The ‘Vortex Of Volatility’ And The Merger Market

The ‘Vortex of Volatility’ and the Merger Market  

Intralinks, the provider of inter-enterprise collaboration products that is perhaps best known for its Deal Flow Predictor, recently interviewed Paul Aversano, a managing director at the consultancy Alvarez & Marsal.

Aversano leads A&M’s private equity services practice, and he is the global practice leader of the transaction advisory group. He has been in the merger and acquisitions business for a quarter century, so it is worthy of attention when he says that mergers are now taking place within a unique “vortex of volatility,” with an unprecedented number of variables driving the markets.

Intralinks interviewed him about the components of this vortex, and of how undeterred market participants might best carry on within it.

Globalization and Politics

The volatility is both a result of the globalization of the world and of the fact that the leaders of important nation states don’t want the world to be globalized. As a sign of the extent of financial globalization, Aversano alludes to the Turkish currency crisis of a year ago, and of how that sent the value of US stocks down.

As an example of the consequences of anti-globalization politics, Aversano says that on a recent trip to China, he was “given to understand that Chinese businesses effectively see the U.S. market as shut.” This is in stark contrast to the situation in 2016, “where we saw Chinese bidders in pretty much every situation.”The change has been brought about not by China’s capital outflow restrictions, though they do have an impact, and not by US protectionist measures narrowly understood either, (the interview in late April, preceded the latest shots in the US/China trade war). The chief driver of the change in climate has been the more intrusive scrutiny Chinese participation in the market gets from the Committee for Foreign Investment in the US (CFIUS).

CFIUS is an inter-agency committee of the US government charged with reviewing the national security implications of foreign investments. Last year, the administration pushed through a new law enhancing its powers over certain types of FDI—a move especially aimed at concern about Chinese investors.

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