Exit Strategy Update 04/22/2010

WSJ: Tech Firms Bulk Up With Debt
“The decision to take on debt breaks from tradition in tech, where companies have typically preferred to raise money by selling stock. Debt has become a more attractive fundraising option largely because interest rates are low. The shift comes as mergers and acquisitions are reshaping the industry, with a handful of tech giants that have huge cash hoards—such as Cisco Systems Inc. and Hewlett-Packard Co.—snapping up firms. Now smaller tech companies are hoping that adding debt will allow them to get in the buying game.”

Virtual Intelligence Briefing: AOL dumps $850M Bebo acquisition – Why big M&A rarely works
“Don’t pay product valuations for feature companies – It is a good strategy to acquire small companies to gain super star employees, cool new features, and access to new market segments. But, the acquiring company needs the discipline to only pay a valuation commensurate with a “feature” not a “product”. Don’t add lots of valuation for synergies that probably won’t happen, or for revenue streams that may not materialize.”

WSJ: Eating Into Apple’s Cash Pile
“With a market cap of around five times book, Apple could choose to use its stock for large-scale acquisitions. But as its market value is around $220 billion, this would need to be a very large-scale acquisition indeed. To give some perspective—and not to propose these companies as targets—U.S. software giant Oracle Corp. has a market cap of around $130 billion, while European leader SAP AG is valued around $60 billion.”

MercuryNews: Palmisano Needs ‘Bold Strokes’ to Sustain IBM Growth
“Under Palmisano, IBM has spent $25 billion buying companies. Compare that with at least $42 billion for Oracle and Hewlett-Packard’s $45 billion. IBM’s share price had risen 31 percent in the Palmisano era, versus 53 percent for Oracle and 165 percent for Hewlett-Packard.”

About Bob Barker
Bob Barker is a trusted advisor to CEOs, helping them identify, define, and execute new growth-accelerating opportunities. He also shares ideas on LinkedIn (robertgbarker), in guest posts on related blogs, and in industry publications. Contact him via email at bob@2020outlook.com.

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