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Posts Tagged ‘m&a’

M&A: Hot Spots in 2010

Posted in Board Of Intellectual Capital, boic, Business models, BusinessWeek, Distressed IP, Economy, Gerbsman Partners, Intellectual capital, Investments, Market research, Sun Microsystems, Technology, Venture Capital, tagged , , , , , , , , , , , , on December 8, 2009| Leave a Comment »

Here is an interresting read from BusinessWeek.

For the mergers-and-acquisitions market, there is no doubt 2009 is ending better than it began. The year is winding up with a “sigh of relief,” says Morton Pierce, chairman of the M&A practice at law firm Dewey & LeBoeuf.

In the past month the M&A market has built up some momentum. According to Bloomberg, deals in North America were valued at $115.6 billion in November, the most since September 2008. Compare that with late 2008 and early 2009, when dealmaking either wasn’t happening at all or was centered in areas where deals absolutely needed to happen, such as failing financial institutions that needed buyers at any price. Deal volume in November was five times February’s volume of $22.5 billion.

Investors looking ahead to 2010 are wondering if this uptick in M&A can continue and where it will occur. Acquirers almost always buy at a premium, so traders can profit from correctly betting which industries will attract the most bidding activity.

Small Tech Deals

In 2009, Internet stocks, the investment and financial services industries, software, and oil and gas production were among the most active, according to Bloomberg data. Expect more dealmaking among technology stocks, say M&A experts. Oracle Corp. (ORCL) is battling European regulators to finish its $7.4 billion acquisition of Sun Microsystems (JAVA).

Such acquisitions, and especially much smaller deals, are a way of life for tech firms, says Daniel Mitz, a partner at law firm Jones Day who specializes in tech deals. “A lot of the innovation comes from smaller companies,” Mitz says. Dealmaking in tech slowed but didn’t stop during the downturn. There could be significant pent-up demand, Mitz says. “This is an industry that is ripe for M&A.”

One driver of a rebound for M&A in tech will be the strong financial positions of many tech firms, says Nadia Damouni, editor of dealReporter Americas, which tracks the M&A market. Another “cash rich” sector is health care, she says, but here the prospects for an M&A rebound are harder to read. The reason: Uncertainty surrounding the federal overhaul of the U.S.health-care system proposed by President Barack Obama and under discussion in Congress. “They’re at the whim of health-care reform,” Damouni says of the many insurers and health-care services companies that could be M&A targets at some point.

In health care, the key ingredient for dealmaking is “stability,” says Bob Filek, a partner at PricewaterhouseCoopers Transaction Services. If health-care reform passes—or even if it doesn’t—acquirers will want some certainty about what federal policy will mean for health care before making bids. Filek envisions “a couple of scenarios where [the result could be] a lot of M&A activity.”

Read the full article here.

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UBS sees 15% M&A rebound next year

Posted in Uncategorized, tagged , , , , , , , , , , , , , , on November 3, 2009| Leave a Comment »

Here is some good market analysis from The Reuters Blog – Dealzone.

“Like SocGen before them, UBS strategists are looking forward to a pickup in M&A next year.

“We expect 2009 to mark the trough in global M&A transactions and for activity to pick up in 2010 and beyond. For FY2010, globally we expect M&A activity in the region of $2.5-2.7trl, an increase of 15% on current annualised run rate for 2009 and close to levels last seen in mid 2004-05. The biggest driver of an increase in activity is likely to be the increase in risk appetite in equity markets and in the boardroom, a return to earnings growth and profitability by World Inc and a backlog of pending asset disposals.”

“Credit conditions are also supportive and we expect private equity and bank lending to pick up at some point next year.”

“We do think investors can take advantage of the growing interest in M&A as the likelihood of deals gets priced into stocks. The average take-out premium historically has been 30-40%, much of which is earned around the announcement of a deal. Merger arbitrage post bid announcement has earned a levered IRR around of 9% this year.”

“Despite a 27% decline in global M&A activity in 2009, deal volumes in Asia remained strong. At the current run rate, 2009 activity in the region will be up on 2008, taking APAC’s share of global M&A to 25%, from 6% in 1995. A meaningful pick-up in global activity in 2010 will require a rebound from trough deal volumes this year in the Americas and Europe.”

Read the full story here.

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The Great Internet Buildout Is Spurring Mergers

Posted in Board Of Intellectual Capital, tagged , , , , on October 23, 2009| Leave a Comment »

Here is an interesting article from Business Week.

“If you’re a BlackBerry (RIM) or iPhone (AAPL) user (see: addict), then you are partly responsible for the great Internet buildout. Those cute apps that look up baseball scores or let you log into Facebook eat up enough bandwidth to put the backend infrastructure of phone companies under pressure, forcing them to upgrade their networks with new and fancy gear. I’ve described this as the great Internet buildout, and it’s one of the main reasons we’re seeing a wave of mergers and acquisitions in tech land.

Equinix (EQIX), a data center provider, said on Wednesday it is going to buy competitor Switch & Data for about $689 million in cash and stock. From the release:

“Equinix will integrate Switch & Data’s data center business and operations, including the company’s 34 data centers in 22 markets in the U.S. and Canada. The acquisition will add more than 1 million gross square feet of data center capacity, bringing Equinix’s total global footprint to 79 data centers in 34 markets and more than 6 million square feet across the North American, European, and Asia-Pacific markets.”

Spending More Time on the Web

And now Tellabs (TLAB), a Naperville (Ill.)-based maker of telecom equipment, says it’s buying WiChorus, a mobile Internet equipment maker based in San Jose, Calif. Tellabs is paying $165 million in cash for the upstart company, whose venture backers include Pinnacle Ventures, Accel Partners, Mayfield, and Redpoint Ventures and which counts Clearwire among those that use its products. WiChorus’ SmartCore platform competes with the likes of Starent, which itself is in the process of being acquired by Cisco Systems (CSCO) for $2.9 billion.

What’s really going on is pretty simple: Today’s consumers are increasingly spending more time on the Web—and they’re using the mobile Web almost constantly. From my post The Great Internet Buildout Continues.

“There are 444.3 million broadband subscribers n the world, according to the Broadband Forum, and that number is only going to increase over the next few years as emerging telecom economies such as India, Brazil, and Russia ramp up their Internet efforts. A whopping 250 million people are going to connect to the Internet wirelessly by the end of 2009. Just imagine the bandwidth and computing horsepower needed if all of them started streaming movies from Netflix, listening to music by visiting Spotify, and sharing videos and photos via Facebook.”

Pressure on Mobile Networks

A Facebook executive pointed out this week that the company’s users spend a collective 8 billion minutes a day on the site. If my math is right, that’s roughly 25 minutes per user. (Facebook has 330 million users.) Like me, many are busy uploading their photos to the unstoppable social network.

As higher speeds become available on our mobile handsets, thanks to 4G wireless technologies such as LTE, we will to be spending even more time on these networks. The carriers need to make sure that these networks perform to consumer expectations, otherwise they’ll put their fast-growing data revenue stream at risk.”

Read the full article here.

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Venture liquidity still a trickle

Posted in Board Of Intellectual Capital, boic, Business models, tagged , , , , , , , , , , on October 1, 2009| Leave a Comment »

Here is a story from VentureBeat.

“It has been a rough three months for startups hoping to get acquired. Well, it’s been more like a rough year, but there’s new data from Dow Jones VentureSource focusing on the third quarter of 2009.

Overall, venture-backed liquidity (the combination of mergers, acquisitions, and initial public offerings) added up to $2.7 billion, down 49 percent from the same period last year, VentureSource says. It’s even a drop from the $3 billion of venture liquidity earned in Q2.

Things were even worse for M&As, which fell 56 percent to $2.25 billion paid in 71 deals — though the number would have been higher if VentureSource had counted Amazon’s $807 million purchase of Zappos, which hasn’t closed yet. Instead, that should add a big boost to next quarter’s numbers.

Acquired companies also made less money (median acquisition price fell 52 percent to $22 million) and had been waiting for longer to sell (median age increased 23 percent to 6.13 years).

On the other hand, IPOs were actually up from last year, with a combined total $451.25 million, the highest since 2007. That’s less exciting than it sounds, since the vast majority of that money came from battery company’s A123’s spectacular IPO, and there were only two IPOs in all. So it’s hard to see the increase as indicative of any big trend, except the fact that big IPOs are still possible. But hey, after the yearlong period (which ended in Q2) of no IPOs , that’s something.”

Read the full story here.

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Tech Titans Holding $260 Billion In Cash

Posted in Board Of Intellectual Capital, tagged , , , , , , , , , , , , , , , , , , on September 25, 2009| Leave a Comment »

As the economic slump is fading off, tech titans have amassed cash for possible takeovers. Here is an opionion further explaining this from 24/7 Wall Street Blog.

“The economy is obviously getting better, so long as you are not one of the unemployed or about to lose your job.  Now with more than a 50% rally from the March lows and a Dow Jones Industrial Average challenging the 10,000 level, suddenly everyone wants to put on their investment banker hats again and look for buyers and buyout candidates after deals are announced.  This week’s Dell Inc. (NASDAQ: DELL) deal for Perot Systems Corp. (NASDAQ: PER) was a $3.9 billion acquisition versus $12.7 billion in cash and equivalents held at the end of the quarter.  The Oracle Corp. (NASDAQ: ORCL) deal for Sun Microsystems Inc. (NASDAQ: JAVA) is valued at $7.4 billion, or $5.6 billion net of Sun’s cash and debt.  We went back through our list from September 2, 2009 where we noted that outside of the financials  in the 20 largest US companies had a cash hoard of $335 billion that could be used for mergers and acquisitions, and that is not accounting for lines of credit, stock or debt that could be sold, and other means of financing a deal.  While nowhere near all of the cash will ever be used, many companies could pay big dividends before any tax changes.

So we wanted to look through the technology sector and after we looked through the top 100 markets caps in our 24/7 Wall St. Real-Time 500 we added a few new additions in the tech sector that still had over $5 billion in cash.  Out if the $335 billion from those in the top twenty, we broke out Microsoft Corporation (NASDAQ: MSFT), International Business Machines (NYSE: IBM), Apple Inc. (NASDAQ: AAPL), Google Inc. (NASDAQ: GOOG), Cisco Systems Inc. (NASDAQ: CSCO), Intel Corp. (NASDAQ: INTC), Oracle Corp. (NASDAQ: ORCL).  Even after a huge rally, $335 billion and then some could go a very long way for strategic and bolt-on acquisitions as a positioning strategy for the next decade.  Now, going further down the list of the top 100 companies with $5 billion or more in cash from tech companies alone adds in Hewlett-Packard Company (NYSE: HPQ), QUALCOMM Inc. (NASDAQ: QCOM), EMC Corporation (NYSE: EMC), and Yahoo! Inc. (NASDAQ: YHOO). When we tally up all the cash, there is over $260 billion available from these few tech companies that could be deployed for mergers, acquisitions, or the good old dividends.  Again, that is before tallying up credit lines, factoring, debt sales, and other financing methods.

Hewlett-Packard Company (NYSE: HPQ) had almost $25 billion in cash and long-term investments.  Now that it has migrated away from just selling PCs and printers, we think that there will be a rather long lull before H-P tries to match its big buyout of EDS even if Dell is tip-toeing into IT-services and consulting with Perot.  But in the end, what we think may not matter.  Nearly $25 billion in cash when you know you will be profitable ahead leaves a lot of room to go out make purchases.

QUALCOMM Inc. (NASDAQ: QCOM) was the 29th largest company as of Wednesday with a $74.12 billion market cap. If you tally up its cash, short-term and long-term investments, it is sitting on almost $15 billion in cash and equivalents as of last quarter.  After all the lawsuits that the Jacobs team are settled, it might consider a way to deploy capital to get around future patent cases.  If only it was possible, although anything is possible.”

Read the full article here.

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