| From: Glenn Petersen | 8/18/2014 8:21:30 AM | | | | | | In Silicon Valley, Mergers Must Meet the Toothbrush Test
By DAVID GELLES
DealBook
New York Times
August 18, 2014 7:32 am
Credit Liz Grauman/The New York Times
_______________
MOUNTAIN VIEW, Calif. — When deciding whether Google should spend millions or even billions of dollars in acquiring a new company, its chief executive, Larry Page, asks whether the acquisition passes the toothbrush test: Is it something you will use once or twice a day, and does it make your life better?
The esoteric criterion shuns traditional measures of valuing a company like earnings, discounted cash flow or even sales. Instead, Mr. Page is looking for usefulness above profitability, and long-term potential over near-term financial gain.
Google’s toothbrush test highlights the increasing autonomy of Silicon Valley’s biggest corporate acquirers — and the marginalized role that investment banks are playing in the latest boom in technology deals.
Many of the biggest technology companies are now going it alone when striking large mergers and acquisitions. Companies like Google, Facebook and Cisco Systems are leaning on their internal corporate development teams to identify targets, conduct due diligence and negotiate terms instead of relying on Wall Street bankers.
“Larry will look at potential deals at a very early stage,” said Donald Harrison, Google’s vice president of corporate development. “Bankers can be helpful, but they’re not necessarily core to the discussions.”
Deals with unadvised buyers are increasing rapidly. The acquiring company did not use an investment bank in 69 percent of American technology acquisitions worth more than $100 million this year, according to Dealogic. That number was 27 percent 10 years ago.
Above, executives from Beats Electronics and Apple, after Apple bought Beats this year in a $3 billion deal conducted without Wall Street’s help.Credit Paul Sakuma/Apple
________________
When Apple bought Beats Electronics for $3 billion this year, it eschewed the help of professional deal advisers. When Facebook spent $2.3 billion for the virtual reality company Oculus VR in March, it did so without the help of bankers. And when Google acquired the mapping company Waze for $1 billion last year, no bank got a cut of the fees.
In June, one of the largest-ever deals with an unadvised buyer was announced when Oracle, known for its refusal to use investment bankers, acquired Micros Systems for about $5 billion. The biggest such deal came in 2011, when Microsoft, acting alone, bought Skype from Silver Lake Partners for $8.5 billion.
The diminished reliance on investment banks comes as technology deal-making is booming. More than $100 billion in such deals have been announced in the United States this year, the most since 2000, according to Dealogic.
At the heart of the disconnect between technology companies and banks is the belief among many tech executives that some advisers simply do not know what companies like Google and Facebook are looking for.
“Bankers do two things well: financial evaluation and negotiation,” said Richard E. Climan, a partner at the law firm Weil, Gotshal & Manges who often works with companies to complete deals where no banks are involved. “But there’s a feeling that investment bankers might not be so important on the evaluation of early-stage tech companies.”
Amin Zoufonoun, Facebook’s vice president for corporate development, said some bankers would come in and pitch acquisition candidates, like the user reviews site Yelp or the payment network PayPal. But instead of trying to swallow already established Internet brands, Facebook uses acquisitions to make big bets on the future and plug technical holes. And in Silicon Valley’s relatively small circle of elite entrepreneurs, executives and venture capitalists, connections are easy and ample.
Facebook’s most recent big deal, the acquisition of Oculus VR, came as a surprise to even seasoned technology watchers. But Marc Andreessen, a Facebook board member, was also on the board of Oculus VR, paving the way for the deal. The move had nothing to do with improving the social network’s main site or increasing sales. Instead, it was a bet that virtual reality would emerge as a new operating system of sorts.
While other companies focus on deals that will bolster their earnings per share, “we haven’t done a single deal like that, where we are looking at a target with that being a rationale,” Mr. Zoufonoun said.
The same dynamic was true when Google acquired Nest, the home monitoring company, for $3.2 billion this year. Nest’s current sales are a drop in Google’s ocean of profit, but the deal gave Google an entry to a potentially huge new market.
Big tech companies sometimes struggle to explain such unconventional deals to investors. When Facebook spent $19 billion to acquire WhatsApp, assisted only by the boutique bank Allen & Company, shareholders tried to square the enormous price with WhatsApp’s small team of engineers and minuscule revenue.
“It’s more art than science at times,” said Sanjay Kacholiya, head of corporate development at Eventbrite, a ticketing start-up. “That can make it difficult for an investment banker who’s familiar with earnings per share and discounted cash flow.”
Not all unadvised deals go well. Google spent $228 million on the social games company Slide without the help of a bank, then unceremoniously shut it down. Cisco didn’t work with a bank when it paid $590 million for the maker of Flip video cameras, and it wound up shuttering the unit quickly. But thanks to tech companies’ enormous war chests, such mistakes rarely have long-term consequences.
While traditional investment banks might not be comfortable suggesting that clients pay such startling prices for relative unknowns, many big tech companies have built up robust corporate development departments designed to do just that. The teams are largely staffed by former bankers who have abandoned pinstripes and wingtips for T-shirts and sneakers.
Cisco, which has acquired more than 170 companies, decided it was more efficient — and more economical — to hire its own full-time bankers rather than pay millions of dollars in fees each time it struck a deal.
“Our heritage has been embracing M.&A. as a way to enter new markets,” said Hilton Romanski, Cisco’s head of corporate development, who started his career as a JPMorgan banker. “It makes sense to build a relatively scaled effort around M.&A. with teams and talent that understand the market.”
Facebook has hired bankers away from Credit Suisse and Jefferies, among other companies, and gives them more responsibility than they would have at a bank. “They can run a deal from beginning to end,” Mr. Zoufonoun said. “As an analyst, they were doing one part of a pitch deck.”
At Google, Mr. Harrison has an employee looking after the deal needs of each of the company’s 12 product areas, like ads, YouTube and search. That person goes to all meetings held by the senior members of that group, staying attuned to possible acquisition needs.
But the hours are not necessarily any better than on Wall Street, said Mr. Zoufonoun, who stayed up several nights in a row working to close the WhatsApp deal and fell asleep at the office the day it was announced.
Once a target is identified and it is time for an approach and negotiations, corporate acquirers working on their own often diverge from the standard advice given out by bankers.
Mr. Zuckerberg developed friendships with the chief executives of Instagram and WhatsApp before Facebook went on to buy them. Only after the men knew one another well and began discussing integrating the products did discussions about actual transactions begin. Even then, much of the focus was on how autonomously the target company would operate once acquired.
“It’s very easy to treat M.&A. transactionally, to not put the target company first. Are we aligned? Do we want the same thing post-acquisition?” Mr. Zoufonoun said. “I always use the marriage example. You should spend a lot of time dating first. It takes two to dance.”
Once a deal is made, the real work of merging corporate cultures begins. “The success or failure of deals is really determined by the success or failure of the integration,” Mr. Harrison said, adding that Google closely monitored new acquisitions for two years.
The trick is to strike the right balance of blending teams while also allowing for a measure of autonomy.
“The last thing you want to do as an acquirer is go in there and start changing things around,” Mr. Zoufonoun said.
Tech companies emphasize that they maintain good relationships with many banks and use them on big deals when financing or fairness opinions — independent justifications of a deal — are needed. When Google acquired Nest, for example, Lazard provided a fairness opinion to Google’s board.
But often, when big tech companies are looking to grow through acquisitions, it is the culture and vision, not the earnings and revenue, that are of paramount importance. And for the likes of Facebook and Google — shareholder darlings that are flush with cash and run by well-connected entrepreneurs — it is easier than ever to get by without bankers.
“The most important thing is that soft stuff,” Mr. Zoufonoun said. “And that soft stuff is more challenging for a bank or an adviser to tap into.”
dealbook.nytimes.com |
| | Speculating in Takeover Targets | Stock Discussion ForumsShare | RecommendKeepReplyMark as Last Read |
|
| To: richardred who wrote (3228) | 8/26/2014 12:42:33 PM | | From: richardred | | | | RE-SKY-Skyline- Reported earnings just recently released. The company is still not cash flow positive yet. A turnaround that has yet to materialize. The company seems to be selling off everything, but the kitchen sink. After the company plane, excess land, idle facilities, and life insurance policies. I'm not sure how much is left to sell off. The thing that's keeping me here. Insider ownership at close to 50% and the synergies with Buffett's Clayton homes. YH Reported book value is down to around to four bucks.
One bright spot seemed to be increasing orders the manufactured homes segment. Although much of that might be due to a one time order from a manufacture homes community. The trailer segment has been a total drag. The consolidation of those facilities or an outright along with a better product mix has me hopeful. |
| | Speculating in Takeover Targets | Stock Discussion ForumsShare | RecommendKeepReplyMark as Last ReadRead Replies (2) |
|
| To: richardred who wrote (3084) | 8/26/2014 1:05:07 PM | | From: richardred | | | | Ok I'll say it if it hasn't already. A Wopper of a deal, only hold the Inversion. <G>
Burger King to Buy Tim Hortons for $11.4 Billion
Canada has taken a hard line to it's big companies being bought out. We will see how this goes.
If I remember right. It was the Peltz brothers that decided for Wendy's to spin of Tim Hortons for shareholder enhancement.
Now it's time for a Burger King try. Warren Buffett said to be funding part of the deal. The market has taken a positive reaction.
Warren tried to provide funding for a Coty/Avon deal that fell apart. Now Coty has a venture with Avon for distribution of some products in Avon's profitable Latin Americas business.
If that venture becomes successful. I see renewed speculative appeal in AVP. Especially since the Avon bribery China scandal will be settled at a high cost to the company.
P.S. I've notice the Carrols Restaurant Group, Inc. (TAST) has move up smartly due to the fact it it the franchisee of many Burger Kings. I still remember the days my parents took us to Carrols here in Western NY. There all Burger Kings now. Their club burger was 25 cents I think.
finance.yahoo.com
 |
| | Speculating in Takeover Targets | Stock Discussion ForumsShare | RecommendKeepReplyMark as Last ReadRead Replies (2) |
|
| To: golfer72 who wrote (3743) | 8/27/2014 1:33:03 AM | | From: richardred | | | | They still have the empty shell of a Carrols not far from our house. Only the arches are down. I expect consolidation of the group to continue. No targets I'm currently at. However Sonic drew my attention last time I looked at the group.
finance.yahoo.com |
| | Speculating in Takeover Targets | Stock Discussion ForumsShare | RecommendKeepReplyMark as Last Read |
|
| To: richardred who wrote (3420) | 8/28/2014 12:07:09 PM | | From: richardred | | | | Bullseye today- :+ ) First one of this year- COBRA Electronics
Message 29662000
RE- Cobra takeover-I'll bet the tax loss carryforwards had something to do with it. <O> Wink
Monomoy Capital Partners To Acquire Cobra Electronics Corporation
CHICAGO, Aug. 28, 2014 /PRNewswire/ -- Cobra Electronics Corporation ( COBR), a leading global designer and marketer of mobile communications and navigation products, and Monomoy Capital Partners II, L.P. ("Monomoy") a New York private equity fund focused on value investing and business improvement, announced today that Cobra Electronics and entities affiliated with Monomoy have executed a definitive merger agreement pursuant to which an affiliate of Monomoy will acquire all of the outstanding shares of common stock of Cobra Electronics at $4.30 per share in cash.
Under the terms of the agreement, an affiliate of Monomoy will commence a tender offer to purchase all outstanding shares of common stock of Cobra Electronics at a price of $4.30 per share in cash within ten business days. The offer is conditioned on, among other things, the tender of a majority of the outstanding shares of Cobra Electronics' common stock, calculated on a fully diluted basis. The merger agreement provides that, promptly after the closing of the tender offer, any shares not tendered in the tender offer (other than shares for which appraisal is properly sought under applicable law) will be acquired in a second-step merger at the same cash price as paid in the tender offer.
Directors and officers of Cobra Electronics holding approximately 2.6% of Cobra Electronics' outstanding shares of common stock, on a fully diluted basis, have executed support agreements pursuant to which each of them will tender their shares in the tender offer.
"This transaction will deliver to Cobra Electronics' shareholders certainty of value and liquidity in the form of a cash payment immediately upon closing," said Jim Bazet, Chairman and Chief Executive Officer of Cobra Electronics. "We are excited to work with Monomoy as this transaction marks the next stage in the evolution of the Cobra brand."
"We are thrilled to add Cobra's market leading products to the Monomoy portfolio," said Justin Hillenbrand, Co-CEO of Monomoy. "We look forward to working with Cobra's team members, suppliers and customers for many years to come."
In addition to the minimum tender condition, the transaction is subject to other customary closing conditions. The transaction is expected to close in the fourth quarter of this year. William Blair & Co., LLC acted as financial advisor, and Sidley Austin LLP acted as legal advisor, to Cobra Electronics. Houlihan Lokey acted as financial advisor, and Kirkland & Ellis, LLP acted as legal advisor, to Monomoy Capital Partners.
About Cobra Electronics
Cobra Electronics is a leading global designer and marketer of communication and navigation products, with a track record of delivering innovative and award-winning products. Building upon its leadership position in the GMRS/FRS two-way radio, radar detector and Citizens Band radio industries, Cobra identified new growth opportunities and has aggressively expanded into the marine market and has expanded its European operations. The Consumer Electronics Association, Forbes and Deloitte & Touche have all recognized Cobra for the company's innovation and industry leadership. To learn more about Cobra Electronics, please visit the Cobra site at www.cobra.com.
About Monomoy Capital Partners
Monomoy Capital Partners is a private equity firm with $700 million in committed capital that makes controlling investment in middle market businesses in the manufacturing, distribution, consumer product and foodservice sectors. Over the past five years, Monomoy has closed 43 middle market acquisitions. Its portfolio companies generate over $1.2 billion in combined sales and employ more than 6,000 people across four continents. Monomoy implements customized business improvement programs at its portfolio companies that reduce operating expenses, increase profitability and support profitable growth. Please visit www.mcpfunds.com for a detailed description of Monomoy and its portfolio companies.
Safe Harbor
This release contains forward-looking statements. These statements are based on management's current expectations and are subject to risks and uncertainties. Actual results may differ materially from these expectations due to factors such as the acceptance of Cobra's new and existing products by customers, the continued success of Cobra's cost containment efforts and the continuation of key distribution channel relationships. Please refer to Cobra's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K, for a more detailed discussion of factors that may affect Cobra's performance.
Important Additional Information
This press release is not a recommendation, an offer to purchase or a solicitation of an offer to sell shares of common stock of Cobra Electronics Corporation (the "Company"). The tender offer (the "Offer") described in this press release for all of the outstanding shares of common stock of the Company has not yet commenced. Upon commencement of the Offer, Venom Electronics Holdings, Inc. will file a Tender Offer Statement on Schedule TO (including an Offer to Purchase, Letter of Transmittal and related tender offer documents, the "Tender Offer Documents") with the Securities and Exchange Commission (the "SEC"). Following commencement of the Offer, the Company will file with the SEC a solicitation/recommendation statement on Schedule 14D-9 (the "Schedule 14D-9"). Before making any investment decision, Investors and shareholders of the Company are strongly advised to read the Tender Offer Documents, the Schedule 14D-9 and other relevant materials when they become available, because they will contain important information.
Investors and shareholders of the Company can obtain copies of these materials (and all other related documents filed with the SEC) when available, at no charge on the SEC's website at www.sec.gov. Copies of the Schedule 14D-9 and other documents filed by the Company with the SEC will be available at no charge under the heading "SEC Filings" in the "Investor Relations" portion of the Company's website, www.cobra.com. |
| | Speculating in Takeover Targets | Stock Discussion ForumsShare | RecommendKeepReplyMark as Last Read |
|
| From: richardred | 8/29/2014 12:15:14 PM | | | | | | New buys today tripling position in US ENERGY and new buy in Contango Oil & Gas Company (NYSE MKT:MCF) . This adds to a current small money loosing position in USEG- US Energy
IMO -Prospects are much better and Speculative Appeal higher than when I first entered years ago. I entered some USEG the day I bought Creedo Petroleum. Creedo has already been bought out. Maybe it's time for the family to sell out to ? Maybe-Contango Oil & Gas Company (MCF)? Bought some MCF just in case a bigger player wants in, & plus they own a bigger working interest in some USEG producing wells. |
| | Speculating in Takeover Targets | Stock Discussion ForumsShare | RecommendKeepReplyMark as Last ReadRead Replies (2) |
|
| To: Glenn Petersen who wrote (3734) | 9/1/2014 12:33:53 AM | | From: richardred | | | | Now here's a new initiative buy a foreign Gov't I haven't ever heard of before.
>the South Korean government has told the company to put its cash to work or risk a fine
Samsung under pressure to spend (RCR Mobile Minute)
Mobile Minute:
Samsung could be shopping for acquisitions soon — the South Korean government has told the company to put its cash to work or risk a fine. The government has its eye on Samsung’s $60 billion cash pile and would like to see that money distributed to households as dividends paid to Samsung shareholders. (Corporate profits have been growing faster than household income in South Korea.)
The government is proposing a 10% tax on “excess” cash held by large companies, and lawmakers would have the authority to define “excess.” If the law passes, companies that want to avoid the tax will have some choice about how they get their cash out into the economy. Dividends are certainly one option, but Samsung may instead choose a strategic acquisition or two. Even before the latest moves by lawmakers, analysts were predicting that Samsung would look for an acquisition that could expand its footprint. There are several struggling smartphone makers that Samsung could swallow, but the company might also branch out into a related industry, like software. It already makes devices, chips, and network gear, so networking software could be the next logical extension.
rcrwireless.com |
| | Speculating in Takeover Targets | Stock Discussion ForumsShare | RecommendKeepReplyMark as Last ReadRead Replies (2) |
|
| |
