Showing posts with label sourcing. Show all posts
Showing posts with label sourcing. Show all posts
Monday, November 24, 2008
Back in NYC
I slipped into Manhattan late last night; I'm speaking this evening at the New York County Lawyers' Association on social networking and legal business development. Sure, it's a diversion from my usual M&A-related trips to NYC, but it's an age of expanding horizons, right? Event is 6:00 - 9:00 tonight at 14 Vesey Street, downtown.
Wednesday, August 08, 2007
Sourcing Deals
In general, I think it easier to find deals as a strategic acquiror than it is when looking for investment opportunities in the VC or PE worlds. First, the universe of potential targets is a lot smaller, unless you work for General Electric. Secondly, although your financial models may not adequately account for this factor, there is, at some level of the corporate decision-making process, a built-in "strategic bias" favoring deals that help grow the business.
Assuming you're not operating within a global conglomerate or looking to expand inorganically into a new line of business, potential targets are going to be found primarily amongst your competitors and suppliers. For example, in the wireless industry we would do deals to acquire operating markets or raw spectrum from other carriers (competitors), acquire or sell towers to or from aggregators (suppliers), and acquire companies providing billing and other IT services (suppliers). In addition, there would be the occasional deal with a financial entity (speculators) to acquire spectrum assets, or a small company with something new and exciting to offer that wasn't currently a vendor (innovators).
In at least the first two groups, you should know who the potential targets are, at least for the most part. You probably already talk regularly with some of them. Others you may cold-call to get a discussion started, or they may hire bankers to approach you. Or your CEO might come back from a two-week camping trip with a deal in hand. In any event, deals with those categories of targets are not hard to get going.
Of the other two groups, the speculators are the easiest to locate - they will usually find you. The innovators are the tough ones to find. While this category may be of lesser importance in stable, slower-growing businesses, it's critical in many technology businesses to find and acquire these talents and ideas before the competition does. The problem of finding them could stem from not knowing where they might be, not knowing how to get your inquiries returned, or not being able to efficiently filter out the few good opportunities from the flood of dreck that is being thrown on your desk every day (an issue Google no doubt struggles with). More than ever, overcoming these issues requires those doing the deals to know as much as humanly possible about their company and the environment it operates in.
Assuming you're not operating within a global conglomerate or looking to expand inorganically into a new line of business, potential targets are going to be found primarily amongst your competitors and suppliers. For example, in the wireless industry we would do deals to acquire operating markets or raw spectrum from other carriers (competitors), acquire or sell towers to or from aggregators (suppliers), and acquire companies providing billing and other IT services (suppliers). In addition, there would be the occasional deal with a financial entity (speculators) to acquire spectrum assets, or a small company with something new and exciting to offer that wasn't currently a vendor (innovators).
In at least the first two groups, you should know who the potential targets are, at least for the most part. You probably already talk regularly with some of them. Others you may cold-call to get a discussion started, or they may hire bankers to approach you. Or your CEO might come back from a two-week camping trip with a deal in hand. In any event, deals with those categories of targets are not hard to get going.
Of the other two groups, the speculators are the easiest to locate - they will usually find you. The innovators are the tough ones to find. While this category may be of lesser importance in stable, slower-growing businesses, it's critical in many technology businesses to find and acquire these talents and ideas before the competition does. The problem of finding them could stem from not knowing where they might be, not knowing how to get your inquiries returned, or not being able to efficiently filter out the few good opportunities from the flood of dreck that is being thrown on your desk every day (an issue Google no doubt struggles with). More than ever, overcoming these issues requires those doing the deals to know as much as humanly possible about their company and the environment it operates in.
Thursday, February 16, 2006
Know thy Target (or Suitor)
Lorne Grohe has an interesting series going on valuation. His posts contain lots of useful detail and tactics for dealing with valuation discussions. Inherent in all this is a theme that’s critical if you want to make a deal happen – you’ve got to be prepared. If you’re looking to acquire someone, you’ve got to know as much about them as you can. What challenges or opportunities will they have in the next year? Who else is sniffing around? How’s the financial position? What’s the company culture like? How viable are their transaction alternatives?
Naturally, buyers also need to have a keen understanding of their own transaction alternatives, including organic growth. The “build” alternative may not come up in negotiations, but it certainly will be of interest to senior management or the BOD when it comes time to approve the deal.
On the seller’s side, preparation is even more important, yet for some reason it’s more common to see woefully prepared sellers than buyers. If you get a call out of the blue from a potential buyer, and you’ve got no interest in selling, it’s fine to simply throw a fantasy number out there. If they want to pay it, great! If not, back to business. But if you’re actively shopping your company, there’s no excuse for not knowing everything about yourself that impacts value (good and bad) and everything about your suitors. What’s their debt capacity? How are the growth prospects? Can they build a competitive product or service, and at what cost/timing? What synergies are they likely to realize? Are there shareholder/regulatory approval issues? How hungry are they?
Naturally, buyers also need to have a keen understanding of their own transaction alternatives, including organic growth. The “build” alternative may not come up in negotiations, but it certainly will be of interest to senior management or the BOD when it comes time to approve the deal.
On the seller’s side, preparation is even more important, yet for some reason it’s more common to see woefully prepared sellers than buyers. If you get a call out of the blue from a potential buyer, and you’ve got no interest in selling, it’s fine to simply throw a fantasy number out there. If they want to pay it, great! If not, back to business. But if you’re actively shopping your company, there’s no excuse for not knowing everything about yourself that impacts value (good and bad) and everything about your suitors. What’s their debt capacity? How are the growth prospects? Can they build a competitive product or service, and at what cost/timing? What synergies are they likely to realize? Are there shareholder/regulatory approval issues? How hungry are they?
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