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IMG
Silicon Valley Venture Capital Survey – First Quarter 2019
Full Analysis
By Cynthia Clarfield Hess, Mark A. Leahy and Khang Tran

View the full report.

Background
We analyzed the terms of 185 venture financings closed in the first quarter of 2019 by companies headquartered in Silicon Valley. We found that valuation results continued to be strong, with the average price increase in Q1 slightly lower than in the prior quarter, though still substantially higher than the historical average. The internet/digital media software industry recorded the strongest valuation results.

Key Findings

  • Valuation Results Remain Strong, but Declined from Three-Year Highs of Prior Quarter
  • Valuation Results Declined for Each Financing Series
  • Internet Industry Showed Strongest Valuations
Full Report

Terminating/Restructuring Prohibitive Real Estate, License, Payables & Contingent Liabilities

Gerbsman Partners has been involved with numerous national and international equity sponsors, senior/junior lenders, investment banks and equipment lessors in the restructuring or termination of various balance sheet issues for their technology, life science, medical device, cyber security, solar and cleantech portfolio companies.

These companies were not necessarily in crisis, but had cash (in some cases significant cash reserves) and/or investor groups that were about to provide additional funding. In order to stabilize their Go-Forward-Plan and maximize cash resources for future growth, there were specific needs to address Balance Sheet and Contingent Liability issues as soon as possible.

Some of these areas where Gerbsman Partners has assisted, these companies have been in the process of termination, restructuring and/or reduction of:

 

Prohibitive Executory Real Estate Leases, Computer and Hardware-related Leases and Senior/Sub-debt Obligations

Gerbsman Partners was the “innovator” in creating strategies to terminate or restructure prohibitive real estate leases and senior and sub-debt obligations.

To date, we have terminated or restructured $810 million of such obligations for private and public companies, and which has allowed them to return to financial viability.

 

Accounts/Trade Payable Obligations

Companies in a crisis, turnaround or restructuring situation typically have account and trade payable obligations that become prohibitive for the viability of the company on a go-forward-basis. Gerbsman Partners has successfully negotiated mutually beneficial restructurings that allowed all parties to maximize value based on the reality or practicality of the situation.

 

Software and Technology-related Licenses

As per the above, software and technology-related licenses need to be restructured/terminated in order for additional capital to be invested in restructured companies. Gerbsman Partners has a significant, successful track record in these areas.

 

About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in underperforming, undercapitalized and undervalued companies and their intellectual properties. Since 2001, Gerbsman Partners has successfully maximized the values of 107 companies in a wide and diverse spectrum of industries. In the process, GP has successfully restructured/terminated over $810 million of real estate executor contracts and equipment lease/sub-debt obligations, and has assisted in over $2.3 billion of financings, restructurings and M&A transactions.

 

Gerbsman Partners has offices and strategic alliances in Boston, New York, Washington DC, McLean VA, San Francisco, Orange County, Europe and Israel.

 

Steve Gouves dies a billionaire, with a fortune of $ 7 billion, at the age of 56 from pancreatic cancer, and here are some of his last words:

In other eyes, my life is the essence of success, but aside from work, I have a little joy, and in the end wealth is just a fact of life to which I am accustomed.

At this moment, lying on the bed, sick and remembering all my life, I realize that all my recognition and wealth that I have is meaningless in the face of imminent death.

You can hire someone to drive a car for you, make money for you – but you can not rent someone to carry the disease for you. One can find material things, but there is one thing that can not be found when it is lost – “life”.

Treat yourself well, and cherish others. As we get older we are smarter, and we slowly realize that the watch is worth $ 30 or $ 300 – both of which show the same time.

Whether we carry a purse worth $ 30 or $ 300 – the amount of money in the wallets are the same. Whether we drive a car worth $ 150,000, or a car worth $ 30,000 – the road and distance are the same, we reach the same destination.
If we drink a bottle worth $ 300 or wine worth $ 10 – the “stroller” will be the same.

If the house we live in is 300 square meters, or 3000 square meters – the loneliness is the same.
Your true inner happiness does not come from the material things of this world. Whether you’re flying first class, or economy class – if the plane crashes, you crash with it.

So, I hope you understand that when you have friends or someone to talk to – this is true happiness!

Five Undeniable Facts-

  1. Do not educate your children to be rich. Educate them to be happy. – So when they grow up they will know the value of things, not the price.
  2. Eat your food as medicine, otherwise you will need to eat your medicine as food.
  3. Whoever loves you will never leave you, even if he has 100 reasons to give up. He will always find one reason to hold on.
  4. There is a big difference between being human and human being.
  5. If you want to go fast – go alone! But if you want to go far – go together!

And in conclusion,
The six best doctors in the world.
1. Sunlight
2. Rest
3. Exercise
4. Diet
5. Self-confidence
6. Friends

Keep them in all stages of life and enjoy a healthy life.

On this long weekend of summer, cookouts, swimming pools, and sales, I invite you with me to take the time to slow down and to intentionally feel the sacrifice of soldiers who fight for your freedom…

Please listen to this song while imaging this little girl wondering why a parent died in a remote land- Lee Greenwood – God Bless the USA

https://youtu.be/bQIWhqjWhpo

 

 

May God Bless and Protect our Troops.

Please always remember “Freedom is NOT Free”

Please see below Gene Simmons Military Tribute

 

 

Advantages of ‘Date-Certain M&A Process over Standard M&A’ – Gerbsman Partners

Every venture capital investor hopes that all his investment will succeed. The reality is, however, that a large percentage of venture investments eventually are shut down.

In the extreme they end in bankruptcy or assignment to creditors. The majority falls into the category of the “living dead.” Such companies are not complete failures, but their prospects do not justify continued investment, yet they are rarely shut down quickly.

Once reality has been recognized, most investors engage investment bankers to sell their investment off through prevailing M&A processes. Unfortunately, seldom with good results.

REASON #1

The main reason for that sad result is a fundamental misunderstanding of buyer psychology. In general, buyers act quickly and pay the highest price only by force of competitive pressure.

Potential buyers of the highest probability are those already familiar with the company for sale, such as competitors, existing investors customers and vendors. Once a sales process starts the seller is very much a diminishing asset. Both financially and organizationally.  Unless compelled to act, potential buyers simply start to draw out the process, submit a low-ball offer when the seller runs out of cash, or try to pick up key employees and customers at no cost.

REASON #2

The second reason is usually a misunderstanding of the psychology and methods of investment bankers.

Most investment bankers do best at selling “hot” companies. Companies whose value is perceived by buyers to be increasing quickly over time, and where there are multiple bidders.

They tend to be more motivated and work harder on such cases because transaction sizes –and resulting commissions– are larger and surrounding publicity can bring in new assignments, among others. They also tend to be more effective in maximizing value in such situations by using time to their advantage, pitting buyers against each other and setting very high expectations.

In a situation where time is not your friend, the actions of standard investment banking practices often make a bad situation much worse. Such actions include assigning less experience B-Teams to smaller transaction size cases, “playing out the process” which works against the seller, and pitting multiple players against each other which can drive away potential buyers who often know far more about the seller than does the banker.

 

THE GERBSMAN PARTNERS Proprietary ‘DATE-CERTAIN’ M&A PROCESS

The most effective solution in situations where time is not on your side is a Date-Certain Merger and Acquisition Process.

Under this proprietary process, the company’s board of directors hires a crisis management/private investment banking firm (‘advisor’) to wind down business operations in an orderly fashion and to maximize the value of their intellectual properties and tangible assets. The Advisor works closely with board and corporate management to:

  • Focus on Control, Preservation and Forecasting of CASH
  • Develop a Strategy/Action Plan and Presentation to Maximize Value of Assets.
  • Plans to include Sales Materials, Due Diligence access. a list of all possible Interested Buyers for Intellectual Properties and Assets and Identify and Retain Key Employees on a go-forward basis.
  • Stabilize and provide Leadership, Motivation and Moral to all Employees.
  • Communicate with the Board of Directors, Senior Management, Senior Lender, Creditors, Vendors and all other Stakeholders in Interest.

THE PROCESS:

The company attorney prepares a simple “As-Is/Where –Is” asset sale documents. This document is very important and includes a “No-Reps or Warrantee” Agreement, as the board, officers and invertors typically do not want any additional exposure on a deal.

The advisor then follows up systematically with ALL potentially interested parties and coordinates their interactions with company personnel, including on-site visits.

Typical terms for a Date-Certain M&A asset sale exclude representations and warranties and include a sales date –typically four to six weeks – from the point of readying sales materials for distribution, a refundable CASH deposit in the range of $200,000, a strong preference for cash consideration and with the ability to close a deal in seven business days.

Date-Certain M&A terms can be varied to suit needs unique to given situations. For instance, the board may choose not to accept any bids, or to allow re-bids if there are multiple competitive bids, and/or allow early bids.

The typical workflow timeline from advisor hiring to transaction close and receipt of consideration is four to six weeks. Such timelines may be extended as circumstances warrant. Upon receipt of considerations, the restructuring/insolvency attorney then distributes funds to creditors and shareholders (if there is sufficient consideration to satisfy creditors), and takes all needed steps to wind down the remaining corporate shell. Typically in coordination with the CFO.

PROCESS ADVANTAGES:

Speed:   – The entire Date-Certain M&A Process can typically be concluded in 4 to 6 Weeks. Creditors and investors receive their money quickly. A negative PR impact on investors and board members related to a drawn out process is eliminated. Where required, such timelines can be reduced to as little as two to three weeks, however severely compressing the process often impacts the final value received during asset auction.

Reduced Cash Requirements:  – Owing to the Date-Certain M&A process’ compressed turn-around time, there is a significantly reduced need for any additional investor cash to support the company during the process.

Maximized Value:  – A quick and effective process during wind-down mode minimizes strain and rapid asset depreciation and thereby preserves enterprise value. The fact that an auction will occur on a certain date typically brings truly interested and qualified parties to the table. In our considerable experience, this process strongly aids in maximizing the final value received.

Cost:  – Advisory fees consist of a retainer and a performance fee, which is a percentage of the sales proceeds.

Control:  – At all time during the process, the board of directors retains complete control. For instance, it can modify the auction terms, or discontinue the auction at any point, thereby preserving all options for as long as possible.

Public Relations:  – As the entire sales process is private, there is no public disclosure. Once closed, the transaction can be portrayed as a sale of the company with all terms kept confidential. Accordingly investors can list the company in their portfolios as sold vs. having gone out of business.

A Clean Exit:  – Upon closing of the auction, considerations received are distributed and the advisor, under the leadership of the insolvency counsel, then takes all remaining steps to effect an orderly shut-down of the remaining corporate entity.

About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in underperforming, undercapitalized and undervalued companies and their intellectual properties. Since 2001, Gerbsman Partners has successfully maximized the values of 107 companies in a wide and diverse spectrum of industries, ranging from technology, life science, medical device, digital marketing, consumer to cyber security, to name only a few.

Since inception in 1980, Gerbsman Partners has successfully restructured/terminated over $810 million of real estate executory contracts and equipment lease/sub-debt obligations, and has been involved in over $2.3 billion of financings, restructuring and M&A transactions.

Gerbsman Partners has offices and strategic alliances  in San Francisco, Orange County CA, Boston, New York, Washington  DC, Mc Lean VA,  Europe and Israel.

 

IMG
Silicon Valley Venture Capital Survey – First Quarter 2019
First Look
By Cynthia Clarfield Hess, Mark A. Leahy and Khang Tran

View the full report.

Background
We analyzed the terms of 185 venture financings closed in the first quarter of 2019 by companies headquartered in Silicon Valley. We found that valuation results continued to be strong, with the average price increase in Q1 slightly lower than in the prior quarter, though still substantially higher than the historical average. The internet/digital media software industry recorded the strongest valuation results.

Key Findings

  • Valuation Results Remain Strong, but Declined from Three-Year Highs of Prior Quarter
  • Valuation Results Declined for Each Financing Series
  • Internet Industry Showed Strongest Valuations
Full Report
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