Saturday 21 April 2018

The Punt: Wall Street legend looks East to buy on the cheap

SOME guys have all the luck. The downturn may continue to bite for the rank and file, but for the 1pc, business just carries on as normal.

Private equity giant KKR has raised some €4.5bn for a buyout fund aimed at the Asian markets. The fund – a record for an Asian-focused fund by a US company – gives KKR the chance to take advantage of market volatility in the likes of Korea and Japan which sees numerous companies falling into the "underpriced" category. That means "cheap" to you and me.

The fund will also give one of the most famous names in finance the chance to rise again.

For students of Wall Street in the 1980s, Henry Kravis (pictured) is a name held up in bright lights. As head of KKR, along with his cousin George Roberts, he led the biggest leveraged buyout in history, taking biscuits-to-cigarettes conglomerate RJR Nabisco private. That epic battle, which captivated the business press in 1988, was immortalised in the bestseller 'Barbarians at the Gates'.

Kravis may be less well known among the mainstream today, but even at 69, he is showing no signs of slowing down. His firm came to Asia later than its rivals but has proved every bit as successful there as in the US. The Punt will watch the performance of this new fund with interest.

When Dijsselbloem speaks, it's best to prick up your ears

Eurogroup chief Jeroen Dijsselbloem has been vindicated.

The Dutch Finance Minister got a lot of flak and was accused of triggering a market scare earlier this year when he suggested that burning depositors and bondholders, as happened in the Cyprus bailout, would become the norm in bank rescues – a "template" in Dijsselbloem's words.

"Cyprus is not a template," an obviously annoyed ECB President Mario Draghi said at the time.

It seems the Dutchman was correct – Cyprus was indeed a template.

New bank resolution and recovery rules, which form part of the European Commission's so-called single resolution mechanism published yesterday, do just what Mr Dijsselbloem predicted.

Under the proposed deal, after 2018 shareholders will be tapped first when a bank needs to be bailed out, followed by junior bondholders, senior bondholders and, in a last resort, depositors with more than €100,000. Corporate organisations will be hit before ordinary savers or SMEs.

We should keep a close ear on Mr Dijsselbloem's musings.

Times are a-changin' but who will join board?

THE changes on the board of the 'Irish Times' continue. Two more directors, Greg Farrell and John Fanning, stepped down from the board of the Irish Times Limited – the parent company of the newspaper – at the end of June.

The moves come a year after Dr Ruth Barrington stepped down along with former diplomat Noel Dorr and Judith Woodward. All five retired after serving their full terms.

The Punt, however, notes that while five people have left the Irish Times board in the past 12 months, only two people have joined during that time – solicitor Margaret Elliott came on board last year, while Cork native and TV executive Dee Forbes joined in January.

We await with interest who else the Times will call up to join them at the top table.

You'll never be on breadline counting other people's dough

THE Punt never wanted to be an accountant, but looking at salaries for qualified professionals, we nearly wish we were.

The statistics from recruiters Marks Sattin show that Irish accountants' salaries are up 7.2pc in 2013, with basic pay averaging €58,794 a year. Throw in a bonus that has increased 14pc and you are looking at a package of more than €67,000. Not bad at all.

Clearly, this will be skewed by what the guys at the top are earning, but not by too much.

And what sort of service do companies get for financing these sort of wages?

Well, take the "big four" firm EY, or, as The Punt likes to call them, The Accountants Formerly Known As Ernst & Young (TAFKAE&Y for short).

TAFKAE&Y was the long-time auditor of Anglo. It received about €9m over the decade leading up to nationalisation, repeatedly giving the bank a clean bill of health. While there is no suggestion Ernst & Young were negligent in their auditing, it was certainly bad PR.

That has been exacerbated by the perception, rightly or wrongly, that the "big four" are earning fortunes coming up with schemes that allow multinationals to "manage" their tax affairs more efficiently.

Then again, you need to be highly skilled for these things. No doubt accountants are well worth the €67,000 a year.

Irish Independent

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