Venture capital is a choice for mergers and acquisitions

Moris Beracha.- If I have to recommend a type of investment which I feel more comfortable with, I usually say that it is preferable to invest in sectors where the creation of value is the main engine generator.

A few days ago I read an article posted on the Funds and Society website referring to an article in The Wall Street Journal which noted that hedge funds join the boom in mergers and acquisitions

It is noteworthy that in September 2015 the private equity firm of New York, KKR, which has been following a line of planting and acquisition of minority shareholdings in hedge funds, was made with 24.9% of the firm Marshall Wace.

It is also mentioned the fact that private bank Julius Baer increased its share in Kairos Investment Management, a wealth management company that also manages hedge funds.

Another important publication on economic news such as the Expansión de México portal points out that the relatively stable environment helps explain why more than half of this year’s activity began in 137 mega agreements, “defined by Thomson Reuters as the operations of at least $ 5 billion. ” And it names among the most important mergers those of the pharmaceutical companies Pfizer and Allergan, the breweries AB InBev and SABMiller and the oil companies Royal Dutch Shell and BG Group. It also referred to the partial share offer that helped Charter Communications block an operation to buy Time Warner Cable.

Gilberto Pozzi, co-chairman of Mergers and Acquisitions of Goldman Sachs, is quoted in Expansión. He points out that these operations are the result of shareholders having decided to share the risks and benefits more equitably in recent times. “Now, CEOs try to balance risk distribution and value creation, which is why there are more mergers between equals and more deals with shareholdings,” says Pozzi.

It draws attention, however, that the head of Bank of America Mergers and Acquisitions, Steve Baronoff, reports that venture capital agreements are receding. “In total, operations worth US $ 300 billion have been carried out this year, half the level registered in 2007. Although this could change next year,” said the expert.

In this regard I must say that while it is true that a Private Equity Fund can invest in any sector, in the financial certainly these types of specialized business models are also valid.

It is true that there is a tendency for mergers and acquisitions as a result of the opportunities that have been generated by the financial crises in the United States in recent years; as well as by the increase of the regulations by the authorities that have certainly made the successful operations of these hedge funds more complicated.

If I have to recommend a type of investment which I feel more comfortable with, I say that it is preferable to invest in sectors where value creation is the main generator engine. Beyond the returns and valuation of assets, the north must always be pointed, including social responsibility.

Experience shows that the companies that contribute to generate employment and that promote new technological trends are the most suitable.

In hedge funds the main source of growth is the ability of traders to generate opportunities. This is often the case where such opportunities are precisely speculative.

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