First Light of US Economic Improvement?

Last week in the US we may have seen the first light of some economic improvement.

The US has a big knock-on effect to the rest of the world so this could be good news for all.

Three important measures of US economic performance all moved in the right direction last week:

1) both existing and new home sales rebounded by around 5% in February after a very poor January
2) consumer spending rose for a second consecutive month
3) durable goods orders, a leading indicator of investment, rebounded in February after dipping sharply in January

Perhaps more important than the data was the feedback following publication of the detail on the US Treasury’s financial rescue plan, the Public-Private Investment Program, or “P-PIP”. This was met with resounding approval by financial markets.

The S&P 500, for example, staged a strong rally to recover from what had been the lowest level since 1996. The plan aims to use a combination of public and private funds to buy up ‘toxic assets’, untradeable loans and securities that have weighed upon banks’ balance sheets and impeded lending. Many private sector players have already confirmed that they will participate in the scheme, raising hopes that it will be successful.

What does the current economic situation do for the mergers and acquisitions markets is so far not clear. Many owners will look at the low interest rates they can obtain on cash investments as a reason to hang on to their business assets. However, there is mounting pressure on some companies as the credit crunch squeezes them hard. If they can’t obtain credit many more companies will go under this year.

Companies sitting with cash in the bank will look at profitable and stable companies more than ever as a good place to put their money. A profitable company that can be acquired for instance 5X EBITDA despite the higher risk must look more attractive than the current interest rates returns being achieved by just parking the cash? Where else will you get a 20% return?

This ignores the benefits that the right strategic acquisition/s could do to leverage value from the acquirers existing business. Right NOW could be an excellent time to raise your company above the size of your closest competitors. Like the old boxing says;

“A good big un usually beats a good little un”

All Photographic Images on this blog are Copyright of Mark Edwards and should not be published without permission

IBM Could Be Acquiring Sun

It is rumoured that IBM may acquire Sun Microsystems possibly within the next two weeks. Nothing has been confirmed as yet but IBM is likely to pay at least $6.5 billion. That would equate into a premium of more than 100% over Sun's closing price on Tuesday

Tridion Performance

Tridion (WCM player) was acquired by SDL for $94m in May 2007. Looking at SDL's year-end financial results I can see that Tridion saw revenue growth of 16% in 2008. Tridion’s revenues in 2008 were just under $49M which is not as high growth as they achieved in 2007 but still significant.

SDL Tridion now claims about 600 customers in total which is a solid increase up from the 500 a year ago. The company is strong in Europe, with its largest market in North America.

Web Content Management as I have mentioned previously is still performing despite economic pressures and there is more potential from this sector. There are opportunities to claim the high ground for an acquirer who is prepared to enter the WCM market strongly with focus and beat the less focused larger players who have acquired their way in to the sector.

Who has the appetite the strategy and the cash to make the splash in WCM?

Getting Your Ducks Aligned for Peace of Mind and Acquisition Success

“Spectacular achievement is always preceded by unspectacular preparation.”

Robert H. Schuller

What's Waiting For The Unprepared Down the Acquisition Path?

OK, so we know that the failure rate with acquisitions is so high that such work should commence with a government health warning but let’s focus a bit more on the important issue of why. Well as always in business there is not a single simple answer. If it was so simple then the problem would not exist in the first place. You could just simply log-on to one of those specialist blogs written by some highly irritating industry know-it-all and find out what the problem is and how to…………………. Errrr??? Anyway where was I.

The area I would like to focus upon in this post is in the preparation and planning stage what I call the “Formulate Stage”.

5 Stage Acquisition Process
In the process that I use for acquisitions there are 5 major stages these are:

1. Formulate –
2. Locate –
3. Investigate -
4. Negotiate –
5. Integrate -

Getting the correct work completed during the formulate stage is critical. Now this next point is very important: This work will be twice as difficult and take you three to four times longer than you expect. So many companies I have come across that have failed to reach their acquisition objectives have made major mistakes in this step of the process and it has cost them dearly further down the line.

Once you have invested weeks and months in an acquisition it can be difficult if not painful to back away, just because you made a mistake back at the start. Many acquisitions gain a momentum of their own.

Communication and Process are Key!
During the early “Formulate” stage it is important that a clearly defined profile of the ideal company is created and communicated with all the key influencers and stake holders. I have a process to achieve this that has been refined over the years that I call “Success Profiling” which is a methodology for pulling out the essential questions that need to be asked sooner rather than later.

The key steps in the process must also be agreed and communicated to avoid later confusion and this must be updated throughout the acquisition process to maximize your chance of success.

The Information that is gathered and the processes that are agreed and put in place before commencing a structured search will be a major factor in the final success of the acquisition not just immediately following the acquisition but 1, 2 or 3 years later when you really want to reap the benefits.

Want to Know More?
If you would like to know more about all the steps in the formulate stage or details on the rest of the process just send me an email (Mark at Documentboss.com) . It is such an important first step the vast majority of acquisitions failures can be back tracked to failure in the initial “Formulate” stage of the acquisition.

And Finally………. for those who decide that planning for your next acquisition is just a waste of time and gets in the way of business, I have a recommendation for a new hobby. Have a look at this http://vimeo.com/1778399 I think you will enjoy it! Give the video one minute to really get going and then you will understand.

“Never interrupt your enemy when he is making a mistake”

“Never interrupt your enemy when he is making a mistake” – Napoleon

One of the strategies used by Napoleon, when faced with superior numbers, was the use of speed and focused attack to gain the central position. This allowed Napoleon to drive a wedge to separate the enemy armies. He would then be able to overwhelm his enemy in smaller targeted battles against mightier forces.

The reason I mention this, was that it occurred to me late last night that the WCM sector is still very segmented and may be vulnerable to such a strategy against some of the less focused players, who also operate in the sector. By a few well timed strategic acquisitions there is an opportunity to gain a dominant hold on the WCM sector.

Although there are massive repercussions across all industries and sectors due to the credit crunch the WCM sector will probably do better than most. This is a technology that is coming of age. There are still massive opportunities as companies continue to buy WCM solutions.

FatWire Software has reported 40% revenue year-over-year growth in 2008, taking it to $44m. The company reportedly rebuffed acquisition approaches last year, as it focused on growth and updating its product line under new management.

The opportunities for consolidation are evident. Vignette have been a potential likely target for some time despite with 2008 revenue down 11.6% from 2007 and Q4 specifically down 29.4% year over year. License revenue is especially weak, with just 19.5% ($7.3m) of total Q4 revenue coming from licenses. Overall, the company reported a net loss of $6.3m for the year. However, this could be seen as systematic of them possibly struggling with internal issues of integration and capitalisation, given their acquisition of Tower Software in 2004, when they added workflow and imaging.

Sitecore claimed 100% growth in its fiscal 2008, which ended June 30. However it must be taken in to consideration that this is from a relatively small base circa $10m for fiscal 2007. Sitecore's fiscal 2009 revenue is expected to be in the $30m range.

There maybe an opportunity to gain new business against slower less focused forces. The likes of Interwoven who have been recently swallowed by Autonomy, are one of a number of larger but less focused players in the WCM sector.
Would a multiple consolidation in this sector gain battle advantage by following the Napoleon strategy, to create a relatively large but more importantly focused and specialist force in WCM?

Perceptive Software YTD revenue UP 41% over previous year

Pereceptive Software seem to be flying high despite the economic recession.

Perceptive Software completed the second quarter of the 2009 fiscal year with revenue of $18M year to date global revenue is $40m up 41% on the previous year.

Their CEO Scott Coons is quoted as saying: "Todays adverse economic conditions are compelling businesses to purchase technologies that provide quick bottom-line results".

There are a number of companies in this area that continue to grow whilst others falter. Is this an inevitable result of "right technology" / service or right attitude, right marketing effective sales?

Acquisition Opportunity (Europe): Document Production Software Vendor

I said that from time to time I would be able to bring to you some M&A opportunities from this sector. Well here is the first. Should you have an interest and want to know more please contact me in strictest confidence:

Document production (assembly/composition) software vendor seeking acquisition. The market for document automation and production tools is growing tremendously. Companies like to increase and enhance the personal communication with their clients and put more emphasis than ever before on their communication processes. A recent survey indicated that 63% perceived document based communication as business critical for their organization whereas only 16% indicates having a “best of class” solution in place. Our client has taken advantage of this market by focusing strongly on having the most innovative and industrial strength solution in the market by focusing on the large insurance and banking companies. This has resulted in having >50% of the top 20 insurers and 30% of the top 10 banks in their domestic market as clients. Our client is now looking to expand outside their domestic marketplace via acquisition from a company that operates internationally.

Their solutions empower organizations to:-

1. Automatically, create and personalise all business documents.
2. Render the created output into all most formats such as Local print, Mass print, Web output, Fax/Mail etc.
3. Deploy the system in a variety of environments for large enterprise systems (runs natively available on IBM OS/390, zOS, AIX, Unix, Linux, Sun Solaris and Windows servers).
4. Access native data in databases such as Oracle, DB2 etc.
5. Control every aspect of the document production whether batch or interactive productions based upon its internal workflow component.
6. Flexible for end user but system controlled centrally (IT).
7. Embed or integrate the system into their existing infrastructure or applications (black box).
8. Fully web deployable

This solution covers the entire spectrum of document automation and can replace a myriad of solutions by one centrally managed system. Some of their clients have installations with >10,000 users (in operation since 2003). The company has an attractive list of clients and continues to win new deals with blue chip clients in central Europe. Typical deals are from €500K and upwards. If you feel this proposition might be of interest for, than please do not hesitate to contact me Mark at DocumentBoss.com