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Archive for the ‘Economy’ Category

When a takeover battle goes nuclear

Posted in Board Of Intellectual Capital, Business models, Distressed IP, Economy, Intellectual capital, Investments, Market research, Strategy, Venture Capital, tagged , , , , , , , , on July 9, 2009| Leave a Comment »

Here is a good reflective article from CNN on the art of mergers – and it´s possible pitfalls.

“(Fortune Magazine) — David Crane, CEO of NRG Energy and a father of five, was standing in a stubby cornfield in Bucks County, Pa., one windy evening last October when his BlackBerry began to stir. He checked his in-box, but he didn’t respond, not right away. It was Sunday night, and he was on an outing with his family, waiting in line for a Halloween hayride. Nor did he respond an hour later on his way to the Amtrak station to catch a train to Washington, D.C. How could he, when he drives a Mini Cooper with a stick shift? You need both hands to manage a car like that. So it wasn’t until after nine at night, having found a quiet corner of the waiting room behind a Dunkin’ Donuts kiosk, that Crane finally got around to calling back John Rowe.

Rowe, CEO of Exelon Corp. (EXC, Fortune 500), picked up Crane’s call at his big-windowed aerie in Chicago’s Chase Tower, 54 stories above the Loop. Rowe told Crane that his board had met that afternoon, and he had some news: Exelon, the country’s biggest electric utility, was hereby offering to buy NRG (NRG, Fortune 500), the country’s fastest-growing independent electricity merchant — it sells wholesale power to utilities — for stock in a deal worth $6.2 billion. Term sheet to follow, press release within the hour. “Offer” was a euphemism; this was a hostile act.

Crane was stunned, less by Rowe’s uninvited bid (his lust for NRG was no secret) than by his choosing to publicize it instantly. Protocol dictates that a classic bear hug, as the M&A world defines the ritual, begin with a warm embrace, in private, with an eye toward achieving mutual consent. Rowe wasn’t even pretending to be nice. Crane could imagine why. NRG was secretly pursuing two deals of its own with Houston-based power companies: one code-named Doris, for Dynegy (DYN), the other Rodeo, for Reliant. Either would create regulatory obstacles that could block Exelon. Somehow Rowe had gotten wind of them. Neither was imminent, Crane says now (“He had a lot more time”), but Rowe didn’t know that.

Their conversation lasted only a few minutes. Crane asked Rowe if he had his debt financing in place. Both men understood that a change of control would trigger an immediate requirement to pay down $8.5 billion in NRG loans. “Not yet,” said Rowe, “but we’re working on it.” Crane wanted nothing to do with this deal: not with Rowe, whom he barely knew; not with Exelon, which he views as stodgy, bureaucratic, and otherwise “ill suited” to run an entrepreneurial enterprise like NRG without “suffocating” it; and definitely not at that price, which he would soon be describing to anyone who would listen as tantamount to “stealing the company.” Nevertheless, he tried to be civil as he concluded the call, promising Rowe, “We’ll give this serious consideration.”

So much for his scheduled trip to Washington. Crane called Jonathan Baliff, NRG’s M&A specialist, and reached him at home. “You’re not gonna believe this,” he said, still not quite believing it himself. “John Rowe just called to wish me a happy Halloween.”

Click here for the whole article.

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Lean times continue for startups, as sales, IPOs wither

Posted in Board Of Intellectual Capital, Business models, Economy, Gerbsman Partners, Investments, Strategy, Technology, Venture Capital, tagged , , , , , , , , , , , , , , , , , , , , , , , on July 8, 2009| Leave a Comment »

Here is an excellent Bloomberg article by way of statesman.com.

“SAN FRANCISCO — Acquisitions of startups fell to the lowest level in a decade in the second quarter as the recession stopped companies from buying smaller competitors.

A total of 59 startups merged with other companies, a drop of 30 percent from a year earlier and dropping to the lowest level since 1999, the National Venture Capital Association said. Five U.S. startups have had initial public offerings so far this year. In 2007, before the financial crisis, there were 86.

Acquisitions and IPOs — the two ways for venture capitalists to cash in their investments — have almost come to a standstill, NVCA President Mark Heesen said. With the IPO market struggling, larger technology companies — confident that prices will fall — are waiting before proposing takeovers, he said.

“The buyers on the merger and acquisition side got smart real fast,” Heesen said. “They wait for companies to come crying to them to get bought.”

No venture-backed companies went public between September and March — the longest slump since the association began collecting data in 1971. Only 11 startups have had IPOs since the end of 2007, and there is little immediate prospect for improvement, said Paul Bard, an analyst at Renaissance Capital.

Only 10 startups have filed pre-IPO paperwork with U.S. regulators, and none has done so since January, said Emily Mendell, an NVCA vice president. That signals that deals such as the May IPOs of Austin-based SolarWinds Inc. and online restaurant-reservation service OpenTable Inc. failed to spur other young companies to act.

It also means the market won’t revive in the next few months, Bard said.

“Unless filing activity spikes in the next two to three weeks, we’re unlikely to see a more sustainable pickup in VC-backed IPOs before Labor Day,” Bard said. “The bar will remain high for most VC-backed deals to get done.”

Even if the 10 biggest venture capitalists had 25 companies ready to go public by early next year, that would still leave IPOs at about a third of their levels from 2004 to 2007, he said.

That means startups lack bargaining power in merger talks, a situation that is keeping offers low and stalling many negotiations that do occur, Heesen said.

Only 13 of the 59 companies that sold out reported how much they were paid, the association said. Prices were higher than in the first quarter, a possible sign of improving conditions later this year, it said.

Cisco Systems Inc.’s $590 million deal to buy Pure Digital Technologies Inc., maker of the Flip Video camera, helped drive up the average merger price to $197.7 million.

Five companies commanded less than venture capitalists had invested, the venture capital association said. Purchases of medical-instrument makers CoreValve Inc. and Chestnut Medical Technologies Inc. were the only ones in which early backers received 10 times their outlay, the traditional standard for a venture-capitalist home run, Mendell said.”

Read the full article here.

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Six Year Low For Venture-Backed Liquidity, Despite IPOs

Posted in Board Of Intellectual Capital, Business models, Economy, Intellectual capital, Investments, Market research, Venture Capital, tagged , , , , , , , , , on July 2, 2009| Leave a Comment »

Here is a story I picked up at DowJones VentureSource;

“Dow Jones VentureSource is reporting today that Q2 of this year was “one of the worst” ever for venture capital backed firms, in terms of liquidity, since early 2003. According to Dow Jones, there was only $2.8 billion in exits for the quarter, including both mergers and acquisitions and IPOs, down 57% from last year’s numbers. Dow Jones said there was $2.57 billion in mergers and acquisitions of 67 companies in Q2, down from $6.48B and 89 transactions in Q2 of 2008. The three venture-backed IPOs on the market raised $232M. In terms of valuation, VentureSource reported the median amount paid for a venture-backed company in Q2 was almost $22M, down from $41M from the comparable period in 2008″


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IPO Issuance Steps Up

Posted in Board Of Intellectual Capital, Business models, Economy, Gerbsman Partners, Investments, Market research, Technology, Venture Capital, tagged , , , , , , , , , , , , , , on July 1, 2009| Leave a Comment »

Good news are starting to come across from market indicators. The economy is slowly starting to turn its heavy pessimism to a optimistic, normal belief of opportunity. Looking at these indicators on IPO filings, there are plenaty of opportunities on the horizon.

Here ar some good news posted by Wall Street Journal.

“The pace of new stock offerings perked up this spring after a cold winter, but the market for new issues still has a long way to go before a real recovery.

The story was the same in every corner of the world. At best, there was a pickup in issuance in the second quarter of 2009 from the first quarter, but there was nowhere near the levels of a year earlier.

World-wide, 78 companies raised $10.6 billion in initial public offerings of stock in the second quarter, up from 54 deals that raised just $1.3 billion in the first three months of 2009, according to data from Dealogic, which tracks new issues. But in the second quarter of 2008, 243 new public companies sold $33.4 billion of shares, by Dealogic’s count. All data exclude real-estate investment trusts and empty shell companies known as special-purpose acquisition companies, or SPACs.

If comparisons with last year aren’t sobering enough, consider this: In the second quarter of 2007, 469 companies raised a total of $88.2 billion — six times the number and more than eight times the dollar volume of the latest three months.

“In terms of volume of issuance, let’s face it, we’re still in the very early innings of recovery,” says Kevin Willsey, head of equity capital markets for the Americas at J.P. Morgan Chase & Co.

U.S. pricings in the latest quarter totaled 10, valued at $1.3 billion, compared with 11 deals that raised $4.2 billion in the 2008 period. Latin America and India each had one IPO for the second quarter, while Russia and Australia had none.

The largest offering in the world during the second quarter was the $4.27 billion raised on the Bovespa stock exchange by VisaNet, the Brazilian affiliate of credit-card network Visa Inc.

China had 13 IPOs in the second quarter that raised a combined $2.9 billion, compared with 20 that raised $2.3 billion a year ago; Europe had 10 deals totaling just $209 million, compared with 79 that raised $12.1 billion.

Still, bankers appear more optimistic now about the IPO market than at any time since last fall, with many saying there could be a stronger pickup in issuance in the second part of this year.

U.S. IPOs have performed well on their debuts this year. The May offering of OpenTable Inc. generated the best first-day performance since late 2007, before the stock-market meltdown. The company, which raised $60 million in its offering, rose 59% on its first day of trading.

The outlook for the IPO market depends on whether there are nasty surprises in second-quarter earnings reports, which will start arriving by the middle of this month, stable prices in the broader stock market and continued hopes for economic recovery.”

In this articl, Lynn cowan closes by saying:

“More deals later in the year would play into historical buying patterns by large institutions such as mutual funds and hedge funds, says Joe Castle, head of U.S. equities syndicate at Barclays Capital. “Fall is a popular time to buy IPOs,” he says, “because it positions portfolios with high-growth companies for the following calendar year and boosts performance for the current year if they trade well initially.”

Despite glimmers of hope in some areas of the world, like the U.S., bankers and investors alike are aware things could suddenly take a turn for the worse.

“We don’t see firms storming the gates to launch into the IPO market right now,” says David DiPietro, president of boutique investment bank Signal Hill in Baltimore. “We probably need to see another quarter of solid earnings from a broad base of companies.”

To read the full article, click here.

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CMEA seeking new Cleantech opportunities

Posted in Board Of Intellectual Capital, boic, Distressed IP, Economy, Gerbsman Partners, Intellectual capital, Investments, Life Science, Strategy, Venture Capital, tagged , , , , , , , , , , , on June 29, 2009| Leave a Comment »

Here is an article I found at cleantech.

“San Francisco, Calif.-based CMEA Capital is on the hunt for the best and brightest cleantech investments. But if the investors can’t find what they are looking for, founder and Managing Director Tom Baruch told the Cleantech Group they’ll create their own company.

The venture capital firm usually invests anywhere from $10 million to $15 million per company, over the life of its involvement with the company, he said. And these days, renewable fuels and chemicals from cellulosic precursors as well as algae are catching the attention of CMEA investors. Baruch said they are working on a stealth project in collaboration with a university in San Diego to genetically modify algae to produce chemicals.

“We’re working to see if we can build our own company,” he said. “We’re shopping for the right technologies and supporting some small research projects.”

CMEA has also invested about $15 million to date in Codexis, which makes producing biofuels, pharmaceuticals and industrial products faster through its next-generation biocatalytic chemical manufacturing processes. CMEA was involved in spinning Codexis out of Redwood City, Calif.-based biotech company Maxygen (Nasdaq:MAXY).

Codexis, which filed its S-1 in 2008 (see Codexis files for $100M IPO) and then pulled it due to market conditions (see Codexis withdraws IPO), has attracted significant private equity investment with IPO plans on the horizon again come 2010.

In March, global energy giant Royal Dutch Shell NYSE:(RDS.A) and Codexis expanded an agreement to develop better biocatalysts, with Shell increasing its equity stake in Codexis. The companies first announced the partnership in 2006 to investigate other biofuels, researching new enzymes to convert biomass directly into components similar to gasoline and diesel, with Shell taking a stake in the company in 2007 (see Shell partners with Codexis for next generation biofuel research and Shell, Codexis in biofuels agreement).

Baruch said he expects Codexis to turn a profit by the end of this year.

“We want to be involved in companies that are truly transformative—that change the way people do things and think about things, that have cost and performance characteristics that are a leap apart from what’s currently available,” he said.  “And frankly, if it’s not transformative I don’t want to do it.”

To read the full article, click here.

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