U.S Is On Its Way :: essays research papers

The Asian financial crisis serves as a timely reminder of a fact too often overlook Merchant banking is the leading edge of shareholder activism. Indeed, one of the chief traits shared by hard-hit Pacific Rim economies is a decided lack of such activism. As a result, their companies are less prepared than they might be for global competition. To one degree or an other(a), much the same holds true in other markets abroad.U.S. companies, in contrast, have seen their competitive ability markedly strengthened by shareholder activism. And much credit goes to merchant banking--that is, private investors managing their own capital. True investor activism as practiced by such financial buyers has created a new model for American enterprise. That model is based on highly leveraged capital structures, on payment and equity ownership that align the interests of managers with owners, and on effective corporate governance mechanisms to monitor and control the use of free notes flow. All have the documental of maximizing value.Contrary to popular perception, the strategies of merchant banks involve not just financial engineering, but also growth, which would not be achievable without risk capital. In the buyout world, we have seen a fundamental shift from the 1980s mantra of "unlocking value"--capitalizing on arbitrage opportunities and market inefficiencies. Today, the emphasis is on creating value by molding strategic direction, giving incentives to and empowering managers, and rationalizing operations.Increasingly, merchant banks are the key agents of change. In the 1980s, parts of the manufacturing and retailing sectors were entirely reconfigured by leveraged-buyout activity. In the 1990s, financial buyers have changed the landscape of such industries as media, broadcasting, business services, printing and publishing, and food and health services. Americas technological reemergence, captured in part by the Silicon Valley phenomenon, has been fueled by ventu re capital. And for more jump on industries, LBOs have triggered corporate renewal.Countless academic studies and real-world examples have highlighted the perils of the corporate governance status quo sans LBO the central conflict between owners and managers over the control and use of corporate resources, the unenlightened use of free cash flow, and the scrutiny of and pressure on quarter-to-quarter earnings growth versus long-term growth and value creation.By severely encumber and imposing restrictions on the use of free cash flow, LBOs force only positive net present value capital decisions. Studies have shown that operating cash flow increased on average by about 40 percent in a one-to-four-year time frame following the transaction.