Winning business models in ICT - Danyel Slabbers

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Winning business models in ICT - Danyel Slabbers

  1. 1. Valuation & Strategy 18 May 2009 National ICT Event 2009 Winning business models in ICT Draft Danyel Slabbers
  2. 2. Agenda Page 1 Introduction to PwC, Transactions and V&S 1 2 Key elements of winning business cases 6 3 Case: Software Corp 12 4 Questions? 21
  3. 3. Section 1 Introduction to PwC, Transactions and V&S 1
  4. 4. PricewaterhouseCoopers Network <ul><ul><li>PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services for public and private clients. More than 150,000 people in 150 countries connect their thinking, experience and solutions to build public trust and enhance value for clients and their stakeholders. </li></ul></ul>2 Section 1 - Introduction to PwC, Transactions and V&S
  5. 5. Transactions Group within PwC NL 3 Valuation & Strategy - 25 professionals - Dealing with a wide range of valuation assignments <ul><ul><li>The Transactions Group within PwC is a X-Line of Service initiative, consisting of groups within Assurance, Tax and Advisory. Through our international network we are able to service our customers in many parts in the world. </li></ul></ul>Transactions Group: > 200 professionals Section 1 - Introduction to PwC, Transactions and V&S PWC NL Tax & HRS Assurance Advisory Transaction Services Financial Due Diligence Vendor Due Diligence M&A Tax Commercial Due Diligence IT / Systems Due Diligence Corporate Finance Valuation & Strategy Mergers and Acquisitions Capital Markets Group HRS & Pension M&A Services Economics
  6. 6. Transactions Group services clients through the entire deal continuum 4 Evaluating Deals Executing Deals Harvesting Deals Identifying Deals PwC Transactions Mergers & Acquisitions <ul><li>Mergers & acquisitions advisory (buy & sell) </li></ul><ul><li>Finalize acquisition criteria </li></ul><ul><li>Identify and screen targets </li></ul><ul><li>Privatization advice </li></ul><ul><li>Approach target </li></ul><ul><li>Deal structuring </li></ul><ul><li>Advice on fundraising </li></ul><ul><li>Project finance </li></ul><ul><li>Private equity advisory </li></ul><ul><li>Public company advisory </li></ul>Valuation & Strategy <ul><li>Valuation consulting </li></ul><ul><li>Independent expert opinions </li></ul><ul><li>Modelling and business planning </li></ul><ul><li>Tax valuations </li></ul><ul><li>Accounting valuations </li></ul><ul><li>Post deal integration </li></ul><ul><li>Value based management </li></ul><ul><li>Economics </li></ul>Transaction Services <ul><li>Bid support and bid defence services </li></ul><ul><li>Financial due diligence </li></ul><ul><li>Commercial and market due diligence </li></ul><ul><li>Structuring services </li></ul><ul><li>Post deal services </li></ul><ul><li>Strategy review </li></ul><ul><li>Portfolio analysis </li></ul><ul><li>Negotiations </li></ul><ul><li>Finalize structure </li></ul><ul><li>Finalize S&P agreement </li></ul><ul><li>Completion of transaction </li></ul>Section 1 - Introduction to PwC, Transactions and V&S
  7. 7. What is V&S? 5 <ul><li>Valuation </li></ul><ul><li>Conducting merger, acquisition or re-structuring </li></ul><ul><li>Valuing intangible assets, e.g. brands, goodwill, IP, tax or financial reporting (IFRS) </li></ul><ul><li>Needing to understand the value where assets are transferred within an organisation </li></ul><ul><li>Preparing and negotiating valuations for tax purposes with HRMC to support tax planning, meet compliance obligations, resolve disputes in most tax efficient manner </li></ul><ul><li>Economics and regulation </li></ul><ul><li>Analysing country risks & the cost of capital when investing </li></ul><ul><li>Appraising economic profitability and share prices </li></ul><ul><li>Competition issues: merger, cartel, monopoly, predatory pricing, anti-competitive practices </li></ul><ul><li>Regulation advice in building cases & acting for regulator </li></ul><ul><li>Economic and financial analysis to support submissions to the European Commission e.g. Sate aid </li></ul><ul><li>Strategy </li></ul><ul><li>Major investment decision & capital allocation – providing robust quantitative analysis behind decisions </li></ul><ul><li>Strategy reviews supported by expert industry knowledge </li></ul><ul><li>Assessment and enhancement of existing strategies </li></ul><ul><li>Scenario and option modelling combining valuation with strategy </li></ul><ul><li>Market entry analysis; demand and revenue analysis </li></ul><ul><li>Pricing strategies e.g. Long-Run Incremental Cost (LRIC) modelling </li></ul><ul><li>Brand strategy, marketing ROI and effectiveness </li></ul>Section 1 - Introduction to PwC, Transactions and V&S Economics & Regulation Valuation Strategy Industry expertise
  8. 8. Section 2 Key elements of winning business cases 6
  9. 9. A well prepared business plan important starting point <ul><ul><li>Investment summary </li></ul></ul><ul><ul><ul><li>Make your messages short and punchy </li></ul></ul></ul><ul><ul><ul><li>Demonstrate how you can make this business model ‘sing’ </li></ul></ul></ul><ul><ul><ul><li>Highlight the key strengths and weakness </li></ul></ul></ul><ul><ul><ul><li>Show that you understand exactly what investors looking for. Investor is always looking for risk-free investments – but such things do not exist </li></ul></ul></ul><ul><ul><li>Investment summary often an indicator of quality of opportunity </li></ul></ul>7 Section 2 - Key elements of winning business cases
  10. 10. A well prepared business plan important starting point <ul><ul><li>Checklist of elements to consider </li></ul></ul><ul><ul><ul><li>Articulate the key investment criteria of the opportunity </li></ul></ul></ul><ul><ul><ul><li>Indentify risks and how they will be managed </li></ul></ul></ul><ul><ul><ul><li>Outline the strategic objectives </li></ul></ul></ul><ul><ul><ul><li>State business’s qualifications </li></ul></ul></ul><ul><ul><ul><li>Present your financial projections </li></ul></ul></ul><ul><ul><ul><li>Indicate the amount, form and use of finance </li></ul></ul></ul><ul><ul><li>Clearly demonstrated that you have done your home work </li></ul></ul>8 Section 2 - Key elements of winning business cases
  11. 11. A well prepared business plan important starting point <ul><ul><li>Articulate the key investment criteria of the opportunity </li></ul></ul><ul><ul><ul><li>What does the business do? </li></ul></ul></ul><ul><ul><ul><li>What are its key markets? </li></ul></ul></ul><ul><ul><ul><li>Key selling points / critical success factors </li></ul></ul></ul><ul><ul><ul><li>Barriers to entry </li></ul></ul></ul><ul><ul><ul><li>Competitive advantage </li></ul></ul></ul><ul><ul><li>Indentify risks and how they will be managed </li></ul></ul>9 Section 2 - Key elements of winning business cases
  12. 12. A well prepared business plan important starting point <ul><ul><li>Outline the strategic objectives </li></ul></ul><ul><ul><ul><li>Describe product </li></ul></ul></ul><ul><ul><ul><li>Identify (new) target markets </li></ul></ul></ul><ul><ul><ul><li>Detail plans for implementing this strategy </li></ul></ul></ul><ul><ul><li>State business’s qualifications </li></ul></ul><ul><ul><ul><li>What is the business’s past success record? </li></ul></ul></ul><ul><ul><ul><li>What abilities do management bring to the venture? </li></ul></ul></ul>10 Section 2 - Key elements of winning business cases
  13. 13. A well prepared business plan important starting point <ul><ul><li>Present your financial projections </li></ul></ul><ul><ul><ul><li>How much growth is expected? </li></ul></ul></ul><ul><ul><ul><li>What earnings are projected? </li></ul></ul></ul><ul><ul><ul><li>Relate financial projections to the strategic objectives </li></ul></ul></ul><ul><ul><ul><li>Over what period of time will these be achieved? </li></ul></ul></ul><ul><ul><ul><li>Present an overview of sensitivities </li></ul></ul></ul><ul><ul><li>Indicate the amount, form and use of finance </li></ul></ul><ul><ul><ul><li>How much finance is required? </li></ul></ul></ul><ul><ul><ul><li>What will the money be used for? </li></ul></ul></ul>11 Section 2 - Key elements of winning business cases
  14. 14. Section 3 Case: Software Corp 12
  15. 15. Overview of the investment opportunity <ul><ul><li>Software Corp is (early stage) start-up, with no revenues / customers </li></ul></ul><ul><ul><li>Developed a technology (patented) that enables wireless identification of objects </li></ul></ul><ul><ul><li>Easier and cheaper compared to existing emerging technologies </li></ul></ul><ul><ul><li>Catalyst: availability of wireless (broadband) / mobile devices </li></ul></ul><ul><ul><li>Can be used for a wide range of B2B and B2C applications </li></ul></ul><ul><ul><li>Potential strategic partners (hardware/software vendors and teleco’s) showed interest </li></ul></ul>13 Section 3 - Case: Software Corp
  16. 16. Overview of the investment opportunity <ul><ul><li>Looking for financial investor as it does not want to limit its potential by selling the technology to a single strategic partner </li></ul></ul><ul><ul><li>Business model based on licences income (remaining full owner of IP) </li></ul></ul><ul><ul><li>Currently no revenues and expected profit before tax within 3 year of EUR 10 million </li></ul></ul><ul><ul><li>Funding requirement of EUR 2.0 million (documentation, running beta versions and pilots) </li></ul></ul>14 Section 3 - Case: Software Corp
  17. 17. Next steps <ul><ul><li>Step 1: Write a short profile (teaser) of investment opportunity </li></ul></ul><ul><ul><li>Step 2: Prepare a detailed (financial) business plan </li></ul></ul><ul><ul><li>Step 3: Identify potential investors (based on relevant criteria) </li></ul></ul><ul><ul><li>Step 4: Approach investors </li></ul></ul>15 Section 3 - Case: Software Corp
  18. 18. Investor feedback (some examples) <ul><ul><li>Good concept based on using existing technologies, however to early stage for our fund (key middleware not sufficiently available yet) </li></ul></ul><ul><ul><li>Complementary to a number of investments and are definitely interested </li></ul></ul><ul><ul><li>The proposition does not fit within the investment focus as the fund aims on innovative products linked to sustainability, which implies a positive contribution the environment or an improvement of the well-being of people </li></ul></ul>16 Section 3 - Case: Software Corp
  19. 19. Investor feedback (some examples) <ul><ul><li>Interesting idea, but we see a number of considerable issues in becoming successful: primarily the market developments, limited ‘edge’ compared with available solutions and the fact that the whole value chain needs to be convinced of using the technology before getting useful </li></ul></ul><ul><ul><li>The early stage phase on this moment makes it to risky for our investors </li></ul></ul><ul><ul><li>How many funding do they need, for what and what do they expect from an investor? This enable me to better determine whether this opportunity fits our criteria. By the way we are absolutely interested in the segment they are operating in. </li></ul></ul>17 Section 3 - Case: Software Corp
  20. 20. Investor feedback (some examples) <ul><ul><li>A license model (remaining owner of IP) is considered a very difficult business model to achieve and we would advice to look for a strong strategic partner. Furthermore the fact that the product is not operational yet and that no client is using it is also regarded a high risk </li></ul></ul>18 Section 3 - Case: Software Corp
  21. 21. PwC Technology centre (some general thoughts) <ul><ul><li>In general large enterprises don't innovate quickly and quibble with each other a lot based on power positioning. Offering an alternative, something Web app developers could build on if you allowed them to do so, could be an alternative. They will start quite small, but the innovation cycles will be orders of magnitude shorter than for large enterprises </li></ul></ul><ul><ul><li>Google for example has offered an open API. Developers out on the Web take the basic functionality and run with it, doing things you haven't anticipated, combining your functionality with something else to generate buzz and interest on the Web. It could give much more visibility. Services like these get a leg up when prominent bloggers and trend seekers take notice of them </li></ul></ul>19 Section 3 - Case: Software Corp
  22. 22. Key messages <ul><ul><li>Demonstrate how you can make the business model ‘sing’ (all potential issues related to certain conditions to be met should be addressed) </li></ul></ul><ul><ul><li>Strategic partners vs. retaining full ownership of the IP </li></ul></ul><ul><ul><li>Generating revenues / having a customer is often an important criteria for investors (proven concept) </li></ul></ul><ul><ul><li>Select potential investors based on relevant criteria (e.g. complementary investments, investment criteria of fund, etc.) </li></ul></ul>20 Section 3 - Case: Software Corp
  23. 23. Section 4 Questions? 21
  24. 24. Questions? 22 Section 4 - Questions?

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