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Privatization: Now for the fight back

At the end of last year, world privatization seemed to be out for the count. Disgruntled investors, fed up with buying too many issues that bombed, swore they'd never touch privatizations again. Now government privatization teams, armed with more realistic pricing and some innovative ideas to attract retail investors, are back up and fighting. Could this be the time to buy? By Garry Evans.

Mike Evans, partner in charge of equity capital markets at Goldman Sachs in London, is not the sort of person you'd expect to sound off about the failings of recent privatization deals. Goldman has, after all, arranged more of them in the last decade than any other firm.

But Evans can hardly contain his anger. "Privatization as a sector of investment has become less and less attractive," he complains. Hardly pausing for breath, he outlines the reasons: "There's a crushing weight of supply but not an equally expanding base of investment ... Performance has been mixed. If I were an investor, I'd view privatizations selectively ... Governments are becoming more sophisticated and are being more aggressive on the price and size of issues. They are concerned less about future privatizations - they need the money now."

The rant over, Evans halts briefly. So what's the solution? "The only way we'll get the big calendar done is if fund managers start to make money from these deals again. If this year's big deals such as Repsol aren't profitable, we're dead. Goldman is more worried about this than most banks because of our backlog of deals."

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