Monday, February 23, 2009

Perspective on Australian Import/Export Business

Having our firm recently co-invest in a new venture (a Sydney based exclusive importer of European, automotive performance and enhancement products for BMW, Mercedes, Porsche, VW, Audi etc), it was interesting to discover the fact that many firms, especially German – despite of huge distances between the parties and costs of transport, still can to do competitive business with antipodes.

Australia is doomed to trade with distant partners. In the past, this distance greatly influenced just about every aspect of everyday life here (and not favourably). The phrase “tyranny of distance” was probably invented here.

Australia’s larges economic partners include such superpowers as Japan, US, China and Korea, it’s no wonder that European trade is also very lively. However, in discussions with a number of CEO’s managing large, privately held companies, in Germany, Poland and other EU countries, it became very apparent that the EU trade with many suitable Australian businesses is not suppressed by the geographical distance, it is suppressed by a psychological distance.

For many European businesses, Australia is seen as a distant, exotic trade partner, with small population and unknown cultural compatibility. Many of the common objections, when dealing with local companies wishing to expand their products to foreign markets, revolve around that fundamental need for a mind shift.

With recent drops in the value of Australian dollar and the movements against stronger currency like the Euro, Australian exports are well positioned for EU markets, right now, more so than ever.

There are no shortages of good export opportunities for Australian products, there are however few contacts and traditions which can position many other Australian made products on a world trading stage.

by: Andrew Ochudzawa

Wednesday, February 18, 2009

PEG's & US Toxic Debt

Just like many times before, private equity firms are picking up pieces of ‘profits’ in the otherwise rotten, (or as referred be some, toxic) bank assets. Will this help the new US Government in its somehow confused search for a way to do away with bad debt off the financial markets?

Possibly, but there are some limitations as to what PEG’s can do by themselves.
A number of private equity groups such as Black Rock are regarded as a potential white knights in their quest for turnaround of a bad debt into something more…profitable?.

Many are hopeful that PEG’s can scoop up what’s left and buy up so much bad debt that the burden will be removed from the Government and assist its hopeless search for a solutions to the current, and now global, financial crisis. There are huge issues with this proposition.

Firstly, the new US Government had been toying with the idea of creating a ‘bad debt’ bank that would aggregate debts (buy up bad debt) The US treasury announcement of a rescue plans (details) on the 10th of February have been extremely sketchy. So far, the consensus seems to be that a private/public investment fund, not a distressed/bad debt bank, would handle this.

Secondly, the idea of such a debt vehicle could give large leverage to private equity groups. There are significant conflict of interest considerations.

Lastly, while interest in bad debts restructuring seems appealing, without a larger investment vehicle to steer the process, there is just not enough that can be done by a small number of private equity firms who act alone.

The costs of bad/toxic debt are so enormous; it is surely delusional to think that PEG’s alone can make any significant impact.

by: Andrew Ochudzawa