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M & A Toolkit ... 5 Steps to a Successful Exit!
Colleagues,
As reported in New York Times Dealbook ... Without an active I.P.O. market, the “new normal” average successful exit is about $100 million for venture-backed information technology companies. So how has Azure Capital Partners sold eight companies in relatively short history for an average amount of more than $300 million? The answer is what they could call their M.&A. toolkit, and here is how it works:
Step One: Break new ground when deciding where to build ... astute investors seek out companies with limited competition ... The importance of first-mover advantage for a young company is that potential acquirers will often pay a premium when there are few, if any, good alternatives. An example was the sale of Bill Me Later to eBay for $1 billion, in which Bill Me Later was the clear market leader with the only credible solution.
Step Two: Build something unique that is difficult to replicate ... An example was VMware, where independent checks confirmed the transformative nature of the company’s technology and how difficult it would be to replicate. VMware was subsequently acquired for $675 million by EMC and was highly sought out as the leader in its space.
Step Three: Involve buyers early on ... With the permission of company management ... engage one or two potential acquirers in ... original investment due diligence. This process can set the wheels in motion for future commercial and strategic partnership opportunities with potential acquirers of the business. While there are situations where it does not make sense to expose a young business to certain large companies too early, the benefits often outweigh the negatives.
Step Four: Keep courting buyers. The best investors use their Rolodexes to engage business development partners on behalf of portfolio companies. Often, these partnerships begin as limited commercial agreements with large technology companies, but they can develop over time into more strategic relationships. Some of the most compelling partnerships are ones where a larger company leverages a start-up’s products to increase its own revenue and/or improve its overall market position ... An example was TopTier, who was acquired by SAP for $400 million. Originally, SAP had embedded TopTier’s software in one of its product lines under a limited license agreement. As the relationship between the companies grew and the two chief executives got to know one another, SAP decided to acquire the company...
Step Five: Optimize, optimize! ... The goal is to help the company engage from a position of strength while seeking win-win scenarios with partners that result in successful exits ... An example is World Wide Packets, which was sold to Ciena for $300 million, where the investors worked closely with management both before and after ...
The M.&A. toolkit is not rocket science, but it requires expertise, strategic contacts and continuing attention ... In an environment where I.P.O.’s are far and few between, this approach can be effective in generating attractive realized returns to investors.
Read on at: http://dealbook.blogs.nytimes.com/2009/10/29/another-view-venture-c...
ENJOY!
CC
As reported in New York Times Dealbook ... Without an active I.P.O. market, the “new normal” average successful exit is about $100 million for venture-backed information technology companies. So how has Azure Capital Partners sold eight companies in relatively short history for an average amount of more than $300 million? The answer is what they could call their M.&A. toolkit, and here is how it works:
Step One: Break new ground when deciding where to build ... astute investors seek out companies with limited competition ... The importance of first-mover advantage for a young company is that potential acquirers will often pay a premium when there are few, if any, good alternatives. An example was the sale of Bill Me Later to eBay for $1 billion, in which Bill Me Later was the clear market leader with the only credible solution.
Step Two: Build something unique that is difficult to replicate ... An example was VMware, where independent checks confirmed the transformative nature of the company’s technology and how difficult it would be to replicate. VMware was subsequently acquired for $675 million by EMC and was highly sought out as the leader in its space.
Step Three: Involve buyers early on ... With the permission of company management ... engage one or two potential acquirers in ... original investment due diligence. This process can set the wheels in motion for future commercial and strategic partnership opportunities with potential acquirers of the business. While there are situations where it does not make sense to expose a young business to certain large companies too early, the benefits often outweigh the negatives.
Step Four: Keep courting buyers. The best investors use their Rolodexes to engage business development partners on behalf of portfolio companies. Often, these partnerships begin as limited commercial agreements with large technology companies, but they can develop over time into more strategic relationships. Some of the most compelling partnerships are ones where a larger company leverages a start-up’s products to increase its own revenue and/or improve its overall market position ... An example was TopTier, who was acquired by SAP for $400 million. Originally, SAP had embedded TopTier’s software in one of its product lines under a limited license agreement. As the relationship between the companies grew and the two chief executives got to know one another, SAP decided to acquire the company...
Step Five: Optimize, optimize! ... The goal is to help the company engage from a position of strength while seeking win-win scenarios with partners that result in successful exits ... An example is World Wide Packets, which was sold to Ciena for $300 million, where the investors worked closely with management both before and after ...
The M.&A. toolkit is not rocket science, but it requires expertise, strategic contacts and continuing attention ... In an environment where I.P.O.’s are far and few between, this approach can be effective in generating attractive realized returns to investors.
Read on at: http://dealbook.blogs.nytimes.com/2009/10/29/another-view-venture-c...
ENJOY!
CC
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