giora yaron m&a to be or not to be
DESCRIPTION
The Big Boys Playground 12.7.2011TRANSCRIPT
M&A
“TO BE OR NOT TO BE?”“TO BE OR NOT TO BE?”
Dr. Giora Yaron
M&A Experience base
Comsys I; Sold to Conexant 1996
Pentacom; Sold to Cisco, 1999
P-cube; Sold to Cisco 2004
2
P-cube; Sold to Cisco 2004
Mercury; Sold to HP 2006
Qumranet; Sold to RedHat 2009
M&A Key consideration;
Maximizing Share Holders Value
Breadth of product portfolio
Competitive landscape
Market segment
3
Market segment
Maturing? Exploding? [Scitex/Creo/Kodak]
Disruptive technology emerges [Kodak films, Galileo/Marvell]
Founders desire
THE EMOTIONAL QUESTION
Do I want to sell
4
or
take it all the way?
THE TWO SIDES OF M&A
Acquirer view
Defensive; control product transition (Rockwell/Comsys)
Catch-up strategy; “On the fly fix” for a strategic
miss (Cisco/P-cube, Qumranet/RedHat)
5
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
ACQUIRER VIEW; DEFENSE PLAY
[ROCKWELL/COMSYS]
CPU processing power increases
HW enhanced instructions can be done in SW
6
SW
No need for HW modem
Rockwell market leader (70% market share) in HW modems.
Comsys technology threatens hundreds of millions of Rockwell revenue
Rockwell acquires Comsys to control market transition
CATCH-UP STRATEGY; CISCO/P-CUBE
P-cube develops Deep Packet Inspection [DPI] for next generation networking systems
7
networking systems
P2P takes the market by a storm
Cisco has a hole in its product offering
Cisco acquires P-cube to meet market need “on the fly”
CATCH-UP STRATEGY; REDHAT/QUMRANET
Qumranet develops Hypervisor for Linux
RedHat market leader for Linux has no virtualization strategyvirtualization strategy
The compute world is going vitrual
8
RedHat acquires Qumranet for its KVM Hypervisor
STRATEGIC MOVE;1+1>2
(HP/MERCURY)
HP Openview has wide acceptance in the data center mgt market, but competing hard against IBM Tivoli
9
competing hard against IBM Tivoli
Mercury “owns” BTO market
(performance analysis infrastructure and application)
HP acquires Mercury; 1+1>2
BIG COMPANY; UNIQUE CONSIDERATIONS
Breaking the $1B revenue barrier
Customers pushing for “end to end”
solution
Must
10
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 infrastructure
Conclusion; Expend via acquisitions or be acquired
“VALIDATION POINT”
Mercury sold to HP
Stock shoots overnight from $34 to $52!!
11
Largest acquisition in the history of the country!!!
Considerations to insure successful
M&AConsiderationsStrategic fit
Product portfolio fit
12
Product portfolio fit
Company DNA
Case studiesConexant/Comsys
Cisco/P-cube
HP/Mercury
RedHat/Qumranet
VALUATION DEFLECTION POINTS
Technology feasibility; up to $100m (Pentacom, Qumranet)
Market traction; up to $250m (P-cube)
13
Market traction; up to $250m (P-cube)
Customer base; up to billions (Mercury)
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
14
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 Israeli
Based companies can go “all the way”
15
16
THANK YOU!