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Path to Control M&A Deals: Strategic Benefits and Situations Where They Are Advantageous

Path to control M&A deals involve a buyer purchasing a significant minority stake with the rights or requirements to buy a majority or the entire business later. These deals can be highly strategic, offering both the buyer and seller unique advantages. This article will delve into the strategic benefits of path to control deals, explore situations where they are particularly advantageous, and examine common structuring options and the risks and pitfalls associated with them.

Maybe we should talk about 5%

The “shock” of a reacceleration in global growth even as core inflation persists and remains sticky is pushing investors – and economists – to consider levels of long-term interest rates that were previously unthinkable. We believe that there are good arguments for why a 5% US 10-year bond yield is quite possible. Despite many a market commentator being in denial, US growth is running at a pace far quicker than consensus expectations, and inflation is not necessarily trending back to the Fed’s long-term target range.

Testing Times

Some economists drew comfort from last week’s US inflation report, but we believe it still does not paint a rosy picture. Core inflation, which peaked at 6.6% year-on-year last September, is still at 4.7%, indicating it remains sticky and high. We continue to be sceptical that the US Federal Reserve will be in a position to cut interest rates through much of the next year absent a global event that brings about a marked slowdown in growth.

US not ready to Samba

The US asset markets managed to pull themselves out of a bit of a tailspin last week. Investors sold off both equities and bonds and the recent dollar rally lost some momentum. In contrast, Brazil shows resilience as interest rates are falling and the economy is in good shape. Although the prices of emerging market debt have dropped, the asset class continues to provide a fair value proposition.

Growth Challenges the Markets

There were a number of themes to digest last week, but we have some better clarity. The US is not on the cusp of a recession, far from it. Hence equity markets may still have some momentum. Central Bankers in the US, Europe and Japan delivered their different forms of tightening, but future policy shifts seem very data dependent. Equities look like they may continue to make progress until the growth at hand, notably out of the US, soaks up resources leading to potential inflation pressures.

Look Out for What They Say, Not What They Do

There are widespread expectations that the Fed will impose a 25 basis point rate hike this week, but the markets will be more keen on what the Fed has to say rather than what it actually does. The ECB is also expected to hike the deposit rate by 25bp to 3.75%. The early part of the week sees some data points that may affect the mood of policymakers.