Insight nuggets

Copper: Macroeconomic bellwether turns geopolitical indicator

News-tickers have been filled with copper price news recently with different sources headlining with rising falling prices at the same time. What is going on?

The macro view

Overall commodities have been moving sidewards with steel continuing its slow descent to normality after the spike due to Russia’s attack on Ukraine. Year to date, steel is down 4% and aluminum 1%. This fits with a broader normalization narrative as well as the heavy drag on global growth exerted by the Trump administration.

Copper has some structural tailwinds including more exposure to growth verticals like electrification and electronics, which lead to projected medium term far outstripping confirmed supply. However, copper tends also to be much more sensitive to changes in global growth. In fact, BNP’s senior commodities strategist David Wilson is quoted saying “We expect prices to collapse in Q2 2025” on the back of negative demand trends in a note published on Friday.

Still, copper quoted on CME has increased 25% since the start of the year.

The geopolitics view

While copper prices in the US increased by a quarter, the global benchmark index at the London Metal Exchange increased only 11%. The explanation is in Washington: With the imminent threat of Trump tariffs on copper imports into the US, traders have been buying in London and selling in New York, which led London prices exceeding US prices more than usual at the start of the year. The result was a higher demand in London and higher supply in the US, opening up a pricing gap. As tariffs come closer to implementation and practical limits to hoarding copper stockpiles, that effect as unwound. Rather, the gap has inverted: Fitting with tariffs, copper is now more expensive in the US while London global copper is moving back to its overall trend of timid growth. Stockpiling of copper in the CME warehouses is something we have seen before - during the first Trump term.

Outside the US, there is no copper price surge as can also be seen multiples on copper stocks, which have held steady (though they are admittedly also influenced by other factors).

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Boeing’s carve-outs: A sign of the times

The broad based interest in Boeing’s two carve-outs Jeppesen and ForeFlight is making waves with reports indicating an $8bn valuation for Jeppesen alone. These potential deals are interesting both from a seller and buyers perspective.

Background
Jeppesen is provider of navigational information, operations planning tools, and flight planning products. Founded in 1934 it is established to the point that pilots are said to refer to navigational charts as “Jepp charts”. Rumoured suitors include both strategics (RTX, Honeywell, GE, Transdigm), as well as PEs (including Vista, Warburg Pincus, Advent, Permira, TPG, Apollo, Blackstone).
ForeFlight is a flight planning app for pilots including aviation weather monitoring, maps, charts, and more. It also integrates with Jeppesen’s global library. While Jeppesen carve-out is confirmed to be in the final stages of bidding, at the time of writing, it is unclear whether ForeFlight will be part of this transaction, a separate transaction, or remain with Boeing. ForeFlight was only acquired in 2019.

Capital recycling

Businesses run for value generation follow the ‘best-owner’ principle to portfolio management: As long as you are the best owner of an asset, keep it, if someones else was able to generate more value, sell it. This approach can underpin a strong capital recycling programme whereby the funds obtained from asset sale get reinvested in more promising business opportunities. This would be the friendly way of seeing it.

Another positive way of looking at it would be to see a far-flung corporation trying to refocus on its core activities: Better do one thing well than many things so-so.

In light of the quality of businesses being carve out (high margin digital business models, data infrastructure, recurring revenue MRO business, growth options like drones and space), one could, however, also see a troubled company: Both its space and commercial aircraft lines have had quality issues with severe bottom-line impact; in fact Boeing has not turned a positive EBITA since 2018, and the cumulative EBITA losses over the last 6 years have wiped out the positive EBITA of the prior 3 years. All the while, the company has amassed $63bn in debt and pension commitments. One might ask: Is it shrewd capital portfolio management and strategy-adjustments, or just a company trying to break out of its financial troubles?

Old and new PE favourites

Let’s start with the obvious: Already starting with the Russian attack on Ukraine, there has been a renewed interest in aerospace & defence themes. This has been supercharged in Europe in Q1 where strategic autonomy is set to become a real policy, underpinned by unprecedented investment - think e.g. of the €150bn ReArm Europe program, the €500bn German special budget. Both Jeppesen and ForeFlight are not primarily defence companies, they fit the dual-use bill. Beyond the defence gold-rush, Jeppesen also fits an old PE favourite, which we like to call digital infrastructure: Business models built on providing the basic infrastructure on which more advanced, digital services are built. Navigation data -like positioning- is a prime example here.

While not a new feature per se, the Jepessen suitors also stand out for being mostly consortia - either of two or more private equity funds, or a private equity plus a strategic.

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Porsche-Piëch family explores €2bn defence investment to diversify holdings

The Porsche-Piëch family is considering a major move into the defence sector to broaden its investment portfolio beyond Volkswagen and Porsche.

This shift reflects a growing trend among major investors to seek stability through diversification, particularly in sectors like defence and infrastructure, as traditional automotive investments face challenge

The Porsche-Piëch family is exploring the acquisition of a defence company as part of a broader strategy to diversify its holdings and invest up to €2bn. The family’s investment arm, Porsche SE, announced the plan to move beyond its current stakes in Volkswagen and Porsche. This shift aims to provide a new "core investment" to complement its automotive holdings and diversify its dividend income. Although specific targets were not revealed, the focus is on the defence sector, with the company also considering investments in infrastructure.

Porsche SE has a cash reserve of €2bn to finance any acquisitions, but it will avoid taking on additional debt, limiting the scale of the deals. The company also faces upcoming repayments on its €5.2bn net debt from its 2022 purchase of a controlling stake in Porsche AG. However, Porsche SE's chairman, Hans Dieter Pötsch, ruled out selling shares in Volkswagen or Porsche to fund these repayments.

The family investment vehicle has previously made smaller investments in start-ups and holds a stake in the drone maker Quantum Systems. The defence sector focus aligns with recent changes in Germany’s military spending policies, which have boosted shares in the sector. Despite the controversial history of VW and Porsche in arms production during WWII, Porsche SE’s leadership sees no ethical issues in its current plans to expand into the defence industry.

Full Financial Times article: Link to FT

Private equity’s new IPO playbook: Only the best will survive

Private equity firms are facing a tougher IPO market, where only top-tier businesses with discounted valuations can secure exits.

In today’s cautious investment climate, gold-plated companies, steep discounts, and smaller initial floats have become the key ingredients for IPO success.

Private equity firms once followed a clear strategy: buy an asset, leverage it with debt, improve operations, and exit at a profit. But weak M&A markets and shut IPO windows have left trillions in unsold assets weighing down portfolios. Now, sponsors hope improving conditions will provide long-awaited exits. Several European companies, including Stada, Asker Healthcare, and Odido Holding, are considering listings in 2025. The Stoxx index has risen 12% over the past year and trades at 15.5 times forward earnings, above its 10-year average. However, IPO activity remains sluggish, just €64bn was raised last year, half the previous decade’s annual average.

The issue is that public investors and IPO buyers are not the same. For a successful offering, bankers need active fund managers to place orders, yet these funds suffered €60bn in outflows last year. This environment forces companies to meet stricter criteria: only top-tier businesses with attractive pricing are gaining traction.

Recent listings reveal the new IPO playbook: high-quality assets, steep discounts, and small initial floats. CVC priced its IPO 25% below rival EQT and has since gained 38%, while Swiss injectable-maker Galderma has doubled in value. Smaller initial offerings allow for follow-on sales at higher prices, as seen with Galderma’s backers EQT and Adia. While the US offers higher valuations, poorly prepared listings still struggle, as Venture LNG’s flop demonstrated. For private equity, the message is clear: only strong businesses with realistic valuations will succeed in this new IPO landscape.

La bellezza globale senza confini: come e-commerce e AI stanno ridefinendo i rituali culturali della bellezza

Un tempo legati ai confini geografici, i rituali di bellezza sono oggi fenomeni globali, alimentati da e-commerce, social media e personalizzazione basata sull’intelligenza artificiale.

Da Parigi a Seoul, le tradizioni di bellezza stanno superando i confini, trasformandosi in tendenze mondiali, guidate dalle piattaforme digitali.

I rituali di bellezza erano una volta strettamente legati ai luoghi di origine: la skincare francese era un lusso parigino, la bellezza ayurvedica rimaneva in India, e la K-beauty era esclusiva di Seoul. Oggi, grazie a e-commerce e social media, queste tradizioni locali sono diventate fenomeni globali. Marketplace come Amazon generano il 70% delle vendite online nel settore beauty, contribuendo all’espansione internazionale di brand come COSRX, Tatcha e Innisfree. Solo COSRX realizza il 72% delle sue vendite e-commerce tramite Amazon, e il 93% proviene da fuori della Corea.

Ma non basta la popolarità: efficacia dei prodotti, pricing competitivo e strategie digitali solide sono essenziali per avere successo nei mercati internazionali. Mentre brand K-beauty e J-beauty prosperano all’estero (con solo il 22% delle vendite nel mercato domestico), i marchi indiani e africani stanno ancora lavorando per affermarsi a livello globale, affrontando sfide legate alla visibilità digitale e alla concorrenza con marchi internazionali.

Il futuro della bellezza sarà nella iper-personalizzazione, unendo tradizioni culturali e tecnologia moderna. Raccomandazioni personalizzate grazie all’AI — basate su tipo di pelle, clima ed etnia — rivoluzioneranno le routine skincare in tutto il mondo.

Con l’espansione dell’e-commerce nei mercati emergenti come Africa, America Latina e Medio Oriente, sempre più brand di bellezza legati alle culture locali entreranno sulla scena globale. Le vendite online di prodotti beauty in queste aree cresceranno dai 47 miliardi di dollari nel 2024 ai 75 miliardi nel 2028, portando a una vera trasformazione del settore.

Il futuro della bellezza sarà più connesso, inclusivo e innovativo, capace di unire antichi rituali con le tecnologie più avanzate.

Full Euromonitor article (als source of data above): Link to Euromonitor

Il paradosso del rossetto: piccoli lussi non bastano a salvare i colossi della bellezza

Anche se il "Lipstick Index" suggerisce che in tempi di crisi i consumatori non rinunciano ai piccoli piaceri, i grandi marchi cosmetici faticano a tenere il passo.

Il calo delle vendite in Cina e negli USA dimostra che, oggi, neppure il make-up sfugge alla cautela dei consumatori.

Quando i tempi si fanno difficili, i consumatori più attenti alle spese rinunciano magari all’acquisto di un’auto nuova o di una lavatrice, ma continuano a concedersi piccoli lussi, come un rossetto di qualità da €20. Questo è il concetto alla base del cosiddetto "Lipstick Index", termine coniato dall'ex CEO di Estée Lauder, Leonard Lauder, durante la recessione del 2001.

Negli Stati Uniti, il trucco per labbra ha registrato un aumento delle vendite del 18% lo scorso anno, ma questo non è bastato a compensare i problemi del settore. La Cina è ancora in fase di rallentamento economico e si teme una recessione negli USA. Estée Lauder, proprietaria di Clinique e MAC, ha previsto per il trimestre in corso un calo delle vendite fino al 12% rispetto all'anno precedente. Il gruppo soffre in Cina, dove i consumatori spendono meno per creme costose, e il business del duty free fatica a riprendersi. Anche in Nord America le vendite sono in calo e il titolo ha perso l’80% rispetto ai massimi del 2021.

Altri marchi come Coty, e.l.f. Beauty e Ulta Beauty segnalano una crescita più debole negli USA. Coty, in particolare, vede rallentare sia i marchi economici come CoverGirl sia quelli di lusso. A conti fatti, solo giganti diversificati come L’Oréal sembrano restare una scommessa sicura.

Abbiamo analizzato come le aziende rispondono a queste sfide, adottando strategie difensive o trasformando l'incertezza in opportunità. È possibile accedere alla ricerca completa al seguente link: How firms react to uncertainty: Strategies, adaptations, and market implications

Luxury cosmetics boom: Louis Vuitton joins a growing market

The global beauty market is thriving, with luxury brands expanding into cosmetics to capture new consumer segments.

As inflation cools, premium beauty brands like Louis Vuitton are seizing the opportunity to drive sustainable growth and reinforce brand loyalty.

Luxury cosmetics remain a lucrative segment, with premium beauty brands experiencing steady growth despite overall economic uncertainty. Louis Vuitton aims to leverage this momentum, introducing 55 lipsticks, 10 lip balms, and eight eye shadow palettes across 116 of its stores. Spearheading the project is renowned British makeup artist Pat McGrath, known for her influence in the beauty industry and commitment to inclusive product development.

The expansion aligns with a broader industry trend, as luxury fashion houses such as Prada, Celine, and Burberry have all entered the cosmetics market in recent years. High-end beauty products serve as an accessible entry point for consumers who may find luxury handbags and jewelry increasingly out of reach due to price hikes.

The expansion also comes at a time of strong growth in the global beauty market. In 2023, retail sales in the sector grew to $446bn, up 10% from 2022. While much of this growth stemmed from price increases rather than volume gains, cooling inflation in major markets like the United States presents an opportunity for sustainable growth strategies in the coming years.

With plans to extend into skincare and foundation, Louis Vuitton is positioning itself to capture a larger share of the beauty industry while reinforcing brand loyalty. The cosmetics venture offers another gateway for consumers to engage with the iconic brand, further strengthening its presence in the luxury market.

Carmakers bet big on hybrids as EV growth slows

Automakers are ramping up hybrid and petrol investments to stay profitable while waiting for EVs to take off.

With EV demand cooling and regulations tightening, hybrids are becoming the industry's most profitable middle ground.

Carmakers are doubling down on hybrids and upgraded petrol models to keep profits steady while waiting for electric vehicles (EVs) to go mainstream. In recent weeks, General Motors, Porsche, BMW, and Mercedes-Benz have all committed to investing in internal combustion engine (ICE) and hybrid models, even as they expand EV production to meet stricter emissions rules.

Global launches of new ICE and hybrid vehicles are set to rise 9% this year, per S&P Global Mobility. While petrol model launches will dip 4% to 205, hybrid models will surge 43% to 116. Mercedes-Benz plans to release 19 petrol models versus 17 EVs between 2025 and 2027 after its profits took a hit from slowing EV demand. “If you don’t believe the market will be fully electric by 2030, it makes no sense to abandon your profitable ICE business,” said CEO Ola Källenius.

Porsche is also rethinking its EV strategy after a 49% drop in Taycan sales. The luxury brand is investing €800mn to develop new hybrid and petrol models. While carmakers pour money into future EVs, they’re keeping ICE tech alive longer than expected. Hybrids, combining batteries with combustion engines, are both profitable and in demand. The EU’s 2025 regulations require a 15% emissions reduction per carmaker, with a full petrol and diesel ban looming in 2035. However, BMW and others are lobbying for flexibility.

Despite sluggish EV growth in Europe, China’s market is booming, hybrids and EVs made up 47% of sales last year, up from 6% five years ago. Meanwhile, Volkswagen and GM are hedging their bets, prioritizing ICE profits as EV costs remain high. “ICE profitability can continue longer than expected,” GM CFO Paul Jacobson said last week.

Germany’s Election Lifts Stocks, But US Risks Still Dominate

Germany’s new leadership brings market optimism, but global trade tensions—especially with the US, remain the real challenge.

While political stability helps, the true driver of German stocks isn’t domestic policy, it’s global trade, with the US holding the decisive vote.

Germany’s incoming chancellor aims for “independence” from the US. Sunday’s election result offers a modest boost to the stock market, as reflected in the DAX’s 0.6% rise on Monday. But with Germany’s biggest companies deeply tied to global trade, a Donald Trump-shaped shadow still looms. For investors, political uncertainty is bad news. The likely two-party coalition between the Christian Democrats and Social Democrats at least provides stability. While they differ on many issues, both favor increased defense spending and pro-business policies—a win for Germany’s DAX, which leans heavily on cyclical sectors like industrials.

Unlike the US, where investors prefer gridlock to prevent drastic policy shifts, Germany could use decisive action. Reforming its restrictive “debt brake” would be a start, though strong performances by the far-right AfD and left-wing Die Linke could complicate that. Despite a 25% DAX rally over the past year, outpacing the Stoxx 600 and S&P 500, tech stocks drove much of the gain. Yet, the broader index trades at just 14 times forward earnings, signaling room for growth.

Still, the real game-changer for German stocks isn’t politics, it’s trade. Less than 20% of large-cap revenues come from within Germany. Sectors like autos remain undervalued, with Volkswagen at less than 5 times expected earnings. Trump called Germany’s election a “great day.” Whether it’s great for German stocks? That decision lies across the Atlantic.

Sanremo 2025: A record-breaking festival in music and finance

Il Festival di Sanremo è da sempre un motore economico di grande rilievo, ma l’edizione 2025 si appresta a raggiungere vette senza precedenti, con un impatto economico stimato di €245mn di euro.

Oltre al suo valore culturale, Sanremo sta ridefinendo l’industria musicale, trainando le cifre dello streaming e le vendite degli album, oltre a conquistare un pubblico sempre più giovane.

Molti si chiedono quale sia il valore economico del Festival di Sanremo. La risposta breve: ha sempre generato milioni di euro. Secondo un rapporto di EY, il fascino dell’Ariston resta immutato. Infatti, l’edizione 2025 è destinata a infrangere ogni record, con una stima di 245mn di euro movimentati durante la settimana del Festival. Questo dato segna un incremento di 40mn rispetto al 2024, con una crescita del 20%, facendo sì che Carlo Conti superi Amadeus, almeno sotto il profilo economico. Il principale contributo all’impatto finanziario del Festival proviene dalla pubblicità e dalle sponsorizzazioni, che rappresentano il 70% del totale.

Sanremo sta anche trasformando l’industria musicale. Negli ultimi cinque anni, lo streaming dei brani in gara è aumentato del 460%, rappresentando ora oltre il 2% del mercato. L’allineamento del Festival alle tendenze musicali contemporanee è evidente nell’aumento delle certificazioni di platino assegnate ai brani in gara: 241 tra il 2013 e il 2024, con un incremento significativo negli ultimi quattro anni. Inoltre, per il quarto anno consecutivo, l’artista con l’album più venduto dell’anno è tra i concorrenti e, per il terzo anno di fila, un brano presentato a Sanremo è diventato il singolo più venduto dell’anno. Non solo: il 57% delle canzoni dell’ultima edizione è entrato nella Top 100 dei singoli più venduti del 2024, consolidando il ruolo di Sanremo come forza trainante dell’industria musicale.

Secondo la FIMI, questi dati riflettono un mercato musicale sempre più dominato dagli artisti italiani e caratterizzato da un pubblico più giovane. Nell’ultimo decennio, l’età media degli artisti nella Top Ten annuale degli album è diminuita del 13%, in linea con il ringiovanimento del pubblico televisivo del Festival. Nel 2024, secondo i dati Rai, l’evento ha registrato un'eccezionale quota di ascolto dell'82% tra i giovani tra i 15 e i 24 anni, rendendolo il programma di intrattenimento in prima serata con il pubblico più giovane della storia.

Why Europe may prove more resilient than expected in 2025

Despite concerns about economic divergence, Europe has the tools and momentum to close the gap with the US.

Structural reforms, macroeconomic stability, and policy predictability position the EU for a stronger-than-expected recovery.

The prevailing view is that the economic divergence between the US and EU, evident since the pandemic, will persist. While the US currently enjoys strong growth and market optimism, extrapolating this trend may be misleading. BNP Paribas anticipates a narrowing gap in 2025, with US growth slowing and the Eurozone modestly accelerating. Moreover, concerns that Donald Trump’s policies will weaken Europe overlook several key factors.
• Europe Thrives in Crisis - Trump’s potential return is seen as a challenge, yet crises have historically driven European integration. Landmark reports from former Italian prime ministers provide a roadmap for competitiveness, now shaping the EU’s five-year agenda. EU Commission President Ursula von der Leyen recently affirmed Europe’s readiness for change, signaling reforms in internal markets, regulations, and investment.
• Macroeconomic Stability and Policy Flexibility - Unlike past crises, Europe enters this period with relative economic strength. Inflation is nearing the ECB’s 2% target, allowing a shift toward neutral monetary policy. Meanwhile, the US and UK face constraints due to high interest rates and inflation risks. Fiscal space varies across EU nations, but key economies have room for stimulus if needed.
• Limited Exposure to US Tariffs - While the US is a major trading partner, it represents less than 8% of EU exports. Modest increases in intra-EU and non-EU trade could offset potential losses. The EU is also pursuing new trade agreements, potentially lowering external tariffs to sustain competitiveness.
• Advancing the Green Transition - A rollback of US climate policies could benefit Europe by attracting investment in green technologies, reinforcing the EU’s leadership in decarbonization.
• Policy Predictability - Europe’s post-election stability contrasts with ongoing US political uncertainty, providing a favorable environment for investment and economic planning.

Europe may not surpass the US, but it holds strong strategic advantages, and the urgency to act.

Energy dilemma: Fossil fuels, renewables, and the rise of battery power

As BP navigates investor pressure, the real transformation in energy is happening in battery storage.

While BP rethinks its green direction, battery storage is proving to be the real game-changer in the energy transition

All eyes are on BP this week as CEO Murray Auchincloss unveils the company’s strategy at an investor day, amid mounting pressure from activist investor Elliott. Reports suggest BP will abandon its oil and gas reduction pledge and announce a major divestment in renewables to boost its lagging share price. But with 48 institutional investors demanding a say on any rollback of climate goals, the move is bound to divide shareholders.

Meanwhile, energy executives gather in London for the Energy Institute’s International Energy Week, where Trump’s potential return to the White House looms large over discussions.

While oil giants battle over strategy, the real energy revolution is happening elsewhere, in battery storage. Last week, BWESS launched its battery storage system in Hampshire, capable of powering 44,000 homes for a day. It’s part of a sharp decline in battery costs, down 90% since 2010, coupled with soaring energy density. According to Brent Wanner of the IEA, battery deployment hit 70GW in 2024, outpacing fossil fuel plant growth by 2030. Batteries, once sidelined, now rival coal and gas on cost in key markets like India and the US.

But outdated electricity markets remain a barrier. Fees for charging and discharging discourage investment, despite batteries being crucial to stabilizing grids. Yet, optimism prevails, costs continue to fall, making a 90-95% green grid increasingly viable. The energy future is being rewritten, one battery at a time.

The energy transition investment divide: Booming sectors vs. struggling innovations

Last year’s record $2tn investment in the energy transition highlights strong momentum, but a closer look reveals an uneven distribution of funding.

While mature industries thrived, emerging technologies faced a sharp decline in investment, exacerbated by policy uncertainty and the fading SPAC boom

Last year’s record-breaking investment in the energy transition was a major milestone. However, a closer look reveals a significant imbalance. While established sectors like solar and wind power experienced strong growth, investment in emerging technologies lagged behind. This disparity is especially pronounced in industrial decarbonization, a critical piece of the transition puzzle, which saw a sharp drop in funding last year.

Although energy transition investment grew in the U.S. and reached new global heights, the majority of capital flowed into mature industries such as wind and solar. Meanwhile, newer technologies, struggled to attract funding. “It’s great to see such strong investment, but the market remains risk-averse,” noted Holmgren.

Part of the issue stems from the short-lived boom in special purpose acquisition companies (SPACs), investment vehicles created to take businesses public through mergers. A record number of SPACs were floated in 2020 and 2021, fueling a wave of clean-tech listings at valuations that now appear inflated. However, as regulatory scrutiny tightened, the craze quickly faded. The trend is clear: investment in mature sectors, including electrified transport and renewable energy, rose by 14% last year, while funding for emerging sectors, such as alternative fuels and industrial decarbonization, fell by nearly 25%.
Adding to the challenge, policy uncertainty continues to deter companies from investing in green technologies, further slowing progress in critical innovation areas.

The struggle of smaller PE funds in a consolidating market

Smaller private equity funds often outperform their larger counterparts, yet they face increasing challenges in raising capital.

As institutional investors favor megafunds, niche private equity firms must adapt, by finding strategic partnerships or risking obsolescence.

In private equity, bigger isn’t always better. Data from Preqin shows that smaller buyout funds often outperform megafunds, though with considerable variation. Specializing in niche strategies and targeting overlooked market segments can be a profitable approach. Yet, raising capital remains a challenge for smaller players. One major hurdle is the overall decline in available funding. In 2024, private equity funds worldwide raised $680bn, 30% less than the previous year, according to S&P Global Market Intelligence.

In certain markets, large firms are capturing an increasing share of this shrinking pool. In Europe, nearly 75% of all capital raised went to funds exceeding €1 billion—up from about 50% five years ago, according to PitchBook. As a result, institutional investors have become more selective, while private equity firms eager to scale are shifting their focus to sovereign wealth funds and high-net-worth individuals. For smaller firms, these funding sources pose challenges. Sovereign wealth funds manage hundreds of billions in assets and require large investments to make an impact. Retail-focused funds like Blackstone’s BXPE and KKR’s K-Prime, on the other hand, rely on brand recognition to attract numerous smaller investors. They also benefit from high deal flow, something easier to sustain within a larger firm.

This leaves small private equity funds with few attractive options. Some may simply wind down, returning capital to investors as their deals mature. Others may seek shelter under a larger firm’s umbrella. As the industry consolidates, private credit funds may look to expand into equity, while private equity giants could acquire niche specialists. Strong performance can still yield rewards, but success is far from guaranteed.

Full Financial Times article (als source of chart above): Link to FT

In Italia l’industria dello yachting è un’eccellenza da valorizzare

L’industria dello yachting è un’eccellenza italiana con un forte impatto economico, ma servono maggiori investimenti e infrastrutture per valorizzarne il potenziale.

L’industria dello yachting in Italia è un settore strategico in cerca di maggiore riconoscimento

L’industria dello yachting in Italia chiede un maggiore riconoscimento per il suo contributo economico, sostenendo che il Paese dovrebbe fare di più per supportare un settore in cui eccelle a livello globale. L'Italia ospita alcuni dei più rinomati produttori di yacht al mondo, tra cui Azimut, Sanlorenzo, Mangusta, Ferretti Riva e Codecasa. Secondo un rapporto Deloitte, l’Italia è il principale produttore mondiale di superyacht (imbarcazioni oltre i 24 metri di lunghezza), con la metà dei 1.024 ordini del 2022 assegnati a cantieri navali italiani.

L’industria dello yachting è un settore stategico sia per il suo impatto sul PIL nazionale sia per le ricadute positive su altre filiere produttive e settori correlati. Nel 2022, l’impatto economico del comparto è stato pari a 27 miliardi di euro, includendo i ricavi indiretti generati dalle attività di turismo. Più della metà di questo impatto è attribuibile alle imbarcazioni di grandi dimensioni, con dati che evidenziano come la spesa per ospite aumenti proporzionalmente alla lunghezza dello yacht. In alcune regioni costiere, come la Liguria, il settore rappresenta uno dei pilastri dell’economia locale. Città come Genova e La Spezia ospitano corsi universitari in ingegneria navale e design, mentre un vasto tessuto di piccole e medie imprese fornisce materiali e componentistica di alta qualità.

Tuttavia, dei 6.500 superyacht che navigano nel mondo, solo il 6,5% batte bandiera italiana. Se un’imbarcazione non è registrata in Italia, la sua permanenza nel Paese è limitata a 30 giorni, riducendo le opportunità per attività di refitting altamente remunerative, spesso realizzate all’estero. Questo frena il potenziale contributo economico del settore, con gli esperti che sottolineano come gli yacht e i loro facoltosi proprietari dovrebbero essere considerati un’opportunità. Il settore ritiene che il Paese sia carente in termini di infrastrutture e marine attrezzate. Solo il 30% degli ormeggi disponibili in Italia si trova in porti turistici adeguatamente attrezzati per accogliere yacht e superyacht.

Giovanna Vitelli, presidente di Azimut Benetti, conclude: “Dobbiamo intervenire per aumentare l’attrattività delle nostre marine, incentivare l’uso della bandiera italiana e promuovere il noleggio charter lungo le nostre coste.”

The Shift to Smaller Ships: Adapting to a Changing Global Trade Landscape

The transition of manufacturing hubs from China to other Asian nations is reshaping the shipping industry, driving demand for smaller, more adaptable container ships over ultra-large vessels.

As global trade diversifies beyond China, shipowners are prioritizing flexibility over size, leading to a rise in mid-sized container vessels.

The global trade shift from China to other Asian ports is prompting shipowners to move away from ordering ultra-large vessels in favor of smaller, more flexible ships. According to shipbroker Braemar, only 6 container ships with a capacity exceeding 17k TEUs (twenty-foot equivalent units) are set for delivery in 2025, compared to 17 in 2020. Meanwhile, mid-sized vessels between 12k and 17k TEUs are in higher demand, with 83 expected in 2025, nearly five times the number from five years ago.

Peter Sand, chief analyst at Xeneta, attributes this trend to diversified supply chains. “We’re seeing increased interest in sourcing from multiple locations, not just China,” he said. Large ships are only viable when fully loaded, making them less economical as manufacturing shifts to smaller hubs like India and Vietnam. A senior executive at a leading Asian shipping line echoed this view, noting that filling ultra-large vessels at just two or three ports is becoming less feasible. Historically, shipowners favored bigger vessels amid trade expansion, a trend that gained attention after the six-day blockage of the Suez Canal in 2021.

Industry experts cite several factors influencing this shift. Global trade growth has slowed, massive ships have saturated the market, and environmental regulations have created uncertainty. The ongoing attacks on vessels in the Red Sea have further disrupted routes, underscoring the importance of operational flexibility. Before these shifts took full effect, demand for ships over 18k TEUs surged in 2024 as container shipping profits soared. At the start of December, 76 such vessels were on order, up from 45 the previous year. However, experts warn that ultra-large ships, designed primarily for Asia-Europe trade, may struggle in alternative routes, such as the Panama Canal.

With uncertain fuel regulations and emissions targets from the International Maritime Organization, shipowners are weighing their investments carefully. “The lower cost of smaller ships makes them a safer bet,” said William MacLachlan, a shipping law expert at HFW.

Closing loopholes: How the EU plans to strengthen trade controls

The EU is tightening customs regulations to combat counterfeiting, which costs key industries up to 10% of total revenues

Counterfeiting costs the EU industries over €16bn annually in the clothing, cosmetics, and toy sectors alone

Counterfeiting imposes significant financial losses on various industries.. The clothing sector loses nearly €12bn annually (5% of revenue), the cosmetics industry incurs €3bn in losses (5% of sales), and the toy industry suffers a €1bn shortfall (almost 9% of sales).
The EU imported 4.6bn low-value parcels in 2024, a fourfold increase from 2022, with more than 90% originating from China. The sheer volume of these shipments places an "unsustainable strain on the authorities," the draft states.
To address these challenges, the EU-proposed reforms would require online retailers to collect applicable duties and VAT while ensuring their goods comply with EU regulations. Additionally, the proposal seeks to eliminate the existing exemption for goods valued under €150, subjecting them to customs checks. As part of the reforms, customs data from all 27 national authorities would be consolidated into a new central EU Customs Authority (EUCA). According to the draft, the EUCA would leverage this data to screen shipments, assess risks, and identify potential violations even before goods are loaded for transport or physically arrive in the EU.
This will provide customs authorities with a comprehensive view of supply chains, enabling proactive monitoring of imports and exports while offering control recommendations to member states. The proposal is still under internal discussion and may be revised before its scheduled publication on February 5.

AI's winner-take-all myth takes a hit, but the bubble is steady

The era of winner-take-all dominance in technology may be shifting, as new AI model challenges the exclusivity of cutting-edge AI innovation in the hand of few large and well-funded organization.

DeepSeek's breakthrough challenges the winner-take-all narrative in AI, signaling a more accessible and decentralized future for innovation.

For the past four decades, the dominant trend in technology has been the rise of winner-take-all industries, where a single company captures the majority of profits and market share. Companies like Microsoft in software, Alphabet in search, Amazon in e-commerce, Meta in social media, and Apple in premium hardware have exemplified this dynamic. Success in investing has often hinged on backing these dominant players early.

But yesterday’s market moves reflected a potential shift in this paradigm: the possibility that artificial intelligence may not follow the winner-take-all model. The catalyst was Chinese AI company DeepSeek, which unveiled R1, a model rivaling the best from OpenAI, Anthropic, and Meta. What sets R1 apart is its development: it was trained at dramatically lower costs without cutting-edge GPU chips. DeepSeek also made parts of the model public, allowing others to run it on standard computers, though not enough to fully replicate it.

This challenges three assumptions: that top AI requires Nvidia’s state-of-the-art hardware, that only tech giants can afford to build leading AI models, and that only companies with proprietary models can deliver superior AI applications. Interestingly, aside from Nvidia, the biggest declines hit the stocks tied to the growing data center economy. While the Magnificent 7 Big Tech companies, who have made substantial investments in AI data centers, were mostly unchanged. While some of their expenditures may have been excessive, they now have the flexibility to scale back spending.

National pride meets premium cosmetics: The new trend impacting global cosmetics and local Asian economy

China’s beauty market is undergoing a seismic shift as Mao Geping Cosmetics’ explosive debut highlights the rise of premium homegrown brands.

Chinese consumers are shifting from EU luxury brands to high-quality domestic alternatives, fueled by national pride and rising confidence in homegrown products.

What does an opera star-turned-makeup artist mean for the future of the cosmetics industry?

Mao Geping, has become China’s newest billionaire after the debut of his namesake cosmetics company on the Hong Kong Stock Exchange. Shares surged up to 87% on the first trading day, giving the company a valuation exceeding $3bn. This milestone marks the rise of Chinese beauty brands, as consumers shift from European products to domestic alternatives.

The IPO, which was over 700 times oversubscribed, represents the strongest demand in Hong Kong's market this year. It comes as international beauty giants like L’Oréal and Shiseido face declining sales in China due to an economic slowdown curbing luxury spending. L’Oréal’s North Asia sales fell 6.5% in the third quarter, marking five consecutive quarters of contraction in China’s beauty market.

Defying the downturn, Mao Geping Cosmetics reported over 40% sales growth in the first half of 2023, maintaining steady growth since 2018. Its expansion into e-commerce has bolstered a strong offline presence with 300+ department store counters. Unlike other local brands that compete on affordability, Mao Geping positions itself alongside premium international players like Lancôme and Nars. This reflects a shift in consumer behavior, favoring high-quality domestic brands, driven by both national pride and improved product standards.

Secondary markets reflect optimism as discounts on buyout stakes fall by 30% narrowing the gap to net asset value

Secondary market activity hit record levels in 2024, driven by LPs rebalancing portfolios and GPs leveraging continuation vehicles, as narrowing NAV discounts signaled rising investor confidence.

Record secondary market activity in 2024, coupled with narrowing discounts, signals rising confidence in private equity’s ability to deliver strong future exits

Investors unloaded a record $162bn worth of private equity stakes on secondary markets in 2024, driven by a slowdown in dealmaking that encouraged both pension funds and buyout groups to seek alternative liquidity options, according to Jefferies. This marked a 45% increase from 2023 and surpassed the previous peak in 2021 by more than 20%.

Limited partners sold $87bn in fund stakes, a 36% jump from the 2021 record, as many sought to rebalance portfolios heavily weighted toward private equity after the pandemic-induced slowdown in deal activity. These stakes, typically sold at a discount, saw narrowing gaps in valuation last year. Buyout fund stakes, for example, traded at an average discount of 6% below net asset value, compared to 9% the year prior, reflecting rising confidence that private equity managers would successfully exit portfolio companies.
General partners also turned to secondary markets, selling $75bn in assets, 44% more than the previous year. Of this, $63bn involved transferring assets to continuation vehicles, enabling GPs to return capital to investors while also continuing value creation work and waiting for valuations to recover.

The luxury industry: A strategic reset for 2025 and beyond

As the luxury industry experiences a slowdown, brands may need to strike a balance between exclusivity and price increases, as customers begin to question the value of mainstream products priced at significantly higher levels. With price hikes nearing their limit, brands will be compelled to explore alternative avenues for sustainable growth.

Luxury is facing headwinds, with demand curbed by price limits and macroeconomic pressures, urging brands to adopt long-term strategic resets.

From 2019 to 2023, the personal luxury goods sector—including fashion, leather goods, watches, and jewelry, experienced unprecedented demand, bolstered by robust supply. This dynamic allowed the industry to achieve a compound annual growth rate of 5 percent, with luxury brands outpacing global markets and achieving record-breaking profitability. As per a recent McKinsey report, price increases were the primary driver of growth during this period, accounting for over 80 percent of the sector’s expansion, while volume gains remained more modest. Bernstein analysts found that LVMH-owned Dior raised prices by 66% in the same timeframe, with Chanel close behind, while Hermès limited its price increase to 20%.

However, as we enter 2025, the industry is facing a marked slowdown, impacting even the top-performing brands. Key growth engines have stalled: price increases have reached their upper limit, curbing demand among aspirational luxury consumers, while macroeconomic pressures—particularly in China, which fueled annual growth exceeding 18 percent from 2019 to 2023—are weighing heavily on the sector.

Looking ahead, global growth for luxury goods is projected to slow to an annual rate of 1 to 3 percent between 2024 and 2027. While emerging markets such as the Middle East, India, and other Asia–Pacific regions present pockets of dynamism, they are unlikely to offset the single-digit growth anticipated in core markets like the United States, Europe, and China.

This challenging landscape provides an opportunity for the industry to recalibrate. To thrive in this new era, luxury leaders must embrace a comprehensive, long-term strategic reset. Quick fixes will no longer suffice; instead, a holistic approach that addresses immediate challenges while positioning brands for sustainable growth will be essential.

Strengthening the single market: Can the EU overcome fragmentation and protectionism?

Amid protectionism concerns, the European Commission emphasizes early intervention to reduce infringements. However, businesses still face fragmented regulations while President von der Leyen remains steadfast in prioritizing the enforcement of EU law.

The Commission’s reduced infringement actions have sparked concerns about its commitment to upholding the single market’s principles.

Industry groups have accused the European Commission of failing to address violations of the EU’s single market rules, creating trade barriers and hindering growth. Objectors critic the Commission for insufficient enforcement against national laws in countries like Spain, Italy, and France that disrupt cross-border supply chains. Despite the single market’s principles of free movement, enforcement actions have dropped sharply, with new cases against member states falling 60% from 2019 to 2023.

Increasing trade barriers and the dangers of national laws overriding single market rules are the focus of the critics. Efforts to address these challenges by the EU include a new Commission strategy aimed at removing regulatory barriers and ensuring compliance. However, past reports highlight staffing shortages and procedural inconsistencies in enforcement.

As of 2024, Europe encompassed 27 countries, 23mn businesses, and nearly 450mn people, making it the world’s largest developed market. Amid concerns of rising protectionism, the Commission argues that improved early intervention has reduced infringements. Still, businesses face challenges like fragmented packaging laws and inconsistent trade practices. President von der Leyen has made the enforcement of EU law a central priority for the Commission. In 2023, Brussels referred 45 cases to the European Court of Justice, seeking fines for member states, a number that exceeds any in the past decade, highlighting her commitment to a robust enforcement agenda.

How private equity turned Europe’s challenges into a $133bn opportunity as valuations hit record discounts

In Europe, “it is now possible to identify market-leading yet relatively under-the-radar companies with valuations exceeding $1 billion, often at a discount compared to their US peer” notes Alexis Maskell from BC Partners in a recent interview on January 12th with the Financial Times.

PE activity in Europe surged in 2024, driven by discounted valuations and economic challenges, with large deals increasing 78% YOY

Private equity activity in Europe surged in 2024 as firms capitalized on economic challenges to acquire companies at attractive valuations. Large transactions in the region reached approximately $133 billion, a 78% increase year-over-year, far exceeding the global growth rate of 29% to $242 billion.

Europe’s weak economic outlook, political instability, and geopolitical risks, coupled with a strong US dollar, drove US private equity funds to focus on specific European markets. At the same time, European stock exchanges, including the London Stock Exchange, faced company departures as businesses moved to US listings or opted to go private with buyout firm support.

Take-private deals in Europe involving majority stakes above $1 billion rose 44% to $52 billion, according to Dealogic. European equities, long trading at lower valuations than US stocks, now face a record discount, with the Stoxx Europe 600 lagging the S&P 500.

Significant transactions included shifts among private equity firms or consortia, while smaller deals, particularly in the sub-€1 billion segment, remain a European strength but have been heavily impacted by macroeconomic pressures. “This segment has been particularly affected by the region’s challenges,” noted Alexis Maskell from BC Partners. However, activity is anticipated to increase in 2025, including in the mid-market segment.

Tech titans vs. diversification: How Europe outpaces the S&P 500 when excluding the AI-hype

In a broadly shared article published on Jan 3rd, the Financial Times points out that the S&P 500's recent performance is disproportionately influenced by Nvidia and the broader AI boom, creating a concentrated growth dynamic. European markets, by contrast, showcase resilience through sector diversification and the relative strength of small-cap companies.

European companies outperform U.S. peers due to healthier market dynamics and the absence of dominant tech monopolies.

Excluding Nvidia from the S&P 500 fundamentally alters the narrative of its recent performance. Without the chip-maker, the total returns of the S&P 500 would underperform the eurozone’s stock benchmark since the bull market began in late 2022. This disparity underscores the heavy reliance of the S&P 500's recent bull run on artificial intelligence -driven growth, with Nvidia at its core, and despite the eurozone's lower exposure to tech, stocks have actually performed well.

Interestingly, the performance of dominant European-listed companies initially mirrored that of the U.S.’s so-called "Magnificent Seven" — the elite group of high-performing tech giants. However, these trends have begun to diverge in recent months. A key differentiator lies in the revenue exposure of S&P 500 companies, 70% of which is tied to the U.S. market vs 40% for European listed companies, that received a boost following the election of Donald Trump.

Small-cap companies reveal another layer of differentiation. European small businesses consistently outperform their American counterparts, a trend rooted in structural market differences. Approximately 40% of U.S. small-cap companies report negative earnings, compared to just over 10% in Europe. This disparity highlights the “winner-takes-all” dynamic prevalent in the U.S., where tech behemoths monopolize capital and talent, leaving smaller enterprises at a disadvantage. In Europe, while scaling challenges for smaller firms are undeniable, the absence of a similarly dominant tech sector allows small businesses to maintain more robust financial health and attract investment.

Recovering sectors and fundamentals: A year of opportunity

Our analysis of projected revenue growth for 2024–2025 highlights promising trends across most sectors in Europe and North America. In contrast, emerging markets, including Latin America, continue to face significant headwinds and structural inefficiencies.

AI and Pharma & Biotech drive strong growth, with moderate gains in other sectors, but outcomes may vary by segment and geography

Strong growth in 2023 and early 2024 was driven by AI-related segments, expected to sustain double-digit growth globally, alongside robust Pharma & Biotech performance. Modest gains are anticipated broadly, though the outlook varies by segment and geography. Sectors like Automotive and Personal Products are expected to encounter challenges, particularly in Europe and Latin America.

Industrials and materials are beginning to recover from cyclical headwinds, following a period of weak earnings driven by subdued manufacturing activity in recent years. As interest rates decline and the cost of capital eases, both consumer and business spending on capital-intensive projects are expected to rebound. Durable goods subsectors, particularly those linked to housing, are well-positioned for recovery, though the pace of growth is anticipated to be gradual.

In the consumer space, gradual improvement is expected as household purchasing power strengthens. However, elevated price sensitivity is expected to favor non-discretionary or value-oriented companies, which are likely to demonstrate greater resilience in this environment.

Investor activism in Europe: A rising threat for small and midcap companies calling for strategic changes and leadership overhauls

Aquisis conducted a comprehensive analysis of over 600 nonfinancial small and midcap companies across Europe. The evaluation, which assessed firms across four key dimensions, revealed that 15% of these companies exhibit an elevated risk of becoming targets for activist investors.

Investor activism in Europe rose 16% in 2024, targeting mostly small- and midcaps, with 50% demanding board changes.

Investor activism surged across Europe in 2024. Between January and December, the number of campaigns exceeded those of the prior three years, marking a 16% increase compared to 2023. While the activity remains below 2017- 2019 levels, the upward trend is clear and noteworthy.

Jim Rossman from Barclays in a recent report on investor activism stated that "Investors are no longer willing to sit and wait for promised improvements and are saying, 'We want the companies where we are invested to change right now'”.

Activist investors have proven to be a disruptive force. Over the past 12 months, 50% of European campaigns included demands for changes to the board of directors. One in five campaigns called for strategic shifts beyond simple cost-cutting measures (which were the focus of 7% of campaigns), while another 20% sought the sale of all or part of the targeted company.

While campaigns at mega cap companies like Shell, Nestlé, and Linde grab public attention, 73% of European targets are small- and midcap companies. Boards may find some reassurance in the fact that only 38% of activist campaigns were ultimately successful. However, recent high-profile cases underscore the potential impact of investor pressure e.g. the chairman of British banknote printer De La Rue resigning two weeks after activist Chrystal Amber requested it, Airbus aborting the Atos acquisition about one month after TCI requested it, or EVN AG putting its WTE Wassertechnik business unit up for sale in response to demands from Petrus Advisers.

How lower interest rates and political clarity are reviving M&A activity, is there an emerging acquisition wave?

Declining interest rates are a critical catalyst for M&A, as they reduce the cost of acquisition financing. In addition, robust equity markets in 2024 have strengthened the financial positions of both buyers and sellers, encouraging more transactions. By narrowing the valuation gap between buyers and sellers, these conditions are setting the stage for increased deal activity.

Sector-specific growth: technology and oil and gas are standout sectors poised to lead M&A growth, reflecting industry-specific tailwinds.

Key drivers for an M&A recovery are gaining momentum. Political uncertainty tied to historic global elections in 2024 is beginning to dissipate. Emerging clarity, particularly in the United States, is expected to boost buyer confidence and, in turn, catalyze greater dealmaking activity.

Two sectors where this is especially true are technology and oil and gas. Worries that antitrust concerns would block deals arose when President Joe Biden’s administration had made limiting corporation control a priority. The theory was tested by a string of successful large transactions. Cross-border deals remain vulnerable to potential obstacles driven by rising protectionism, as in the recent case of Japan’s Nippon Steel's proposal to acquire U.S. Steel, blocked by Trump.

The most significant factor driving M&A recovery is the easing of monetary policy. After a record-breaking surge in deal activity in 2021, M&A volumes declined sharply in 2022 as central banks raised interest rates to combat inflation. However, with the onset of a rate-cutting cycle in 2024, expected to continue into 2025, the environment for dealmaking is improving. Although current rates remain elevated compared to pre-hiking levels, lower borrowing costs will facilitate a return to historical transaction norms. In addition, robust equity markets in 2024 have strengthened the financial positions of both buyers and sellers, encouraging more transactions. By narrowing the valuation gap between buyers and sellers, these conditions are setting the stage for increased deal activity.

Price reductions across markets: retailers, luxury brands, and wine producers adjust to evolving consumer expectations

General prices of goods have risen steadily in recent years, driven by a combination of factors such as escalating input costs, particularly energy prices, and supply chain disruptions. Quarterly inflation hit a record-high 10% in the Eurozone in 2022. While raising the prices of products and services has often been a straightforward response, price reductions are historically less frequent and harder to implement. However, recent trends suggest a shift.

"The decision to raise prices, merely because it was convenient, was a mistake." Andrea Guerra, CEO of Prada, suggest to focus on product rather than price.

In recent months, price reductions have emerged as a strategic focus across diverse market segments, from essential goods to luxury items and premium wine. Retail giants Target and Walmart have both taken steps to remain competitive by lowering prices. In May, Target announced reductions on 5,000 items. Similarly, Walmart reported to analysts that it had cut prices on a broad array of grocery products. In the furniture market, IKEA has invested over €2bn to reduce the prices of its popular offerings. “For a couple of years, we moved in a direction that was not aligned with our core values. Last year, we achieved an average price reduction of 10%” explained IKEA’s CEO.

Price reductions are not confined to mass-market goods. The luxury sector is also revising its pricing strategies to adapt to shifting consumer expectations. Mid-tier luxury brands like Burberry and Saint Laurent are taking similar measures. Burberry has introduced price cuts ranging from 5% to 22% on all new handbag designs. Saint Laurent has also reduced prices for its Loulou handbags in the U.S. by 10% in January. Even premium wine producers are responding to pricing pressures. Bordeaux's 2023 vintage saw prices decline by an average of 22% compared to the 2022 vintage. Some producers have implemented even steeper cuts, slashing prices by 41%.

These adjustments highlight a broader trend: industries at all levels are reevaluating pricing strategies to align with evolving market dynamics and consumer expectations.

Innovation imperative: How businesses can learn from consumer behavior and R&D strategies to redefining market leadership

"Google had this seemingly insurmountable position in search, but the advent of AI has fundamentally shifted the landscape," notes Melissa Schilling. "AI is to search what e-commerce was to Walmart." Her observation serves as a reminder that even the most dominant players are vulnerable to disruption through innovation and new product launches.

Many companies fall short in allocating sufficient resources to adjacent and transformational innovation. It is time to realign R&D spending

David Yoffie, a professor at Harvard Business School, observed: "We know from behavioral economics that people tend to get into certain routines, and in the absence of a spectacularly better product, people tend to stick with that." While this insight highlights consumer inertia, it should not encourage complacency. According to the Financial Times, major industries—including automotive, telecommunications, and consumer goods—predict that a third of their sales, totaling $30tn over the next five years, will stem from new products.

This underscores the critical importance of fostering an entrepreneurial culture within R&D functions, even in large organizations. Teams with this mindset are more likely to generate transformational, rather than incremental, innovations. Such groundbreaking developments are precisely what can disrupt consumer routines and drive changes in purchasing behavior.

A 2012 Harvard Business Review paper found that companies allocating 70% of their innovation efforts to core initiatives, 20% to adjacent ones, and 10% to transformational projects consistently outperformed their competitors. Setting clear targets is also essential to the R&D process, whether the goals focus on reducing material costs, cutting engineering expenses, accelerating time-to-market, or achieving a combination of all. These objectives provide a foundation for establishing key performance indicators (KPIs) to evaluate the effectiveness of innovation strategies. This structured approach to innovation helps businesses stay ahead in competitive markets.

Major European cities are driving enterprise growth, with the digital sector leading as a key driver for future development

Europe is actively seeking corporate growth leaders as concerns grow over the continent’s slow economic recovery. The IT, construction, and logistics sectors have been the primary drivers of revenue CAGR in EU over the past decade, accounting for one-third of the region's growth champions.

Europe faces economic challenges, with growing GDP gaps and lagging business growth, while companies in developed EU show remarkable resilience.

Competitiveness has become a central focus among Europe's political leaders. French President Macron recently warned that the EU has only two to three years to close the gap, cautioning that "the EU could die". The economic outlook is equally troubling. IMF highlighted the growing disparity between EU and US GDP, noting that, at the turn of the millennium, GDP per worker adjusted for purchasing power was comparable across the US, Germany, France, Italy, and Spain. However, today it is roughly 20% lower in the European nations. The IMF also emphasized that Europe is falling behind in terms of new businesses. Its share of firms aged five years or less is roughly half that of the US.

The Financial Times has released a ranking of Europe’s Long-Term Growth Champions, highlighting 300 companies that have maintained strong sales growth despite economic challenges. These companies, with the highest CAGR over the past decade, span a period marked by the financial crisis and the Ukraine invasion. The median revenue of these companies increased from €2m in 2013 to €29m in 2023, demonstrating remarkable growth even in challenging times. The best represented sector was IT, with 14.7% of ranked companies, followed by Construction & Engineering (7.3%), and Logistics & Transportation (6.7%). Despite representing just 19% and 11% of Europe's GDP, Germany and Italy are home to 30% and 22% of its fastest-growing companies, proving that they outperform expectations despite often receiving less favorable coverage.

See the full FT 300 ranking

Euronext pressured to bridge the gap with U.S. capital markets, calling for greater integration and streamlined bureaucracy

While Europe's equity markets are reaching record levels, they are grappling with underlying challenges. Trading activity is dwindling, IPOs are becoming rarer, and several of the region's largest companies are opting for the U.S. market instead. A recent example is Swedish fintech company Klarna, which announced on November 13th that it began filing for a U.S. stock exchange listing.

Europe’s fragmented markets hinder investment and fundraising, contrasting with the U.S.'s unified system. Euronext's unified prospectus offers hope

European policymakers are taking action to revive their struggling markets by offering incentives aimed at boosting investment in domestic companies and encouraging local listings. However, these efforts face significant political, financial, and cultural challenges that have proven difficult to overcome over the years. Meanwhile, the U.S. market continues to expand rapidly.

Europe’s market structure is far more fragmented than that of the U.S., which benefits from a simpler system with fewer listing venues and a single clearinghouse for trade finalization. In contrast, many European countries operate their own exchanges, often viewed as a point of national pride, which divides liquidity across multiple markets. This fragmentation makes it more challenging to attract investment. Although European stock markets have seen record highs this year, fundraising remains relatively weak.

New listings and secondary share sales in the EU have consistently lagged behind those in the U.S. While the number of IPOs in Europe is gradually catching up to its transatlantic counterpart, the total value disparity remains significant, ranging from a 1x difference in 2023 to a 6x gap in 2020. Euronext is responding by introducing a unified prospectus for companies across its seven exchanges, aiming to improve investor access and stimulate Europe’s fundraising market.

Luxury market €20bn slowdown: U.S. and experiential segments drive hope for recovery in 2025

After experiencing robust growth in the previous decade, the luxury sector is now facing a slowdown. The global luxury market is projected to close 2024 with a value of approximately €1.48tn, a slight 2% decline from €1.5tn in 2023, as reported by Altagamma.

Pursuit of higher margins, coupled with efforts to offset declining order volumes, has driven price increases, leading to the exclusion of 50m consumers from the luxury market.

The S&P Global Luxury Index reflects an even more cautious outlook, with a year-to-date decline of 6% and a 14% drop from its peak in March. The gap between ultra-high-end luxury and aspirational consumption is widening, with a loss of 50 million consumers over two years, primarily among younger demographics, partly due to rising prices. Among product categories, watches, leather goods, and footwear have seen the sharpest decline, while beauty products, eyewear, and especially jewelry have shown growth. Experiential luxury is also bucking the trend, with an estimated 5% increase.

“We expect a moderate recovery in 2025, driven by experiences such as hospitality, fine dining, and wellness, along with strong markets like Europe and the U.S., and the solid performance of jewelry and cosmetics,” said Matteo Lunelli, President of Altagamma. The U.S. market is anticipated to lead the growth, with a forecasted increase of 3.5% (despite lingering uncertainties tied to trade policies under the Trump administration), followed by 2% growth in Europe and Japan. Modest growth is expected for leather goods and footwear, which remain impacted by price hikes, while cosmetics continue to stand out as a top performer.

Outdated strategies make even profitable companies vulnerable to activist investors, especially when they fall behind market benchmarks

$151bn conglomerate Honeywell under scrutiny

Activist investor Elliott Investment Management has amassed a $5 billion stake, or 3%, in Honeywell International and is calling on the company to break itself apart, seeking to dismantle one of the few remaining industrial conglomerates.

Strategic and operational improvements are becoming a primary focus in activist campaigns, representing 23% of initiatives in 2024

While many industrial giants are breaking up to focus on specialized sectors, CEO Vimal Kapur has been expanding Honeywell’s reach. In just 17 months, Kapur has allocated nearly $10 billion to acquisitions.
Honeywell, known for products ranging from home thermostats to aircraft landing gear, has long defended its diversified structure, even as the model has become less popular. Recently, the company has indicated it may streamline parts of its portfolio.

In 2017, Honeywell successfully resisted a campaign by activists to break up the company. However, Honeywell’s stock has recently lagged behind the broader market, leaving the conglomerate potentially exposed to renewed activist pressure. Activist investor Elliott suggests a corporate breakup could yield share price gains of 51% to 75% over the next two years.

Last year, the company reported $5.7 billion in earnings and $37 billion in revenue, both below its 2019 figures. This underperformance has been mirrored in its stock, which, prior to Elliott’s stake announcement, had risen only 12% this year compared to a 26% gain for the S&P 500.

A surge in specialization within the pharmaceutical industry has fueled rapid growth and value in outsourcing market

The $1.5 trillion global pharmaceutical sector has seen major companies increasingly outsource the production of pharmaceutical products and the development of manufacturing processes to contract development and manufacturing organizations (CDMOs), as reported by the Financial Times.

Outsourcing has gained significant traction in the pharmaceutical sector as a strategic approach to managing complex drug pipelines

While industries like electric vehicles, technology, and digital contents are increasingly embracing horizontal integration, one of the world’s largest sectors is trending in the opposite direction. As the pharmaceutical landscape grows more complex—with a diverse, R&D-intensive drug pipeline and emerging production modalities—CDMOs play a critical role in reducing development and manufacturing costs, timelines, and capital requirements. These organizations provide specialized manufacturing and quality control expertise that cannot be quickly developed, especially by startups and academic institutions, which often lack the equipment, expertise, and capital needed to bring new drugs to market.

In addition to meeting regulatory requirements, a crucial priority for leading CDMOs is maintaining production capabilities across multiple regions. As new pharmaceutical modalities and drug types emerge, pharmaceutical companies are increasingly seeking flexible production solutions to accommodate diverse and evolving manufacturing needs.

Currently, the top 10 CDMO companies worldwide secure an estimated 70% of all contracts for outsourced manufacturing of biopharmaceutical drug substances, predicted to grow at 13% within 2020 – 2028.

Read the full article at the Financial Times: link

Tariffs of up to 100% exacerbate trade tensions and further fragment global supply chains

Geopolitical tensions are projected to further disrupt global supply chains, with electric vehicles (EVs) exemplifying the challenges posed by escalating competition among the U.S., China, and the EU, particularly into 2025.

Tariff wars raise costs and disrupt supply chains, pushing companies to adapt rapidly to maintain competitiveness amid geopolitical tensions

The U.S. is excluding vehicles dependent on Chinese critical minerals from tax credits offered under the 2022 Inflation Reduction Act (IRA). This restriction already applies to all “foreign entities of concern,” including China, Russia, Iran, and North Korea. In mid-2024, the U.S. raised import tariffs on Chinese EVs from 50% to 100% and on EV batteries to 25%, with Canada soon implementing similar measures. Concurrently, China is requiring its automakers to source 25% of semiconductors from domestic suppliers. The EU imposed provisional duties up to 45% on Chinese EV imports following an anti-subsidy probe, pending a final vote in November. In response, China is anticipated to target agricultural tariffs and restrict EV-critical mineral exports.

Automakers globally will encounter volatile input costs and be pressured to diversify supply chains, mitigating tariff impacts through alternative production and trade agreements. While tariffs will be a significant factor, other influences on EV market growth across different geographies include baseline effects, the EU's strong political commitment and market competition.

Generating a $1bn equity uplift on announcement, activist investor Jana Partners aims to turn $6bn food producer’s performance around with just 5% of shares

Activist investor Jana Partners has acquired a 5% stake in Lamb Weston, a leading producer of frozen potato products, with plans to drive significant changes within the company

Activist investors wield significant influence even in large corporations by leveraging strategic investments and boardroom pressure.

Jana aims to improve operational efficiency, enhance capital allocation strategies, and explore a potential sale. This development was disclosed in a recent securities filing, which led to a 10% increase in Lamb Weston’s share price, already pricing in significant value generative measures. Based in Eagle, Idaho, Lamb Weston has a market capitalization of approximately $10 billion and is the largest producer of French fries in North America and the second largest globally, serving major clients like McDonald’s and Yum Brands (KFC parent company).

The investment comes after Lamb Weston’s disappointing quarterly earnings report in July, which triggered a sharp 25% drop in its stock price. Lamb Weston’s stock had declined by over 34% this year, largely due to weakening demand driven by higher restaurant prices. Jana, known for pushing companies toward strategic deals, has a history of activism in the food industry, and it may nominate industry veterans to Lamb Weston’s board to help steer the company’s future direction.

India emerges as a promising market with opportunities driven by both rural spending and a rising number of high-income consumers

Retail sales growth in Asia is anticipated to outpace that of other regions, though China is unlikely to be the main contributor. India's growth will average approximately 5% year-on-year, presenting opportunities across the spectrum of the market, from luxury goods to consumer essentials.

900 million Indian consumers are projected to increase spending on cosmetics, packaged goods and household products

China's real growth rate is forecasted to reach nearly 4% Y.o.y in 2025. This figure represents a significant decline compared to the historical average of 7% recorded between 2015-2019. In September, Chinese political leaders and the central bank announced a series of stimulus measures aimed at revitalizing the country's sluggish economic growth. These measures include interest rate cuts and support for the stock market. However, Western consumer groups, particularly those in the luxury, beauty, and beverage sectors, remain skeptical that the initiatives will be sufficient to significantly enhance growth in the coming months.

In contrast, India is poised for notable opportunities. At the lower end of the market, fast-moving consumer goods companies like PepsiCo and Procter & Gamble are targeting increased spending from the rural population, representing 65% of the total. Recent data show a strong propensity for this demographic to invest in packaged goods, cosmetics, toiletries, and household products. At the upper end, the rising number of high-income consumers is expected to lead to a doubling of households with net financial wealth exceeding $1 million, reaching over 234k by 2025.

Read the full study at the Economist Intelligence Unit

Contrasting economic prospects: Germany faces continued contraction, while Italy struggles to rebound in 2024

Embrace sustainable business practices and forge strategic partnerships to navigate global challenges and unlock new growth opportunities.

In the Euro area, growth appears to have bottomed out in 2023 It’s projected to crawl back to 0.8% in 2024, buoyed only by better exports, particularly in goods, and inching up to 1.2% in 2025 due to stronger domestic demand and rising real wages. Yet, this growth is far from robust; it’s precariously supported by a gradual loosening of monetary policy.

The real crisis lies in the details. Germany is grappling with the fallout of fiscal tightening, a drop in real estate prices, and structural headwinds. Meanwhile, Italy may see some relief from its EU-financed National Recovery and Resilience Plan, but its manufacturing sector remains a significant drag on potential growth. Globally, as monetary policy shifts back to neutral by 2025, the outlook remains bleak. For many economies the base case is even weaker growth over the mid-term.

Long-standing structural issues—such as aging populations, sluggish investment, and historically low total factor productivity growth—continue to constrain economic expansion in Europe. While some rebound in investment and productivity is on the horizon, the relentless demographic decline threatens to overshadow any potential gains and keeping overall growth trapped in a cycle of stagnation.

Advanced economies have hit a wall in 2023, with growth slowing significantly. Projections indicate a modest stabilization at around 1.7–1.8% annually through 2029. However, this apparent stability masks stark differences between countries as various cyclical forces unwind.

Read the full study at the International Monetary Fund

Recent insights from the Bank of Italy's report

The Bank of Italy's report shows significant contraction in manufacturing, with declining production levels and an unfavorable economic outlook amid weak euro-area performance.

In challenging times, companies must prioritize growth opportunities to increase survival rate.

According to the Bank of Italy's latest report, a substantial 52% of manufacturing segments reported a year-on-year contraction, with sharp declines in transport equipment and textiles, the latter continuing a long-term downward trend. The Purchasing Manager’s Index (PMI) for manufacturing remained below the expansion threshold in the third quarter. Qualitative surveys revealed a worsening in production levels, especially in the intermediate goods sector, with businesses holding an unfavorable view of the overall economic situation. Contributing factors include weak euro-area manufacturing, particularly in Germany. This raises the question of whether the overall economic situation is relatively stable and whether we are witnessing a broader trend of de-industrialization.

During economic downturns, businesses often excessively cut costs, which can hinder growth and long-term success. Instead, focusing on growth opportunities and investing in the future is essential for thriving during a crisis

Read the full study at Banca d'Italia

Middle East Crisis

The situation in the Middle East is constantly evolving. Until October the war had been largely confined to Gaza. With rising Iranian involvement, the risk of a spiraling regional conflict has alarmed world leaders.

Focus on broader market trends, while tracking crisis trajectories

The geopolitical situations tend to feedback directly into commodity prices, which are strategic to many businesses. In the graph below, JP Morgan highlights that geopolitical events are on average not significant for long-term trends. Economic conditions and the business cycle are more critical. However, for companies is still crucial to know which trajectory the crisis at hands take. Evidence like the Ukraine invasion or Arab Israeli War of 1973 show that firms should invest in understanding commodity price and supply chain disruptions for their own specific industry.

Insights of Mario Draghi Report (1/2)

Mario Draghi’s report, widely acclaimed when published on September 9th, looks at Europe's productivity challenge from a policy perspective. It, however, entails concrete business implications. The first topic is:

Increasing the access to financing for tech firms and scalable startups:

When Draghi says Europe needs to make it easier for “inventors to become investors”, it is a policy recommendation, but also highlights an opportunity - like any market imperfection: Both financial and strategic investors can seize the needs of funding of European startups by providing the capital and resources required for growth. Backing this up, Venture Capital (VC) financing in the US is quadruple the EU’s at every stage

Insights of Mario Draghi Report (2/2)

Mario Draghi’s report, widely acclaimed when published on September 9th, looks at Europe's productivity challenge from a policy perspective. It, however, entails concrete business implications. The second topic is:

Regulatory changes, a call to action for further integration in the single market

Several regulatory, fiscal, legal, and cultural differences across Member States limit the ability of EU companies to scale up efficiently as evidence by the fast majority of companies being present in only very few markets. In addition, investors lack information on cross-border investment opportunities or are deterred by intra-European complexities.
For businesses, this entails that if existing markets are saturated or becoming too competitive, it may be worth looking for more attractive markets right across the border. To tap these, however, requires local presence and expertise, which can e.g. be obtained through strategic add-on acquisitions.