αριθμός μικρών επιχειρήσεων/επιχειρηματιών. Η Ελλάδα έχει έναν εκπληκτικά υψηλό αριθμό αυτοαπασχολούμενων επαγγελματιών (δικηγόροι, λογιστές, μηχανικοί, γιατροί, καθηγητές, οικιακοί βοηθοί, εργάτες κλπ) καθώς και μεγάλο ποσοστό μικρών εταιρειών. Σχεδόν το 35% του ελληνικού εργατικού δυναμικού είναι αυτοαπασχολούμενο σε σύγκριση με το 7% στις ΗΠΑ. Από την άλλη πλευρά, το 58% των εταιρειών στην Ελλάδα είναι πολύ μικρές (έως 9 εργαζόμενοι) ενώ το αντίστοιχο ποσοστό στην ΕΕ είναι 29%. Είναι γενικά δύσκολο να εισπράττεται φόρος από αυτούς τους δύο τομείς λόγω της πολυδιάσπασης. Ο φόρτος παρακολούθησης είναι πολύ μεγάλος που εν τέλει μπορεί να κοστίζει περισσότερο από το έσοδο που τελικά θα εισπραχθεί. Όμως ο έλεγχος γίνεται σε όλες τις χώρες, τουλάχιστον για παραδειγματισμό και για απόδοση κοινωνικής δικαιοσύνης.  Στις ΗΠΑ για παράδειγμα που οι μισθοί των εφοριακών είναι υψηλοί (όπως και θα έπρεπε με βάση τη δουλειά που κάνουν αλλά και για να μην υπάρχουν και πειρασμοί..) γίνονται δειγματοληπτικοί έλεγχοι σε μικρά καταστήματα (και εκεί φοροδιαφεύγουν οι μικρές επιχειρήσεις κι ας κατακρίνουν πολλές φορές οι ομογενείς μόνο την Ελλάδα). Όταν όμως διαπιστωθεί παράβαση τότε τα πρόστιμα είναι ουσιαστικά εξουθενωτικά, ακόμα κι αν δεν εισπραχθούν, κυρίως για λόγους παραδειγματισμού.

Εν πάσει περιπτώσει, με βάση την ανάλυση του Schneider μπορούμε να δούμε ότι ενώ η Ελλάδα έχει σχεδόν 35% ποσοστό αυτοαπασχολούμενων παρουσιάζει παραοικονομία 22% (Size and Development of the Shadow Economy of 31 European and 5 other OECD Countries from 2003 to 2015, Friedrich Schneider). Την ίδια στιγμή η Εσθονία με μικρότερο αριθμό αυτοαπασχολούμενων (περίπου 10 και 15%) παρουσιάζουν υψηλότερη παραοικονομία της τάξης του 27%!! Και να σκεφτεί κανείς ότι σε πολλά άρθρα η Εσθονία υμνείται για την μεγάλη πρόοδο στον εκμοντερνισμό της δημόσιας διοίκησης και την ψηφιοποίηση!

Προσωπική άποψη του γράφοντα είναι ότι το μεγάλο πρόβλημα δεν είναι η παραοικονομία αλλά ο δυσανάλογα μεγάλος αριθμός μικρών εταιριών αν και οι μικρές επιχειρήσεις είναι ζωτικής σημασίας επειδή δημιουργούν μεγάλο αριθμό θέσεων εργασίας. Από την άλλη πλευρά όμως, σε ανεπτυγμένες χώρες, υπάρχουν πολλές μεγάλες εταιρείες οι οποίες, στο βαθμό που δεν φοροδιαφεύγουν (νόμιμα η παράνομα), μπορούν να παράσχουν τα απαραίτητα κεφάλαια για τη χρηματοδότηση των κρατικών προϋπολογισμών (το 33% των επιχειρήσεων είναι μεγάλες στην ΕΕ (πάνω από 250 εργαζόμενοι ) σε σύγκριση με μόνο το 13% στην Ελλάδα). Εκτός αυτού, οι μεγάλες εταιρείες μπορούν επίσης να επενδύσουν στην έρευνα και στο εργατικό δυναμικό και έτσι να ηγούνται των πολιτικών οικονομικής ανάπτυξης και προόδου κάτι που οι μικρότερες επιχειρήσεις δεν μπορούν, καθώς πολλές μετά βίας επιβιώνουν.

Επίσης βοηθητικός παράγοντας για την παραοικονομία είναι και μεγάλος αριθμός συναλλαγών που πραγματοποιούνται σε μετρητά (ξενοδοχεία και εστιατόρια, λιανικό εμπόριο, μεταφορές). Το τελευταίο έχει μειωθεί μετά την εισαγωγή των ελέγχων κεφαλαίου (capital controls) με τους Έλληνες να χρησιμοποιούν σήμερα περισσότερο το πλαστικό χρήμα. Για τον λόγο αυτόν μάλιστα στα πρόσφατα απολογιστικά στοιχεία της Ελληνικής οικονομίας παρουσιάζεται η ιδιωτική δαπάνη να αυξάνεται όταν μειώνεται το εισόδημα και αυτό αποδίδεται στο γεγονός ότι μεγάλο μέρος της παραοικονομίας «φανερώνεται» (δηλ. καταγράφεται πια μέσω της έκδοσης αποδείξεων κλπ).

7. Διαφθορά

Η διαφθορά στην Ελλάδα είναι ένα μεγάλο θέμα που έχει συζητηθεί υπερβολικά και είναι και από τους συνηθέστερους αποτρεπτικούς παράγοντες όταν πρόκειται για επενδύσεις (μαζί με τη γραφειοκρατία) ειδικά όταν εμπλέκονται χώρες με αυστηρό νομοθετικό πλαίσιο. Στις ΗΠΑ π.χ. υπάρχει νομοθεσία (Foreign Corrupt Practices Act –FCPA) που απαγορεύει στις εταιρίες να προβούν σε δωροδοκίες στο εξωτερικό (εκτός από τις Αμερικανικές εταιρίες καλύπτει και όσες ξένες είναι στα Αμερικανικά χρηματιστήρια και έτσι αποκαλύφθηκε και το σκάνδαλο Siemens το οποίο είναι διεθνές). Ας δούμε, ωστόσο κατά πόσο είναι υπαρκτό πρόβλημα η υπερβολή η διαφθοράς όσο αφορά τις επενδύσεις.

Η διαφθορά μετράται από τον Δείκτη Αντίληψης της Διαφθοράς (Corruption Perceptions Index, CPI) που δημοσιεύεται από τον οργανισμό Transparency International. Ο δείκτης αυτός κυμαίνεται από 0 έως 100:

  • Η τιμή του δείκτη CPI για την Ελλάδα το 2017 είναι 44 και έχει κυμανθεί μεταξύ 36-46 τα τελευταία πέντε χρόνια
  • Η Ελλάδα έχει καλύτερη κατάταξη όσον αφορά τη διαφθορά (δείκτης CPI) σε σύγκριση με την Κίνα (40), το Μεξικό, το Βιετνάμ (33), τις Φιλιππίνες (35), το Περού (35), το Μπαγκλαντές (26). Παρόλα αυτά οι χώρες αυτές προσελκύουν μεγαλύτερα ποσά Αμέσων Ξένων Επενδύσεων (Foreign Direct Investment, FDI) (βλ. Πίνακα με βάση τα δεδομένα του 2015). Έτσι, εκ πρώτης όψεως, το επιχείρημα ότι η διαφθορά επηρεάζει τις επένδυσες δεν φαίνεται να ευσταθεί σε γενικές γραμμές.
  • Προχωρώντας ένα βήμα παραπέρα, από μια στατιστική επεξεργασία των τιμών του δείκτη CPI και των επενδύσεων (FDI) σε διάφορες χώρες δεν προκύπτει καμία συσχέτιση μεταξύ των δυο. Αν κάποιος γνωρίζει κάτι περισσότερο επί αυτού ο γραφών ενδιαφέρεται να το μάθει. Όμως αν όντως έτσι είναι τα στοιχεία, αυτό επιβεβαιώνει ότι οι επενδυτές μπορούν να κάνουν δουλειές σε διεφθαρμένα κράτη (χωρίς αυτό να σημαίνει ότι αναγκαστικά προχωρούν και σε παρανομίες). Γενικά οι καλοί επενδυτές, αυτοί που επιτυγχάνουν τις καλύτερες επιδόσεις πηγαίνουν εκεί που οι άλλοι είτε δεν τολμούν, είτε αποτυγχάνουν….

Μερικές ακόμα επισημάνσεις:

  • Η συζήτηση περί διαφθοράς βλάπτει την φήμη μιας χώρας συνεπώς χρειάζεται προσοχή: Ακόμα κι αν η διαφθορά δεν είναι μεγάλος αποτρεπτικός παράγοντας για τις επενδύσεις, όπως είδαμε και μόνο η συζήτηση δημιουργεί μια αρνητική εικόνα για την Ελληνική οικονομία και τελικά έναν φαύλο κύκλο που οδηγεί σε αυτοεπιβεβαιούμενη προφητεία (δηλ. είμαστε διεφθαρμένη χώρα όπως διαλαλούσε και ένας πολιτικός κατά τις διαπραγματεύσεις για την υπαγωγή στο ΔΝΤ και τα μνημόνιο άρα τι μπορεί να περιμένεις; μας αξίζει η καταστροφή. Έριχνε νερό δηλαδή στο μύλο των δανειστών). Ποιος θέλει να εμφανίζεται ότι συνδέεται με διεφθαρμένες πρακτικές; Κανένας, τουλάχιστον δημόσια. Επομένως, σε αυτά τα ζητήματα, τα ΜΜΕ και ατομικά ο καθένας στα κοινωνικά δίκτυα πρέπει να είναι πολύ προσεκτικά για να μην δίνει λαβές. Οσοι έχουν ζήσει στο εξωτερικό θα ξέρουν ότι άλλες εθνότητες ή μειονότητες κάτι τέτοιο το προσέχουν πολύ και δεν δέχονται δημόσια κριτική (δηλ. «τα εν οίκω μη έν δήμω»).
  • Η δημόσια συζήτηση για τη διαφθορά, ακόμα και όταν υπάρχουν αποδείξεις μπορεί να είναι επικίνδυνη γιατί η κοινή γνώμη συχνά αντιδρά υπερβολικά σε αυτές τις ειδήσεις και αυτό μπορεί να οδηγήσει σε αναταραχή, βία και υστερία (για παράδειγμα σε περιπτώσεις που επηρεάζουν τη δημόσια υγεία αν υπάρξει η φήμη για δηλητηριασμένα τρόφιμα κλπ). Ακόμη και αν ένα κοινωνικό σύστημα είναι νοσηρό, δεν είναι φρόνιμο να κλονίσει κανείς την εμπιστοσύνη του κόσμου και να εξάψει τα συναισθήματα το οποίο μπορεί να οδηγήσει σε ανεξέλεγκτες καταστάσεις πριν προσπαθήσει πρώτα να το διορθώσει.
  • Γενικεύσεις και προπαγάνδα: πόσο δίκαιη είναι η εξαγωγή συμπερασμάτων με γενικεύσεις; Είναι κάτι το οποίο κάνουν κατά κόρο οι δημαγωγοί και το οποίο εμφανίζεται και σε αυτές τις συζητήσεις περί διαφθοράς και γενικά στα αρνητική δημοσιότητα για την Ελλάδα (αυτό η λογική πλάνη λέγεται και association fallacy). Συνήθης μορφή της είναι αν πούμε ότι αφού ο τάδε είναι δημόσιος υπάλληλος και πιάστηκε να δωροδοκείται τότε όλοι οι δημόσιοι υπάλληλοι δωροδοκούνται. Ποιος μπορεί να πει αυτό?
  • Η διαφθορά κατά σύμβαση σχετίζεται με παραβίαση των γραπτών νόμων. Οι νόμοι όμως και η ηθική διαφέρουν από χώρα σε χώρα. Κατά μια ριζοσπαστική προσωπική άποψη επηρεασμένη από την κοινωνιολογία (Hofstede, Weber κ.α.) θα μπορούσαμε να πούμε ότι σε ορισμένες κουλτούρες (συλλογικές/collectivist) οι άγραφοι νόμοι έχουν μεγάλη αξία και σε άλλες (ατομικιστικές/individualist) έχουν μεγαλύτερη αξία οι γραπτοί (τέτοιες είναι π.χ. οι περιπτώσεις βεντέτας όπου κάποιος υπακούει στο άγραφο δίκαιο και όχι στον νόμο). Προσωπικά δεν θέλω να κρίνω ποια είναι καλύτερη κουλτούρα αλλά ποια είναι συμβατική με τα δικά μου πιστεύω και άρα με ποιους θέλω να συναλλάσσομαι ή όχι. Όμως όσο αφορά τη διαφθορά και τις συναλλαγές ο Bill Gates, στο ετήσιο δελτίο του προσωπικού του Φιλανθρωπικού Ιδρύματος Gates Foundation που διαχειρίζεται $38 δισεκατομμύρια δολάρια και επενδύει σε χώρες αναπτυσσόμενες όπως η Αφρική, είπε το 2014: “η διαφθορά δεν είναι τόσο μεγάλο εμπόδιο στην ανάπτυξη όπως οι περισσότεροι πιστεύουν…οι δωροδοκίες είναι σε πολλές περιπτώσεις ένας είδος φόρου επί της επένδυσης”. Ριζοσπαστική άποψη αλλά μπορεί και να συζητηθεί. Σε αυτή την περίπτωση το πρόβλημα πιστεύω είναι κυρίως η διαφάνεια. Τι γίνεται εάν σε μια κοινωνία είναι ηθικά αποδεκτή η προμήθεια(φακελάκι) αλλά αποκρύπτεται από τον κόσμο το ύψος της ή και ακόμα και στο σύνολό της οπότε δεν φορολογείται δημιουργώντας συνθήκες αδικίας και ανισότητας; Και φυσικά ας μη μιλήσουμε για την δωροδοκία πολιτικών.
  • Τέλος, το ζήτημα της διαφθοράς ως προς της Ελλάδα δεν έχει αντιμετωπιστεί δίκαια. Τα τελευταία χρόνια υπάρχουν πολύ μεγάλα σκάνδαλα διεθνώς τα οποία όμως δεν αποτελούν αντικείμενο δημόσιας κατακραυγής στον ίδιο βαθμό με την Ελλάδα και τελικά δεν επηρεάζουν την υπόληψη άλλων κρατών ή εταιριών. Για παράδειγμα:
    • Το σκάνδαλο Dieselgate της παραπλανητικής μέτρησης των καυσαερίων στα ντιζελοκίνητα αυτοκίνητα της Volkswagen (όπου επιβλήθηκε πρόστιμο 15 δισ. Δολαρίων) και στο οποίο εμπλέκονται και άλλες ενδεχομένως Γερμανικές εταιρίες. Παρόλα αυτά οι Γερμανικές βιομηχανίες συνεχίζουν να επαίρονται για την αξιοπιστία και υπεροχή της Γερμανικής τεχνολογίας. Πόσοι θα αγόραζαν Γερμανικά αυτοκίνητα ή θα πλήρωναν περισσότερο για αυτά εάν κλονιστεί αυτή η φήμη;
    • Σκάνδαλο δωροδοκίας της Siemens (1,6 δισ. δολάρια πρόστιμο στις ΗΠΑ). Η δίκη ακόμα να τελειώσει στην Ελλάδα…
    • Μεγάλος αριθμός παραβάσεων από την Deutsche Bank (το μεγαλύτερο πρόστιμο που της επιβλήθηκε είναι 7,2 δισ. δολάρια πρόσφατα από τις ΗΠΑ για το ρόλο της στην κρίση του 2008). Όμως η Deutsche Bank συνεχίζει να προβάλλεται ως ένας κολοσσός και να θεωρείται μια αξιόπιστη τράπεζα

Υπάρχουν και άλλα παραδείγματα διεθνώς αλλά επικεντρώθηκα στην Γερμανία επειδή από εκεί έρχονται τα περισσότερα «μαθήματα ηθικής». Αλλά και πάλι, για να είμαστε δίκαιοι δεν σημαίνει ότι θα πρέπει και εμείς να πάμε στο άλλο άκρο και να υποστηρίξουμε ότι όλο το επιχειρηματικό σύστημα της Γερμανίας είναι διεφθαρμένο.

8. Γραφειοκρατία και Αναποτελεσματικότητα

Εκτός από τη διαφθορά, ένα άλλος σημαντικός αποτρεπτικός παράγοντας είτε αυτός είναι πραγματικός είτε δικαιολογία, για πραγματοποίηση επενδύσεων στην Ελλάδα είναι η γραφειοκρατία και η αναποτελεσματικότητα στη δημόσια διοίκηση και το θεσμικό πλαίσιο. Ετσι μας λένε δηλαδή. Αυτοί οι παράγοντες μπορούν να αποτυπωθούν από τον Δείκτη Οικονομικής Ελευθερίας (Index of Economic Freedom, EFI) που δημοσιεύεται από τον οργανισμό The Heritage Foundation. Επίσης από τον πιο γενικό Δείκτη Παγκόσμιας Ανταγωνιστικότητας (Global Competiveness Index (GCI)) που δημοσιεύει το Παγκόσμιο Οικονομικό Φόρουμ. Αυτός καλύπτει όλες τις πτυχές της ανταγωνιστικότητας μιας οικονομίας (συνολικά 12 παραμέτρους που αφορούν στο εργατικό δυναμικό, τις υποδομές, τους θεσμούς, τις υποδομές και τη καινοτομία)

Από μια εκ νέου στατιστική επεξεργασία των Άμεσων Ξένων Επενδύσεων (FDI) και των δεικτών EFI και GCI προκύπτει ότι δεν υπάρχει κάποια σχέση μεταξύ των δύο. Δηλαδή και σε αυτή την περίπτωση μπορεί κάποιοι να παραπονιούνται για γραφειοκρατία και αναποτελεσματικότητα αλλά παρ’όλα αυτά επιχειρούν σε αυτές τις χώρες. Εάν κάποιος έχει διαφορετική γνώμη επί αυτών των στοιχείων ο γραφών θα ήθελε να τη ξέρει.Αν δούμε στον πίνακα η Ελλάδα έχει καλύτερους δείκτες EFI από την Κίνα, το Βιετνάμ και όμως αναλογικά λαμβάνει λιγότερες επενδύσεις. Συνεπώς δεν είναι η γραφειοκρατία και η αποτελεσματικότητα το μόνο θέμα που μετράει.

Μια άλλη οπτική στο θέμα αυτό δίνει ο δείκτης Doing Business της Παγκόσμιας Τράπεζας (που μετρά το Επιχειρηματικό Πλαίσιο σε μια χώρα. Κατά αυτόν η Ελλάδα κατατάσσεται στην 67η θέση το 2017 από 60η το 2016. Δηλαδή έπεσε το 2017 παρά τις τόσες διαρθρωτικές μεταρρυθμίσεις που έχει απαιτήσει η Τρόικα και οι διάφορες κυβερνήσεις έχουν υλοποιήσει παίρνοντας τα εύσημα των δανειστών!!!!. Και πάλι δεν έρχονται επενδύσεις! Αυτό και μόνο μπορεί να μας βάλει σε σκέψεις για το κατά πόσο είναι άσχημη η κατάσταση στο θεσμικό πλαίσιο και την διοίκηση και για το αν χρειάζονται εν τέλει πολλές από αυτές οι μεταρρυθμίσεις ή γίνεται για αποπροσανατολισμό ή για εξυπηρέτηση άλλων σκοπών. Τώρα που βρήκαμε παπά, ας θάψουμε πέντε-έξι….

Τώρα όπως είπαμε και στο προηγούμενο μέρος σίγουρα υπάρχουν επενδύσεις που μπλοκάρονται και επενδυτές που παραπονιούνται. Όμως πολλές φορές και οι επενδυτές δεν είναι λογικοί ή καλά προετοιμασμένοι. Πολλές φορές επενδυτές από το εξωτερικό έρχονται και παραπονιούνται επειδή τα πράγματα δεν γίνονται με τον ίδιο τρόπο που γίνονται στην χώρα τους. Χαίρω πολύ…. Υπάρχει μια φράση στα Αγγλικά: όταν είσαι στη Ρώμη να κάνεις ότι κάνουν και οι Ρωμαίοι (When in Rome do as the Romans do). Και από την άλλη ας σκεφτούμε εάν κάποιες επενδύσεις δεν γίνονται γιατί κάποιοι εδώ δεν θέλουν να μοιράσουν την πίτα με νέους παίκτες…

Αλλά για να γυρίσουμε στο θέμα μας, πέρα από τους δείκτες και την παραφιλολογία οι επενδυτές αναλύουν την κάθε επένδυση με βάση τα συγκεκριμένα δεδομένα της και τα προτερήματα της χώρας υποδοχής.  Οι χώρες της Ανατολικής Ευρώπης έχουν μια θετική αξιολόγηση όσο αφορά τους δείκτες αλλά το κύριο κίνητρο για επενδύσεις είναι το εκπαιδευμένο προσωπικό και τα περιθώρια ανάπτυξης λόγω και του χαμηλού σχετικά κατά κεφαλή ΑΕΠ.  Οι χώρες της Ασίας και της Λατινικής Αμερικής εχουν χαμηλό εργατικό κόστος και μέγεθος αγοράς. Παρατηρώντας τους δείκτες αλλά και από εμπειρία εν συντομία θα έθετα τους εξής κύριους παράγοντες που βοηθούν στις επενδύσεις:

  • Ευκολία, δηλαδή ευνοϊκό φορολογικό ή νομικό καθεστώς: για παράδειγμα η Ιρλανδία, το Honk Kong, η Ελβετία, το Λουξεμβούργο, η Κύπρος, η Μάλτα. Βέβαια πολλές φορές οι ροές κεφαλαίων εδώ δεν γίνονται για επένδυση αλλά για απόκρυψη…
  • Βαθμός ανάπτυξης και μέγεθος οικονομίας: όπως η G7 και άλλες δυτικές χώρες της ΕΕ, BRIC, Αυστραλία. Εδώ μετρά η πρόσβαση στην αγορά και στη τεχνογνωσία αλλά μεγάλο μέρος είναι και ανακυκλούμενα κεφάλαια των οικονομικών αυτών
  • Αναδυόμενες οικονομίες με αυξητικές τάσεις ΑΕΠ, ή/και χαμηλό κόστος εργασίας ή/και φυσικούς πόρους: όπως το Μεξικό, η Κεντρική / Ανατολική Ευρώπη (Τσεχία, Πολωνία, Ουγγαρία), Ασία (Βιετνάμ, Κορέα, Ινδονησία, Αμερικανός (Κολομβία, Αργεντινή, Χιλή), Αφρική (Νιγηρία, Σ. Αφρική)
  • Συγκριτικό πλεονέκτημα: για παράδειγμα πρόσβαση σε τεχνογνωσία όπως για παράδειγμα οι επενδύσεις σε νεοφυείς εταιρίες λογισμικού στην Καλιφόρνια (Silicon Valley startups) ακόμη και αν η περιοχή αυτή έχει υψηλό κόστος και φορολογία ή ο τουρισμός στην Ελλάδα λόγω του περιβάλλοντος

9. Τελικά, κανένας λογικός άνθρωπος δε θέλει να επενδύσει στην Ελλάδα

Τα ερώτημα λοιπόν είναι εάν η Ελλάδα προσφέρει κάποια χαρακτηριστικά που προσελκύουν επενδύσεις. Η απάντηση είναι ότι προσφέρει ή μπορεί να προσφέρει σε πολλούς τομείς αν μπορέσει να εκμεταλλευτεί τη θέση της, την υπάρχουσα τεχνογνωσία αλλά και το μορφωμένο εργατικό δυναμικό. Αυτό βέβαια είναι θέμα που απαιτεί μακροσκελή ανάλυση.  Το θέμα όμως είναι αν οι παρούσες οικονομικές συνθήκες το επιτρέπουν και εάν υπάρχει βούληση από τους εταίρους της ΕΕ και της Τρόικας και την εγχώρια επιχειρηματικότητα να το υποστηρίξει.  Η Ελλάδα επίσης κάνει κάποια βήματα ως προς την προώθηση μεγάλων επενδύσεων με τις διαδικασίες Fast Track. Γνώμη του γράφοντα είναι ότι «το κράτος μπορεί να αποδώσει γρήγορα όπου θέλει και να μπλοκάρει επενδύσεις όπου δεν θέλει. Tο πρώτο μπορεί να εγείρει υποψίες διαφθοράς ενώ το δεύτερο αποδίδεται στην γραφειοκρατία….» Καθένας θα πρέπει να είναι πληροφορημένος και προετοιμασμένος, παράπονα κατόπιν εορτής δεν ωφελούν.

Οι άμεσες ξένες επενδύσεις (FIDI) ανήλθαν σε $1,7 δσ το 2014 σύμφωνα με την Παγκόσμια Τράπεζα και $39,5 δις μεταξύ 1990-2015. Οι υψηλότερες επενδύσεις προέρχονται από Ευρωπαϊκές χώρες (Γερμανία, Γαλλία, Ηνωμένο Βασίλειο και Ολλανδία. Η γεωπολιτική και η απόσταση μπορεί να είναι ένας παράγοντας που να ευνοεί τις Ευρωπαϊκές επενδύσεις σε σύγκριση με τις ΗΠΑ που δεν είναι σημαντικός επενδυτής.

Τον τελευταίο καιρό, πάντως η Κίνα έχει ξεκινήσει να επενδύσει σε μεγάλο βαθμό στα πλαίσια του νέου δρόμου του μεταξιού (One Belt One Road), της διαδρομής δηλαδή που ακολουθούν τα Κινεζικά προϊόντα για να βρεθούν στη Βόρεια Ευρώπη, στην οποία αναπόσπαστο μέλος είναι η Ελλάδα με το λιμάνι του Πειραιά αυξάνοντας και τη γεωστρατηγική σημασία της Ελλάδας και τη προοπτική εμπορίου.

Ο τουρισμός αποδεικνύει ότι είναι δυνατό να προσελκυσθούν επενδύσεις όταν υπάρχει συγκριτικό πλεονέκτημα και προοπτική κέρδους. Πώς να ανταγωνιστεί την Ελλάδα μια χώρα χωρίς ήλιο ότι και να κάνει σε επίπεδο θεσμών; Όμως ο τουρισμός δεν φθάνει γιατί δεν παράγει μεγάλη προστιθέμενη αξία και εν τέλει δεν μπορεί να απορροφήσει πολλούς πτυχιούχους. Ευτυχώς έχει αρχίσει να γίνεται συζήτηση για την παραγωγή στην Ελλάδα και δίκαια. Το θέμα είναι κατά πόσο θα προχωρήσει. Σκεφτείτε πόσοι εισαγωγείς θα ζημιωθούν σε αυτή την περίπτωση.  Όμως πρέπει να γίνουν πολλά τόσο όσο αφορά κίνητρα αλλά και ενημέρωση και προβολή (και φυσικά να σταματήσει η αρνητική δημοσιότητα).

Για όσους συνεχίζουν να παραπονιούνται και να δυσφημούν ότι κανείς δεν επενδύει θα αναφέρουμε εδώ επιγραμματικά μόνο κάποιες σημαντικές επενδύσεις τα τελευταία χρόνια ως απόδειξη περί του αντιθέτου (χωρίς να υπεισερχόμαστε στο κατά πόσο μια επένδυση είναι καλή ή κακή):

  • Ο μεγάλος Ελληνοαμερικανός επενδυτής John Calamos και η κοινοπραξία Calamos-Exin Partners(Ελληνική) εξαγόρασαν την Εθνική Ασφαλιστική έναντι €1δις
  • Κινεζική ναυτιλιακή Cosco: $1.7 δις για εξαγορά και επενδύσεις στον ΟΛΠ (λιμάνι Πειραιά)
  • Γερμανική Fraport και όμιλος Κοπελούζου: $1.1δις για λειτουργία και αναβάθμιση 14 περιφερειακών αεροδρομίων για 40 χρόνια
  • Deutsche Telecom: αγορά OTE, $5.5 δις
  • Επενδυτική Εταιρία PSP Investments- Canadian Pension Fund: $1.7 δις για ποσοστό στη λειτουργία του Αεροδρομίου Ελ Βενιζέλος για 20 χρόνια
  • Αμερικανική Επενδυτική Εταιρία KKR-Pillarstone: αγορά $1.2 δις κόκκινων επιχειρηματικών δανείων
  • Κοινοπραξία Ρωσικών συμφερόντων Mirum Hellas: επένδυση $400 εκατ για το τουριστικό συγκρότημα Elounda Hills στην Κρήτη
  • Κινεζική εταιρία ηλεκτρισμού State Grid: εξαγορά του 24% της ΑΔΜΗΕ (δίκτυο ηλεκτροδότησης) έναντι $320 εκατ
  • Διάσημη Αμερικανική επενδυτική εταιρία Blackstone: $40εκατ στη Lamda Development (ακίνητη περιουσία και επένδυση στο Ελληνικό που αναμένεται να φτάσει τα €7δις)
  • Αμερικανική Επενδυτική Εταιρία Oaktree: $280εκατ στο Ikos Resorts (Σανι) στη Χαλκιδική
  • Διάσημοι Αμερικανοί επενδυτές: John Paulson (μετοχές στην Alpha Bank, Piraeus bank), Wilbur Ross (ο νυν Υπουργός Εμπορίου των ΗΠΑ, μετοχές στη Eurobank), Fairfax/Prem Watsa (μετοχές στην Eurolife, Eurobank)
  • Το Αραβικό Olayan group: επένδυση $150 εκατ στο ξενοδοχειακό συγκρότημα Costa Navarino στην Πύλο (Κωνσταντακόπουλος)
  • Τουρκικά κεφάλαια Jermyn, Dogus και Κουβετιανά κεφάλαια: $440 million για εξαγορά του Αστέρα Βουλιαγμένης
  • Τουρκική Dogus και Ελληνική Temes (Κωνσταντακόπουλος): $190 εκατ για την αγορά του κτιρίου του Hilton Αθηνών
  • Εταιρία Σιδηροδρόμων Ιταλίας: $50 εκατ για την εξαγορά της Τραινοσε
  • Αμερικανικό κεφάλαιο NCH Capital (NY): $83 εκατ για εξαγορά του ακινήτου στην Κασσιώπη Κέρκυρας

Το που μπορούν να γίνουν επενδύσεις στο μέλλον και πως είναι ένα αρκετά μεγάλο για να καλυφθεί εδώ (ενδεικτικά παραπάνω (δείτε: SUGGESTED AREAS FOR INVESTMENT IN GREECE) παρατίθενται μια σειρά προτάσεων του γράφοντος όσο αφορά προτεινόμενους τομείς για επενδύσεις στην Ελλάδα ). Σίγουρα θα πρέπει να εξεταστεί η δραστηριοποίηση στη βιομηχανία και σε τομείς υψηλής προστιθέμενης αξίας χτίζοντας σε υπάρχουσες δυνατότητες αλλά και ακολουθώντας τις μελλοντικές τάσεις. Και φυσικά θα πρέπει να προστατευτεί η αγροτική παραγωγή στο βαθμό που τουλάχιστον εξασφαλίζει την διατροφική επάρκεια. Είναι απαράδεκτο να εκβιαζόμαστε στη λήψη αποφάσεων με βάση το γεγονός του ότι πρέπει να εισάγουμε βασικά είδη διατροφής! Για την ώρα ελπίζω να παρείχα κάποια στοιχεία για προβληματισμό όσο αφορά την αρνητική δημοσιότητα ώστε να αντιμετωπιστεί η κατάρα και η μειοδοσίας της δυσφήμησης.


Συντάχθηκε από τον Παναγιώτη Χατζηπλή, CFA, ACCA, MBA, Οκτώβριος 2018

Το άρθρο αυτό βασίστηκε σε δημοσιευμένα στοιχεία και επεξεργασία από τον γράφοντα.  Το κείμενο αυτό γράφτηκε στα Αγγλικά και μεταφράστηκε ή μεταφέρθηκε στα Ελληνικά (κατά το δυνατό καλύτερα αλλά όχι πιστά) με κάποιες παραλλαγές. Το Transatlantic Business Forum δεν μπορεί να θεωρηθεί ότι συμμερίζεται τις απόψεις των άρθρων που φιλοξενεί.




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.

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.

Middle market cross-border M&As set to grow

Mergers & Acquisitions plummeted in the aftermath of the 2008 economic crisis; investor sentiment, consumer demand and most importantly financing was simply not there for deals to happen. However, as US corporate profits reached sixty year highs and global economies are growing, M&As are coming back with a bang. Investors regain their risk appetite; strategic investors feel the pressure to use their newfound riches to invest in future growth, either through acquiring technology or market share. Financial investors start flexing their muscles as new capital starts flowing in their funds. Earlier this year BC Partners raised 4 billion Euros ($5.6 billion) for a new fund, Apax is expected to raise around 11 billion Euros by the end of the year (Source: Reuters).

Market Outlook

Although the recent rebound however, global M&As are down 35% compared to the 2007-2008 highs, reaching $2.4 trillion in total value in 2010, according to Mergermarket data. M&A recovery is mainly fuelled by a rebound in the US and Europe, the largest markets, and continued growth in emerging economies.

Almost 60% of the activity took place in Europe and US; of that, middle market deals where $356 billion or around 25% according to Mergermarket data. According to Thompson Financial and Deloitte US Corporate Finance total middle market deals in the US only was $175 billion in 2010. A total of 7,100 transactions were completed with average size of around $80 million. We have no available data for middle market deals in emerging markets but should be high considering the companies’ size there. The following graph illustrates M&As by deal size in Europe and US over the last 7 years, which pretty much spans the latest economic cycle. Deal activity spiked in 2006-2007 fuelled by LBOs. As these are large deals, M&A activity was more prevalent in large cap companies although middle market deals increased as well. Another differentiating factor attached to LBOs and large deals is the high participation of financial buyers; in middle market on the other hand private equity participation is relatively lower, at 13% of all deals (Thompson data).

As economies start to recover there are definitely better days ahead for M&As and especially for the middle market that forms the backbone of most economies. According to CIT and 2010 US Census data, there are 106,000 middle size companies in the US employing 32 million people. Their total annual revenues of $6 trillion compare to $8.3 trillion of the S&P 500 companies. Their total capitalization is estimated at 60% of total U.S. equity market capitalization.

Mid size companies are increasingly expanding globally, tapping into opportunities overseas be it in production resources or demand for their products. According to Mergermarket, cross-border transactions accounted for 31% of all deals in the first half of 2010. In a 2007 survey performed by KPMG’s Global Enterprise Institute four out of ten middle size Colorado companies considered global expansion as integral to their growth strategy and the majority of them actively focused on expansion plans.

This post aims to illustrate the significance and global potential of the middle market M&A sector that often doesn’t attract that much of media coverage. It will also aim to touch upon some best practices to bring cross-border middle market deals to fruition.

Middle market segmentation

Before moving any further let’s make sure we are on the same page regarding definitions. So what really constitutes middle market?

By industry convention, at least in the US, middle market refers to those companies with revenues between mostly $10- 500m and as high as $1 billion at the upper end of the range. The market is divided into lower, middle and upper brackets, with different characteristics in terms of management style and organizational resources; by that we are referring to Robert Slee’s work on private capital markets and more specifically the Slee, Trottier paper on middle market segmentation. Mid market’s lower and middle bracket deals fetch between $10m to $500m as a broad guideline. Price considerations off course depend on case specifics and industry sector, i.e. small companies in basic industries might fetch lower prices than fast growing new economy companies where even low earning figures can produce disproportionately high valuations.

What’s important to note however is that the middle market definition should not be considered unambiguous around the world. Depending on local circumstances such as level of development and industry segmentation the middle market ranges can vary. Looking for example at the graph below the percentage of companies with less than 10 employees is much higher in OECD’s less developed economies pushing higher the middle market mark there compared to US; UK, Germany and other economies in later stages of development.

To our opinion what’s middle market depends on the “big-fish–little-pond” effect: the size of your pond is what really defines where you stand. What’s considered small or middle market in the US might be taken for big somewhere else, just as a large-size US shirt might be extra large somewhere else. What’s the implication of this? There’s a huge difference in terms of self-perception. Hung out with basketball players and you might feel mid size, lead the boy scouts and you might feel a giant. These differences in self-perception make a huge difference in psychology that warrants special attention when approaching a deal.

For example, a midsize company by US standards might be a regional champion in some other country, employing a large number of employees and generating significant wealth for the particular economy. The differences go beyond semantics; they are about management styles and importance in the local setting which all bear implications during the M&A negotiation phase and beyond. Place executives from these two different worlds on the same table and you realize that they don’t only speak different languages in terms of mother tongue or cultural background but also in terms of personal objectives, styles and aspirations. Failure to appreciate that early enough in an M&A process can lead to results that range from amusing to catastrophic.

Deal Drivers

As mentioned above mid market M&As are expected to recover and along with the global economy increasingly become cross-border. According to Mergermarket data, the total value of cross-border transactions rose by 60% in the first half of 2010 reaching 31% of global deal value. Total US outwards middle market deals reached $32.9 billion in 2010 of which 35% landed in Europe (Thompson Financial and Deloitte US Corporate Finance). Add to that the large deals and you end up with total transatlantic deals of $160 billion just to underline the size of the market opportunity that the Transatlantic Business Forum and our blog follow. Outside Europe, large increase in middle market outward M&A took place in Canada, Japan and India.

Alongside the interest from western world to the emerging markets, the Mergermarket data shows that increasingly emerging market companies are also becoming extrovert. Outbound deal activity from the emerging markets rose 318% by value and 111% by deal count in the first half of 2010. According to the U.S. Census Bureau, U.S. companies with a value of $260 billion were acquired or established by non-U.S. owners in 2008 up fourfold from 2003 levels; it is expected that his trend will persist (Source: The Deal: The middle market goes global). There are various reasons for the increase of cross-border transactions. Below we attempt to highlight some of them without aiming to make this list all-inclusive.

• Stage of development: there’s increasing integration across global economies; there’s no denial to that. Globalization allows developed world companies to take advantage of growth prospects in emerging markets as well the later of consumer strength in the former. These opportunities arise from lower but rising GDP per capital levels and lower labor costs in the emerging world (see graph below taken from our recent post about stimulating investment in Europe’s periphery). The latter is a driver for outsourcing, however we would argue that this only cannot be a long term investment criteria as the cost advantage will most probably be sustainable over a specific period. For example there are concerns that although China’s immense production capability, costs there start to grow too.

• Modernization: Developing economies are in the process of modernization; they often start from low value added processes and hopefully move towards higher value added products and higher GDP levels. In this context the large number of promising middle size companies need to retool, upgrade processes to remain competitive as trade barriers fall or labor costs increase. That is crucial in order to preserve their role within local communities. In this context they may welcome foreign input.

• Horizontal expansion: M&As for middle size companies provide a way to grow quickly and break into the large company bracket thus enjoying economies of scale in production, marketing or finance. This growth can be achieved faster and with less risk when existing strengths and products can be leveraged across different regions. Off course this assumes that existing products and know-how can be easily adjusted to foreign environments. In comparison, further penetrating their local niches or even moving into new ones might be too challenging.

• Restructuring/bottom fishing. According to the Transatlantic Restructuring Outlook report published by Debtwire in association with Merrill DataSite it is expected that activity in this area will increase in 2011. Restructuring drivers for North America will be corporate sector distress while in Southern Europe solvency concerns resulting from the sovereign debt crises especially in financial services. Financial distress in Europe’s periphery is a highly publicized problem these days. Additionally Central and Eastern Europe will continue to promote inward investment and modernization. There, as well as in Southern Europe the highest percentage of suitors will be strategic buyers as they could quickly gain market share through a distress sale. But then again, private equity activity has relatively slowed down in Europe.

• Unavailability of capital or of investment options. Companies in developing economies, especially the middle market ones, are usually plagued by difficulty in accessing capital to finance their growth. On the other hand there’s significant accumulated capital and financial know-how in developed countries with limited investment options locally. We believe that this creates significant inefficiencies in capital allocation. Probably for this reason large US banks are looking into assisting middle market companies in their overseas quests leveraging strong capital base and global network (Source: article). On the other side an acquisition in a developed country can provide an emerging economy company access to capital and sophisticated financial products be it through stock market, private equity or bank loans. In this context some companies have pursued reverse mergers to list in the US.

• Access to capital and know-how: According to a UNDP’s report (“Unleashing Entrepreneurship: Making Business Work For The Poor”, UNDP 2004) private sector in emerging economies face certain limitation as it has to operate in corrupted and bureaucratic environments with ill-directed macroeconomic policies and poor infrastructures. According to the report: “even with strong macroeconomic and institutional foundations, three additional factors are indispensable for entrepreneurship and the private sector to flourish in an economy: a level playing field, access to finance, and knowledge and skills”. Entering a developed economy can provide much needed access to advanced technology and know-how.

• Access to natural resources: there’s increasing competition for commodities in a growing global economies. Access to commodities is critical for sustainable growth so we are observing increased interest for investment in natural resources in Africa and elsewhere.

• FX/capital gains: as the US is following a weak dollar policy (low interest rates alleviate the housing market crisis) while emerging economies’ currencies and consumer demand are growing (for example in Brazil, China) there’s a benefit for US companies expanding and investing overseas. We would be critical of investing driven by capital or FX gains only; as this could be speculative and not related to core business. On the other hand there are certainly business owners that may consider building wealth through capital gains (related articles on demand for US manufacturers and capital flows to emerging markets).

• Prestige: operating in a developed economy or in an emerging economy can also enhance some companies’ image. We had to resist the temptation of excluding this reason as it might seem a bit superficial but we think that it is at least in the back of some buyers mind. For example a company can be considered as having growth potential when expanding its global reach and entering an emerging economy while a developing world company can be perceived as playing on another league when operating in a developed country.

Success factors for Middle Markets M&As

Succeeding in executing an M&A doesn’t come easy. The right target should be selected, the one that fits in terms of competencies and management culture, the right price and financing should be negotiated and finally the company can be integrated in a way that resources and time is not wasted. This is not easy; actually a large number of M&As do fail. For a middle market company to succeed in a cross-border transaction or even in a simple cooperation it should select competent advisors and invest on training its management team to deal with issues related to strategic management and international finance in order to fine tune use of capital and maximize shareholder value. Management should also become aware of foreign economies and cultures and walk in negotiations without prejudices or assumptions based on own experiences.

M&A advisors should master a large array of topics in finance, legal, tax and operational matters. This is highly specialized knowledge; therefore a team is necessary with discreet roles. As this is not already enough cross-border M&A advisors should be knowledgeable in both regions to be able to bridge differences in economic circumstances, regulations and cultures. Throw in special regulations associated with foreign investment such as FCPA (Foreign Corrupt Practices Act) and the typical middle market company has enough red tape on its plate to be overwhelmed.

Middle market companies that lack the human capital resources of their larger competitors require increased support during M&As. Apart from that however, planning and executing an M&A can turn out to be a very useful self-evaluation exercise. Working on M&As external advisors bring in valuable technical background and experience from other sectors and transactions playing thus a valuable cross-insemination role. By examining acquisition options companies can evaluate their own competencies and strategy. By valuing acquisition targets they can gain insights on their own cost of capital and value creation record. Thus an M&A can have multiple benefits in shaping up a company in its quest to grow and become more competitive.

The problem with middle market companies is that they don’t reach out to external consultants that often. Cost can be a reason as smaller companies are usually tight with their money, disbelief can be another. On the other hand there’s a limited supply of knowledgeable consultants for middle size companies. Advisors in this market should possess knowledge that is directly applicable to companies of this segment and ability to engage and communicate it. Problem is that much of business literature is created by business schools or consultancies with largely, blue chip companies in mind. Capabilities, objectives and resources of large listed companies usually vary considerably for those of middle market private companies. On the other hand middle sized companies may be underserved by consultants with limited technical background largely depending on empirical knowledge. The ideal solution can be somewhere in the middle where advisors have the right education but also experience in dealing with middle market companies so that they are able to select and apply the most suitable tools for the case in hand.

On the cost side there’s little that can be done for investing on quality. A problem with middle market deals, especially those on the lower range, is that their small size often makes it uneconomical for advisors to work on them on a contingent basis. Work required for large or middle size deals doesn’t vary that much in terms of effort and time; however commission based compensation does. We believe that a solution to that can be provided by technological breakthroughs that make certain processes more efficient. For example advisors increasingly are able to source buyers or targets through online M&A platforms such as MergerID, AxialMarket or others. These platforms can provide liquidity and transparency to private markets, saving the effort in market screening and follow up that bites into transaction fees. We, in the Transatlantic Business Forum are great supporters of the online liquidity platforms (private company exchanges) and follow developments on a continuous basis (if interested further you can read our recent post about main competitors here as well as our presentation on the market ).

For all the above reasons we are very optimistic of middle market prospects both at national level but increasingly cross-border as well. However success is very much depended on getting the right advice.


The Transatlantic Business Forum is a portal, online community of professionals and consulting firm that aims to facilitate discussions on international business and especially between Europe and the Americas and promote and facilitate opportunities for cross border capital flows be it Mergers & Acquisitions, Partnerships or Trade. Contact at:

Private Company Exchanges: $10 billion market but one size doesn’t fit all

Had a great opportunity to listen first hand from Barry Silbert, CEO of Secondmarket, Peter Lehrman, CEO of AxialMarket and Daniel Confino, Founder of MergerID about market trends and different approaches among private company exchanges so thought of sharing. The discussion was organized by the Harvard Business School alumni of New York and held at KPMG’s New York offices (Innovation in Private Company Liquidity, April 4, 2011). Dan Burstein, Managing Partner of Millennium Technology Value Partners and David Weild, former Vice Chairman of NASDAQ also participated.

Private company exchanges (PCEs or online liquidity pools as we like to refer to them) may not have yet gained broad awareness or widespread adoption but they are making headlines by facilitating trading in hot, not listed stocks like Facebook, Twitter, Linkedin, Groupon or Zynga. It is by trading on SecondMarket, that Facebook’s implied valuation skyrocketed to $5obn. As these transactions have lately attracted SEC’s attention and Warren Buffet’s cautionary comments, let’s emphasize that valuations in these platforms are set by demand and supply among sophisticated investors; so it’s a “big boys” game in arm’s length transactions. It is believed that Facebook and some other hot private companies’ stocks have achieved such dispersion and active secondary trading that the line between what’s considered private or public is in essence blurred.

Apart from blocks of stocks, whole companies can as well change hands on these platforms. These “control transactions” aim to create liquidity for business owners and assist their advisors in consummating transactions. As exchange listings might be too cumbersome due to increased regulation and overhead or traditional offline M&As processes might be lengthy and costly, these exchanges create considerable efficiencies. This function is especially useful to middle market where is more difficult to attract buyer attention. More interestingly, they create opportunities for cross-border transactions, linking across global economies. For example, a US company that wants to enter the Polish market can easily research willing sellers there and make initial contacts. On the same time the Polish company can seek strategic buyers or investors around the world. That may erase inefficiencies that exist due to the fact that capital and investment opportunities usually reside in different locations these days. Capital has mainly accumulated in developed countries and opportunities arise in emerging with limited knowledge overlap between the two. This discrepancy in capital supply and demand create inefficiencies that may lead to misallocation of capital, value destruction and wasted resources; simply some capital is not put in use in the best way and companies on the other site may have to bear too high cost of capital and select projects with higher risk profiles to survive.

Benefits provided by this new technology doesn’t come without problems however Many investors or advisors, especially the “old school” often used to make deals face to face in golf clubs through long standing relationships, express disbelief. Some are worried that technology might take away businesses; some are turned away by dubious market participants. There’s some merit in that; quality of input is sometimes questionable. There are cases of buyers or sellers making false presentation of their abilities much like in a “push marketing” fashion; sometimes their intentions are not that innocent. Platforms are making efforts to remedy this by screening participants and providing research. In our opinion however, this poses a dilemma: should companies strengthen controls and by that increase operating costs, transaction fees and unintentionally drive away even legitimate liquidity or rate participants based on performance and simply caution buyers that some homework is required on their site? In the end, that’s part of the value brought on the table by knowledgeable advisors. We support the second option; see our views on operating models here.

As mentioned at the discussion, PCE adoption is increasing. Their establishment is pretty much a wish come true for many buyers, sellers and advisors spending immense amount of time and energy to communicate market opportunities. After all, we are living in a viral world; once an operating model proves itself it can grow quickly. According to the panel, it is estimated that PCEs is a promising market of $10bn. We would place the medium term target much higher. Another interesting point is that not all platforms are the same. Much like stock exchanges and darkpools, PCEs have different operating models and target different clientele. SecondMarket’s model focuses on pre-IPO stock while AxialMarket and MergerID are mainly geared towards control transactions and the middle market.

SecondMarket (formerly Restricted Stock Partners) was founded by Barry Silbert in 2004 to offer liquidity for restricted securities in public companies. Barry mentioned in an interview that had own experience in that from when working at Hoolihan Lockey and had to find buyers for parts of bankrupt Enron. SecondMarket gradually introduced trading for auction-rate securities, bankruptcy claims, limited partnership interests, structured products (MBS, CDOs, ABS), whole loans, private company stock, and government IOUs. Private stock was added two years ago. Trading is mainly geared towards pre-IPO companies and their employees on the supply side and venture capitals and high net worth individuals on the buy side. It has attracted much publicity and fame through trading stocks such as Facebook, Groupon and Linkedin.

SecondMarket surpassed a half-billion dollars in private company transactions since this market was launched in April 2009. In fourth quarter of 2010 transaction fees more than doubled compared to the previous quarter, to all times high (probably helped by the Facebook stock that accounted for around 40% of volume). At the same time market participants rose to 35,000 compared to little more than 5,000 a year ago. Companies with stock trading at SecondMarket, can control trading terms. It comes at no cost to them but sellers have to pay a 3-5% fee on transactions. According to Barry Silbert the differentiating factor between stocks traded at SecondMarket and traditional stock exchanges will at some point simply be the platform used. The companies would then choose the venue that better suits their needs. That’s interesting; after darkpools, stock exchanges may also see business taken away by PCEs in the future.

SecondMarket has already gained market recognition. It was named 2011 Technology Pioneer by the World Economic Forum and one of the “Top Fifty Tech Startups You Should Know” by BusinessWeek. Fast Company recognized it as one of eight startups “brimming with hope” for the financial industry. AlwaysOn Media named it as the overall winner of the “Global 250” list of the top private companies in the world.

AxialMarket (formerly Cathedral Partners) is focused on middle market control transactions basically catering to business owners. It was founded by Peter Lehrman with background in the Gerson Lehrman Group, the online community for on-demand consulting services. Peter is passionate for high tech B2B marketplaces, even where many thought they couldn’t exist. Probably that drove him to establish AxialMarket in 2007; outstanding foresight admittedly.

Since AxialMarket’s inception, over 3,000 privately held companies were sold through it. In the first quarter of 2011 over 500 opportunities, a 12% increase, with over $7billion in revenue and $800M in EBITDA were delivered via AxialMarket. Its platform includes over 1,200 qualified M&A advisors and private business owners. Apart from enabling transactions it also offers proactive research over targets and industries. AxialMarket follows a mixed subscription and transaction model. Most of transactions are concentrated in North America. It has strong presence in the US private equity industry.

MergerID is part of the Pearson/Financial Times group. It was founded by Dan Confino, a seasoned international M&A lawyer now based in London. MergerID leverages a strong global footprint and market insights to provide value added M&A information to its members. After all, Mergermarket a leading information platform for the M&A market, is also part of the FT group. MergerID focuses more on the CFO community and the middle market. It has adopted a membership model charging no commission on deals executed. In the first year of its operation (was launched in September 2009), over 25,000 matches between buyers and sellers have been recorded. Its platform includes more than 1,300 companies in 65 countries that is present.

According to Jonathan Goor, Managing Director of MergerID: “Through MergerID, users can effortlessly access a global audience. The interest in all the BRIC and aspirant BRIC countries as well as in the Middle East and Africa has been fantastic so far…” According to Mergermarket data, the total value of cross-border transactions rose by 60% in first half of 2010 reaching 31% of global deal value. Alongside the interest from western world to the BRICs, Mergermarket data shows that emerging market companies are also increasingly acquiring abroad. Outbound deal activity from the emerging markets has risen 318% by value and 111% by deal count in the first half of 2010.

The above platforms are not the only ones, however they are the early market participants and among the most popular. Many more new competitors have started to appear and raise capital (see our post on that here). Hopefully competition will increase product awareness and liquidity for private transactions. After all maybe PCEs are the best platform for investors and companies especially in middle market: in a stock market plagued by short-termism, analyst pressure, where average stock holding period has fallen to 6-7 months and high frequency trading accounts for as much as 70% of trading, PCEs can be a more suitable venue for some companies and long term investors (even though the motives for investing in facebook stock might be speculative..).

Will be interesting to see at some point research on the cost of capital for companies trading in PCEs versus that for listed companies (especially those not actively trading and not followed by many analysts). And one more topic to research: valuations and volatility of private equity investments based on data from PCE trading; we bet that portfolio managers, wealth advisors and accountants would love to see that.

The Transatlantic Business Forum is a portal, online community of professionals and consulting firm that aims to facilitate discussions on international business and especially between Europe and the Americas and promote and facilitate opportunities for cross border capital flows be it Mergers & Acquisitions, Partnerships or Trade. Contact at:

Private stock exchanges update: Capital starts flocking in; great potential for this disruptive technology

Private stock exchanges is a popular topic for this blog (after all we have as well put together a business pitch for a platform as early as 2009; scroll to the end of the post for the link). We can’t help but revisit the topic as this new disruptive technology starts to gain acceptance, something that will rapidly revolutionize financial markets (and generate some good profit for their users and shareholders….). A long awaited useful tool for investment professionals this technology’s introduction hasn’t been easy and still has ways to go.

One of the earlier platforms, Secondmarket, was developed by a young M&A professional facing a common frustrating feeling among investment bankers that try to shop around large amounts of illiquid investments. It is however the trading of private stocks such as those of facebook that helped attract attention to Secondmarket as well as Sharepost; one more sign of business catching up with technologies in unintended ways. And this way, trading platforms started to become a way for private investors to tap into promising returns, once only accessible to private equities and bank clients through private placements. This has recently led SEC to investigate the valuation of securities in these placements to avoid conflicts of interest; one more indication of those platforms’ increased popularity. Other market participants such as MergerID (part of the Mergermarket/Pearson(FT) group) and Axial Market stay focused on outright sale of whole companies.

Market participants are increasing almost by the day and start attracting investor attention. GATE Technologies recently raised $3.6m of new funding from private investors. Xpert Financial, who raised $3m from famous venture capitalist Tim Draper in 2009, offers an SEC approved electronic platform for secondary offerings similar to Nasdaq. More competitors will probably appear as the market will follow the usual pattern of early product introduction: many early adopters vying to penetrate the market followed by consolidation around the fittest. At this point there’s room for all, as long as they have the necessary funding to reach sustainable operations. Existing platforms operate under different execution/membership models and focus in different markets allowing a choice of service to users, much as darkpools do in the traditional exchanges’ space.

What will be the critical success factor to our opinion is the ability to secure liquidity from both buyers and sellers, through aggressive business development and proactive communication of opportunities. System integrity and credibility is another important parameter which will develop as users and regulators become more familiar with the technology. At this point why wouldn’t regulators some day oblige financiers to execute deals through this platforms rather than offline if they are able to secure sufficient liquidity and better execution terms there (along the lines of the MiFID/Best Execution guidelines) further driving their adoption and trading proceeds?

Apart from trading in promising private company stock; there’s a compelling efficiency rational giving birth to such exchanges. Instead of wasting much of a banker’s time on market screening, cold calling, correspondence, etc, using an online tool one can minimize logistics and focus on the higher value parts of a deal (i.e. negotiating and deal structuring); keeping thus fees low and profits high. This way many more middle market deals will get done; even if don’t look that promising at first sight. There couldn’t be a better timing for this product due to capital demand from startups and mid size companies that need to grow out of the recession at the same time that are underserved by the banking system in the aftermath of the financial crisis.

Other product drivers are: increased familiarization with online trading/platforms (darkpools/online trading have changed the market landscape for traditional exchanges/brokers), increased use of social networking especially by the younger generation of professionals, globalization (in today’s world, sources and users of capital increasingly don’t reside at the same location) as well as increasing numbers of high net worth and knowledgeable investors. The latter can now bypass intermediaries through these platforms directly investing on targets. This can as well revolutionize wealth management. An interesting twist to that are platforms specializing in social investing/giving. These platforms can benefit the sizeable, at least in the US, nonprofit sector but also cure some inefficiencies and credibility problems there. Such example is the GATE Impact platform which is supported by Prudential’s Social Investments program.

Finally, but very importantly, this new technology can serve a great good to financial markets as it will increase transparency over private market transactions and provide a point or reference for finance professionals and regulators to value illiquid investments; a malady behind the latest financial crisis.

We will be following news with excitement and look forward to exponential growth for this product as well as M&A activity, especially in middle market.

You can see our views on the topic as well as the business case for one such trading platform in a presentation/business pitch we prepared as early as 2009:

Private Securities and M&A Electronic Marketplaces; the future is here!

For many years and for many M&A professionals, being able to locate targets or capital in a cost-efficient manner has been an elusive target; especially in middle market deals and emerging economies.  Now things are eventually starting to change with the introduction of the private market electronic exchanges (as I would define them) such as Sedondmarket, Sharespost, Cathedral Partners, Merger ID to name a few.  These platforms constitute exchanges for non listed companies where M&A professionals can source deals.  However, the breakthrough, to my opinion, will come from private investors as well as growth in emerging markets.  Private investors are becoming interested in selling securities that they may have received as part of compensation or participate in promising pre-IPO companies.  This trend will be supported by Generation X’s and Y’s familiarity with social networking as they become active members of the investment community (just to attempt a risky comparison the Ebay model may have many more applications; one of these being in some ways the private markets).

On the other hand these platforms can serve as the bridge between private capital in developed markets and investment opportunities in emerging markets.  Although large institutional investors are present in emerging markets, the majority of opportunities there are of small and medium size, hence overlooked.  Thus middle market is for many years plagued by adverse selection and underestimated, especially in the cross-border space.  Electronic marketplaces can help with communicating opportunities and local expertise and provide the necessary transparency to increase investor confidence.  The final step for the wide adoption of these platforms will come, in my opinion, when they become part of the Best Execution/MiFID framework but there’s some way until we get there and in the meantime they’ll have to prove that they’re sufficiently liquid and efficient.  Price transparency and system integrity would also have to be proved to gain user confidence.  

Follow on additional services could be local market, tax and legal information, executive search and selection as well as my favorite: volatility statistics that will offer hedge fund managers with reliable risk profile for their private equity investments.  These investments appear to have low beta and low correlation to other asset classes.  That may be attributed to infrequent revaluation of such portfolios; something that may change with the introduction of fair value accounting and availability of reliable private market data.

Of course it’ll be some time until these platforms prove themselves but I have the sense that this time is not that far.  Once they do they can change the landscape allowing for more transaction hence higher advisory fees, significant returns for knowledgeable investors and opportunities to grow for companies.  Eventually these platforms will also become prized M&A targets themselves.  As a matter of fact they can be more valuable as part of a suite of services than as stand alone businesses.  Everybody serving high net worth individuals will get interested as well as companies integrating vertically or horizontally such as public exchanges, IT/communication companies and off course Private Equities that will be the main market participants and users.  On the other hand once these platforms mature they’ll be cash cows and attract financial investors or strategic investors that will aim at developing certain M&A markets. 

The above is only a summary on a subject that is of great personal professional interest. I have created a business pitch on this idea and would be happy to discuss further with like minded professionals and investors.  Stay tuned for more updates on the topic.