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Well, my cautious note voiced in the previous issue of PKF Update seems to have been spot on! World and local share indices have continued their tumble despite all the reassuring noises and actions from various governments. Prices below book value in some cases defy logic. However, “bailout” and “nationalisation” are not really confidence- boosting terms. Added to this is the increased conservatism in some lending practices, which has now started to affect many companies and, hence, economies. All this will no doubt have a significant impact on share and property investments held in company balance sheets, just as the year end is approaching. Next year would appear to be a very difficult one to forecast, giving us all problems with our budgeting exercises.
The recent statements made by the Chairman of Dubai’s Advisory Council regarding Dubai’s asset and liability situation provides comfort and the repayment of debt obligations, even more so.
All this of course demonstrates that “cash is king” once more and there may well be some opportunities at attractive prices for investment in private companies that require alternative sources of funding in these difficult times. Pre-acquisition due diligence, satisfying yourself on the efficacy of the business model and an independent forward looking valuation of the target would be of paramount importance in order to try and avoid the “white elephant”.
In this edition we are very pleased to have had the opportunity to interview Mr. Ram Buxani, Executive Vice Chairman of ITL Group. We have an article from Bain & Co. on building a winning culture and one about the proposed new rules for joint venture accounting under International Financial Reporting Standards. We also have our usual free zone and offshore updates.
Please feel free to write (update@pkfuae.com) if you would like to express an opinion on any matter inside.
GRAHAM MARTINS
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