Greenwashing: Volkswagen bought the car rental company Europcar in 2021 because as a service provider it emits hardly any CO2
2021 was a record year not only in share prices but also in mergers and acquisitions. It was a profit festival for the investment bankers. This festival is held when company bosses want to buy a rival, when they sell a division and put its new shares on the stock exchange (like Daimler with its truck division at the beginning of December) or when the private equity robber barons (formerly known as grasshoppers) take over a company claw or sell it emaciated, but completely “reorganized” and pepped up once more. And this festival was in full swing in 2021. Business trade flourished. Not only was 2021 a record year, 2022 might also be one once more, say the investment bankers who are threading the deals. This is also what their legal advisers from the international law firms say. They smile modestly because they are doing the business of their life.
All of this is reminiscent of the time before the financial crisis in 2007. It was raining money and the previous generation had its big time. 2007 was the last record year for mergers and acquisitions worldwide. At that time, parts of the company and companies with a volume of 4.6 trillion US dollars (regarding four trillion euros) were turned over. At the beginning of December 2021, this peak was exceeded for the first time at 5.3 trillion dollars.
The gentlemen and the few women who make a living from the M&A business (M&A – Mergers and Acquisitions, as they themselves describe their industry), relate their optimism to a sustained boom from surprisingly soft factors: a) the Stock prices are rising, and b) Chief Executives are confident that earnings will continue to rise sharply. The two factors are mutually dependent. Or has it ever been observed that the Chiefs were optimistic in times of falling stock prices? Or, conversely, have stocks risen when the bosses complained across the board regarding the erosion of their profits (for example because of excessively rising wages)? Oho, say the gentlemen and a few women, we can also cite structural reasons: for example, that private equity firms are getting more and more, getting bigger and have more and more money that needs to be invested. Their share in global corporate deals was around 25 percent between 2008 and 2020. In the year 2021, which is just coming to an end, this share has risen to 35 percent – with the total amount growing rapidly.
Behind this development is the accelerated expansion of the money supply in the first Corona year, which continued almost unabated in 2021. The private equity funds cannot save themselves from millionaires and billionaires who want to have their lavish and lazy sums of money realized. They also have no difficulty in borrowing at moderate interest rates of almost any amount to finance a handsome business purchase of five to ten times the amount they have invested.
Finally, there is one more factor that drives trade in companies and company shares. It’s called ESG. The letters of this, of course, English abbreviation stand, as it is so nicely puffy, for the “three dimensions of sustainability”: Environment, Social and Good Government – or Environment, Social Affairs and good corporate governance. Here we are dealing with a trend that is also affecting the takeover, merger and company breakdown industry. In practice, the big “E” for environment plays the main role. Capitalist companies have always been socially influenced and well managed. But in order to become “green”, a company sometimes has to act. Let’s think of such a proven arms manufacturer as good old Rheinmetall. The company feels compelled to sell the engine piston department, because internal combustion engines are neither “green” nor “in” these days. Conversely, good old Volkswagen AG is buying the car rental company Europcar, which used to belong to the group and as a service provider hardly emits any CO2. In this style the entire capitalist economy is being restructured. Parts of the company with e-appeal are becoming more expensive. Conversely, manufacturers of pistons (whether for tanks, ships or cars) or coal mines are available at a discount.
Business leaders might also make it easier for themselves and, similar to financial institutions, simply stick an ESG label on their products. The EU would have nothing once morest it: According to its rules, financial products are sustainable if the funds or banks make it clear which criteria they use to define sustainability. Who can blame them if the criterion is that the product contains all things “green” marketed? For example, a government bond issued by Olaf Scholz (SPD) as finance minister, which differs in nothing, absolutely nothing, from the other bonds except for the fact that it is called “green”.
The “green” sales argument has primarily caught the financial sector itself. The funds advertise their “sustainable”, ESG-labeled fund shares. Private equity firms are demanding that business leaders trim their companies to “green” so that the share price continues to rise. The good managers have learned that marketing is always the most important thing. The shrewd ones among them and among the finance sharks buy cheaply in less or not at all “green”. A great record market in which autosuggestion rules.
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