Giora Yaron M&A To Be Or Not To Be


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The Big Boys Playground 12.7.2011

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Giora Yaron M&A To Be Or Not To Be

  1. 1. M&A“TO BE OR NOT TO BE?” Dr. Giora Yaron
  2. 2. M&A Experience base Comsys I; Sold to Conexant 1996 Pentacom; Sold to Cisco, 1999 P-cube; Sold to Cisco 2004 Mercury; Sold to HP 2006 Qumranet; Sold to RedHat 2009 2
  3. 3. M&A Key consideration;Maximizing Share Holders Value Breadth of product portfolio Competitive landscape Market segment Maturing? Exploding? [Scitex/Creo/Kodak] Disruptive technology emerges [Kodak films, Galileo/Marvell] Founders desire 3
  4. 4. THE EMOTIONAL QUESTION Do I want to sell or take it all the way? 4
  5. 5. THE TWO SIDES OF M&AAcquirer view Defensive; control product transition (Rockwell/Comsys) Catch-up strategy; “On the fly fix” for a strategic miss (Cisco/P-cube, Qumranet/RedHat) Strategic response to deliver 1+1>2 (HP/Mercury)Seller view Defensive; competitive new technologies, market changes [Rockwell/Comsys, Cisco/P-cube, Qumranet/RedHat] Quick liquidity 5
  6. 6. ACQUIRER VIEW; DEFENSE PLAY [ROCKWELL/COMSYS] CPU processing power increases HW enhanced instructions can be done in SW No need for HW modem Rockwell market leader (70% market share) in HW modems. Comsys technology threatens hundreds of millions of Rockwell revenueRockwell acquires Comsys to control market transition 6
  7. 7. CATCH-UP STRATEGY; CISCO/P-CUBE P-cube develops Deep Packet Inspection [DPI] for next generation networking systems P2P takes the market by a storm Cisco has a hole in its product offeringCisco acquires P-cube to meet market need “on the fly” 7
  8. 8. CATCH-UP STRATEGY; REDHAT/QUMRANET Qumranet develops Hypervisor for Linux RedHat market leader for Linux has no virtualization strategy The compute world is going vitrualRedHat acquires Qumranet for its KVM Hypervisor 8
  9. 9. STRATEGIC MOVE;1+1>2 (HP/MERCURY)HP Openview has wide acceptance inthe data center mgt market, butcompeting hard against IBM TivoliMercury “owns” BTO market(performance analysis infrastructureand application) HP acquires Mercury; 1+1>2 9
  10. 10. BIG COMPANY; UNIQUE CONSIDERATIONS Breaking the $1B revenue barrier Customers pushing for “end to end” solution Must increase number of deals at the $10m- $25m level Must go global rather than national Must develop global support infrastructure Must develop global IT infrastructureConclusion; Expend via acquisitions or be acquired 10
  11. 11. “VALIDATION POINT” Mercury sold to HPStock shoots overnight from $34 to $52!! Largest acquisition in the history of the country!!! 11
  12. 12. Considerations to insure successful M&A Considerations Strategic fit Product portfolio fit Company DNA Case studies Conexant/Comsys Cisco/P-cube HP/Mercury RedHat/Qumranet 12
  13. 13. VALUATION DEFLECTION POINTS Technology feasibility; up to $100m (Pentacom, Qumranet) Market traction; up to $250m (P-cube) Customer base; up to billions (Mercury) 13
  14. 14. ALL THE WAY VS. M&A THE ISRAELI PERSPECTIVE Historically had no mgt infrastructure to go all the way; No more!! Historically US lead innovation in all technology segments; No more!! Historically US market were first to adopt new technology; No more!! Today more than ever before IsraeliBased companies can go “all the way” 14
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  16. 16. THANK YOU! 16