The Role of Private Equity in Enterprise Development and Its Challenges: A Case Study of Access Capital Services Share Company

Several studies have documented that private equity, leveraged buyouts in particular, can fill the financing gap that exists when it comes to risky firms, such as distressed firms. This is, basically, because private equity firms not only provide patient capital but also close nurturing of investments by the financiers-characteristics which other forms of financing such as public equity and debt do not have. However, the role that a private equity firm can play in solving the challenges of risky firms is unknown in Ethiopia. To provide ‗real-life‘ evidences of such role, the case of Access Company Service Share Company, the sole investment firm providing private equity services (to the researcher‘s knowledge) was used. Such role was examined from the point of view of corporate governance, management system, business networks, innovation and access to further finance. For that purpose, in-depth interviews with the general managers of each investee firm were made and few secondary documents reviewed as a supplement. The findings revealed that the main areas in which Access Capital has contributed are in improving the governance and management systems of investees. As it was deemed necessary to provide evidences on the general practises of private equity investments and the related challenges that these pose to investors as well, an assessment of such practises and challenges were also made. For that purpose, in-depth interviews with the vice president at Access Capital and a senior analyst were made, again supplemented by a review of few secondary documents. These have revealed that the most serious challenges faced by Access Capital are disorganized records of investees hindering the smooth undertaking of the deal sourcing and due diligence process, finding a skilled management team for investee firms and the potential challenge of making a fair exit. Even though the study is a quite useful one because of the insights it gives on Private Equity in Ethiopia, it is limited by the lack of financial data. Thus, further research should be done to objectively measure the impacts that Access Capital has in its investee firms

The transmission and management of price volatility in food supply chains

The 2006-2011 period has been marked by increased volatility in food an agricultural commodity prices at a global level. In the EU, the continuous liberalization of agricultural markets under the Common Agricultural Policy has led to the exposure of EU agricultural to increasing market price volatility. This thesis has investigated the transmission and management of price volatility in EU food supply chains. The transmission of price volatility in various food supply chains is first investigated through a literature review followed by an empirical analysis of price volatility transmission in the case of the German fresh pork supply chain. The effect of market power was also taken into account in the latter empirical analysis. Next, the management of price volatility was investigated through interviews conducted with actors of selected EU food supply chains. This was followed by the analysis of the effectiveness of selected price volatility management strategies. Lastly, in light of the policy support for agricultural insurance within the Common agricultural policy, premium rates of an agricultural revenue insurance contract were calculated for the Dutch ware potato sector. One of the gaps identified in the reviewed literature is the lack of attention given to the effects of contextual factors on price volatility transmissions in food supply chains. Contextual factors include market power in the chain and pricing strategies (e.g. contracts) by chain actors. Results of the price volatility transmission analysis conducted in this thesis in the case of the German pork chain show that retail market power limited both the transmission of price levels and price volatility. This thesis shows that price volatility is perceived as risky by all actors in the food supply chain. Deviations of prices by more than 10 to 15 % from expected levels were perceived as price volatility by a majority of the chain actors. Results further show that price volatility management strategies in EU food chains are diverse and well beyond traditional instruments such as futures and forward contracts. Contrary to expectations, price fixing contracts were not found to be desirable by interviewed chain actors. This thesis also found that the effectiveness of contracts in reducing price volatility depended on how the contract price was set. Results of this thesis further show that premium rates of a revenue insurance contract for the Dutch ware potato sector across categories of farms. The average premium rates calculated were 32.1%, 22.2%, 33.1% and 24.0% on guaranteed revenue per hectare for the high expected yield, low expected yield, high yield variance to expected yield ratio and low yield variance to expected yield ratio categories of farm, respectively. The difference in premium rates across categories of farms implies that charging the same average premium rate to all Dutch ware potato farms can lead to adverse selection

Mutual insurance companies as a tool for farmer income stabilization: performance and prospects in the CAP

The European Commission is currently considering the introduction of income stabilisation tools as a means of stabilising farmers’ incomes throughout the European Union. One of the options is to use mutual insurance schemes. The objectives of this paper are to analyse the performance of mutual insurance companies currently operating in The Netherlands and to discuss the pros and cons of mutual insurance schemes as tools for farmer income stabilization. Data was collected through interviews with the companies’ experts and from the companies’ websites. We conclude that, even though provision of net income and revenue insurance goes beyond their expertise, mutual insurance companies are effective in insuring farmers against income fluctuations arising from specific agricultural production risks. In order to encourage solidarity among farmers, policy support that stimulates the development of local mutual insurance companies can be more beneficial than support aimed at companies operating in more than one European country

Price and Volatility Transmission and Market Power in the German Fresh Pork Supply Chain

We investigate the relationship between the transmission of price volatility and market power in the German fresh pork supply chain. We use a theoretical model underpinning this relationship followed by an empirical application that uses monthly farm, slaughterhouse and retail pork price data for the period 2000–2011. We examine both the relationships of market power with price level transmission and price volatility transmission in the chain. We use a vector error correction model and least squares regressions to analyse price transmission and price volatility transmissions, respectively. Results show that retail market power limited both types of transmissions. Competition inducing policy measures coupled with measures that support price risk management initiatives of chain actors are suggested.</p