Inside The World Of Business
Quinn lobbyists could be their own worst enemy
IF MATTHEW Elderfield had any illusions about the vagaries of Irish life they were dispelled for him on Monday.
Having been hired by the Government with a mandate to enforce a high standard of regulation, he finds himself confronted within weeks by a delegation that includes Government deputies asking him to bend the rules.
Hopefully, he will not be to distracted by this particular Father Tedmoment as he grapples with what is a difficult situation.
If, and it’s a big if, Quinn Group’s creditors – Anglo Irish Bank and the consortium on banks and bondholders led by Barclays – can agree some sort of restructuring, then the ball will quickly be back in his court.
He will be under pressure to withdraw his application for the appointment of an administrator to Quinn Insurance. In theory, there is no reason why he cannot do that if he is satisfied that as a result of the restructuring the insurance company is once again solvent and being properly managed.
This is likely to require the effective takeover of the group and an injection of State money via Anglo Irish Bank along with the replacement of the current senior management tier and board. A useful test that might be applied in this regard is whether the situation that would then pertain is analogous to the insurance company being taken over by another entity, which is the cleanest and simplest solution to the problem.
But even if these criteria were satisfied Mr Elderfield may find it hard to go along with a deal because it would inevitably look as though he has been forced into a climbdown because of political pressure.
With this in mind, the various groups currently lobbying so vociferously on Quinn Insurance’s behalf might be better advised to back off.
Bebo a has been?
Mergers and acquisitions in the technology sector are rarely a success. Just ask Carly Fiorina the once high-flying chief executive of Hewlett-Packard who was forced out in 2005 following her championing of a contentious merger with fellow PC maker Compaq.
Although acquisitions in the sector are common, they are rarely agreed because the buyer believes in the products or services they are buying. Instead they are seen as a way to remove upstart competitors or to acquire talented engineers and executives.
So to industry watchers the news that AOL will shut down Bebo by the end of May if it does not find a buyer for the service does not come as a complete shock. It’s just two years since AOL paid $850 million for the social networking site once so-beloved of Irish and British teens.
Bebo once had a million account holders in Ireland but under its new corporate owners the pace of innovation slowed and it failed to replicate its success in key markets such as the US. It’s an echo of MySpace, the once dominant player in the market acquired by Rupert Murdoch’s News International for $440 million in 2005. While MySpace had its lunch eaten by Facebook, it has carved out a useful niche as a showcase for bands – both the unsigned and major label acts.
It remains to be seen if either AOL or new owners can reinvent Bebo whose core audience was the notoriously fickle teen market.
Either way, Irish venture capitalist Barry Maloney, whose Balderton Capital took $140million off the table for the 15.7 per cent stake in Bebo it held as an early backer, won’t lose any sleep.
Cashing in at the top of the market was certainly one of the veteran technology investor’s more prescient moves.
Go green in the long term
It’s hard to argue with the logic behind the carbon credit investment offering that Bank of Ireland private banking is launching this week.
The bank is offering private individuals, with a minimum of €250,000 to invest, a chance to get into a financial instrument that holds out the prospect of returning up to 40 per cent over two years and 11 months.
That return is in line with the institution’s own predictions for the carbon credit market. But those forecasts are conservative, as some estimates have the price of credits doubling in this period. This is because the EU plans to stop handing out free credits to power stations, some of its biggest polluters, by 2013, which should push up prices between now and then.
But the fact remains that this is a volatile – and new – market. The big factor driving it, namely the end of the power plants’ free ride, actually provides a clue as to where more solid, if longer term, gains might lie.
The people who own the power plants have known for some time what was coming down the tracks. This is one reason why they rushed to buy wind farm developers – witness Scottish & Southern’s purchase of Airtricity in 2008 for €1 billion – and why they also back developers of newer technologies.
They can offset the “green” electricity generated by these facilities against the not-so-green kind produced by conventional plants, which will in turn cut their dependence on carbon credits.
Now that the conventional players are building their presence in green energy, it looks likely to attract cash as the recovery gets going in Europe and the US. Backing companies that are developing and manufacturing products for this market could be a much better bet for a return.
Today
TODAY’S focus will remain on efforts to find a solution to ongoing difficulties at Quinn Insurance in advance of Monday’s court date. Elsewhere, Ryanair is due to host a press conference in Belfast.
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