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Posts Tagged ‘steve gerbsman’

Article from GigaOm.

“I meet a lot of owners of midmarket IT services companies who almost immediately ask me, “What is my company worth?” Even those who don’t ask want to know often ask.

It’s a fair question, with a complicated answer. I can do a back of the envelope calculation and determine the enterprise value of a company today based on 12 months trailing revenue or perhaps a multiple of EBITDA (earnings before interest, taxes, depreciation and amortization). But the real value of a company is based less on its past performance than on its potential worth to a future owner. What the buyer can bring to the party and how well its management believes it can execute the acquisition and business strategy going forward is where a company’s true value resides and where the domain expertise or strategy comes into play.

Case in point: In 1996, IBM bought Tivoli Systems for $743 million, paying about 10 times trailing revenue. Many analysts concluded at the time of the sale that IBM grossly overpaid for the asset. Within a year, IBM was able to leverage Tivoli into almost a billion dollars in revenue. Just like beauty, value is in the eye of the beholder. Tivoli had more value to IBM than Tivoli had to itself at the time. So did IBM pay 10 times revenue or less than one times revenue for Tivoli?

Unfortunately, I don’t have a crystal ball. So I don’t know what potential buyers can do to leverage a company’s value. And a calculation on the back of an envelope almost always fails to satisfy.

Here is something else the owners I talk with really don’t want to hear: Chances are they have taken actions that over time have eroded — or even destroyed — the value of their company without even realizing it. In my last post for GigaOM, I wrote about “5 things that destroy a company’s value.” In this post and in future posts, I’m going to examine these value killers one at a time in greater detail.

Today, my topic is opportunistic acquisitions. And to be clear, my message is for owners of midmarket companies who are interested in making acquisitions designed to increase their own value. In doing so, they hope to become attractive acquisition candidates to buyers in the future.

Acquisitions fail 70 to 90 percent of the time

If you search for the phrase “acquisition failure rates,” you’ll be treated to study after study that peg failure rates at somewhere between 70 percent and 90 percent. Dig a little deeper, and you’ll find articles enumerating the many reasons most acquisitions don’t work.

Nearly all of these reasons can be boiled down to two:

  1. The acquisition was a bad match between what the seller had and what the buyer could do to create value. The bad match often occurs because the buyer was fooled, misled, or overlooked key points of the deal, or the buyer simply suffered from hubris.
  2.  The buyer did a poor job of integrating the acquisition and executing on the business strategy designed for its new asset.

In both situations, acquisitions fail because the buyer doesn’t really know what or why it’s buying — let alone what to do with the acquisition.

Think about when HP bought Compaq or when Time Warner bought AOL.

Of course there are companies that are successful with acquisitions. Cisco has acquired 150 companies since its first acquisition in 1993. In fact, acquisitions are a core competency of Cisco — few companies are better at it.

Cisco’s purchases are fueled by the desire to speed up the rate at which the company can offer new technologies in a market that is hyper-competitive and evolving rapidly.

Not all of Cisco’s acquisitions are hits. Remember the Flip video camera that Cisco shut down in 2011? But many were successful, especially in the early days. At the peak of its acquisition activity in 2001, Cisco’s purchases were widely credited with laying the foundation for about half of its business at the time.

The secret to Cisco’s fruitful acquisitions is its ability to successfully onboard companies. Cisco employs a full-time staff solely focused on integrating new companies into the fold — instead of haphazardly assembling part-time transition teams whose members are all busy with their regular jobs.

In terms of strategy and execution, Oracle is even better at acquisitions. The company has spent billions on about 90 companies since its acquisition of PeopleSoft closed in 2005. Oracle’s chief skills are identifying companies that fit well into its longterm business strategy at the front end of the process, and its ability to integrate and act on these strategies at the back end. In 2011, readers of The Deal Magazine recognized Oracle’s track record with an award for most admired corporate dealmaker in information technology for deals completed from 2008 to 2010.

Until late in 2011, Oracle’s acquisition drive was to create the broadest portfolio of traditional enterprise software applications in the industry. With the company’s $1.5 billion acquisition of SaaS CRM applications provider RightNow Technologies (announced in September 2011 and completed in January 2012), Oracle now hopes to work its magic in the SaaS market. Oracle paid more than seven times trailing revenue for RightNow. I bet that in the next year or two, Oracle will make that multiple look like a bargain — just like when IBM bought Tivoli.

Still, Cisco, Oracle and other exceptions to the rule underscore the difficulty of making acquisitions work. It’s even harder when an acquisition happens because a buyer is presented with an unexpected “opportunity” and management decides it’s just “too good to pass up.” These so-called “opportunistic” acquisitions often lead to disappointment or disaster.

The reasons for failure are obvious. Acquirers lured by such a passive approach often have no clearly defined goals, have not thought through the attributes of ideal acquisition candidates, have done little or no pre-acquisition planning, and suffer from a lack of choice.

It reminds me of people who go to Las Vegas for the weekend and end up married. Getting married in Nevada is quick, easy and relatively inexpensive. All you need is a marriage license — no blood tests and no waiting period. And there is a wedding chapel on every corner.

Of course, when you wake up the next morning, there may be hell to pay.

I know. I’ve been there. Not in Las Vegas on the morning after, but at an organization that for many years only bought companies that showed up on its doorstep. We had no strategy and no process for integrating acquisitions into the mothership. I’m convinced that if the owner of the neighborhood car wash had offered us a “good” deal, we’d have taken it.

So here’s my advice for owners of companies seeking to enhance their value through opportunistic acquisitions. Acquisitions can do a lot of good. They can add to your growth and earnings, speed your entry into new markets, allow you to acquire human capital or intellectual property more quickly, and lower your costs through economies of scale. All of these things have the potential to increase the value of your company to a prospective buyer.

But just like marriage, acquisitions should never be decided on a whim. And you should never buy a company just because it’s for sale. Frankly, companies that are not for sale offer juicier profits and are likely a better strategic fit. Better to take some of that money and go have fun with it in Las Vegas.

And if you go there, don’t get married.”

Read more here.

 

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Article from GigaOm.

YouTube has seen its video uploads grow 50 percent over the last year: Users are now uploading 72 hours of video every minute, compared to 48 hours just a year ago. The Google-owned video site announced the milestone Sunday night to celebrate its seventh birthday.

The amount of video uploaded to YouTube has increased steadily over the last few years. In early 2007, users were uploading six hours of video every minute to the site. By January of 2009, that number had grown to 15 hours. By March of 2010, the total reached 24 hours, only to go up to 35 hours by November of that year.

YouTube officially launched in May of 2005, but the first video was actually uploaded on April 23 2005. It shows co-founder Jawed Karim at the San Diego Zoo, and is still available on the site.

Read more here.

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Article from Bloomberg.

China’s reduction in reserve requirements for banks, the first since 2008, may signal government concern that a slowdown in the world’s second-biggest economy is deepening.

Reserve ratios will decline by 50 basis points effective Dec. 5, the central bank said on its website yesterday. The move may add 350 billion yuan ($55 billion) to the financial system, according to UBS AG.

A report due today may show that China’s manufacturing contracted for the first time since February 2009, and the nation’s stocks had their biggest decline in almost four months yesterday. Premier Wen Jiabao aims to sustain the economic expansion as Europe’s debt crisis saps exports, a credit squeeze hits small businesses and a crackdown on real-estate speculation sends home sales sliding.

“The deceleration of growth may have become faster than expected on increased external uncertainty, a sagging property market” and difficulties for smaller companies, said Liu Li- gang, a Hong Kong-based economist with Australia & New Zealand Banking Group Ltd. who previously worked for the World Bank. The manufacturing report may be “worse than expected,” Liu said.

The Purchasing Managers’ Index may dip to 49.8 for November, a level marking a contraction, according to the median estimate in a Bloomberg News survey of 18 economists. That data is due at 9 a.m. local time today. Consumer price gains eased to 5.5 percent in October, compared with a government target of 4 percent, as exports rose the least in almost two years.

Joint Action

The policy move yesterday came two hours before the U.S. Federal Reserve, the European Central Bank and the monetary authorities of the U.K., Canada, Japan and Switzerland said they were cutting the cost of emergency dollar funding to ease strains in financial markets.

Spurring lending in China, the nation that contributes most to global growth, may boost confidence as Europe’s crisis worsens. Stocks and the euro rallied after the moves.

China is at “the beginning of monetary easing,” said Qu Hongbin, a Hong Kong-based economist for HSBC Holdings Plc, adding that “aggressive” action is warranted. While more reserve-ratio cuts may follow, interest rates may remain unchanged until inflation is below 3 percent, he said.

The latest change means that reserve requirements for the biggest lenders will fall to 21 percent from a record 21.5 percent, based on past statements.

‘Liquidity Crunch’

Mizuho Securities Asia Ltd. said that the timing of the Chinese announcement “could be linked” to the move by the Fed and others. In October 2008, China cut interest rates within minutes of reductions by the Fed and five other central banks as the global financial crisis worsened.

“Some form of coordination may have gone into this,” said Ken Peng, a Beijing-based economist at BNP Paribas SA. “But I think China is pretty urgently in need of a reserve ratio requirement cut anyway — otherwise, we’d have a liquidity crunch in the New Year.”

Barclays Capital yesterday forecast at least three more reserve ratio cuts by mid-2012 and said two interest-rate reductions are likely next year.

Yesterday’s move may have been partly a response to inflows of foreign-exchange drying up, according to UBS’s Hong Kong- based economist Wang Tao. Central bank data released this month suggested that capital has been flowing out of China.

Growth is slowing across Asia, the region that led the world recovery, with India today reporting its economy expanded the least in two years and Thailand cutting interest rates. In China, the clampdown on property speculation has added to the threat of a deeper slowdown after a 9.1 percent expansion in the third quarter that was the smallest in two years.

Home Sales

Property risks are “overshadowing” the outlook as falling sales threaten to trigger developer collapses, the Organization for Economic Cooperation and Development said this week. Agile Property Holdings Ltd. (3383), the developer in which JPMorgan Chase & Co. owns a stake, has said it will stop buying land until at least February and is slowing construction at some projects.

October housing transactions declined 25 percent from September and prices fell in 33 of 70 cities, according to government data. The Shanghai Composite Index fell 3.3 percent yesterday after Xia Bin, an academic adviser to the central bank, said credit should remain “relatively tight” and people shouldn’t hope for a reversal of housing market curbs.

China hasn’t raised interest rates since July, the longest pause since increases began in October last year. Benchmark one- year borrowing costs stand at 6.56 percent. The last interest- rate cut was in December 2008, during the global financial crisis.

Premier Wen Jiabao said last month the government will fine-tune economic policies as needed to sustain growth while pledging to maintain curbs on real estate.”

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Steven R. Gerbsman to speak at iiBig conference “Investment and M&A Opportunities in Healthcare” June 13-14, 2011 – The Wit Hotel – Chicago, IL

Conference Overview

iiBIG is proud to return to Chicago for our Mid-Year 2011 conference, “Investment and M&A Opportunities in HEALTHCARE” at The Wit Hotel; June 13-14, 2011.

Our series of conferences on healthcare investing are quickly becoming the industry standard, leading the way with the latest information from the leading investors, middle-market healthcare executives, deal-makers who gather to discuss getting deals done in this fast-growth sector.

In 2011, experts are predicting an increase in Middle-Market M&A deal flow in all sectors – however, HEALTHCARE will continue to lead all others. Strategic buyers who dominated the market during the downturn will be joined by more financial buyers, private equity investors and others.

Date: June 13-14, 20111

The Wit Hotel, Chicago, IL

For more information, click here.

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 68 technology, life science and medical device companies and their Intellectual Property and has restructured/terminated over $795 million of real estate executory contracts and equipment lease/sub-debt obligations. Since inception in 1980, 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 San Francisco, Boston, New York, Washington, DC, Alexandria, VA, Europe and Israel.

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Students from across Georgetown University are invited to attend the Georgetown Entrepreneurship Summit, where you will learn from a variety of industry experts ranging from company founders to venture capitalists. The day will include keynote speakers, panel discussions, and an Elevator Pitch Competition.

Date: Friday, January 29, 2010

Time: 9:00 a.m. to 4:30 p.m.

Elevator Pitch Competition: 1:30 p.m. to 3:00 p.m.

To Register, click here.

Location: Rafik B. Hariri Building , Lohrfink Auditorium Combination of keynote speakers (general interest) and breakout panel discussions (topic-focused). Afternoon keynote to be followed by the Elevator Pitch Competition, highlighting student business ideas – with prize money for the best ideas. Networking reception to end the day.

Discussion Topics include:

  • Understanding Entrepreneurship
  • Tech Entrepreneurs
  • Opportunities in Clean Technologies
  • Entrepreneurship in Consumer Products
  • Minority Entrepreneurs
  • Social Entrepreneurship
  • Investors’ View: How to Get Funding in Today’s Market

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 60 Technology, Life Science and Medical Device companies and their Intellectual Property,, through its proprietary “Date Certain M&A Process” and has restructured/terminated over $790 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, Europe and Israel.

For additional information please visit www.gerbsmanpartners.com

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Here is another merger bit of news from TechNewsWorld.

“If regulators approve Comcast’s acquisition of a majority interest in NBC Universal, the cable company will instantly become a major content producer, going head to head with ABC, Viacom and Fox. “Comcast believes that controlling content will ensure the future successof its distribution system,” said entertainment-corporate attorney Jeff Liebenson.

It’s official: Comcast (Nasdaq: CMCSK) has engineered what appears to be the biggest media joint venture of the year — a multibillion-dollar merger that will combine General Electric’s (NYSE: GE) NBC Universal with Comcast’s own cable networks.

Once complete, Comcast will take majority ownership of NBC, ending GE’s 20 year control of the network. It is a complex transaction that, among other things, requires GE to buy Vivendi’s 20 percent stake in NBC for US$5.8 billion — a deal within a deal that was agreed upon last month.

Terms of the transaction call for Comcast to pay GE some $6.5 billion and contribute programming valued at $7.25 billion in exchange for its 51 percent stake.

The merger still must meet regulatory approval, which may require that Comcast make certain concessions. Already some members of Congress are calling for hearings to determine the merger’s impact on consumers.

NBCU chief Jeff Zucker will report to Stephen Burke, Comcast’s operating chief, who will oversee the takeover once the deal is complete.

For all the complexity surrounding the transaction, its end goals are fairly simple: GE wants to focus on other elements of its diverse corporate kingdom. Comcast wants access to content for distribution on its own networks.”

Read the full article here.

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SALE OF ASSETS OF OMNISONICS MEDICAL TECHNOLOGIES, INC.

INTRODUCTION
Gerbsman Partners (www.gerbsmanpartners.com) has been retained by Emigrant Bank (“Emigrant”) to solicit interest for the acquisition of all, or substantially all, assets of OmniSonics Medical Technologies, Inc. (“OmniSonics”).  OmniSonics was a leader in commercializing technology that uses ultrasound technology to break up blood clots.
A copy of the proposed purchase agreement is attached as Exhibit A, as well as a confidential information memorandum and related documents.  A Purchaser who wishes to participate in the auction must submit a sealed bid which is actually received by Emigrant no later than Friday, November 6, 2009 (the “Bid Deadline”).

The assets of OmniSonics are attractive for a number of reasons:

· FDA approved product indicated for the removal of thrombus in the peripheral vasculature and the infusion of physician specified fluids.
· Intellectual Property: a comprehensive patent estate which includes 20 issued patents and 16 pending patent applications in the U.S., as well as 6 issued patents and 13 pending patent applications outside of the U.S. Many of the key patents which cover apparatus, methods and uses do not expire until 2022.  A list of the intellectual property is attached as Exhibit B.
· Preliminary Prospective, Registry Patient Data Set for removal of thrombus in patients with Deep Vein Thrombosis (DVT) Sonic I.
· Preliminary Prospective, Registry Patient Data Set for removal of thrombus in patients with Acute Limb Ischemia) Sonic II.
· Manufacturing, Design and Calibration Equipment.
· Relationships with Third Party Manufacturers that can assist with the production of saleable product.

OmniSonics  Company Profile

Founded in 1999, OmniSonics was a private, Wilmington, MA-based revenue stage medical device company. Over the past 10 years, OmniSonics raised approximately $100MM in equity and debt from leading venture capital firms including GE Asset Management, Nomura Phase4 Ventures, Domain Associates, H&Q Asset Management and Canaan Partners.

Bankruptcy Case. On March 23, 2009, OmniSonics filed a chapter 7 bankruptcy case in the United States Bankruptcy Court for the District of Massachusetts.  John J. Aquino is Trustee. Emigrant’s affiliate, Life Sciences Capital, LLC, was a prepetition lender to OmniSonics and Emigrant has entered into a transaction with the Trustee to purchase substantially all of the assets of OmniSonics, including its intellectual property. Emigrant has retained Gerbsman Partners to conduct a sale of these assets.  Some of the former employees of OmniSonics may be available to assist purchasers with due diligence and a prompt, efficient transition to new ownership. Notwithstanding the foregoing, former employees or officers of OmniSonics and the Trustee should not be contacted directly without the prior consent of Gerbsman Partners.

Assets Being Sold. The assets which are being sold consist of substantially all of the intellectual property of OmniSonics including issued patents and trademarks, related records, patent applications, and certain equipment.   These are referred to as the “Assets.”

IMPORTANT LEGAL NOTICE

The information in this memorandum does not constitute the whole or any part of an offer or contract.

The information contained in this memorandum relating to the Assets has been supplied by former executive officers of OmniSonics and the Trustee. It has not been independently investigated or verified by Gerbsman Partners or their respective agents.

Prospective purchasers should not rely on any information contained in this memorandum or provided by Gerbsman Partners (or their respective staff, agents, and attorneys) in connection with the proposed sale, whether transmitted orally or in writing as a statement, opinion, or representation of fact. Interested parties must satisfy themselves through independent investigations and due diligence as they see fit.

Gerbsman Partners, and their respective staff, agents, and attorneys: (i) disclaim any and all implied warranties concerning the truth, accuracy, and completeness of any information provided in connection with the proposed sale and (ii) do not accept liability for the information, including that contained in this memorandum, whether that liability arises by reasons of OmniSonics’ or Gerbsman Partners’ negligence or otherwise.

Any sale of the OmniSonics Assets will be made on an “as-is,” “where-is,” and “with all faults” basis, without any warranties, representations, or guarantees, either express or implied, of any kind, nature, or type whatsoever from, or on behalf of OmniSonics, Gerbsman Partners, Emigrant or the Trustee. Without limiting the generality of the foregoing, the foregoing parties and their respective staff, agents, and attorneys,  hereby expressly disclaim any and all implied warranties concerning the condition of the Assets and any portions thereof, including, but not limited to, environmental conditions, compliance with any government regulations or requirements, the implied warranties of habitability, merchantability, or fitness for a particular purpose.

Please refer in the Confidential Information Memorandum to the section on Legal Considerations for further information about these matters, and the section on Bidding Procedures for information about bidding procedures.


BIDDING PROCEDURES

1. Each person or entity who is or may be interested in bidding for and purchasing all or some of the Assets shall be referred to as “Purchaser.” Each Purchaser who executes the Confidentiality Agreement may request access to former personnel of OmniSonics who may be made available and access to the “Data Room” which includes various documents (the “Diligence Access”).  Any Purchaser seeking access to OmniSonics personnel or who wishes to request additional information should contact Gerbsman Partners.  Each Purchaser who executes the Confidentiality Agreement and obtains the Diligence Access (whether or not such Purchaser has obtained all or some portion of the personnel and access materials) shall be deemed to acknowledge and represent:  (a) that it is bound by the bidding procedures described herein; (b) that it has had an opportunity to inspect and examine the Assets and to review pertinent documents and information with respect thereto; (c) that it is not relying upon any written or oral statements, representations, or warranties of Gerbsman Partners or Emigrant; and (d) all such documents and reports have been provided solely for the convenience of the interested party, and Gerbsman Partners and Emigrant do not make any representations as to the accuracy or completeness of the same.

2. A Purchaser who wishes to participate in the auction must submit a sealed bid, which is to be received by Emigrant no later than Friday, November 6, 2009 (the “Bid Deadline”), to Karen Wold, Emigrant Bank, 6 East 43rd Street, 20th Floor, New York, New York 10017 and e-mailed to:  Woldk@emigrant.com and steve@gerbsmanpartners.com.  The bid shall contain:  (a) a list or identification of the Assets such Purchaser wishes to purchase; (b) the amount of the bid; (c) any proposed changes to the Purchase Agreement and all exhibits and schedules, with redline to show all such changes and (d) any other information that Purchaser deems relevant.  All bids must be accompanied by a refundable deposit check in the amount of $50,000 (payable to Emigrant).

In addition:

(a) Bids may be made for all or any portion of the Assets.

(b) Any Purchaser making a bid must be prepared to provide independent confirmation that it possesses the financial resources to complete the purchase.

(c) Emigrant reserves the right to, in its sole discretion, extend the Bid Deadline, accept or reject any bid, or withdraw any or all Assets from the sale.

(d) Emigrant shall determine the highest and best bid and may contact Purchasers regarding their bids prior to the final determination.  The winning bidder will be notified as soon as possible after the Bid Deadline. Unsuccessful bidders will have their deposits returned to them.

(e) A successful Purchaser with regard to some or all of the Assets will be required to increase its deposit to $200,000 within 24 hours of being notified it is a successful Purchaser and be prepared to close within seven (7) days of being notified that its bid has been accepted. All sales, transfer, and recording taxes, stamp taxes, if any, relating to the sale of the Assets shall be the sole responsibility of the successful bidder and shall be paid to Emigrant at the closing of each transaction.  If the successful bidder fails to close, Emigrant may retain the deposit, exercise any remedies under applicable law and subsequently sell to another party.

(f) Any Purchaser who bids shall have no remedy against Emigrant or Gerbsman Partners or any other person except for the return of its deposit; provided, that, any Purchaser who enters into an Asset Purchase Agreement shall have all remedies under such Agreement and under applicable law.

(g) Copies of all bids should be sent by e-mail to steve@gerbsmanpartners.com

CONTACTS

For additional information, please do not contact OmniSonics or the Trustee directly; instead please contact:

For additional information, please see below and/or contact:

Steven R. Gerbsman
(415) 456-0628
steve@gerbsmanpartners.com

Dennis Sholl
(415) 457-9596
dennis@gerbsmanpartners.com

Kenneth Hardesty
(408) 591-7528
ken@gerbsmanpartners.com

Other covering this topic include: Xconomy, Taragana.

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