Greece defiant following collapse of eurozone debt deal talks

BY Fraser Tennant

Greek prime minister Alexis Tspiras has called for “realism” from international creditors following the collapse of the latest round of debt deal talks in Brussels on Sunday.

The talks between the Greek government and EU officials saw Greece reject demands to make €2bn (£1.44bn) worth of spending cuts in able to secure a deal to unlock bailout funds. Also at issue was the looming deadline for Greece to repay more than €1.5bn of loans to the International Monetary Fund (IMF) by the end of June.

Mr Tspiras also rejected an EU request to make substantial cuts to pensions by saying his country's dignity would not allow for such an eventuality.

“One can only suspect political motives behind the institutions insistence that new cuts be made to pensions despite five years of pillaging by the memoranda," said Mr Tspiras in an interview with the Greek newspaper Efimerida Ton Syntakton. “The Greek government is negotiating with a plan, and has presented nuanced counterproposals. We will patiently wait for the institutions adhere to realism.”

Mr Tspiras also commented that his stance was not “a matter of ideological stubbornness” but was “about democracy”. In response, a muted European Commission (EC) said that although some progress had been made during the talks, “significant gaps” remained and time was running out for Greece to unlock bailout funds from the EU and IMF.

The impasse between Mr Tspiras and EU officials has intensified concerns as to the prospect of a Greek default in two weeks’ time. Furthermore, many believe that this could ultimately lead to Greece withdrawing from the eurozone altogether – a ‘Grexit’, as it has become known.

On the prospect of a Grexit, French president Francois Hollande said there was “little time” to prevent Greece from leaving the eurozone and that “the ball was now firmly in Greece's court”.

Mr Hollande said: “It's not France's position to impose on Greece further cuts to smaller pensions, but rather to ask that they propose alternatives. We have to get to work... everything must be done in order that Greece remains in the eurozone."

Next up for Mr Tspiras and the Greek government is a European Central bank (ECB) reassessment of continuing support for Greek banks in case of default (17 June); a meeting of Eurozone ministers to hammer out a deal that Greece can ratify by the end of the month (18 June); and the end of the Eurozone bailout with Greece and the deadline for a Greek €1.5bn debt repayment to the IMF (30 June).

News: Morning Agenda: Greek Debt Talks Break Down Again

CPPIB to acquire Antares from GE Capital in $12bn deal

BY Fraser Tennant

In a major transaction within the US lending sector, the Canada Pension Plan Investment Board (CPPIB) has agreed to acquire 100 percent of Antares Capital - the sponsor lending portfolio of GE Capital - in a deal worth in the region of $12bn.

The move to acquire Chicago-based Antares Capital, the leading lender to middle market private equity sponsors in the US (provider of more than $123bn in financing over the last five years), is being seen as a highly strategic, long-term platform investment for CPPIB Principal Credit Investments (PCI) group.

With a focus on providing financing solutions both globally and across the capital structure, CPPIB’s PCI group makes direct primary and secondary investments in leveraged loans, high yield bonds, mezzanine, intellectual property and other solutions.

“This acquisition exemplifies our strategy to achieve scale in key sectors through platform investments," explained Mark Wiseman, president & CEO of CPPIB. “It secures a market-leading business that is exceptionally well positioned to deliver value-building investment flows. In doing so, we are advancing the prudent diversification of our investment portfolio, strengthening the Fund even further.”

Upon the closure of the transaction, Antares Capital will operate as a standalone, independent business governed by its own board of directors, effectively retaining the brand that has built up a long and impressive track record in the US middle market lending sector.

“We are excited to partner with CPPIB," said delighted David Brackett, a managing partner at Antares Capital. “We couldn't imagine a better outcome to the sale process for our team or our customers. CPPIB brings deep understanding and knowledge of our market and permanent capital, which will allow us to serve our customers in both good and challenging times.”

The acquisition of Antares Capital, along with the retention of its managing partners, David Brackett and John Martin, will expand and complement CPPIB’s existing Principal Credit Investments portfolio, according to Mark Jenkins, senior managing director & global head of private investments at CPPIB. He said: “With this single transaction, we immediately acquire turn-key scale and a long-term partnership with the best, most experienced management team in the market.”

The Antares Capital transaction, subject to the customary regulatory approvals and closing conditions, is expected to complete during the third quarter of 2015.

News: General Electric to exit banking sector with $12bn sale of finance business

Divestments key to capital strategy, growth

BY Richard Summerfield

In 2014 divestments became one of the most important weapons in the arsenal of corporates. By getting smaller, many firms gave themselves the room, and the financial muscle, to grow.

Increasingly, leading companies are utilising divestments to further their capital strategy and facilitate growth. According to EY’s latest Global Corporate Divestment Study, many more companies are waking up to the benefits of divestitures, with more than half of those firms surveyed - some 71 percent - expected to join the swelling ranks of strategic sellers over the next 12 months.

Much of the renewed interest in divestments as a corporate strategy has been predicated on the return of M&A to the corporate agenda. 2014 saw the level of M&A activity across the global economy achieve pre-financial crisis levels as firms adapt to the shifting sands of modern corporate life, with its complex compliance obligations and rising costs.

Activist investors are also having a significant impact on corporates and their willingness to divest assets. Forty-five percent of executives noted that shareholder activism influenced their decision to divest some of their assets. A unit’s weak performance, position in the market can also trigger a divestment, as can a unit no longer being part of a company’s core business or a need to generate cash.

For those companies that have decided to take the plunge and divest a unit, the process represents an excellent opportunity for growth. Seventy-four percent of respondents said they are using divestitures to fund corporate growth, while 66 percent said they saw an increased valuation multiple in the remaining business after their last divestment.

When undertaking a divestiture, organisation and planning can play a pivotal role in increasing shareholder value. Fifty percent of respondents noted that by starting the preparatory work behind the deal at an early stage, they were able to complete their transaction on time. Taking shortcuts in deal preparation only elongates diligence work, and delays closure times. For divesting firms, speed is the key.

Report: Global Corporate Divestment Study 2015

Businesses lax on tax transparency – EY

BY Richard Summerfield

In the face of increased regulatory pressure from the OECD, the European Commission and various national governments, tax transparency is becoming an extremely important issue. However, many companies lack the systems and resources to adequately respond to these new global tax disclosure and transparency requirements, according to a report from EY.

The report, ‘A new mountain to climb: tax reputation risk, growing transparency demands and the importance of data readiness’, surveyed 962 tax and finance executives across 27 distinct jurisdictions. It found that more than two-thirds of those surveyed believe that they would require additional resources to gather and provide the information required following the introduction of the OECD's base erosion and profit shifting project, and increasing government clampdowns on tax avoidance.

Though many of those firms surveyed believe that they are unable to meet their tax transparency obligations, interest in tax transparency in the corporate boardroom has never been higher.

According to EY, 83 percent of executives surveyed said they regularly brief the chief executive or chief financial officer on issues of tax reputation risk. Forty-three percent of executives regularly brief their audit committee. And 89 percent said they are somewhat or significantly concerned about media coverage as to how much companies pay in taxes.

“We are at a critical stage as the global tax environment evolves,” said Jay Nibbe, EY’s global vice chair of tax. "Increasing transparency readiness presents an opportunity not only to comply with new disclosure demands but also to proactively work to mitigate reputation risk. Getting prepared will require some additional investment in technology, data extraction capabilities, and new skills in people resources. It also involves increased awareness on how you think about your tax position, and how it could be perceived by a wide range of stakeholders.”

If companies hope to achieve compliance, internal tax professionals may need to change the way they report, track information related to the taxes they pay, and realign their IT systems accordingly.

Report: Businesses must augment tax transparency readiness to mitigate increasing reputation risk

Strong UK/US axis helps drive resurgence in UK deals market in Q1

BY Fraser Tennant

The UK deals market is experiencing a major resurgence, with Q1 deal volumes up 50 percent on Q1 2014 and total deal values increasing by 96 percent, according to a new deals index published by PwC this week.

The PwC Deals Index, a survey of 103 c-suite private equity and corporate respondents, tracks global deals over £25m involving a UK asset or acquirer. Much of the resurgence in UK deal activity, claims PwC, is due to the number of 'mega deals' and the ongoing availability of capital.

Key findings presented by PwC include the disclosure that although corporate activity was the main driver of growth in terms of deal numbers – accounting for 70 percent growth compared to growth of just 2 percent in private equity led deal numbers – private equity has turned its attention to much larger deals, with average deal sizes rapidly increasing from £97m to £235m in Q1 2015.  

As far as average corporate deal values are concerned, the Index finds them remaining steady at £153m in Q1 - up from £142m in the previous quarter.

“Although headline numbers across all deal sizes showed a decline in this quarter, the market for larger deals was significantly more positive driven by the improving macroeconomic environment, increased market confidence, favourable debt markets and a strong UK/US deals axis," commented Stuart McKee, PwC's head of corporate finance in the firm’s UK deals business.

Despite the positive outlook for the UK deals market highlighted by PwC, many survey respondents stated that they believe the rapid increase in UK M&A activity seen in Q1 will begin to slow later in the year, but that the outlook for Q2 remains positive. In terms of Q2 deals, 36 percent of corporate respondents said that they are likely to make an acquisition in Q2 2015, while 85 percent of private equity respondents made a similar claim.

“Embedded in these statistics are a number of transformational deals led by private equity,” explains John Dwyer, PwC’s global head of deal business. “Our latest research indicates that our survey panel expect deal activity to remain strong for the next six months before tailing off towards the end of 2015.”

Report: PwC Deals Index Q1 2015