What’s on International Treasurers’ radar.
With three trillion or so on corporate balance sheets, the hope in the deal economy is that some of this cash will find its way into strategic acquisitions and not just share repurchases. Intel’s $7.7bn deal for McAfee helped the hope meme, as August (normally a slow month) is set to surpass March as the biggest M&A month this year. $39bn of the $175bn in deal flow this month came from BHP Billiton’s hostile bid for Potash Corp.
US bank consolidation also got an endorsement from First Niagara’s $1.5bn bid for NewAlliance. This deal also follows the storyline from the NeuGroup’s UBS-sponsored Bank Treasurers’ Peer Group annual meeting last May, where the expectation was for normal M&A to take-over from government-assisted consolidations. While the biggest banks may still be on the sidelines for a few years, they too will be more inclined to acquire if their capital requirements prove less severe. A recent report from Barclays Capital suggested that new changes to proposed Basel III guidelines would reduce the additional capital requirements of the top 35 US banks by roughly half—from $225bn to $115bn.
Dublin docks, farewell
Speaking of banks, the announcement that Lloyds is pulling out of Ireland calls to mind how far the country has fallen as a financial center as a result of the crisis. Once a prime treasury center destination, tax and regulatory changes, and now the financial crisis’ impact on the country appear to have decimated its desirability. Begging the question, what’s the prime treasury destination now?
Asset manager competition
At a time when large cash investors in corporate treasury are talking about seeking fee reductions as their Treasury allocations continue to grow, the larger asset management firms with bigger market share would seem to continue to have advantage. Reports that JPMorgan Asset Management is shaking up its leadership in order to better compete with BlackRock and Pimco seem to support this trend. To ward off impulses to just put all of your firm’s cash with the big players, we will be looking into new services seeking to help treasury investment managers evaluate their external managers.