For the crime of success

Recently, I have been reading a lot about the rising inequality in the US, its possible effects on the upcoming presidential elections, and even fears about the same happening in the UK.

I have two points to make.

Firstly, economic equality, as much as anybody may want it, is an ephemeral chimera that at best can cause frustration in the society and at worst lead to birth of a mediocre, self-annihilating socialist state. Even communists, with all the bloodshed and programs, were unable to achieve it. Are we really thinking of achieving it in an apparently capitalistic society? Nevertheless, we can (and should) aim for absolute equality before law and possible equality of opportunity for everybody, without fear or prejudice. That means making corporate lobbying and graft difficult. It also means making employment laws more meritocratic and employment process more transparent. It does not mean demonising the successful and ramming down their throat socialist taxes for the crime of being successful.

Secondly, it will be a mistake to make the current state of US economy a matter of class-warfare or a matter of punishing corporate America in the upcoming election. In the end, it is corporate America that will create jobs. Instead, the public of Unites States needs to do extensive soul-searching to understand what is blighting a great country. Is it really just greedy corporate? Easy answers are seldom right. If the country of democracy and free-enterprise is held hostage to things like corporate lobbying, excessive litigation, disintegrating social fabric, and a new-found worry about equality, something has gone wrong horribly somewhere down the line. Discouraging industry will only make it worse.

As unions and score of people cry out for good jobs and better pays, I am almost tempted to ask them to pluck it from the bush they think it grows on. Successful people make the jobs possible, demonising them is the worst possible thing that the society can possibly do to itself.

About VAT

Some useful links for understanding VAT and importing services, specifically for a services company.

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageImport_ShowContent&id=HMCE_PROD1_029955&propertyType=document

http://www.hmrc.gov.uk/vat/managing/international/exports/services.htm#2

http://www.hmrc.gov.uk/vat/managing/international/imports/importing.htm#3

http://www.hmrc.gov.uk/vat/forms-rates/rates/rates-thresholds.htm

Bank Mergers in Europe?

I agree that tighter regulations and worsening economic climate may lead to bank mergers in Europe: http://on.ft.com/rS5PEO

Other news clips of interest for this week:

WPP acquires Glover Park Group

BHP puts diamonds division up for sale

Free Accounting Software

Following free accounting software are available for small businesses:
http://www.icebergo.com/
http://www.tassoftware.co.uk/products/tas_accounts_software/basics.html
https://www.bionicbooks.com/
http://www.sage.co.uk/softwaresolutions
http://www.adminsoftware.biz/software.html
http://www.quickfile.co.uk/
http://www.vtsoftware.co.uk/cashbook/index.htm

If not Capitalism, then what?

Going through the recent articles in the FT by Ken Costa and Martin Wolf got me thinking: if not Capitalism, then what? In fact, it has been quite some time that I have been reading anti-capitalist articles all over the media and it makes me wonder: how many protestors actually understand what they are protesting against?

If they are protesting against the current system, we are in a continent that has a strong welfare system, difficult employment rules, strong unions, high taxes, generous pensions, and subsidised access to education & health. This is not capitalism, just ways to live beyond our limited means. We live in a system that has increasingly made it difficult for entrepreneurship to prosper, as pointed out by Luke Johnson. A system of greed and entitlement, be it banks, governments, unions or the people, has led us to where we are.

If anything, I would argue we need more of Capitalism if there has to be prosperity. I would argue that in today's world China is more capitalistic than Europe, and the results are for everybody to see. At the same time it is undeniable that comprehensive regulations, fostering a culture of ethics and a well-aware population are necessary for free enterprise to flourish.

Finally, I would like to say that while free-market played its part, it is absurd to blame it for everything. If the West was living beyond its means, are businesses the only ones to blame? Perhaps not, but they do make a convenient target. The truth remains that, given all things equal, Democratic Capitalism produces more prosperity and equality than systems like Communism, Socialism, Monarchy, Theocracy or any other system that the protesters may know about. The big question is still this: if not Capitalism, then what? Reform, not revolution, is the way ahead.

Olympus Saga

Olympus agrees to acquisitions probe

The more I learn about business, the more one thing becomes clear: ability is a small part of running a business. There are many ways to excellence and profits in business, and ability is definitely one of them. Business however, I have learned, is more complicated than that. As the Olympus saga illustrates, many times businesses are able to survive misspending millions. As long as the business model remains intact and there is somebody who thinks that the business can generate cash at an acceptable rate of return, the business will survive. I also see compliance and not ethics as the defining force for the code of conduct, which I attribute to the fact that self-interest is the defining force of capitalism. Unsurprisingly, unbridled self-interest can be fairly self-destructive as well. Regulations keep that in check to some extent, but there are always people looking for a loophole. So goes the game of cat and mouse.

In terms of M&A, it brings out some critical questions like value of an acquisition to the buyer and the fees paid to advisors. Already enough research papers have indicated that, at least in the short-run, the value of the acquisition goes to the seller. Deals like the infamous sale of ABN Amro raise a pertinent question on the effectiveness of advisors. The last thing the M&A world needs is the use of advisory as a cover for siphoning away millions from a company. All in all, an ignominious event in the corporate world that should be dealt with firmly.

Potential Upcoming Deal-business from European Aeronautic Defence and Space Company (EADS)

In a recent article in the Financial Times (August 2011), EADS’s chief financial officer stated that the company is looking to make acquisitions to put its €11bn of net cash to work and rebalance its portfolio.

Data from public sources indicates that in 2011 alone EADS subsidiaries have announced five acquisitions valued at about £1510m. These include acquisition of Vizada by Astrium, Satair and Metron Aviation by Airbus, Vector Aerospace Corporation by Eurocopter Holding and Grintek Ewation by Cassidian. Of these, Vector Aerospace Corporation deal was completed recently in June 2011. With so many acquisitions already in the pipeline and with presumably more to come, a full service firm can offer EADS a variety of services and advice.

For example, 'Consultancy’ practice can possibly help EADS with acquisition search and due diligence. Then ‘Corporate Finance’ can provide M&A Advisory and deal accounting service. Finally, ‘Transaction Services’ could offer M&A Integration and post-acquisition performance improvement advice.

About EADS: EADS engages in the manufacture and sale of commercial aircraft, civil and military helicopters, commercial space launch vehicles, missiles, military aircraft, satellites, defence systems, and defence electronics, as well as provision of services related to these activities worldwide.

About Aeronautics and Aviation industry: According to a report by ‘Ecorys Consulting’, the aviation industry has been under duress due to the financial crisis, which is critical for a capital intensive and global industry. Another recent report by ‘Roland Berger’ indicates that due to the crisis defence sector is also expected to suffer due to cuts in state spending. Business leaders expect the industry to return to pre-crisis growth levels at least by 2012. Overall, this state of aerospace and defence industry should present cash-rich EADS with good bargains in the market.