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Posts Tagged ‘Cisco Systems Inc.’

A Recapitalization’s Risk And Reward

Posted in Board Of Intellectual Capital, tagged , , , , , , , , , , , , , on August 26, 2010| Leave a Comment »

Article from WSJ´s Venture Capital Dispatch.

“A last-minute recapitalization to save a 10-year-old optical networking company demonstrates the extreme risk and possible rewards that come with these types of investments.

Around the turn of the century, telecommunications carriers, hungry for more bandwidth in anticipation of the coming Internet boom, were already looking past the then-evolving 10-gigabit standard to a 40-gigabit standard, leading companies like Mintera Corp. to begin developing products for that market. After the dot-com bust, that market didn’t take off the way Mintera’s investors and other venture capitalists that put money into the sector originally anticipated.

Many companies closed, but a few 40-gigabit companies had decent outcomes, such as CoreOptics Inc., which was sold to Cisco Systems Inc. for $99 million in May, and StrataLight Communications Inc., sold two years ago to Opnext Inc. for $169 million.

Mintera, which burned through about $73 million in venture capital since it was founded in 2000, was able to build a decent business, generating $20 million in revenue over the last year and capturing around one-sixth of its total market. But that wasn’t enough to generate a home run for its investors any time soon.

By this year, it was clear that some of Mintera’s weren’t willing to commit more capital to the company, so it searched for a buyer. Normally, the investors would have stuck by the company, putting in more capital for growth, but the “real reason it had to be sold was that it had been funded by venture capital firms that had mature funds that had come to the end of their lifecycle,” said Jim Murray, a managing general partner of Court Square Ventures, an early investor in Mintera.

The company needed enough capital to keep the lights on while it searched for a buyer. At the end of May, Court Square decided to double down in exchange for a near-majority stake in the business.

As happens in a recap, the equity structure of Mintera was reset. Two shareholders, RRE Ventures and STAR Ventures, held onto stakes, but three others – Polaris Venture Partners, Portview Communications Partners and Glynn Capital Management – were washed out completely.

At the same time, talks were under way with a buyer, Oclaro Inc., but a deal was less than certain. Oclaro looked like it would walk away, Murray said. “We knew it was a good company, if Oclaro didn’t want to buy it someone would,” he said, declining to say how much capital Court Square put into Mintera.

Six weeks after Court Square invested, Oclaro agreed to buy the company in July for $12 million in cash with the potential to earn as much as $20 million if Mintera reaches certain milestones.”

Read the full article here.

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Silicon Valley Gears Up for Acquisitions as Economy Improves

Posted in Board Of Intellectual Capital, Economy, Gerbsman Partners, Intellectual capital, Investments, Market research, Strategy, Technology, Venture Capital, tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , on April 12, 2010| Leave a Comment »

Here is some interresting news from Bloomberg.

“Silicon Valley companies looking to put their cash to work may drive a wave of mergers this year, bankers and venture capitalists say.

Companies are eager to make acquisitions because many of them have cut research budgets, says Robert Ackerman, founder and managing director of Allegis Capital in Palo Alto, California. That means they’re not as able to fall back on their own ingenuity to fuel growth. More businesses are relying on acquisitions to find their next new product or service, he says.

“The product cabinet is bare, but the market continues to move forward,” Ackerman said. “Wherever you see innovation sprint ahead, companies will have a product deficit, and will look to fill it.”

Google Inc., based in Mountain View, is currently one of California’s most acquisitive companies, buying at least five businesses in 2010. It agreed to buy Picnik Inc. last month, acquiring online photo-editing tools. Its purchase of DocVerse provided it with software that lets people share documents over the Internet. The value of the deals wasn’t disclosed.

The state’s largest single deal this year was Shiseido Co.’s purchase of San Francisco-based Bare Escentuals Inc. for about $1.7 billion.

California deal-making plummeted after 2007, when more than 2,670 transactions totaled almost $254 billion. So far this year, there have been about 530, worth $16.7 billion. That’s a higher number than in the first three months of 2009, although the value was greater in that year-ago period, at about $30 billion.

McAfee, Tibco

Local acquisition targets include Santa Clara’s McAfee Inc., Tibco Software Inc. in Palo Alto and Cupertino-based ArcSight Inc., according to Brent Thill, an analyst at UBS AG in San Francisco. McAfee and ArcSight both make programs that protect data, which could be more valuable as cyber threats mount. Tibco’s software helps programs of all kinds share information.

Goldman Sachs Group Inc. also cited San Francisco’s Salesforce.com Inc. and Palo Alto-based VMware Inc. as possibilities — though those companies aren’t the most likely targets, the firm says. Salesforce.com makes online customer- relationship software, while VMware sells so-called virtualization programs, which help computers run more than one operating system. Representatives from all the targets declined to comment or didn’t respond to messages.

Deal Volume

In Northern California, there were 45 deals involving venture-backed startups during the first three months of 2010, according to the National Venture Capital Association. That was the highest number in any quarter in at least five years.

More than 50 companies in California have at least $1 billion in cash and equivalents, which they could use for acquisitions. They’re led by a Bay area trio: San Francisco’s Wells Fargo & Co., with $68 billion; Cisco Systems Inc. in San Jose, with $39.6 billion; and Cupertino-based Apple Inc., with $24.8 billion, according to Bloomberg data.

“There’s a lot of cash on people’s balance sheets, so I think it’s a great time for startups,” said Kate Mitchell, managing director at Scale Venture Partners in Foster City, California. “They see that the faster, better, cheaper venture- backed companies are still growing, and they’re not spending on R&D, so they can be accretive.”

The value of deals in California topped out at $378.1 billion in 2000 during the Internet bubble, when there were more than 2,200 transactions. It took five years for the number of deals to surpass that earlier peak, and the dollar amount has never come close to recapturing the dot-com era’s glory.

Internet Bust

While the latest recession was the worst economic slump since the Great Depression, it actually wasn’t as devastating to California deal-making as the dot-com collapse. After having easy access to venture money and initial public offerings in the late-1990s and 2000, money dried up. The M&A industry hit bottom in 2002, when just 1,505 transactions accounted for $95.3 billion.

The deals crept back up over the next four years, peaking again in 2006 and early 2007. There were 665 in the first quarter of 2007, valued at $59.8 billion. That’s more than three times the number reported last quarter.

Tor Braham, head of technology mergers and acquisitions for Deutsche Bank AG in San Francisco, says mergers are ready to surge again for two reasons.

Pressure’s On?

“Private-equity funds have raised a lot of money before the financial crisis and there’s pressure on them to spend it before those commitments expire,” he said. Also: “Sellers want to get their deals done this year, before the expected increase in capital gains tax rate.”

Private-equity firms raised $538 billion in 2006 and $587 billion in 2007, just before the recession, according to the Private Equity Council in Washington. Capital-gains taxes, meanwhile, could rise above 20 percent for people earning more than $250,000 under budget proposals before Congress.

In the first quarter, Deutsche Bank advised Techwell Inc. in its $370 million takeover by Intersil Corp. The bank also worked with Nimsoft Inc. in its $350 million acquisition by CA Inc., and Francisco Partners on its sale of Numonyx BV to Micron Technology Inc. for about $1.3 billion.”

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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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