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Archive for February, 2012

Article by Fenwick and West. For more information, please contact Barry Kramer and Michael Patrick (bkramer@fenwick.com).

“We analyzed the terms of venture financings for 117 companies headquartered in Silicon Valley that reported raising money in the fourth quarter of 2011.

Overview of Fenwick & West Results

  • Up rounds exceeded down rounds in 4Q11, 70% to 16%, with 14% of rounds flat. This showed continued strong valuations in the venture environment, consistent with 3Q11, and was the tenth quarter in a row in which up rounds exceeded down rounds.
  • The Fenwick & West Venture Capital BarometerTM showed an average price increase of 85% in 4Q11, an increase from 69% in 3Q11. Series B rounds were exceptionally strong, with an average increase of 164% since the last round.

Anecdotally, we attribute the Series B results in part to the increased number of smaller, relatively low valuation, Series A financings undertaken by micro VC firms. When the investee companies in these financings make good progress, it can result in a significant percentage increase in valuation in the Series B round – and if these companies do not make good progress, and do not raise a Series B financing, they will not appear in the Barometer statistics because there is no transaction to report, as described under “Methodology” below.

If Series B financings were excluded from the Barometer calculation (which we believe would be over compensating for this anomaly) the Barometer would have been 50%. Along these lines we note that Dow Jones VentureSource (“VentureSource”) reported that the three most prolific venture investors in 4Q11 were 500 Startups, SV Angel and First Round Capital, all early stage investors, with a combined 77 investments in 4Q11.

The results by industry are set forth below. In general, consistent with recent quarters, the internet/ digital media and software (which includes many of the “big data” and “cloud” companies) industries were the valuation leaders, and cleantech and life science lagged.

Overview of Third Party Data

In 2011 we saw a generally improving venture environment, with venture investment, fundraising, valuations, M&A and IPOs all up compared to 2010. But there were some anomalies:

  • Fundraising by venture funds was up in dollar terms, but the number of funds raising money declined.
  • Venture capitalists invested healthy amounts at healthy valuations, and showed gains in their portfolios, but venture capitalist confidence has been down three quarters in a row.
  • Some industries are concerned about a bubble (internet/digital media and software), while others are having a tough time (cleantech and life science).
  • Venture capitalists again raised significantly less money than was invested in venture-backed companies.
  • Although 2011 was strong, the fourth quarter showed some weakness with venture investment and M&A down in 4Q11 compared to 3Q11.
  • The number of venture funds is decreasing, while the number and importance of angel investors is increasing, and secondary market activity is expanding.

Venture Capital Investment. Highlights:

  • Venture investment was moderately lower in 4Q11 than 3Q11.
  • Venture investment was significantly higher in 2011 than 2010.
  • Average deal size increased in 2011.
  • Internet and software industries lead in 2011, although both saw declines in investment in 4Q11.
  • Silicon Valley received 41% of all U.S. venture investment in 2011, and 46% in 4Q11.

Data:

Venture capitalists (including corporation-affiliated venture groups) invested $7.4 billion in 803 deals in the U.S. in 4Q11, a 12% decrease in dollars from the $8.4 billion invested in 765 deals in 3Q11 (as reported in October 2011), according to VentureSource. For all of 2011 venture capitalists invested $32.6 billion in 3209 deals, a 25% increase in dollars from 2010, when $26.2 billion was invested in 2799 deals (as reported in January 2011).

The PwC/NVCA MoneyTreeTM Report based on data from Thomson Reuters (the “MoneyTree Report”) reported similar results. Venture investment in 4Q11 declined 6% in dollars compared to the 3Q11 results (as reported in October 2011), with investment of $6.6 billion in 844 deals in 4Q11, compared to $7.0 billion in 876 deals in 3Q11. For all of 2011 venture capitalists invested $28.4 billion in 3673 deals, a 30% increase from 2010 when $21.8 billion was invested in 3277 deals (as reported in January 2011).

The MoneyTree Report also noted that the internet and software industries saw the largest increase in investment in 2011, increasing 68% and 38% respectively over 2010, although both saw declines in investment from 3Q11 to 4Q11. Silicon Valley received 41% of all venture funding in 2011, followed by New England and New York at 11% and 9.5% respectively.

Merger and Acquisition Activity. Highlights:

  • M&A activity declined significantly in dollar terms in 4Q11 compared to 3Q11.
  • M&A activity increased significantly in dollar terms in 2011 compared to 2010.
  • Average deal size was up significantly in 2011, as the number of deals was flat to down.

Data:

Acquisitions (including buyouts) of U.S. venture-backed companies in 4Q11 totaled $9.4 billion in 107 transactions, compared to $13 billion in 122 transactions in 3Q11 (as reported in October 2011), a 28% decline in dollars, according to Dow Jones. For all of 2011, 477 venture-backed companies were acquired for $47.8 billion, compared to 468 acquisitions for $35.8 billion in 2010 (as reported in January 2011), an increase of 34% in dollar terms.
Thomson Reuters and the NVCA (“Thomson/NVCA”) reported 92 acquisitions in 4Q11 compared to 101 in 3Q11 (as reported in October 2011), and 429 in all of 2011, compared to 420 in 2010 (as reported in January 2011).

IPO Activity. Highlights:

  • IPOs increased in both 4Q11 and 2011 overall. o    63% of IPOs were in the IT industry. o    Groupon and Zynga accounted for 31% of IPO money raised in 2011. Data:

Dow Jones reported 10 U.S venture-backed company IPOs raising $2.4 billion in 4Q11, close to 5x higher in dollars from the 10 IPOs that raised $0.5 billion in 3Q11. In all of 2011, 45 venture-backed companies went public raising $5.4 billion, compared to 46 IPOs in 2010 raising $3.3 billion, a 64% increase in dollar terms.
Similarly Thomson/NVCA reported a 5x increase in IPO dollars raised from 3Q11 to 4Q11, and a 41% increase in dollars raised from 2010 to 2011. Thomson/NVCA also reported that approximately 63% of the companies going public in both 4Q11 and 2011 overall were IT companies, and that 75% of the companies going public in 2011 were based in the U.S., with 54% of the U.S. companies based in California.

To read the complete report, please visit Fenwick & West website here.

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Fashion Whip is a political style column in The Huffington Post by fashion stylist Lauren A. Rothman and HuffPost DC reporter Christina Wilkie inspired by Lauren’s experience at Styleauteur, the firm she founded. Follow us on Twitter at @FashionWhip.

WASHINGTON —  When Michelle Obama stepped onto the national stage in the summer of 2008, she did so in bare legs a bold new look on the political landscape. Shortly after, Sarah Palin’s VP candidacy — much of which she spent sans pantyhose — made hosiery seem practically obsolete on the campaign trail.
What a difference three years can make.

The brief, celebratory atmosphere of Obama’s inauguration gave way to a sustained economic downturn which, coupled with the rise of the Tea Party in 2009 and 2010, lent a new seriousness to Washington.

All of a sudden, pantyhose are back — on store shelves, on the legs of Republican candidates’ wives, and on K Street. But before we rush to credit a certain young British royal for reviving the trend, it’s worth considering whether they ever really left Washington.

The nation’s capital is one of the last bastions of formal attire in the country. As such, DC has presented a unique challenge for women’s professional wardrobes, and rarely more so than in lean economic times.

So many clients I work with are dressing for a public stage, whether arguing cases before the Supreme Court or campaigning for office. But among my younger clients — the ones senior management might have accused of looking too casually entitled just a few years ago — the question of hosiery comes up a lot. They ask me, “are pantyhose an asset that will help me look competent, a necessity to keep me from looking ridiculous, or a dowdy throwback, like I’m trying too hard to dress like a ‘grown up?'”

Here, understanding the distinction between pantyhose and tights is essential. Pantyhose are sheer, always, regardless of the shade. Tights, on the other hand, are opaque or patterned. In general, tights make an outfit appear more modern, and pantyhose, more traditional. As one congressional staffer put it recently, “Tights are all over the Hill in the winter, on everyone, because we all wear skirts so often. But come summer, the only women in hosiery are staffers who work for southern, Republican senators. Then it’s sheer, nude pantyhose every day.”

Another client of mine, a litigator, recently explained the self-assurance that pantyhose convey to her in Washington courtrooms, telling me, “If I walk into court and the opposing counsel isn’t wearing hose, I already know I’ve won that case.”

While there are no hard and fast rules, there are certainly guidelines that I offer to clients who ask me. Anytime they think they could find themselves on C-SPAN, in a courtroom, or in a meeting with a high-ranking official, I advise them to err on the side of hosiery. If they work in Congress and plan to meet with constituents, the same rule applies.

For women who work in politics, the best plan during this election cycle may be to take cues from the field of candidates and their spouses. Are you more of a “Callista Gingrich” than a “Michelle Obama,” more conservative than fashion forward?

If that’s the case, you know what to do. We’ll see you in the hosiery aisle.

See article here.

To schedule an interview with On-Air Political Style Expert Lauren A. Rothman, please contact:

Jason H. Gerbsman
Phone: +1.202.631.8878
Email: jason@styleauteur.com
Web: www.styleauteur.com
Twitter: twitter.com/styleauteur
Facebook: facebook.com/styleauteur
TV Clips: styleauteur.com/press/?tubepress_page

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Article from GigaOm.

Om has called 6wunderkinder “one of his favorite new companies”, and there’s good reason. The startup is one of the leading lights in the burgeoning Berlin scene, and impressive take-up claims for its first app could spell good news for its second, more fully-featured offering.

Despite being only a year and a half old, the company already has two core task management products. 6wunderkinder said this week that Wunderlist has amassed two million users in the 15 months since launching, but so far they’re keeping schtum on uptake for the still-in-beta Wunderkit — a fuller project management platform that could have enterprise as well as consumer appeal.

Wunderlist’s adoption seems to be accelerating: six months ago, 6wunderkinder said the app had drawn a million users over nine months. Those are the sort of numbers that drew in $4.2 million of funding from Skype founder Niklas Zennström’s Atomico last November.

Part of the acceleration, however, may be down to the fact that the company has taken the app to more platforms. While it began as an iOS, PC, Mac and web-app affair, with an Android version built on the Titanium platform, it has since then expanded to Linux and BlackBerry while gaining a less-kludgy native Android iteration. A Windows Phone version is also on the horizon.

Announcing its second milestone earlier this week the company gave some stats for Wunderlist’s usage so far:

 

  •          Eight million lists created
  •          75 million tasks created
  •          812 million syncs handled
  •          ‘App of the week’ in over 100 countries, with availability in 30 languages

But even though it’s now launched Wunderkit, 6wunderkinder says it won’t be abandoning its previous app. In a cute ‘love letter’ to its first app on Tuesday, 6wunderkinder stressed that Wunderlist may have lacked attention during the first weeks of Wunderkit’s existence, but the older child would not be left behind.

“You’ve probably been asking yourself: why is my sync not quite as reliable as it used to be? Why does Wunderkit get recurring tasks? We’d like to reaffirm our commitment to you. Over the coming year we’re going to make sure you get the attention you deserve. We’ll be rebuilding you from the ground up, making sure that you run faster, lighter and better than you ever have before. We’ll even be able to get you those new features you’ve been dying to have.”

As for how it intends to make money? Well, 6wunderkinder posted an interesting update last week. The original plan was to have a paid version of the service, at $4.99 a month, which would have been needed if the user wanted to collaborate with people outside of their own ‘workspace’.

But users responded by saying the platform’s adoption would probably be hindered by crippling its collaborative nature, and 6wunderkinder changed its mind and de-limited the free version. The $4.99-per-month Pro scheme still stands, but it’s now targeting heavy users who might want increased storage, for example.

6wunderkinder told GigaOM that Wunderlist saw a brief spike in takeup after Wunderkit went into public beta. The company has not disclosed Wunderkit’s adoption figures yet, but it did say 140,000 people had joined the waiting list for that beta, and it expected Wunderkit to hit the million-user mark as quickly — if not faster — than Wunderlist did.

Read more here.

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2011 marked another strong year for venture capital, but will it continue?

By Peter Delevett

pdelevett@mercurynews.com

For the venture capital industry, 2011 was a year of superlatives — the highest level of investment in Internet companies since the dot-com bust and the highest level in cleantech ever. But it also was a year that ended on a worrisome downward swing.

Venture capitalists pumped $28.4 billion into nearly 3,700 deals, according to new numbers from the National Venture Capital Association and PricewaterhouseCoopers. Both numbers were an uptick over 2010, which itself had marked something of a turnaround for the industry after two years of declines.

But the fourth-quarter numbers limped across the finish line, showing a drop both in dollars and deals compared to the third quarter. And that third quarter represented a decline in activity compared to the second quarter, when investor enthusiasm soared after LinkedIn’s initial public offering of stock. During the second quarter of 2011, venture firms poured $7.5 billion into 966 deals. In the most recent quarter, those figures were $6.6 billion and 844.

Experts disagree on whether the declining numbers mean trouble for Silicon Valley’s startup economy.

Mark Cannice, a professor at the University of San Francisco who conducts a quarterly poll of venture capitalist confidence, reports that venture capitalists grew increasingly pessimistic as 2011 wore on. If venture firms continue to back fewer startups, he asked, “What great firms aren’t going to launch that we don’t even know about?”

Please click on link for rest of story.       http://www.mercurynews.com/business/ci_19990431?source=pkg

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Personal Finance: YoBucko talks money for 20-something

Published: Sunday, Feb. 19, 2012

When it comes to managing money, there’s no lack of advice online, on everything from figuring out a budget to calculating your retirement plan.

But for 20-somethings? Not so much.

And that’s the concept behind YoBucko.com, a new personal finance website aimed squarely at those in their 20s. It’s the brainchild of Eric Bell, a 28-year-old Washington, D.C., entrepreneur who sees a void in personal finance guidance for his generation.

What Bell lacks in years, he’s made up in passion for personal finances. While in college, Bell started money-management workshops at four universities in his native Arkansas. After graduating in 2006 (“one of the last group of graduates to easily get jobs”), he spent four years in the private banking division of Citigroup. Now finishing an MBA program at Georgetown University, he just finished two years as president of the Greater Washington, D.C., Jumpstart Coalition, a national nonprofit that promotes financial literacy in schools.

It all led to November, when he founded YoBucko, which offers advice to 20-somethings on budgets, debt, savings, insurance and more.

This week, he talked by phone about his website and his generation’s attitudes on work, taking risks and the recession’s lasting impact. Here’s an excerpt:

For obvious reasons, I like the YoBucko name. Where’d it come from?

I wanted a name that made people laugh. There’s so much out there on personal finances but not a lot you can laugh about … . Real problems come from personal finances. But people aren’t receptive to the message if they can’t smile about it.

 

Why focus on 20-somethings?

I focus on 20-year-olds and up because I am one. I understand the challenges they’re facing … . When I was in college, I wanted to take classes on money management but nothing was available. … I’m trying to get in front of problems and (help prevent) a lot of what we’ve seen with credit card debt, bad mortgages, etc.

Like many college graduates, you’re saddled with $100,000 in student loans, the legacy of finishing your Georgetown University MBA. Does that make you more – or less – credible with your audience?

From my perspective, it adds to my credibility. I’m in the trenches with people, not speaking to them from my ivory tower. Some of the most successful people in the personal finance field are folks who faced real financial issues and got through them successfully. … So rather than hide behind the facts and pretend to be someone I’m not, I prefer to share my story openly so I can speak from experience, not theory.

Student loan debt is estimated to hit $1 trillion this year and take decades to repay. What’s your advice on student loans? And how are you tackling your own debt?

Tuition and the rising cost of education is the downfall of our generation … . (Students) should think long and hard about why they’re going back to school. If you’re trying to switch careers or add to your current job skills, there can be a payoff. If you’re just going because you don’t know what you want to do, it may not be the best investment.

I’ve already paid off a chunk of my loans, the higher-interest rate loans first. I’m looking at my repayment options: lowering interest rates, consolidating loans, income-based repayment plans.

For your generation, what are the lasting lessons of the recession?

There are three major takeaways:

• Bad things happen to good people. The recession demonstrated this very clearly and instilled a little fear in our generation. Prior to the recession, there was an eternal sense of optimism about our future and our potential. The recession (gave) us a wake-up call and helped us realize that we need to protect ourselves by saving for a rainy day, living below our means and hedging our bets.

• Don’t put all your eggs in one basket. People now see how being too concentrated in one asset – whether it’s real estate, stocks, cash or 401(k) plans – is a risky proposition. The concept of diversification makes more sense to our generation now than it did before.

• Be skeptical. While there are a lot of great people in the financial services industry, a few bad apples caused a ton of financial problems globally … . For our generation, it translates into being skeptical of individuals and companies that sell financial products and services.

Part of the “wake-up call” is setting aside some savings. How do people do that?

People talk a good game about saving. But it’s like you know you’re not supposed to eat sausage, biscuits and gravy, but you do until you have a heart attack. … As a country, we’ve lived through a small heart attack and are finally listening to the fact that we should be prepared if it happens again. … Look at your 401(k). Set up direct deposit. Create a budget so you have a snapshot of your money and where it goes each month. (For detailed tips, see accompanying box, “12 Ways to Save More Money in 2012.”)

According to a recent Pew Research Center study of 18-to-34-year-olds, the ragged economy forced many to move back in with parents (24 percent) and postpone marriage (20 percent) or kids (22 percent). Nearly half said they took a job they didn’t like just to pay the bills. How else did the recession change your generation?

It’s forced us to curb our expectations. That dream home at age 35 isn’t likely. … In 2006, when I got out of college, I’d go hang out with friends and buy drinks and an expensive dinner. Now, I’ll cook at home. And that’s not a bad thing … . With careers, you have to have a backup plan. Our sense of loyalty (to a company) is gone because many of us got laid off. We’ve seen people lose their homes. Parents are having to admit to their kids their house is being foreclosed on and they can’t pay for college. Or they don’t have the money for retirement. It’s a scary time. We came into the world where everything was provided to us. Many more of us are now cynics.

Why start a business in tough times?

It was a calculated risk. I’ve probably learned 10 times more from this experience than what I’ve learned from my MBA. … I’m not married; I don’t have kids. I can afford the risk. … If it doesn’t work out, it won’t be because I didn’t try. I believe in what I’m doing. We’ve already helped some people. If I can help a lot more people, it’s even better.
Read more here: http://www.sacbee.com/2012/02/19/4272661/personal-finance-yobucko-talks.html#storylink=misearch#storylink=cpy

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Software startups reaped lions share of venture capital investment in fourth quarter

By Peter Delevett

pdelevett@mercurynews.com

Posted:   02/18/2012 03:17:00 PM PST

Maybe they should start calling it Software Valley.

Venture capitalists, who provide much of the funding that keeps startups growing, poured twice as much money into software companies in the last quarter of 2011 than into any other sector.

Venture firms nationwide put $1.8 billion into software, spreading the wealth among 238 deals. That was more than double the number of deals in the second-largest sector, biotechnology.

The trend was even more pronounced in the Bay Area, where one-third of all venture money went into software.

The data was reflected in the latest MoneyTree report, prepared by the National Venture Capital Association and PricewaterhouseCoopers using data from Thomson Reuters.

“The big story was software as a service — very hot,” said Debby Farrington of StarVest Partners, speaking of the MoneyTree findings. Her New York-based venture firm focuses on so-called SaaS or cloud-based software, which companies can rent online rather than buy at steep prices.

The wider adoption of cloud software also is being driven by the fact that more workers are bringing their personal smartphones and tablet computers to work and want the freedom to access their files anywhere, she added.

Internet-specific companies also received a healthy dose of attention from venture capital firms in the quarter, the MoneyTree report found. With VCs eager to find the next Facebook,

Groupon or Twitter, the sector received $1.3 billion, shared across 239 deals.But the software and Internet sectors both saw funding drop in the fourth quarter compared to the third, perhaps driven by sub-par Wall Street debuts by Groupon and fellow social media stalwart Zynga.

In fact, biotech was the only one of the five sectors the MoneyTree report tracks that saw gains in both dollars and deals in the quarter.

But while Tracy Lefteroff, who heads the venture capital practice for PricewaterhouseCoopers, called biotechnology “a hot spot” in 2011, his enthusiasm was tempered by the fact that biotech funding — particularly for early stage companies — has been on the decline for several years. In part, that’s because companies in the sector face high regulatory hurdles and steep costs to reach significant size.

The same factors, Lefteroff notes, plague cleantech. Even though the green energy category took in more venture funding in 2011 than ever before — $4.3 billion — the number of deals in the fourth quarter declined 14 percent compared to the previous three months.

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The Advantages of a “Date-Certain” Mergers and Acquisition Process Over a “Standard Mergers and Acquisitions Process”
Every venture capital investor hopes that all of his investments will succeed. The reality is that a large percentage of all venture investments must be shut down. In extreme cases, such a shut down will take the form of a formal bankruptcy or an assignment for the benefit of creditors. In most cases, however, the investment falls into the category of “living dead”, i.e. companies that are not complete failures but that are not self-sustaining and whose prospects do not justify continued investment. Almost never do investors shut down such a “living dead” company quickly.

Most hope against hope that things will change. Once reality sets in, most investors hire an investment banker to sell such a company through a standard mergers and acquisition process – seldom with good results. Often, such a process requires some four to six months, burns up all the remaining cash in the company and leads to a formal bankruptcy or assignment for the benefit of creditors. In many instances, there are a complete lack of bidders, despite the existence of real value in the company being sold.

The first reason for this sad result is a fundamental misunderstanding of buyer psychology. In general, buyers act quickly and pay the highest price only when forced to by competitive pressure. The highest probability buyers are those who are already familiar with the company being sold, i.e. competitors, existing investors, customers and vendors. Such buyers either already know of the company’s weakness or quickly understand it as soon as they see the seller¥s financials. Once the sales process starts, the seller is very much a wasting asset both financially and organizationally. Potential buyers quickly divide the company’s burn rate into its existing cash balance to see how much time it has left. Employees, customers and vendors grow nervous and begin to disengage. Unless compelled to act, potential buyers simply draw out the process and either submit a low-ball offer when the company is out of cash or try to pick up key employees and customers at no cost when the company shuts down.

The second reason for this sad result is a misunderstanding of the psychology and methods of investment bankers. Most investment bankers do best at selling “hot” companies, i.e. where the company’s value is perceived by buyers to be increasing quickly over time and where there are multiple bidders. They tend to be most motivated and work hardest in such situations because the transaction sizes (i.e. commissions) tend to be large, because the publicity brings in more assignments and because such situations are more simply more fun. They also tend to be most effective in maximizing value in such situations, as they are good at using time to their advantage, pitting multiple buyers against each other and setting very high expectations. In a situation where “time is not your friend”, the actions of a standard investment banker frequently make a bad situation far worse. First, since transaction sizes tend to be much smaller, an investment banker will assign his “B” team to the deal and will only have such team spend enough time on the deal to see if it can be closed easily. Second, playing out the process works against the seller. Third, trying to pit multiple buyers against each other and setting unrealistically high valuation expectations tends to drive away potential buyers, who often know far more about the real situation of the seller than does the investment banker.

“Date Certain” M&A Process

The solution in a situation where “time is not your friend” is a “date-certain” mergers and acquisitions process. With a date-certain M&A 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 maximize value of the IP and tangible assets. The advisor works with the board and corporate management to:

1. Focus on the control, preservation and forecasting of CASH;
2. Develop a strategy/action plan and presentation to maximize value of the assets. Including drafting sales materials, preparing information due diligence war-room, assembling a list of all possible interested buyers for the IP and assets of the company and identifying and retaining key employees on a go-forward basis;
3. Stabilize and provide leadership, motivation and morale to all employees;
4. Communicate with the Board of Directors, senior management, senior lender, creditors, vendors and all stakeholders in interest.

 
The company’s attorney prepares very simple “as is, where is” asset-sale documents. (“as is, where is- no reps or warranties” agreements is very important as the board of directors, officers and investors typically do not want any additional exposure on the deal). The advisor then contacts and follows-up systematically with all potentially interested parties (to include customers, competitors, strategic partners, vendors and a proprietary distribution list of equity investors) and coordinates their interactions with company personnel, including arranging on-site visits. Typical terms for a date certain M&A asset sale include no representations and warranties, a sales date typically two to four weeks from the point that sale materials are ready for distribution (based on available CASH), a significant cash deposit in the $100,000 range to bid and a strong preference for cash consideration and the ability to close the deal in 7 business days.

Date certain M&A terms can be varied to suit needs unique to a given situation or corporation. For example, the board of directors may choose not to accept any bid or to allow parties to re-bid if there are multiple competitive bids and/or to accept an early bid. The typical workflow timeline, from hiring an advisor to transaction close and receipt of consideration is four to six weeks, although such timing may be extended if circumstances warrant. Once the consideration is received, the restructuring/insolvency attorney then distributes the consideration to creditors and shareholders (if there is sufficient consideration to satisfy creditors) and takes all necessary steps to wind down the remaining corporate shell, typically with the CFO, including issuing W-2 and 1099 forms, filing final tax returns, shutting down a 401K program and dissolving the corporation etc.

The advantages of this approach include the following:

Speed – The entire process for a date certain M&A process can be concluded in 3 to 6 weeks. Creditors and investors receive their money quickly. The negative public relations impact on investors and board members of a drawn-out process is eliminated. If circumstances require, this timeline can be reduced to as little as two weeks, although a highly abbreviated response time will often impact the final value received during the asset auction.

Reduced Cash Requirements – Given the date certain M&A process compressed turnaround time, there is a significantly reduced requirement for investors to provide cash to support the company during such a process.

Value Maximized – A company in wind-down mode is a rapidly depreciating asset, with management, technical team, customer and creditor relations increasingly strained by fear, uncertainty and doubt. A quick process minimizes this strain and preserves enterprise value. In addition, the fact that an auction will occur on a specified date usually brings all truly interested and qualified parties to the table and quickly flushes out the tire-kickers. In our experience, this process tends to maximize the final value received.

Cost – Advisor fees consist of a retainer plus 10% or an agreed percentage of the sale proceeds. Legal fees are also minimized by the extremely simple deal terms. Fees, therefore, do not consume the entire value received for corporate assets.

Control – At all times, the board of directors retains complete control over the process. For example, the board of directors can modify the auction terms or even discontinue the auction at any point, thus preserving all options for as long as possible.

Public Relations – As the sale process is private, there is no public disclosure. Once closed, the transaction can be portrayed as a sale of the company with all sales terms kept confidential. Thus, for investors, the company can be listed in their portfolio as sold, not as having gone out of business.

Clean Exit – Once the auction is closed and the consideration is received and distributed, the advisor takes all remaining steps to effect an orderly shut-down of the remaining corporate entity. To this end the insolvency counsel then takes the lead on all orderly shutdown items.

About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in under-performing, under-capitalized and under-valued companies and their Intellectual Property. Since 2001, Gerbsman Partners has been involved in maximizing value for 69 Technology, Life Science and Medical Device companies and their Intellectual Property, through its proprietary “Date Certain M&A Process” and has restructured/terminated over $800 million of real estate executory contracts and equipment lease/sub-debt obligations. Since inception, Gerbsman Partners has been involved 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, Alexandria, VA, San Francisco, Orange County, Europe and Israel. For additional information please visit http://www.gerbsmanpartners.com or Gerbsman Partners blog.

GERBSMAN PARTNERS
Email: steve@gerbsmanpartners.com
Web: http://www.gerbsmanpartners.com
BLOG of Intellectual Capital: blog.gerbsmanpartners.com
Skype: thegerbs

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