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The Right Fit: Amazon.com Buys Zappos.com
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Amazon.com Inc. announced on Monday that the Company has closed its deal to acquire online apparel and footwear company Zappos.com, Inc. Amazon announced this past July that it would pay about 10 million shares of common stock for Zappos. Amazon, at that time, valued the deal at approximately $807 million. Amazon also announced it would pay $40 million in cash and stock to Zappos employees and will retain its management team, the Zappos team will continue to operate independently at its Las Vegas headquarters.
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Taking Stock: JDA to buy i2 Technologies
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JDA Software Group Inc., which makes inventory management software for retailers announced yesterday that the Company has agreed to buy rival i2 Technologies Inc. for about $434 million. Under terms of the deal, JDA said it would pay a combination of cash and stock valued at $18 a share for i2 Technologies. The price is a 9% premium over i2's closing price in Wednesday of this week. JDA plans to pay for i2 using cash on hand, debt financing and shares. The deal is expected to close in the first quarter of next year. The transaction is expected to be accretive in 2010; with $20 million of net, near-term financial synergies. The enterprise value is approximately $396 million. The combination of the two companies creates a global leader in the market for supply chain planning and optimization. On a pro-forma trailing 12-month basis, the combined company has annual revenues of approximately $617 million, including over $275 million of annual maintenance and recurring subscription fees.
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Food Break: Landry's to Refinance
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Landry's Restaurants, Inc. announced this Wednesday that the company intends to refinance its debt and fund a portion of its takeover with proceeds from a debt offering. The offering of up to $550 million in newly issued senior secured debt securities will be issued in a private placement.
The Company's president, hopes to take the restaurant chain private next year, following board approval of his $1.2 billion all-cash acquisition offer Tuesday. Underthe terms of the deal, the Company will pay $14.75 per share in cash for Landry's stock it doesn't already own.
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Banking on a Deal: First Keystone Financial to Merge with Bryn Mawr
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First Keystone Financial, Inc., the holding company for First Keystone Bank, announced this week that it has entered into a definitive Agreement and Plan of Merger with Bryn Mawr Bank Corporation–the holding company for The Bryn Mawr Trust Company. Pursuant to the terms of the Merger Agreement, the Company will be merged into Bryn Mawr Bank Corporation, with Bryn Mawr Bank Corporation surviving the merger. Based on the 20 trading days ended October 30, 2009, the value of the consideration to be received by the Company's shareholders in the merger was approximately $13.75 for each share of Company common stock. The actual value to be received is subject to change resulting from, among other factors, the market value of Bryn Mawr common stock at the time of closing. The transaction is subject to regulatory approval and approval of the Company's shareholders and is expected to be completed in the second quarter of 2010.
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A Taxing Deal, Not: Intuit Buys Mint.com
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Tax and finance software maker Intuit announced this past Monday that the Company has completed its purchase of the Web site Mint.com. The deal price tag was $170 million. Intuit said it will keep both brand names. Quicken products will still be sold, and Mint.com will remain a free Web site, but the company also plans to integrate the two lines to offer new services. The acquisition is anticipated to result in a charge of three cents per share in fiscal 2010.
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Pipeline Profile
If your deals are going digital, you might want to reach out to Michael Metzger. Michael is a Vice President at New Century Capital Partners, a premiere investment banking firm focused exclusively on digital media and technology. Michael has over 14 years of corporate finance and strategy experience in the digital media, mobile and technology sectors. Michael has also held senior management positions in marketing and product development at Mindspeed, Conexant Systems, Rockwell Corporation, IBM and AT&T Bell Laboratories. Michael holds 5 patents in the field of communications, and also serves on the Board of Directors for the German American Business Association (GABA) of Southern California. Michael earned his MSEE from the University of Ulm, Germany and an MBA from the Anderson School of Management at the University of California, Los Angeles. For a high-tech 21st Century deal you can reach out to Michael on our M&A Advisor network.
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Metrics Meter
Preqin, an alternative asset data provider, noted that private equity funds have raised and invested $3.3 billion of equity capital in the last 21 months to support existing portfolio companies.
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A Shuffle of the Seasons
Roger's Corner
by Roger Aguinaldo
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It may be fall but there are signs of spring in the IPO markets, especially on the corporate side of deal making. While average IPO's exits these days are in the $100 million range that means middle-market dealmakers should be considering new IPO possibilities.
Here are some basics that middle market M&A dealmakers should keep in mind when employing IPO's:
First, a thorough due diligence process is vital to success. Here, we're not just talking what's on the books. In particular IPO's usually involve companies where technology is employed in some fashion. My advice to middle-market dealmakers is to look for a good IT due diligence team. No one succeeds alone.
Second, when going to market to sell a company in the IPO space, make sure to talk to potential buyers sooner rather than later. Not always, but this process helps develop the strategic partnerships needed going forward with any sale.
Third, remember middle-market dealmakers, VC firms want limited competition and good management. Those are the companies that will succeed in the IPO market. VC firms will look at the size and reach of the market. A good sale of a company will occur when these elements are in place.
Four, middle-market dealmakers should remember most VC firms act as a coach for their portfolio companies. Therefore, consider negotiations with the VC firm key to any successful transaction.
Five, when corporate buyers purchase a smaller company they do so for strategic reasons. Middle-market dealmakers should be working with VC's to help develop the partnerships for sale early on. A VC firm will talk with potential corporate buyers to help gauge the temperature of the market. In the IPO space the general rule for the best price is that buyers should pursue the target company.
As of this week, the genealogy website Ancestry.com raised $100 million in its IPO. The company has more than a million subscribers in search of their roots. Ancestry.com also had little competition, a small debt load and success at revenue raising. Yet middle-market dealmakers should be careful, as five out of nine of the latest IPOs have closed below the offering price on the first day. What made Ancestry.com's IPO work was its revenue stream from ongoing subscribers.
For now, 45% of Ancestry.com's shares are from existing shareholders. The PE firm Spectrum Equity Investors, through various funds, owns approximately 55%. The company plans to use net proceeds of about $48.4 million for general corporate purposes and to repay debt, which is typical these days in the IPO market. Ancestry.com also announced it may also use a portion to expand through acquisitions or investments in technologies. Underwriters in the deal include Morgan Stanley, Bank of America-Merrill Lynch, BMO Capital Markets Corp., Jefferies & Co. and Piper Jaffray & Co.
Meanwhile, the boutique investment banking firm Imperial Capital Group Inc. has filed to go public, with the hopes of wetting investors' improved appetite for new stock. The firm has proposed raising as much as $150 million in a IPO deal that would allow management to cash out of its ownership stake. Beyond the $150 million, and paying off a $10-million credit line, the firm says it does not have plans to do anything with the cash at the moment. Imperial Capital runs banking, trading and research businesses. The firm's investment banking unit targets middle-market companies. Imperial recently advised American Greetings Corp. on its purchase of Recycled Paper Greetings.
Other recent IPO deals include: TeleNav Inc., the profitable, high-growth tech company; Alimera Sciences Inc., the revenue-less pharmaceutical company; and the Chinese company Trony Solar.
Middle-market dealmakers should take note, twenty IPOs have come to market since Sept. 15, compared with 21 in the previous 8 1/2 months, according to IPO research firm Renaissance Capital.
Things are beginning to bud.
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Awards |
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Join Top Deal-Making Performers at the 8th Annual M&A Awards in New York City on Monday, December 14, 2009.
Finalist Announced!
For more details visit www.maadvisor.com. To register, please click here.
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Anatomy of a Deal |
Knowing How to Talk Deal
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| Jason Hutchinson |
A cyclical downturn is not a dealmaker's first choice environment – or even third for that matter – for making a sale. Throw in two Asian countries and a US NASDAQ listing and what do you get? Disaster? No. What you get is the M&A Advisor's Global Corporate/Strategic Acquisition of the Year.
In December 2006, Jason Hutchinson, Managing Director at Houlihan Lokey in their San Francisco office, and his team began their two year odyssey to sell semiconductor equipment maker Peak International.
Prior to the transaction, Peak International was a subscale business in the semiconductor equipment market. The company faced declining revenues, market share, and profitability. From a financial and strategic standpoint things looked no better. The consolidation in the industry, coupled with consistently declining selling prices of semiconductor-packaging products, forced the company into a position where its overhead and labor costs rose above sales, which in turn caused negative and declining gross margins.
Therefore, Houlihan Lokey faced the challenge of penetrating the highly fragmented global semiconductor equipment market with a focus on subscale players.
But if only life were that simple. During the auction process, Peak continued to deteriorate from a financial and competitive standpoint. Meanwhile, hopes for finding the right strategic buyer thinned. The company's well capitalized competitors believed there to be no strategic advantage to acquiring Peak and sat on the sidelines with the hopes of seeing a smaller competitor exit the market.
Yet Hutchinson's team – or Hutch as he goes by – took on the challenge despite the oncoming cyclical downturn in the semiconductor market. To position the company, Hutch's team went to market with the idea that the company could add scale to a competitor, so that the combined entity could compete more effectively with its better capitalized and strongly positioned competition. As Hutch says, "When you are a technology M&A banker you're really focused more on the strategic benefits of the deal."
For interested parties, the transaction offered the opportunity to gain scale and manufacturing experience in China. One such subscale competitor was the South Korean manufacturer Daewon Semiconductor Packing Industrial Company. In a country where the family is key to business, the stars began to align for Hutchinson's team. "Daewon is a fairly well known important family in Korea on the technology side," says Hutch.
From a legal standpoint, the deal presented multiple complexities in executing a cross border deal between a private South Korean conglomerate and a public Hong Kong entity with a US NASDAQ listing. And if you think doing deals and reading legalese in your own country's dialect is a challenge, try executing a deal in three different tongues. As Hutchinson pointed out, "It was a cross border deal so we had, obviously, language issues. First, we need to get things done in Korean in terms of documentation. We also had to get the US accounting, Hong Kong accounting and Korean accounting [in sync]. We [also] worked with finance systems across those three different jurisdictions. [Further], we had to translate the definitive agreement in Chinese, Korean and English. And negotiate with legal teams in three different languages."
Happily, as a result of the tri-language $26.5 million equity deal, the combined entity is now a better positioned competitor in the semiconductor packaging equipment market. S&G Company, through the acquisition, has strengthened its position in the market for plastic extrusion and thermoform molded products. Had the transaction not occurred, both companies would have faced increased financial and strategic hardship in the face of the secular downturn in the semiconductor market.
Today, with S&G's extensive sales channel, Peak International is now able to better penetrate the global market. What Peak's brought to the deal was its manufacturing expertise and strong customer relationships, which are anticipated to create tremendous shareholder value for the combined entity, as the two companies have complementary customer bases. For Peak's employees and management team, the deal was a much needed relief as they have now become part of a stronger company.
As is the case of a merger that is just the right fit, both companies benefited from a reduction in redundant manufacturing and labor costs, making the combined company well positioned for higher profits and better able to take on global competitors, no matter their language.
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