My name is Gijs van de Wetering, 23 years old. I obtained my MSc. Finance diploma in August, 2017 and currently work as junior M&A specialist for Blacktrace, an award-winning, independent, and international M&A specialist. In this article I would like to talk about how I experienced the transition from being a student to being an employee and why I chose to pursue a career in M&A. Tilburg University My life as a student began with the BSc. Economics and Business Economics, which is basically an upgraded version of the more common BSc. Business Administration. This studies enables you to develop a broader economical mindset. In my second year I decided to put theories into practice and started investing (although some might call it trading) in stocks. While analyzing stocks and companies, I realized that I wanted to specialize further in finance. A logical next step was the MSc. Finance program, together with 200 highly motivated, internationally oriented students. This program offers a lot of optional courses, allowing students to customize their program in order to successfully land a job within their preferred field. I experienced a strong but positive competition from my fellow driven students, who all wanted to achieve an above average GPA, which made it both a fun and educative experience. Become active! In 2015, I attended Investment Night, a symposium with prominent investors who discuss the current investment climate and try to transfer their knowledge to the students. After this successful edition, I was eager to organize such an event myself, and 3 months later I was one of the new members of the Investment Night 2016 committee. On top of all the amazing (in)formal activities, working in a committee or board provides you with organizational and semiprofessional experience that closes the gap between studying and working. You also get the opportunity to meet many enthusiastic professionals and ambitious students, which helped me a lot when I was looking for a starter’s job. After organizing Investment Night, I became chairman of A&F Investments, the investment club for Tilburg University students. The two other board members and I were responsible for hosting the bi-weekly meetings, portfolio management, recruitment of new members, acquiring partners, administration, and organizing (in)formal activities such as guest lectures, visits and quarterly drinks. Overall it was the perfect stepping stone for my career and therefore I recommend everyone to acquire some extracurricular experience. “You get insight into all of the firm’s competitive advantages and the road to their success.” Working in M&A Currently I am proud working for Blacktrace as junior M&A specialist. M&A appealed to me not only because of the financial aspects, but also due to its multidisciplinary and dynamic aspects. M&A is a field on its own, where specialists have to possess deep knowledge of finance, accountancy, (fiscal) law, strategy, psychology, and negotiations. Every company and every industry is different, so you continuously have to dive into the business model, the organization and the industry trends. I favored Blacktrace over other M&A firms because of 4 main reasons: (1) it is a relatively small boutique with 10 employees, (2) the pragmatic attitude, (3) the deal size, EBITDA >€3m, and (4) the location: ‘s Hertogenbosch. Within a smaller firm, you are given more responsibilities and freedom, and communication lines are shorter, hence you are aware of almost all developments. A pragmatic approach is very important to me, as I prefer to stay focused on delivering relevant and reliable output, instead of incorporating a lot of fuzz around the principle goal. Our clients, mostly family firms and experienced, successful entrepreneurs, want us to sell their company because of this DNA. Blacktrace mainly focuses on M&A deals for SME’s. Therefore, quite often a family business is involved. Such a transaction is a huge deal for the family, so every tiny detail has to be 101% perfect. We also encounter many market leaders in niche-markets. These are the firms I find the most interesting, as you get insight into all of the firm’s competitive advantages and the road to their success. The quality and quantity of information is rather limited compared to publicly listed firms or the case studies we make in university. This requires thorough analyses and you frequently have to contact the management for an explanation or additional information. I was really surprised how helpful the CFO of a company was, the first time I sent her my list of questions and needs. This is what makes M&A so exciting for starters: the clients and partners you work with/for are always at executive level, meaning you have to be continuously sharp and make sure you are well prepared. “It is always an exciting moment because you finally receive feedback on your work from the market/investor.” Currently I am involved in 4 projects in various sectors (construction, industrial, energy, and retail). In general, the senior is fully in charge of the project and handles the most complex phases, like deal structuring, contracts and negotiations. My main responsibilities are making information memoranda, valuations, long lists, business tools, such as sector overviews or models. Two weeks ago we entered the market with one of the companies by approaching potential acquirers. This is always an exciting moment because you finally receive feedback on your work from the market/investor. If the information memorandum is not appealing (or not complete enough!) to the investors, or when you have selected the wrong firms in the long list, then it will be more difficult to find the right acquirer. I am looking forward to working on all the interesting projects that are coming up this year and of course to the first two (business) trips to Dublin and Warsaw. Lastly, I would like to thank you for your interest in reading this article and express my hope that you found it useful and enjoyable. If you have any questions, please do not hesitate to contact me by email (gijs.van.de.wetering@blacktrace.nl).
Working at Fagro
Who am I? I am Koen Koot, 25 years old and have been working at Fagro as a Financial Consultant for 1,5 years. Just like you, I did my studies in Tilburg, which is where I currently reside. Luckily, I didn’t have to move too far, since I am originally from Kaatsheuvel. Probably most notable to you for…. the Efteling of course. What did I do before Fagro? Like I shortly mentioned before, I studied at Tilburg University as well. After graduating in the Bachelor in Business Economics, I subsequently continued with a Master in Finance. A Master I can recommend to everyone. During my bachelor period I also did an internship at ABN AMRO Bank in Breda. Other than being an incredibly educational period, a really fun time too! Let that be my first tip: make sure that you develop yourself well, but don’t forget to enjoy yourself during this period of your life! “It became obvious that Fagro attaches great value to the personal development of the consultant.” How did I end up at Fagro? The opportunities ahead of you as students, I of course faced as well. When I finished my Master, I had to orientate myself on the job market. An important moment to get in touch with relevant employers are the Economic Business Weeks (EBT). Here I got in contact with Fagro. After a pleasant, personal conversation during the EBT I got invited for a cup of coffee at the office. Things have been snowballing ever since. After a couple of additional follow-up interviews and a competence test, Fagro and I turned out to be a match, and I am still very happy with that! Why Fagro? Other than the right click I had with the business manager of Fagro, there are other reasons why I chose for Fagro. In the conversations we had it became obvious that Fagro attaches great value to the personal development of the consultant. A special program was created for starting employees where you and fellow starters of your generation have monthly competency- or subject oriented trainings. Next to the organized training, Fagro also offers the opportunity to study for the post master part time in order to become a Register Controller. There are definitely enough opportunities to develop yourself! In addition, I really wanted to explore consultancy as well. Gaining as much experience as possible across various organizations, both professionally and socially, is very important to me. I believe that it is incredibly important that you can adapt yourself well to the dynamic environment and deal with varying personalities in the business world. “Try to be active within a study association or local sports club. Not just to strengthen your CV, but to discover yourself!” What do I do now? Even though one of my main reasons to choose for Fagro was to develop myself in different types of businesses and environments in a short amount of time, I am ironically enough still working for my first client: Philips Lightning. However, the fact that I’m still working here means in my case that I have managed to develop myself a lot! After starting out as a credit manager at Philips Lighting IP (intellectual property) I have managed to progress into an assistant controller. Primarily I was responsibly for everything regarding the accounts receivable position, but over time I became responsible for the total revenues of the licensing team. An incredible challenge as a starter, but that makes it incredibly exciting and educational. In fact, I was invited to go to America for week to work on a project for Philips. These wonderful opportunities were offered to me partly because of my choice for Fagro, and who knows what exciting opportunities lie ahead of me! What advice do I have for students? Since I am probably only a couple years older than you, I don’t want to call it ‘advice’. However, I can share with you what I think is important in this period of your lives. Make sure that you know what you like to do! Create distinction in the courses you attend. What do you think is really interesting? In addition, make sure you are active next to your studies. Both socially and professionally. Explore whether it’s possible for you to do an internship so you can get a taste of what it’s like to work inside a certain company or industry. Try to be active within a study association or local sports club. Not just to strengthen your CV, but to discover yourself! Like I said, don’t forget to enjoy yourself during this period of your life. It is an important aspect of developing and discovering yourself. You can always contact me via LinkedIn in case you have any other questions, or would like to know more.
But trees only grow when certain circumstances are met: A&F Investments Fourth Quarter
Looking back at the fourth quarter of 2017 we can see a good ending of the year for A&F Investments. 2017 turned out to be a great year for A&F Investments, which managed to achieve its highest yearly return since its founding. However, it is not just A&F Investments that had a good year, the whole market has had a great year. If we take a look at the fourth quarter we can see that the S&P 500 has risen with 6.51%, the Euro Stoxx 600 remained roughly the same with a 0.00% change and the MSCI World has gone up with 4.73%. Nonetheless, for A&F Investments to realize the performance of its fourth quarter some crucial decisions had to be taken. “We bought a stake in an All-World ex-US ETF that was in line with the strategy of our portfolio.” Looking back at the last quarter we can conclude that the best decision that was made was to significantly reduce our cash pile. This turned out to be a harder task than we thought because allocating the cash to the right securities in a short period of time was not an easy task. Nonetheless, we managed to successfully do this by adding some new securities to our portfolio. We managed to increase our stake in Ahold Delhaize due to the fact that the market overreacted on Amazon.com Inc.’s acquisition of Whole Foods. After a few weeks we could already see some positive results of this decision. We also bought a stake in an All-World ex-US ETF that was in line with the strategy of our portfolio. After getting inspired by one of our guest lectures, we decided to purchase a stake in Alphabet Inc. The main reason to do this was because of the high competitive advantage that this company has compared to its competitors. Besides buying some securities we also sold some securities with a nice profit. After having benefited from the rally of the automotive industry we sold our stake in Porsche SE with great profit. The Canadian financial company GoEasy has also proved itself and we have taken some good profit with this security too. Even though we have had struggles with a large cash position and a weakening USD we can look back at a great performance for 2017. We have also had the privilege to have a guest lecture from IBS Capital Allies in the last quarter. It was a great one where we learned a lot of new things that we certainly have not taken for granted. This upcoming quarter we are looking forward to the guest lectures of Accuracy and First Dutch and the great new insights that they will bring. Although 2017 has set the bar high for us we are hoping to keep improving our performance through 2018.
Interview with Suzanne Pots, Director Elite Model Management Amsterdam
Many graduated students have a lot of opportunities after they have finished their studies. But what is it like to work abroad, start up your own business, make it grow into a great success and then sell this company and the bidders are excited to take it over? To answer these questions, we spoke with Suzanne Pots, Director Elite Model Management Amsterdam. Can you tell us something about yourself and your career? I am Suzanne Pots, I am 35 years old and I was born in Groningen. I was in my second year of higher professional education and was 18 years old when I was asked to do modelling work. This seemed like a very nice challenge, to which I said ‘yes’. Then, things moved very fast and within two weeks, I was on the train to Paris. After a while, things went so great that I was in the Italian VOGUE and that I got to do beautiful campaigns for e.g. La Perla and Dior. I have travelled around the globe for 8 years and I lived in New York for 4 years, 2 years in Paris and 2 years in Milan. After these 8 years, it started to itch to return to the Netherlands. I already had the idea to set up a modelling agency for a while. Therefore, I set up this modelling agency together with my husband Mauro. How did you end up at Elite Model Management Amsterdam? As a ‘world improver’, I wanted to start a modelling agency that was different/better than the others, as I had missed some help/development with my agency when I was 18 years old. Because of this, I started the modelling agency up together with my husband in order to guide the girls well. This became Fresh Model Management. As there was a lot of competition within the Netherlands in terms of modelling agencies, Fresh Model Management had to take a different approach compared to other agencies. This resulted in intensive support, model Camps, a different/renewed website compared to the other agencies, etcetera. Everything revolved around the company, the office was downstairs, on the second floor was the photo studio and our house, the room where we lived, was on the top floor. We were open seven days a week, we were an independent entrepreneurial management, and within the house, we did everything ourselves. In seven years we expanded to a model management that was well known worldwide. Fresh Model management became such a success that Elite World was very interested in taking us over. This has happened and Fresh Model Management has been taken over by Elite World, becoming Elite Model Management Amsterdam. What attracts you in this unique sector? The variety attracts me a lot, but also the contact with new people and new/young talent. It is nice to see that initially a young, insecure girl walks in, then becomes a teenager, and years later a young adult, self-confident woman, model and sometimes even a top model. This development process is very nice to see. In addition, I find the creativity that I can put into my work, the fun things I can organize, including the model camp and judging elite model, nice as well. Every day is different, so every day stays interesting. “Elite is the world’s leading model management and talent discovery network, with a presence that spans across the globe.” Everyone knows the term Director and most people know what this stands for, but what are the specific tasks for you as Director of Elite Model Management Amsterdam? Together with my husband Mauro, I am responsible for everything. Because of this, I also interfere with everything, oversee everything and have the ultimate decision. Do we do something or not? Eventually, my husband and I make all the decisions; make all the financial payments, selection procedures, and etcetera. The accountant does her job and I check the end product. The same applies to the other managers. So actually, I also have a controlling task. To what extent are you currently still involved in the accounting/finance section of Elite Model Management Amsterdam? I know what’s going on, I check it and I make the payments. Every year we have to generate sufficient turnover in order to finance our business operations, but the accountant of Elite Amsterdam keeps the financial statements up to date and we have to report that to the CFO of Elite World. The financial goal is of course an increase in turnover every year, so that there is an upward trend. How do you deal with Work-Life balance? Being an entrepreneur means that I have a tight schedule and I have to put in a lot of effort to get all the work done. There has been a little more balance since the agency became Elite Model Management Amsterdam as compared to before at Fresh Model Management. However, within this field you simply have to be available at all times, always check your mail and phones. It can be the case that at 11 pm a message comes in saying that a model’s flight from Amsterdam has been cancelled, thus she cannot depart even though she has a job the next day in New York. This has to be resolved immediately because otherwise she misses out on her job. Work is always there, but I try to figure out as much as possible what has priority and what can be done the next day. What would you have, with the insights you now posses, differently addressed within your career? I have never regretted anything, but what I might have done differently is that I would have been stricter. An important learning aspect for me is that I have to pull the rank every once in a while. I want to please others and accommodate them. What would you give to today’s Accountancy/Finance students as advice? Motivation and discipline is of high importance. But also be enthusiastic and cheerful. It is important that you
The Axalta Deal: Is AkzoNobel taking the lead?
Recently, AkzoNobel (Akzo hereafter) has been in an unstable situation, mainly due to the fact that the company has been involved in a takeover battle with PPG. This resulted in many offers, lawsuits and political debates in the Netherlands. At its highest level, the deal had a value of around €26.3bn which was equivalent to €95 per share, while the share price was €74.3. This was equal to a 27.79% premium. PPG dropped the takeover deal in the beginning of June, since this was the deadline set by Dutch law to make a final offer. It seemed the battle was over. Following this period, the main question was how Akzo could keep its shareholders satisfied. Consequently, Akzo set higher performance targets, promised extra dividends to shareholders, and made promises to sell a major chemicals subsidiary to please its shareholders. However, one of the major Akzo shareholders, named Elliott Advisors (Elliott hereafter), forced Akzo to talk with PPG. Eventually, this aggressive behaviour led to a loss in the Amsterdam Enterprise Chamber. The aggressive behaviour was also visible in Elliott’s stake in Akzo. Elliott’s stake increased from 3.25% to 9.5% following the takeover battle. Even after the loss in the Amsterdam Enterprise Chamber, Elliott continued to increase its pressure on Akzo, as the company demanded an extraordinary shareholder meeting with the main intention of firing the chairman of the supervisory board, Anthony Burgmans. Elliott accused Mr Burgmans of blocking the PPG – Akzo takeover. In the end, Akzo was in a rocky situation, especially because its CEO Ton Büchner resigned and was replaced by Thierry Vanlacker, who only joined the company in 2016. The Axalta Deal On October 30th, Akzo confirmed it was in a discussion about a potential merger between the AkzoNobel paints & coatings business and Axalta. This would create a leading position for the company, especially due to the fact that Axalta fills an empty space in its portfolio. A merger of Akzo and Axalta could result in a $30bn company. Furthermore, the company stated that the split-off of the speciality chemicals subsidiary will stay on the agenda for April 2018 and is unaffected by the latest developments. However, analyst Joost van Beek of Theodoor Gillissen mentioned that the timing of the Axalta deal will likely be tricky. This is mainly to do with the shareholders’ pressure on Akzo’s management to step back from the merger discussions, as most Akzo investors are aware of the fact that a merger with Axalta will result in a more defensive position for Akzo. As mentioned before, both companies combined could result in a $30bn company, which means PPG has to pay a higher price for a takeover to succeed. Axalta knows that Akzo wants to avoid a PPG takeover in the short-term. Therefore, this could result in Akzo paying too much for Axalta. The Impact on the Share Price After the merge between Akzo and Axalta, the question is what the impact of this particular news event will be on the share price movement. The following chart shows the share price movement of Akzo over the past month. Source: Yahoo Finance From the above chart, it is visible that the potential news of merging had a positive impact on the recent share price movement. The share price shows a tremendous lift as soon as merging speculations came to the forefront on October 27th. The share price increased from €77.48 to €78.03 on October 30th. This is equal to a 0.71% increase in only two trading days. The large question after this positive share price movement is if the share price is going in a downward direction to adjust for the positive news element. This can be confirmed, as the share price decreased from €78.03 to €77.10 last Thursday, which is equivalent to a bounce-back of 1.19%. Nonetheless, the share price has been in an upward movement since last Friday, as it increased to €78.50 on November 7th. The large question remains if merging discussions between Akzo and Axalta move to the next stage. It looks like investors still speculate on this outcome. Furthermore, it is also worth analyzing the share price direction of Axalta before, and just after, the merging news came out. The share price direction of Axalta is visible in the following chart: Source: Yahoo Finance It surged from $28.34 on October 26th to $33.15 just one day later. This is equal to a share price jump of approximately 17%. During the post news period, the share price bounced back to $32.43 on October 30th, which is a small drop of 2.17%. Since October 30th, the share price has been fluctuating as a potential result of uncertainty regarding the future direction of the company, as the talk of merging is still on the table. In short, the impact the M&A news has had on the share price movement of the related companies is certainly notable. Conclusion The question is which direction the merging discussions will go during the coming weeks. It for sure is an interesting development to follow in the coming period. Akzo is still operating in a tough period and seems to move in a direction that makes the defence shield stronger for a potential takeover later this year. On the other hand, Axalta and other potentials for merging are well-informed about Akzo’s current company status. Akzo seems to strengthen its defence for a potential PPG takeover later this year. There is a high chance that Akzo is scheduling additional M&A activities. Axalta and other target companies might be able to use this PPG takeover information to higher the price that Akzo has to pay for M&A. In the end, investors are recommended to closely follow Akzo’s developments until the end of 2017; there may well be some Christmas presents under the tree.
Quantitative Easing: monetary miracle or too good to be true?
We live in special economic times. The financial crisis of 2008 finally seems to be behind us. The economy is gaining strength, stock markets are breaking records once again despite geopolitical tensions, and home prices are back at pre-crisis valuations in certain places in the Netherlands. Despite these positive reports, the European Central Bank (ECB) still pursues very loose monetary policy. The fear is that the central banks will not have any ammunition left for economic stimulus when the next recession comes along. Deflationary spiral Central banks such as the ECB have in recent years desperately tried to beat deflation, as it causes money to gain purchasing power in the future. The widely accepted position on deflation is that it can be harmful to the economy because people will postpone purchases. However, this assumption has some flaws. For example, if my laptop crashes, I will not wait a year to buy a new one for the only reason that it will be 1 or 2% cheaper next year. Also, a human being must eat every day and buy new clothes every once in a while. The money supply needs to grow because there would otherwise literally be no money to settle old debts and pay interest. The real problem lies in the way our financial system works. Strongly simplified, inflation and deflation depend on the change in the amount of money in circulation in relation to the change in the amount of good and services produced. For clarification, I give an example: an economy with only one car and a money supply of € 100 will price the car at € 100. In case the amount of money increases by € 20, the car will be worth € 120. The money supply expands due to the effects of fractional reserve banking (a topic that is worth an article on its own). In short, this means that banks create money when they make loans. The principal amount is created, but the interest that needs to be paid in the future is not. The interest can therefore only be paid if it is created by repeating the money-creation process. This means that society as a whole will have to borrow again and again in order to ensure that enough money is in circulation to pay for all the repayments and interest. In short: the money supply always has to increase. Banks thus create money at the moment they make loans. Money can however also be destroyed. This happens when a loan is being repaid or in the case a bank writes off a bad loan. A shrinking money supply means that more money is being evaporated than is created, and we call this deflation. It is the ultimate nightmare of central banks. The money supply needs to grow because there would otherwise literally be no money to settle old debts and pay interest. This is one of the main reasons central banks pursue a rate of inflation around 2%. Unconventional measures Reducing interest rates is the most important measure that central banks use to fight deflation. The idea behind this is that people will spend and invest more when it becomes cheaper to borrow. During the financial crisis, the ECB reduced interest rates from 4% to 0%, but this did not bring about the desired effect. In addition, the European sovereign debt crisis only seemed to be worsening. For those reasons, the ECB began with quantitative easing in 2015 (QE in short). QE implies that a central bank buys (government) bonds or other assets in exchange for newly printed money. Because the ECB’s acquisition program converts these assets into money, investors will not have to wait until the bond is repaid. In this way, money is created without the intervention of commercial banks. As a result, interest rates continued to decline further and bond prices rose. After all, a large buyer had entered the market, and many investors have benefited from it. From March 2015 onwards, the ECB bought € 60 billion in bonds every month. A year later, bond buying was temporarily boosted to an astounding € 80 billion a month. By comparison: the Dutch government spends roughly € 75 billion on healthcare each year. Central banks have a lot of influence on prices in bond and equity markets. The QE program has ensured that commercial banks were able to clean up to their balance sheets and consequently make more loans. The feared deflationary spiral has been repelled, and countries like Italy and Greece were given some breathing space because they could issue new government bonds at historically low interest rates. Altogether, the QE program seems to be a success story. Blowing asset bubbles The funds released on the bond market through the ECB’s buying policy are used not only to buy new bonds but also to invest in stocks and other assets. Listed companies have also used low interest rates to buy their own shares on a large scale. Compared to other central banks, the ECB is still quite conservative in this new unconventional world. The central bank of Japan for example is now buying stocks with newly created money, and is currently one of the five largest shareholders in 81 Nikkei companies. The Swiss National Bank goes even further and now buys foreign shares with the aim of weakening the strong Swiss franc. For example, the Swiss National Bank owns $ 3 billion of shares in Apple. Central banks thus have a lot of influence on prices in bond and equity markets. We should ask ourselves the question if this is desirable policy. The consequence is, nonetheless, record-breaking stock valuations and the emergence of bubbling markets. Central bank policy has also had an effect on the housing market. Low interest rates mean people have more room for monthly repayments on their mortgages. Thus, people can afford more expensive homes and that pushes up prices in regions with more demand than supply. Next to that, savers are craving for
