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Telecom Mergers and Acquisition s: The VC angle

Telecom Mergers and Acquisition s: The VC angle. Oren Zeev Apax Partners January 18 th , 2001. Agenda. About Apax Partners Why M&A? What are buyers looking for? Prepare your business Strategic Investor as a step to an M&A During the transaction.

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Telecom Mergers and Acquisition s: The VC angle

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  1. Telecom Mergers and Acquisitions:The VCangle Oren Zeev Apax Partners January 18th, 2001

  2. Agenda • About Apax Partners • Why M&A? • What are buyers looking for? • Prepare your business • Strategic Investor as a step to an M&A • During the transaction

  3. Apax Partners: Telecom Activities25 years, $7B, 150 investment professionals, 3 continents • Butterfly (TI) Ceragon Networks • Coreteck (Nortell) EZChip • tdSoft Jazztel • Esprit Telecom (GTS) IPG Photonics • Dialog Semiconductor Webraska • Fore Systems (Marconi) TelDaFax

  4. Why M&A? • Buyer’s perspective: • Buying a business • Integral part of R&D strategy • Seller’s perspective: • Exit • Liquidity – easier to lock in value • Selling products to telecom operators is extremely challenging • Leverage marketing, distribution, financial power, manufacturing and reputation

  5. Erosion In Value Of Tech IPOs Source: Broadview

  6. What Are The Buyers Looking For • Technology lead • Management and technical team • Market opportunity • Competitive opportunity/threat • Fit with buyer’s business/channels • Customer validation/momentum • Strategic Partners – could be a plus, could be a liability

  7. Prepare Your Business • Build it and manage it like a sustainable business • Fit with potential buyers’ customers and channels • Avoid aggressive vesting accelerations • Avoid problematic commercial agreements • - use assignment/termination clauses • Capital structure – take into account taxation and accounting considerations • Chief scientist – limit/avoid • Play hard to get – but don’t overdo it • Timing is everything!

  8. Strategic Investor As A Step To M&A • Try to get a supportive, but not too dominant strategic investor: • Let a VC lead the round • Be ware of valuation “kiss of death” • Be extra careful in the commercial deal • Preferably 5%-15% • Option/ROFR/ROFN/ROFO • Observer/Director • Get 2-3 if you can

  9. During The Transaction • Manage your shareholders consensus • Take care of your employees • Manage the process – don’t let your lawyers/accountants manage it • Get interest/offers from more than one – create a sense of urgency and competition • Keep your alternatives even after you have a term sheet • Focus only on the important issues • In stock deals registration rights are very important • Leave your ego at home

  10. Oren Zeev Apax Partners Oren.zeev@apax.co.il

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