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E Biz Cluster Sept 19 M&A

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E Biz Cluster Sept 19 M&A

  1. 1. Martin Horne September 19, 2007 Ottawa eBusiness Cluster Mergers and Acquisitions (M&A) Lessons Learned
  2. 2. Background <ul><li>The FineLyne Group is a small boutique M&A consultancy </li></ul><ul><li>Martin Horne and Dan McCarthy Managing Partners </li></ul><ul><li>10 acquisition transactions $3M - $110M </li></ul><ul><li>Representative transactions, </li></ul><ul><ul><li>Prior sold to Spar in 1997 </li></ul></ul><ul><ul><li>ProMIRA Software sold to Manugistics 1998 </li></ul></ul><ul><ul><li>Nitidus Technology sold to Parametric Technologies 2000 </li></ul></ul><ul><ul><li>TravelPod sold to Expedia in 2006 </li></ul></ul><ul><ul><li>FlightScape sold to CAE in 2007 </li></ul></ul>
  3. 3. M&A Process
  4. 4. 1. Selection
  5. 5. 1. Selection <ul><li>Who’s A Good Potential Acquirer? </li></ul><ul><li>Where are you in the Food Chain?? </li></ul><ul><li>Merge With “Equal” or Get Acquired </li></ul><ul><li>What’s The Strategic Fit? </li></ul><ul><li>Customer, Partner, Competitor, Unknown </li></ul><ul><li>Top Tier – e.g. Google, IBM, Oracle, Amazon ..etc. </li></ul><ul><li>2 nd Tier – Kaboose, Internet Brands, Local.com, Kayak, Marchex </li></ul>
  6. 6. e.g. “Online” Food Chain Advertisers e.g. Bank Of America Publisher e. Consumer 100% ($18.7B) 1% 2007 ONLINE AD SPEND 50% 5% 25% 15% EBITDA TRAFFIC Buy Visit 40% ($7.4B) 40% ($7.4B) Ad Agencies e.g. Avenue A Ad Networks e.g. Google 1. Selection
  7. 7. 1. Selection <ul><li>The Approach? </li></ul><ul><li>Send email to CEO [email_address] </li></ul><ul><li>Be direct and short (3-5 lines) ... read on Blackberry </li></ul><ul><li>Mention competitors are interested & tight timeframe </li></ul><ul><li>If in doubt send an email! (30-50) </li></ul><ul><li>Try “a short no is better than a long maybe” </li></ul><ul><li>If a NO move on ... don’t confuse NEED with WANT </li></ul><ul><li>Have 10 page investor presentation & NDA ready </li></ul>
  8. 8. 2. Negotiate
  9. 9. 2. Negotiate <ul><li>So They’re Interested and Want To Meet? </li></ul><ul><li>CEO – CEO dinner (little yes...) </li></ul><ul><li>Do they like you ... culture fit? </li></ul><ul><li>Prepare top 5-10 questions </li></ul><ul><li>Understand acquisition process </li></ul><ul><li>How does 1 + 1 = 3? </li></ul><ul><li>Never cross competitors NDA line... </li></ul><ul><li>Never over sell.... due diligence reveals all </li></ul>
  10. 10. 2. Negotiate <ul><li>Price? </li></ul><ul><li>Give price range but terms are often as important </li></ul><ul><li>“ Time to close” is a very important deal element </li></ul><ul><li>Deal sponsor (i.e. CEO) and deal maker (i.e. VP M&A) </li></ul><ul><li>Do deal makers work for them </li></ul><ul><li>If larger or public company use acquirers multiples </li></ul><ul><li>Do forward projecting financial model (1+1=3) </li></ul><ul><li>Inform other suitors of any received term sheet </li></ul>
  11. 11. 3. Close
  12. 12. 3. Close <ul><li>Empower closer (lawyer, VC, agent, CFO) </li></ul><ul><li>Firm timeline to ``Definitive Agreement`` & close </li></ul><ul><li>Use electronic file collaboration service like eRooms </li></ul><ul><li>Due Diligence List, </li></ul><ul><ul><li>IP, Patents, Contracts, Licenses, Financials, Forecasts, Competition, Traffic, Suppliers, Agents, Legal, Domain Registrations, Analytics, NDAs </li></ul></ul><ul><ul><li>Start this process now </li></ul></ul>
  13. 13. 3. Close <ul><li>Reduce the number of parties to agreement </li></ul><ul><li>Payment in cash versus stock </li></ul><ul><li>Deal – buy the company versus purchasing it’s assets </li></ul><ul><li>Employment agreements, </li></ul><ul><ul><li>Spouses </li></ul></ul><ul><ul><li>3-5 years </li></ul></ul><ul><li>Vesting and entitlement </li></ul><ul><li>Investors/stakeholders “woodwork” </li></ul><ul><li>Holdbacks and Escrows </li></ul><ul><li>Tax (corporate, income, GST) </li></ul><ul><li>Reps and Warranties (fraud & tax, cap liability) </li></ul><ul><li>Lawyers & Accountants (cross border) </li></ul>
  14. 14. 4. Post Deal
  15. 15. 4. Post Deal <ul><li>Support the deal – no dine and dash </li></ul><ul><li>Respect NDA’s and non solicitation </li></ul><ul><li>Skeleton board and operations </li></ul><ul><li>Tax Audit </li></ul><ul><li>Final disbursements </li></ul>
  16. 16. Conclusions <ul><li>Time is a deals worst enemy </li></ul><ul><li>De-risk, de-risk, de-risk </li></ul><ul><li>Take the cash! </li></ul><ul><li>Don’t underestimate the human dynamics </li></ul><ul><li>Don’t try and go it alone </li></ul><ul><li>Now Go and Sell Your Company ;-) </li></ul>
  17. 17. Questions Questions?

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