Tuesday, October 26, 2010

Reverse Synergies

Amazon’s acquisition of Woot! this past summer marked the all-time best letter from a CEO announcing his company’s acquisition, as well as the infamous “We Got Acquired by Amazon” sock puppet monkey video:

Lots of people love Woot; the attitude is fun and refreshing, and they DO have plenty of great deals. It’s not hard to see why Amazon saw an attractive acquisition opportunity.

One wonders, though, if the synergies analysis for the Woot acquisition included the impact on Amazon of having to remit sales tax in Texas (Woot is based in Austin). Because Texas just submitted a bill for $269 million. That’s a heckuva lot more than what Amazon reportedly paid for Woot.

In fairness, this is the culmination of a long-running dispute between Amazon and Texas over sales taxes. But owning Woot sure isn’t going to help Amazon’s argument that it’s not responsible for remitting Texas sales tax.


Friday, August 13, 2010

Vote on Oracle's Next Meal

The beast from Menlo Shores has an insatiable appetite, gobbling up companies large and small. Notables like Peoplesoft and Sun Micro have fallen to Larry Ellison's behemoth in recent years - so who's next?

Stephen Jannise, an ERP software analyst who follows Oracle, has taken a stab at answering that question, and invites your vote on who Oracle is likely to next set its hooded gaze upon.

Monday, August 02, 2010

Another GC Weighs in on Outside Counsel

Great post from Richard Russeth: "If Nordstrom's Was A Law Firm, I'd Give Them All My Business: 7 Mistakes To Avoid With Your In-House Client."

Terrific advice for attorneys seeking long-term corporate clients, or wondering why their clients tend to "stray." I would overlay this with previous points I've made about the importance of outside counsel offering business-focused advice, but these issues of responsiveness are so important - and such low-hanging fruit - that it's surprising more attorneys can't figure them out. I especially like rule #5.

Friday, July 02, 2010

Deal Deliberations

Fred Wilson has a post up regarding Foursquare's recent funding round, defending the lengthy process taken by the startup. What started as financing discussions turned into acquisition talks, then ultimately returned to financing as Foursquare decided they'd rather grow organically than cash out now.

That's a respectable, even admirable, choice. It's not without risk, but it's good to see a company swing for the fences. And while I have often urged the virtues of speed in getting deals done, I agree with Fred that Foursquare did the right thing in taking their time through this process.

The distinction lies between the time taken to evaluate alternatives and the time taken to button the deal up once the company has made its choice. During the evaluation/auction phase, the risks of waiting are likely to be heavily outweighed by the benefits of seeing things through. That may mean getting to the best acquisition deal, or arriving at the informed decision to move forward alone (or with new financing).

However, it's once that decision has been made that things need to be moved forward with haste. Even if you haven't chosen your partner and an auction still persists, once the decision to do one type of deal or another is in place it's time to race for the finish. Why? Because at this point the risk scenario is flipped. The risks attendant with delay - new competitors emerging, changes in the macro environment, etc. - strongly outweigh any potential benefits of waiting. This doesn't mean not negotiating hard, but it does mean not allowing any delay due to lawyerly handwringing or people not being willing to work around the clock to get the deal papered.

Or as someone else put more memorably: "Only one thing matters in this life: Get them to sign on the line that is dotted."

I don't know how long it took Foursquare to get their financing closed once they'd made the decision to go that route, but if it took more than a couple of weeks that would be cause for criticism.

Not, however, the time they took to reflect on their options and make the choice between selling now and moving forward independently.

Wednesday, June 23, 2010

Straight Outta Law School

Hewlett Packard is now experimenting with hiring in-house counsel directly out of law school. It's an unorthodox move, but makes sense for a company of HP's size. They've got the volume of grunt legal work that a first year is suited to do, and enough senior counsel to provide training. Most importantly, they are assured of getting new hires who are untainted by time spent toiling in the risk-adverse halls of big law firms.

Sounds like good news for these lucky hires and their internal clients at HP.

Wednesday, June 16, 2010

The Perils of Hyperbole

First of all, has it really been three months since I've posted here? Between being crazy-busy and writing elsewhere I've neglected Corporate Tool. But fear not - this post from What About Clients? today reminded me of how hyperbole, attractive though it might be, is to be avoided like the plague in both litigation and business.

Dan Hull is absolutely right about the corrosive effect hyperbole has on one's credibility as a litigator; how a single overstatement can undermine an entire legal brief. It's simple, really: Lie about one thing, and people won't believe you about anything.

The corollary in business is this: If you're going to overstate your position, make threats or engage in brinkmanship, you'd better be prepared to back it up. Unless you're really ready to walk from the negotiating table, bring a lawsuit or take some other decisive action, such bombast is likely to seriously backfire. Empty threats are almost never successful.

Thursday, March 18, 2010

Avvo Series C

I do a wide variety of things here at Avvo, from talking to angry attorneys to fetching drinks for our Friday beer gardens. Over the last week, I've been back in deal mode, wrapping our Series C financing - a $10MM round lead by DAG Ventures, joined by our existing investors Benchmark Capital and Ignition Partners.

Compared to M&A, negotiating a C round venture investment isn't exactly exciting (although it does generate a lot more paper). We kept this one hopping by closing in record time - 9 days from term sheet to close. Kudos to our great investors, DAG's counsel at Cooley and our attorneys at Perkins for moving this thing along so quickly. We're awfully excited about what the next year has in store for us.

Friday, February 19, 2010

Like Hogs to the Slaughter

One pig-meat conglomerate buying another isn't typically my stock in trade, but I was intrigued by the recent news of the DOJ levying a $900K fine against Smithfield Farms for gun-jumping in its acquisition of Premium Standard Farms. Root of the problem? During the pre-close HSR waiting period, Premium Standard had submitted several long-term contracts for hog supply to Smithfield for review and approval. Sooey!

While the amount of the fine isn't huge (representing little more than one-tenth of one percent of the $810 million Smithfield paid), what's interesting is how after-the-fact it was. The deal closed nearly 3 years ago.

Lesson one, which isn't really a lesson, because both parties should have known better: Don't ask your acquiror to sign off on ordinary course contracts, even if they ARE large and DO extend beyond the closing date. Aside from the gun jumping risk, there are also significant benefits to the seller in maintaining its operational independence while awaiting the close (optionality in the event the deal goes south; additional motivation for the buyer to close quickly). And while the buyer's interest in making sure it's not saddled with non-economic contracts is obvious, tight operating covenants are a better solution than trying to assert de facto operating control pre-close.

Lesson two: Don't expect that closing the deal is the end of your dealings with the DOJ. If you haven't run a clean process, don't be surprised if the feds come calling long after the closing dinner is a distant memory.

Monday, February 01, 2010

Thoughts on Daily Bike Commuting

I starting riding to work about 18 months ago, right after moving from Redmond to Seattle. A fair weather rider at first, I quickly grew to love the feeling of riding to work. From the exhilarating wakeup of flying downhill in the morning to the mind-cleansing burn of pedaling uphill on the way home, I was hooked. I've moved steadily onward to riding nearly every work day. I rode 180 days in 2009, and would have reached 200 if a mid-April sandboarding accident hadn't sidetracked me for 6 weeks with a broken foot.

While I certainly encourage others to "bike their drive," I'll be the first to acknowledge that my situation is about as perfect as it could be for bike commuting. At only 3.5 - 4 miles each way, riding doesn't take any more time than driving, and is way faster than the bus. Parking a car in my building costs $200 a month. My ride is entirely urban, so I'm not (often) dealing with speeding vehicles. With my morning ride almost all downhill, I don't work up a sweat on the way in. My workplace is very casual, so I can ride in my street clothes. Remove any of these factors and who knows how resolved I'd be?

In any event, the last year has been about removing obstacles to riding. The first of these was heavy rain, which for the first six months of riding kept me off my bike. Quality raingear (including these butt-ugly but effective shoe covers) solved that problem, and I now look forward to riding in the rain. I've also added a Cetma rack up front so I can carry bulky items to and from work and run more errands on my bike.

I've probably reached the maximum potential for riding - business travel, speeches and meetings still conspire to keep me off my bike a few weeks each year, and I won't ride in the snow, given the steepness of my hill and how clueless Seattle drivers are at operating in the stuff. I could get another bike, so mechanical problems - which cost me a handful of rides - aren't a factor. But that's probably more just rationalization for me to get this sweet lime-green Swobo.

Wednesday, January 13, 2010

Useless Corporate Lawyers?

Yes, I've known a few . . . enjoyed this brief post from What About Clients, reminding all attorneys out there to quit wringing their hands and give their clients some freaking actionable advice for a change. Also links to WAC's classic "7 Habits of Highly Useless Corporate Lawyers" post.

Thursday, January 07, 2010

Getting Help with the Deal

Good post over at Venture Hacks from Scott Walker - 5 tips on getting deals closed. Here they are, with my thoughts on each:

1. Create a competitive environment. Absolutely. As I wrote about in documenting the sale of AT&T Wireless, a competitive environment drives price and terms in the seller's favor. The only thing better than telling one group that their legal ask is "no longer market" is getting a call from another that they are raising their offer. But - I would emphasize Scott's advice that this effort is one where you must have experienced help. It is a very delicate process to get an auction going and keep it alive, and not a place for any entrepreneur or business manager to learn on the job.

2. Leave your heart at home. Listen, listen, listen - and always check yourself for signs of deal fever.

3. Work your balls off. True for getting most businesses to succeed, and true in the crunch time of getting a deal done. Work 40 hours over a weekend to get a deal done while markets are closed? Spend a week in New York without eating a meal outside of a law firm conference room? You bet - everything needs to fall away when you're focused on getting the deal done.

4. Don't let your investors screw you. Doing diligence is always important - but requires focus. Pay attention to tone and priorities. Don't pay attention to things that don't make a material difference.

5. Get good legal help. God know I've spent a lot of time on this blog dealing with the failings of lawyers, and much of my deal experience has come as a principal rather than the lawyer on the deal. That said, you need to get someone who matches your energy and willingness to work your balls off, AND who knows your business and is aligned with your level of risk aversion. I've seen a lot of good lawyers blow (or nearly blow) deals by wasting time on marginal legal issues. Make sure your lawyer can tell the difference between what matters to you and what can be moved past.

Wednesday, January 06, 2010