Privatization
The continued movement to privatization
creates a series of challenges for governments around the world.
With the strained state of public finances, and the
condition of capital markets, many governments view
privatizations as a realistic and relatively speedy way
to raise much needed resources. However, in an era where
finance is more costly or less available, identifying and securing
bidders capable of acquiring and operating large formerly
state run monopolies is a far harder task. In many cases,
privatizations are raising less capital, with governments being
forced to lower their financial expectations.
Financial advisers are being engaged to
widen the pool of potential bidders and they are increasingly
looking beyond national boundaries. Indian, Chinese and
Middle Eastern entities in particular have been prominent
recent acquirers of privatize assets. This has sometimes
provoked political tensions within a host country, forcing
the acquirer to win over not just the host government but
domestic sentiment too.
Telecoms companies, airlines
and infrastructure have long been and remain
popular areas for privatization. But as many countries move
beyond this initial wave of privatizations, there is an
increasing focus on more core assets such as energy, defense
and essential utilities. These assets, frequently highly attractive
to bidders, are usually also in highly regulated sectors.
Bidders must equip themselves to comply with detailed
regulatory environment and recognize the threats of the regulatory
environment changing at a future time.
Maintaining control or leveraging other
privatized businesses are often prerequisites, whether through a
continuing equity interest, contractual rights, where permitted a
'golden share' or regulatory requirements (often overhauling and
enhancing a major privatization).
Given the number of issues (financial,
political, economic, regulatory and legal) that arise, it is
important that parties to the privatization and their advisers
remain alert to all the issues. In such a context, maintaining a
spirit of partnership and mutual trust is often the most
important ingredient to a successful privatization.
Areas of Focus:
- Energy, Transport and
Infrastructure
- Financial Institutions and Funds
- Government
- Manufacturing
- Real Estate and Hotels
- Technology, Media and
Telecommunications