Archive for June, 2012

Germany Embraces China Buyers Once Spurned as Economy Stings

 

Germany’s mid-size businesses, considered the backbone of the country’s economy, for years spurned advances from Chinese companies. Then the global economy
slumped and German companies stopped playing hard to get.

 

So far this year nine German “Mittelstand” companies,
typically family-owned with fewer than 500 employees, have
agreed to be acquired by Chinese firms, bringing the total to 21
since the beginning of 2011. China surpassed the U.S. last year
to become the largest foreign direct investor in Germany by
number of deals. The uptick signals that the 3 million
Mittelstand companies, accounting for roughly half of Germany’s
economic output, will put aside their wariness of China and
outside ownership in favor of growth and survival.

 

“Many Mittelstand companies ran into problems during the
financial crisis,” said Christian von Stetten, a German
lawmaker in Berlin who helps oversee a Parliamentary committee
on Mittelstand firms. “A Chinese investment can make sense and
be a way out of the crisis.”

 

 

Breakthrough moment: intangible assets as collateral? – The Intangible Economy

Use of intangibles as loan collateral might finally be at a breakthrough point. A story in today’s Financial Times (“Banks eye intangible assets as collateral“) discusses efforts to create IP recognized as collateral for purposes of Basel III bank regulation. At issue is whether these intangible assets count toward the required level of capital a bank must have. As the story notes:

Under the terms of many loans, banks have the right to seize a borrower’s patents and trademarks as part of a foreclosure proceeding. But these intangible assets cannot generally be counted towards the loan’s security for regulatory capital assets because they are considered too difficult to value.

The work around on the knotty valuation problem being proposed is insurance, where the insurance company would buy the IP at a fixed price in case of default. Details, including the pricing model, are, according to the story, still being worked out. Apparently, however, one deal may be going to regulators for approval soon. Obviously getting the pricing models right is the key step. It was the failure of those models for credit default swaps and other synthetic financial instruments that helped created the recent financial debacle.

 

 

 

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