February 2012

Standard & Poor's Ratings Services has published a report examining why sukuk issuance is gaining acceptance in markets beyond its established strongholds in Malaysia, Indonesia and GCC.

According to the report, European banks are reducing their overseas exposure as their capital requirements have increased and their domestic economies faltered. Governments in the Middle East and Asia have therefore turned to local investors to back their infrastructure projects. Banks in the Middle East and Asia that comply with Sharia law have also demonstrated a strong appetite for new assets that meet their requirements.

Greater standardization of sukuk instruments and improved processes for resolving defaults and restructuring can prove to be major boost for this industry.

Link: http://www.reuters.com/article/2012/02/15/idUSWLA293520120215

Interesting article arguing that PE activity is picking up because (a) valuation expectations of buyers and sellers are converging and (b) PE houses are under increasing pressure to deploy cash. I would have to disagree. The reason more deals are closing is that there are better deals out there. Only the best companies have made it through the tough environment of last 3-4 years and these are the ones that are going to market at this stage to seek growth opportunities. Obviously, PE houses know this and are agreeing to higher valuations for these businesses, which is being interpreted as ‘convergence’ of valuation expectations.

It’s like Warren Buffett said: “it’s always better to buy a wonderful company at a fair price than a fair company at a wonderful price”.

Link: http://www.reuters.com/article/2012/02/08/mideast-privateequity-idUSL5E8D62TH20120208