Bitcoin, Blockchain and Smart Contracts : The Future of Finance

Bitcoin, Blockchain and Smart Contracts : The Future of Finance

We all heard about Bitcoin, the digital currency that allows you to transfer and store money without having to trust any third party, but not everyone knows that the Bitcoin protocol is just the monetary application of a very powerful technology called blockchain, something that all the big players in the finance industry are looking at.grafico tenga(Daily transaction on the Bitcoin blockchain)

The blockchain is nothing more than a distributed permissionless database that allows people to store in a secure way very valuable data, such as monetary transactions, and the possible applications over this technology are endless. The most interesting one, at the moment, regards the so called smart contracts, self-executing contractual states that make possible to have any kind of contract, between two or more people, executing automatically when a certain event occurs. What does it mean for the financial industry?  For instance, it is now possible to have futures, options and swaps without a clearing house or any third party involved, 2p2 insurances without counterparty risk, smart bonds without middle or back office (already experimented by UBS), decentralized crowdfunding, prediction markets and 2p2 shares distribution.

The concept of smart contract is not new at all. It was introduced for the first time in 1994 by the famous computer scientist Nick Szabo, however, before Bitcoin it was impossible for a computer program to trigger a payment and, since every transaction had to be manually authorised by a bank, a smart contract could not exist. After Bitcoin became popular, the first smart contract platforms were launched, but there were still many limitations due to structure of the Bitcoin protocol. It is only in 2015 that the first blockchain specifically designed for smart contracts became real when in August, Ethereum, known also as Bitcoin 2.0, has been finally released. Ethereum could be seen like a big distributed computer that cannot be switched off and once you write a contract on it, and you pay the fee to the network, nobody can stop it from being executed. A platform like this opens the financial industry to a huge number of opportunities allowing more secure and better performing financial services with less intermediaries involved. Indeed, through the R3 CEV consortium, 11 banks including RBS, Barclays, UBS, HSBS and Credit Suisse are already experimenting new ways to connect eachothers using the Ethereum network. Once these technologies will be implemented, many back office costs will be cut, making financial products cheaper and more accessible. This means that big corporations will lose part of their competitive advantage, and much more players will have a significant market share in a world where financial services are more diversified and more efficient.

However, it is important to underline that blockchain technologies are so powerful that the possible applications go far behind the finance world, for example in a recent research conducted by IBM Blockchain Technology, Blockchain is identified as the best option to support the development of the “Internet of things”, because it provides better security and less scalability issues compared to centralized alternatives. Therefore blockchain should not concern only the financial industry but it should appeal anyone that wants to be where innovation takes place.

Federico Tenga, MiM Student at ESCP Europe & Founder at College Cryptocurrency Network Italy


Nick Szabo, The Idea of Smart Contracts (1997)
UBS Smart Bonds
Ethereum, The Platform for Smart Contracts
R3 CEV, banks consortium for blockchain development
IBM, Internet of Things report




Having a look at some of the biggest winners and losers on the global financial markets in 2015, Jamaican stocks result to be among the top performers; the island nation’s index rose more than 80 percent. As for losers, the political issues and lower oil prices have hurt the Ukrainian equities index, which has tumbled 56 percent year-to-date.

luca 1

At the same time, on the developed Market, Eurozone equities enjoyed some rallies in 2015, buoyed by the ECB’s bond buying and the weak euro. In terms of local currencies, Europe’s benchmarks did well this year. Investors greeted Italy for finally dragging itself out of a triple-dip recession, but in Spain, fears of political impasse outweighed the excitement surrounding its economic recovery. The commodity rout hammered London’s FTSE 100 as it went down 4.8 per cent on the year.

Luca 2

Had it not been for a small group of nifty companies, 2015 would have entered the history books as a terrible year for the US stock market.

The consumer discretionary sector led the way this year, followed by healthcare. However, energy and materials companies were the biggest loosers due to the decline in price of many commodities. Yet there were some very positive numbers for a group of four companies that have come to be known as the “Fangs”(Facebook, Amazon, Netflix and Google) and for a wider group that included Microsoft, Salesforce, eBay, Starbucks and Priceline to create the “Nifty Nine”.

Both groups gained more than 60 per cent throughout the year.
Part of the reason for that was that profits were declining. This was in large part due to decreasing revenues at energy companies, driven by falling oil prices. But the strong dollar, which hit overseas earnings, was also a factor. In the same manner declining margins played a key role, as wages started a slight recovery. Therefore investments flow mainly to the enterprises that can show strong revenue growth. That is extremely worrying.
Dominance by a few big companies is a symptom of the end of a bull run, as it happened in the early 1970s (dominated by the “Nifty Fifty”) or the late 1990s (dominated by the dot-coms).

luca 4.png
The rise of tech startups with extremely high valuations, as well as the ‘FANG’ group of stocks, has generated much concern over whether or not we are in another tech bubble. According to Goldman Sachs, there is one important difference between the confirmed tech bubble we saw in the late 1990s, early 2000s and today. The big difference is earnings.

During the tech bubble, tech companies never accounted for more than 16 percent of the total index earnings. As January 2016, tech earnings contribute for over 20 percent. Regarding the market cap, tech companies’ accounts for a smaller portion of the S&P 500 in comparison with previous years. In fact, as today, the tech industry’s market cap represents only 21% of the S&P index as compared with previous peak figures of 32%. (smaller market cap of S&P 500, higher earning, hence it is less likely the bubble will repeat itself).

Luca 5.png


 The US stock market has vastly outperformed the rest of the world after the 2008 crisis, accommodative monetary policy helped this to happen. So did the strength of the US economy, while the strong dollar also amplified the outperformance. Yet a too strong dollar might hit the US companies’ overseas earnings while strengthening the rest of the world, and other central banks are now aggressively easing monetary policy while the US Federal Reserve has just started to raise rates.
The growth gap between the US and Europe is starting to narrow. At this point in time, we are expecting Europe to see GDP growth of roughly 1.75 per cent in 2016, against 2/2.5 per cent in the US. This was mainly caused by the rising dollar price that redistributed growth and corporate earnings from the US to Europe. It would be a surprise if in the second half of 2016, the European economic growth accelerates beyond the US growth. Such a result might produce a year of earnings growth for European listed companies, something which has failed to happen since 2010. Stronger Europe growth would challenge assumptions that very low interest rates have become normal.

The UK is expected to follow the US and raise rates by the end of the year, yet Europe is still cutting them. China’s economic wobble (which has deepened the commodities crisis and by doing so, dragged the FTSE 100 down with it) has depressed emerging markets.

Even the political landscape is shifting. A presidential election in the USA and the European referendum in the UK are creating speculations over what “Brexit” or a Trump presidency might mean for investors. The other main risks for this year are Fed’s mismanaging communication of its process, which could have a destabilising impact on financial markets and another round of deflationary pressure exported from China.

 Moreover the world’s major economies are beginning to diverge. The US was the first to begin the withdrawal process from rock bottom rates, but fears remain about its future growth prospects.

Businesses compete for investor money and also offer corporate debt (bonds) to fund operations. If the rates of Treasuries rise due to Fed action or a spread selloff in the bond market, then a company that wants to raise capital must offer higher rates of return on their bonds offerings. This higher rate of return is a larger burden on their balance sheets and decreases profitability therefore they will have lower EPS. Considering also the higher borrowing rates of businesses and consumers, a general slowdown in corporate profits could arise. This slowdown will result in the liquidation of share holdings in search of better investments.


For the commodites sector, 2015 was characterised by a strong downward trend.The worst performers were West Texas Intermediate and Brent Crude oil. Metals, such as platinum and palladium were down by roughly 30% along with gold losing up to 10%.

In agriculture, the coffee fell down by 25%, while it was an upward year for cotton and sugar. The collapse in oil prices during 2015 was determined by the slowdown in China’s economical growth and the unchanged Saudi Arabia’s oil production, which has not decreased in order to stop the business of fracking in America. If oil reserves reach the maximum of their production capacity and the oil demand decreases further down, the oil price will suffer further downward corrections.

The general consensus of the Brent’s price for 2016 is 50$ per barrel, compared to the 29$ per barrel at the moment. Furthermore, Iran, free from sanctions, will add to the current level of world production (95 million barrels per day) half a million barrels per day. Three major investment banks (Morgan Stanley, Citigroup and Goldman Sachs) warned that if oil storages continue to rise, the price might reach a minimum of 20$ in the short term.
However, the decline of oil production in the United States, will counterbalance the levels of world production, creating conditions of getting prices to reach the ones agreed in the consensus. Consequently US WTI crude oil is keeping its outlook at $45 a barrel, while for Brent crude oil at $50 a barrel in 2016. Finally major investment banks analysts forecast gold to remain around $1,100 per ounce for the next three months, $1,050 an ounce for the next six months and $1,000 an ounce for the next 12 months.

London, Jan 19th 2016

Luca Cartechini, Head of Asset Management
Fulvio Abbonato, Asset Management Associate

DELL & EMC -The Path to be Giants- M&A Reports

DELL & EMC -The Path to be Giants- M&A Reports

Computer technology giant Dell Inc. is an American privately owned multinational computer technology company based in Texas, United States. About 70 percent of Dell’s business is still tied to it’s core business of personal computers. Bearing the name of its founder, Michael Dell, the company is one of the largest technological corporations in the world, employing more than 103,300 people worldwide. Dell was listed at number 51 in the Fortune 500 list, until 2014. After going private in 2013, the newly confidential nature of its financial information prevents the company from being ranked by Fortune. In 2014 it was the third largest PC vendor in the world. Dell is currently the #1 shipper of PC monitors in the world. In the first half of 2015 Dell showed of 12.6 percent year-over-year growth and revenue of $2.3 billion which placed the company in the second spot with 18 percent market share this quarter. Dell hasn’t released earnings numbers since it went private in 2013, but back then its EBITDA was $4.5 billion. And there is some indication that Dell’s cash flow has slipped since then.



EMC Corporation is an American multinational corporation headquartered in Massachusetts, United States. EMC is a global leader in enabling businesses and service providers to transform their operations and deliver information technology as a service (ITaaS). Fundamental to this transformation is cloud computing. EMC has over 70,000 employees and is the world’s largest provider of data storage systems by market share. On October 12, 2015, Dell Inc. announced that it would acquire EMC in a cash-and-stock deal valued at $67 billion—the largest-ever acquisition in the technology industry. In the first quarter of 2015, EMC finished in the top position within the worldwide enterprise storage system market and ex, holding a market share of 17.4% and a total revenue of $1,531Million. EMC reported an increase in the 2 quarter 2015 by 1.99% year on year, while most of its competitors have experienced contraction in revenues by -4.36%.




The sector seems to be highly competitive as we can see many players on the market, with a strong presence worldwide. First of all, Dell Inc. mainly competes with Hewlett-Packard Company and Lenovo, but also with IBM Corporation, particurarly in the business hardware and software arenas. Apple is one other strong competitor for what concerns PCs. It is absolutely important the loan of $ 2 bn from Microsoft Corporation who let Dell improve his business in data analytics and cloud services.  Dell’s PCs compete as well with products from HP, Lenovo, Apple, Acer and Asus. However, unlike any of those rivals, Dell no longer offers smartphones. Although Dell continues to sell Windows-based tablets, it no longer competes in the Android tablet arena. At the same time, EMC Corporation has a strong presence in the Electronic Components Industry and his main competitors are Avnet Inc, NetApp, SanDisk Corporation, VOXX International Corporation and West Digital Corporation.

Analyzing the results of Dell and EMC compared with the industry, we can state what follows:

Dell Dell’s Competitors EMC Corp. EMC Corp.’s Competitors
Revenue Growth Y/Y 0.21% 0.89% 1.99% -4.36%
Revenue Growth Q/Q 3.13% -1.79% 6.84% 3.85%
Net Income Growth -72.13% 70.43% -16.56% -43.35%
Profitability – Net Margin 1.41% 15.38% 8.65% 9.48%

Table – Data analysis based on 2013 for Dell, on 2015 for EMC Corp.


Most of companies in this sector compete based on their market presence, wide range of products, service or price. Some of these companies also compete by offering information storage, information governance, security or virtualization-related products or services, together with other IT products or services, at minimal or no additional cost in order to preserve or gain in terms of market share.

The main advantages to have to over come next upcoming new challenges are quality, performance, functionality, scalability, availability, interoperability, connectivity, time-to-market enhancements and total value of ownership. It i also required a well-developed distribution channel in order to serve clients worldwide in an efficient way.

Last but no least, offering a full range of expertise before, during and after purchase is one service that, nowadays, this industry can’t miss.

Only the most client-oriented companies will grow and acquire other companies in order to ensure long-term growth and a strong presence.


  • 29. Oct 2015 Dell privatization Deal with Silver Lake Partners completed
  • Oct 2014 Hewlett-Packard announces its split
  • April 2015 Dells rolls out aggressive marketing campaign to redefine company
  • May 2015 EMC acquires Virtusstream (cloud computing software company)
  • July 2015 Silver Lake manager expresses admiration for EMC’s “federation model”. A report suggest that Dell wants to spin off its CyberWork security business in an IPO
  • Aug 2015 EMC endures continued pressure from investor Elliott Management
  • 08 Oct 2015 innital report suggests that EMC and Dell are making a deal. NYSE 27.18
  • 12 Oct 2015 Del-EMC deal is officially confirmed. NYSE: 28.35


 Looking at deal financials, we can immediately understand we are studying an huge deal, one of the biggest in the history: following data are in EUR million.

Implied Equity Value 55,987.19
Net Debt -283.53 (incl. ST investments: USD 1.939 bn)
Enterprise Value 55,703.66
Deal Value 55,703.66

We can now go over, analysing the share price, underlying that the Offer Price per Share was EUR 28.86, including the Premium paid to acquire each share.

freccia (2).jpg

Moreover, market multiples implied are positive, as follows.

deal finan.png



What brought Michael Dell and the company’s management to acquiring EMC in a $67bn deal?

The combination of Dell and EMC will create the largest “privately-controlled, integrated technology company.”

Expensive or not, Dell, led by CEO Michael Dell, would be able to expand its business and gain entry into a key part of the data storage market. It would also get control of the software company VMware.

EMC’s investment in VMware (VMW) has been a success driving the Group’s growth. Out of $24.4bn in revenues, EMC last year generated $5.5bn in free cash flow, resulting in a 22.7% cash flow yield. Stable and solid free cash flow will help repay the new $50bn debt issued to finance the transaction.

Furthermore, relevant synergies are expected from the transaction, with revenue synergies expected to be $2bn, that is three times the cost synergies. Indeed, Dell is planning to sell EMC’s solutions to some of its customers, pointing to over $1bn in potential additional annual revenue. As a result, Dell will complete its product offering, thus recovering a competitive advantage relative to competitors like Hewlett-Packard and IBM.

Moreover, the transaction is in line with Dell’s strategy to widen its portfolio from a prior focus on personal computers to now also include data storage capabilities including servers, cloud computing and virtualization.

However, does this deal make any strategic sense? It does on paper. Dell and EMC overlap very little. Dell posts about $56 billion in annual revenue according to an estimate, most of which comes from PC sales and a little of which comes from enterprise storage. EMC is the world leader in storage gear, and for the most part its products do not overlap with Dell.

The two businesses are largely complementary: combining them could yield a company with about $80 billion in annual revenue and free cash flow of about $7.7 billion.

Both PCs and enterprise storage are declining or slow-growing markets. The argument for combining the two is to create a unified vendor for PCs, servers, software and storage.

[1] Source: Mergermarket.


Antonio Conte, Head of M&A

Thea Wrobbel, M&A Associate TMT

Riccardo Pizzino, Head of Treasury & Legal



On the Rollercoaster – Yearly Recap

On the Rollercoaster – Yearly Recap

The 2015 has been a very turbulent year for financial markets globally. Greece, the unpredictable oil rout and weak growth perspective in China repeatedly triggered waves of sell-offs during the last year. Here a closer look at the main characters or events that set the trends this year.

S&P 500 Yearly PerformanceSP500


The oil rout has started in the middle of last year, when it collapsed from the range $110/100 a barrel to levels close to the post Financial Crisis lows, $35/45 a barrel. Since the beginning of 2015, Oil has been very volatile, trading in a range between $35 and $65 a barrel. Its unpredictable trend affected financial markets on a global scale. The high-yield bond market is under strict observation after the low prices of oil have been pushing a large number of shale gas companies on the verge of bankruptcy. On December 10, Third Avenue Focused Credit Fund closed its $800m junk-bond portfolio due to the slump in bond prices. The energy sector has been dramatically hit by the rout, forcing layoffs, firm aggregation e.g. (Royal Dutch Shell and BG) and Capex reconsideration. Weaker demands from top-tier consumers as China and consistent OPEC plans to keep production high pushed prices down, weakening inflation expectations in developed countries and increasing risks of deflation. Emerging Markets heavily relying on oil exports have to cope with more than halved revenues from the primary source of inflow, currency depreciation and inflation. Brazil is reportedly in recession, Saudi Arabia disclosed a Balance Deficit of 15% of its GPD, envisaging austerity periods in public spending. Oil will still play a major role in 2016, when the ban on Iran oil exports will be lifted and new fresh oil will flood into the market.

WTI 5 Year PerformanceOilSource: Bloomberg


Being the second largest economy in the world, China has set the trend in many occasions this year. The Stock Market crash sparked fear and volatility all over the world. The Shanghai Composite, after a rapid ascent, it started to fall rapidly between June and August, losing almost 40% of its value. Weaker growth perspectives, decline in industrial production, and weaker demand for commodities, especially copper, dragged down global markets, spilling over other asset classes, especially Emerging Markets local currencies. In order to give China exporters a competitive edge People’s Bank of China devalued the renminbi several times during this year. In August, in the wake of the first devaluation, the Yuan reported the largest daily loss in over 20 years. Kazakhstan’s Central Bank, in order to cope with depreciating rival currencies, decided to shift to a free-floating rate. On August 15, the tenge tumbled 26%. These moves raised the risk of a potential currency war between August and September, which eventually fade away.

CNY/USD Yearly PerformanceYuan RenminbiSource: Bloomberg

In the first days of 2016 a dramatic sell-off in China that triggered the circuit breaker mechanism halting trading if losses greater than 7% materialize, produced a chain effect on the Financial System, resulting in the worst first week of trading in history. The S&P lost almost $1 trillion in market capitalization in the first week.

 Central Banks

The Fed and the ECB adopted divergent strategies in terms of Monetary Policy. Improved economic conditions and a more solid labor market in the US pushed the Federal Open Market Committee to unanimously raise interest rates up to 50 basis points for the first time in nine years. The December hike was broadly expected by all market makers, and paved the way for future hikes in the coming years. The ECB, in the opposite direction, eased the monetary policy in December, lowering the deposit rates at minus 30 basis point and prolonging the quantitative easing up to March 2017, with potential further extension. Draghi’s move disappointed market makers, who foresaw an increase in the monthly purchase of  securities, hammering down European Equities. Despite eased policies, inflation in both region is far from targets and the pressure on oil prices seems to further raise the risk of consistent low prices and deflation. Central Banks will still play a key role in the next year in their effort of improving economic conditions and reaching inflation target.

In the first days of the New Year, negative signals coming from the commodity market and China sparked uncertainty and fear over the stability of the financial system. Will the improved economic conditions in Europe and America be able to offset the downside risks coming from the Chinese transitioning economy?


Tancredi Viale, Master Student