The Case for Being Pursued—Sell-Side Mergers & Acquisitions
There are nearly as many reasons for the owners of a business to sell their business to another entity as there are unique businesses out there. Typically, the reason for considering a sale or a merger relates to harvesting the value of many years of hard work and personal sacrifice. Somewhat related reasons may involve either the unwillingness or the inability to effect management or family succession. Or, in today’s ever more volatile business environment, an owner may want to sell a business prior to the realization of future capital gains tax increases. It is important to understand that it may never be an optimal time to seek a sale if your business or the industry is struggling. As is the case in so many elements of life, “the cream rises to the top” and today’s acquirers are seeking the “cream,” not the spoiled milk. (more…)
The Case for Being a Pursuer — Buy-Side Mergers & Acquisitions
As spring actually starts to turn to summer after a wet and cold winter, signs of confidence are popping up everywhere for renewed growth, development and expansion opportunities by companies in many different business sectors. A recently reported 2010 survey of more than 800 senior corporate executives worldwide, the Capital Confidence Barometer conducted by Ernst & Young and the Economist Intelligence Unit, found that 57 percent (57% versus 33% six months earlier) of businesses say they are likely or highly likely to acquire a rival in the next 12 months. Fully 47 percent (47% versus 25% six months earlier) of businesses indicate they expect to reach an acquisition or merger deal within the next 6 months. That appears to be a lot of renewed business opportunity and strategic development thinking at work. (more…)
Managing the Tough Choices Facing Tech Start-ups
In a world where securing follow-on venture capital financing has never been more challenging, executives and boards of venture capital backed companies face difficult choices as the cash dwindles. It is not uncommon, even in cases where fund-raising is ultimately successful, that developing companies at some point are faced with and must navigate insolvency and all that it entails. (more…)
Are You Obese Or Anorexic, And Does It Matter?
In his blog post The Case For The Fat Startup, Ben Horowitz of Andreessen Horowitz argues against the conventional, post-bubble wisdom that you have to be lean and mean to survive and prosper in the start-up race. Citing his credentials as CEO of Loudcloud/Opsware, he makes the case for outspending your competitors during the downturn.
My favorite quote: “But in a bust, having a lot of cash can be a huge competitive advantage because you can use that cash to put enormous pressure on your underfunded competitors.” Amen to that. (more…)
Preferred Equity Basics Part Three
There Is A Reason Why Preferred Equity Is Called Preferred:
Preferred Equity’s Big Impact on the Value of Common Stock
The terms and conditions of preferred equity issued to venture capitalists may seem arcane, but the impact on the value of common stock (and stock options) is significant! While these impacts are important for tax and accounting compliance, more significantly, they determine the amount of money stockholders will receive when the long hoped-for “exit” is finally realized.
This is the third in a series of posts meant to help explain many of the typical terms for preferred equity we see in our daily valuation work. This analysis will provide some guidance on the impact to the holders of common shares. (There can be legal issues which also come into play, especially in contested matters. However, this blog is not legal advice, and the specific facts and circumstances for any particular case will differ from the examples described herein). (more…)
Selling Patents and Intellectual Property Part Two
In the last post, I discussed the different types of non-operating entities that may acquire intellectual property. In this post, I will talk more about the different strategies these entities pursue and what implications that may have for a technology start-up. (more…)
Silicon Valley Entrepreneurship 2010—A Door Closes but A Window Opens
The recent Chris O’Brien post in SiliconBeat on a shrinking Silicon Valley certainly underscores both the diminished IPO activity as well as the reduced VC funding we’ve seen over the last 18 months. Funding deals and dollars invested are down upwards of 50%. Moreover, the number of VCs who are hurting (feeling the pain from their poor historical rates of return) but still active is now only slightly larger than the number who are either shuttered or qualify as the living dead. See TheFunded for detail on the latter group which by their count totaled 353 firms as of this week. One huge by-product of the VC contraction is that new VC investments are decidedly moving away from seed and early stage opportunities.
So with all this bad news one would naturally conclude that new world realities in Silicon Valley would severely dampen entrepreneurial activity. If both institutional funding at the front end and liquidity at the back end of the venture cycle are severely curtailed, entrepreneurship would naturally lessen. But ironically the reverse is actually true as local new business activity is as strong as ever. So what’s going on? (more…)
Selling Patents and Intellectual Property Part 1
In connection with our restructuring services, our firm recently sold certain assets of a fabless semiconductor company. The sale included physical assets as well as intellectual property (“IP”). As can be expected from technology companies with significant expenditures on research and development, the majority of the value was embedded in the intellectual property: the design database and the patents.
The project reminded me of how much the landscape of acquirers of IP has changed in recent years as the market for buying, selling, and licensing IP becomes more mature. There are a host of different players with very distinct interests and operating models. (more…)
February 24, 2010 at 9:17 am Gunther Hofmann Leave a comment
Texas Hold ‘em, the New Social Gathering Place for Business
An interesting trend has been developing over the past few years. Where once, corporate golf outings were considered the best way to network and entertain clients, a new type of business event has emerged in the last year or two. Many corporations have found a new way to mix philanthropy, networking and fun all together — in a “Charity Poker Tournament”. So, what has really fueled all of this interest in poker? (more…)
Preferred Equity Basics Part 2
There Is A Reason Why Preferred Equity is Called Preferred:
Preferred Equity Has a Big Impact on the Value of Common Stock
The terms and conditions on preferred equity frequently issued to venture capitalists may seem arcane, but the impact on the value of common stock (and stock options) is significant! These impacts are important for tax and accounting compliance. But more importantly, they determine the amount of money shareholders will receive when the long hoped-for “exit” is finally realized. (more…)
