Mergers and acquisitions outlook for 2012

Here are the mergers and acquisitions outlook for 2012, according to Ennovance Capital LLC:

M&A Outlook 2012

View more PowerPoint from Ennovance Capital

Louis Rhéaume
Infocom Intelligence
louis@infocomintelligence.com
Twitter: @InfocomAnalysis

GigaOM Acquires PaidContent

GigaOM has purchased ContentNext, paidContent’s parent company, from the UK’s Guardian News & Media. The exact terms are undisclosed, but it is reportedly about $8 million. The Guardian Media Group paid for ContentNext and paidContent in 2008. As part of the deal, Guardian Media Group also becomes a minority shareholder in GigaOM.

“Technology and covering technology is a global endeavor, and you need to be in all the major centers,” GigaOM CEO Paul Walborsky told Wired, pointing to paidContent’s footprint in London and New York. “We’ve been following paidContent from the beginning, and we’ve always thought it was great journalism. Not only were they breaking news, they were analyzing news. They’ve followed how the media is changing and evolving. We thought if you combined that conversation with our knowledge of technology, and how technology has changed media, you would have a very powerful editorial base to work from.”

Talent and resources from both organizations will also be pooled for GigaOM Pro, the company’s premium business analysis publication service, as well as events spanning both companies, starting with paidContent 2012 in March.

“When you find a company with great coverage and credibility in these industries, that can be leveraged across all our businesses,” said Walborsky, “it makes more sense to partner or acquire than to build the resources from scratch.”

“If you really want to understand how media is going to change, you really need to understand where technology is going,” Walborsky said, when asked about the increased importance of technology in media coverage and vice versa. At GigaOM, we view our business not as building pageviews but building relationships with an audience over time. So we’ve seen first-hand how important it is for businesses to understand how media helps to build those relationships today.”

It’s a business that’s increasingly knotted and complex. Malik is a partner in the VC firm TrueVentures, which in turn is an investor in GigaOM, a media company that covers the technology and media industries. Since GigaOM was founded in 2006, it’s acquired mobile blog jkOnTheRun and The Apple Blog. It generates a remarkable amount of revenue from its events and the Pro version of its site. Now it owns paidContent’s own network of web sites, conferences and newsletters.

The perspective of GigaOM

The main reasons for the acquisitions according to GigaOM are the good quality of its writers, location (offices in New York and Europe).

“The question that mass amateurization poses to traditional media is ‘What happens when the costs of reproduction and distribution go away? What happens when there is nothing unique about publishing anymore because users can do it for themselves?’ We are now starting to see that question being answered.”— Clay Shirky

Shirky’s observation means that we are in a time of chaos where the very idea of media is being questioned. And as a Chinese proverb says, from chaos emerges opportunity. GigaOM founder Malik believes that the best is yet to come for media.

"Over the past few years we have started to see the transformation of media by new technologies, new methods of distribution and newer ways to consume information. Mathew Ingram has been writing about these disruptions on a regular basis, and now we are going to double down on what we think is a great new chapter in the media industry.

I have always believed that we’ve got to stop thinking of media as what it was and focus on more of what it could be. In the world of plenty, the only currency is attention and attention is what defines “media.” Zynga is fighting Hollywood for attention (and winning). Instagram is taking moments away from other media. They have attention. There are old companies that are dying and new ones that are being invented. We’re eager to expand our coverage of social and digital media editorially, in our research and at our events. paidContent is the best chronicler of the media industry, and by blending their coverage with ours, we hope to watch this fast-changing industry ever more closely."

Source: http://www.wired.com/epicenter/2012/02/gigaom-acquires-paidcontent/ and
http://gigaom.com/2012/02/08/why-we-are-buying-paidcontent/

Louis Rhéaume
Infocom Intelligence
louis@infocomintelligence.com
Twitter: @InfocomAnalysis

10 strategic actions Yahoo's CEO should do now.

Here are 10 strategic actions that the management of Yahoo should do.

1. Bring Yahoo email up to par

Yahoo email is actually more popular competitor Gmail — with 302 million users globally, according to Yahoo’s statistics. But Gmail is growing quickly and will eventually win this battle. Both of them are far behind Microsoft’s Hotmail client, which reported 360 million unique users in July.

Yahoo mail still doesn’t allow people to use their accounts as an all-purpose e-mail utility for work, enterprise and recreational unless they pay for a premium subscription — meaning if you want to hide ads, gain offline access via POP, use more than 100 filters/labels or forward your mail to other accounts — you have to pay $19.99 annually.

2. Restore Flickr to greatness

Flickr rose in popularity because it amplified the ability of photographers to store, catalog and share their hobby. Eventually, Yahoo saw its potential and purchased the company. And many critics have argued that’s pretty much where the service went wrong.

Fast forward to 2012, and we see that the iPhone is now the most used camera for uploading pictures to Flickr. We also see that Instagr.am, a startup that gives users filters for pictures they take with mobile phones, has pulled in 13 million users and been named Apple’s number one iOS app of 2011. The problem is that Flickr isn’t mobile enough. The company needs a happy medium between Flickr and Instagr.am — and it needs it fast.

3. Consolidate & trim the fat

Yahoo desperately needs another consolidation plan — something that combines all of its social products into one nice, neat package the way Google is attempting to do with Google+. It’s not enough for Yahoo to provide integration of these services. The company needs to take (another) hard look at what products and areas it’s successful in, and concentrate on them entirely.

This also means the company will inevitably have to trim the fat. Services like Yahoo’s IntoNow, a social check-in service for people watching TV frequently, is hot. Several analysts see the product going anywhere in the future. Yahoo has a history of building great services and not knowing quite what to do with them, leading the company to do nothing more often than not. It should consolidate IntoNow into Yahoo’s other social services and kill things like Yahoo Deals and 4cast.

4. Better organize

The company has several very popular media channels for sports and lifestyle/culture that aren’t being used to their fullest potential. Partnerships between Yahoo and other services (Monster.com, Match.com, etc.) are mixed in with all the other Yahoo channels, which probably earns the company lots of money for placement, but isn’t very desirable for the overall user experience. Yahoo should reorganize these channels, affiliate services and products into something more manageable.


5. Clean up the homepage

Yahoo’s homepage is extremely busy. It has a somewhat complete list of apps/services in a left sidebar, tabs along the top, trending topics on the right along with must-see trending videos, a collection of recent and interesting news down the middle. The company can certainly do a better job of streamlining its services into something more appealing than the current offering.


6-Get Back Into Search

Yahoo partnered with Microsoft to have Bing power its search engine a couple of years ago, part of a deal that let Yahoo run advertising for both. While the arrangement may make sense from a financial standpoint, it robs Yahoo of direct control over one of its primary products, and strengthen's Bing's brand more than Yahoo's. The move basically told them to never come back.

7-Platform First, Services Second

Yahoo has a problem with its products: It's always chasing its competition. Typically, an innovator or competitor will launch a service, then Yahoo will follow much later with a similar product that's inferior. And its core services (search, email) were quickly outclassed by more nimble and focused players. Think Flipboard vs. Livestand, Gmail vs. Yahoo Mail and Digg vs. Yahoo Buzz. Over the past six or seven years, Yahoo has been the ultimate me-too digital brand.

Even though some of those services have improved (notably Mail), a bunch of disparate services does not make a platform. This is something Facebook, Amazon and Google understand, but Yahoo doesn't. Yahoo has a bunch of people using its services, but they're not connected in any meaningful way. Yahoo needs to find its focus going forward -- maybe it's the multitude of niche and hyper-local Groups that are still very popular -- and start uniting its suite of products around that.

8- Make a similar HuffPo Move

When AOL bought The Huffington Post, it was a questionable decision, but it was a strong move forward in the company's plan to morph itself as a media company. It also got people talking about the brand again. Yahoo needs an equivalent action to really assert itself either as an innovator or serious player in the media business. Acquiring the right startup or small-but-growing company (I'm looking at you, Tumblr) could give Yahoo direction, attention and something it's in short supply of -- cool.

9-Get Allies

Yahoo can't compete in every digital sectors. Yahoo's aging brand needs more focus. Yahoo killed its me-too deals service after a few short months last year, so now might be a good time a partnership with Groupon, which could use the help after that firm's shaky IPO. Yahoo made a strategic deal with Facebook in 2010, and it might be worth expanding that. LinkedIn is another company, at least demographic-wise, that might be a good match. Mobile is clearly an area that Yahoo wants to grow in, and there are some key players (Microsoft, RIM, Nokia, Sony) that would also love to take a bite out of Apple and Google.

10-Exit Asia

Yahoo's stake in Asia has been financially lucrative, but it's still a distraction. Its holdings in both Yahoo Japan (35%) and Alibaba Group (42%) don't give Yahoo enough control to make any difference to its core brand. It's already looking at making a deal to sell off these assets,. That'll give the company more focus and a big pile of cash to help it innovate in the coming (hopefully) years and maybe make interesting acquisitions such as vertical WebMD.

Conclusion

The company is in needs of a coherent innovation strategy that relies on a good mix between internal and external innovation building capabilities; acquisitions of innovation from start-ups and hot niche players; and alliances.

Source: Venture Beat and Mashable

Louis Rhéaume
Infocom Intelligence
louis@infocomintelligence.com
Twitter: @InfocomAnalysis

Skype acquired by Microsoft?

The Wall Street Journal reports an important rumor that a deal is near between Microsoft and Skype. Microsoft would acquire Skype for $8.5 billion including the debt. Microsoft still makes few profits from the internet. While Skype's growth is important, it is still losing money and expanding aggressively internationally. Other potentiel acquirers are Facebook and Google.

http://online.wsj.com/article/SB10001424052748703730804576313932659388852.html

Louis Rhéaume
Infocom Intelligence
louis@infocomintelligence.com
Twitter:@InfocomAnalysis

What is hot in mobile games?

It appears that 61% of US smartphones users in October have used at least one mobile game.  Mergers and acquisitions in mobile games are hot.  In October, Ngmoco was sold to DeNA for $400M, providing a 1000% return for private shareholders.  On the other hand, Chillingo was acquired only for $20M by Electronic Arts.  Zynga an online game provider is now valued on the secondary market at $5.27 billion on SharesPost.  According to Levi Shapiro, Partner, TMT Strategic Advisors, these 10 mobile games companies are very interesting acquisitions targets.  It can be very useful to know why they are attractive for video game developers, such as those in the Montreal Video game cluster.


1-Rovio: The Finnish developer of “Angry Birds” is the No. 1 game in 70 countries with more than 30 million downloads, including 10 million paid downloads. Their strategy includes affordable pricing (99 cents) and ongoing engagement (free updates every 4 weeks). Using AdMob’s in-app advertising tools and their own house ads, Rovio is estimated to be earning $500,000 to $700,000 in monthly paid app and ad-supported revenue. Clearly, this is a company that could scale into a much larger player and has set the lofty goal of 100 million downloads, something only Tetris (Electronic Arts) has achieved. Potential buyers will need to bring scale and reach to migrate an iOS and Android success story into a “Transmedia Property.” Just as Disney bought iPhone game developer Tapulous earlier this year for a reported $50 million (including earn-out), studios like Sony, Paramount, 20th Century Fox and Warner Brothers could soon bring “Angry Birds” to a cinema, bookstore, console game or toothbrush near you. 

2-Unity 3D: 3D has moved beyond the cinema to the TV, laptop, handset and game console. For example, Nintendo announced its glasses-free, 3DS portable game player. Moreover, handset vendors are desperate to distinguish their wares and several original equipment manufacturers – including Sharp Corp., Motorola Inc., LG Electronics Co. Ltd. and Toshiba Corp. – are working on 3D handsets. What is missing is content – game developers don’t see a large audience ready to purchase 3D games. This year, global 3D TV sales are unlikely to surpass 5 million units. However, by 2015 that number should scale to between 50 million and 88 million new 3D TV’s. Unity 3D provides a platform for developers to quickly create and deploy 3D games for online, television, console and mobile. Unity has more than 200,000 registered developers worldwide, including Electronic Arts, Disney and Coca Cola. This could be an interesting strategic acquisition for a variety of players seeking competitive advantage in the 3D gaming sector. 

3-Greystripe: Want to start a “show me the money” discussion on Madison Avenue? Try raising the subject of mobile advertising. The entire sector is projected to reach less than $750 million this year (eMarketer), a pittance compared to the $70 billion on television advertising. However, a growing number of Q4 campaigns from retail, automotive and consumer packaged goods brands suggests rapid growth. This is what inspired Apple’s $250 million acquisition this year of Quattro Wireless and Google’s $750 million purchase of AdMob. Among the remaining independents, Greystripe is strong in the in-app advertising sector. Although games downloaded via app stores will contribute only 30% of U.K. mobile game revenues this year, the success of the Apple App Store has inspired new entrants to the app store fray, from Samsung Electronics Co. Ltd. to Amazon.com Inc. Look for Greystripe to get swallowed as the big guys prepare for war.

4-Gypsii: Think of Gypsii as a combination of Twitter and Foursquare for China. Micro-blogging (weibao) is a booming, although not yet profitable, sector in China. Local Twitter clone Sina Weibo claims to be the largest micro-blogging service in China, with more than 20 million registered users since launching in August 2009. Gypsii uses a hybrid subscription and ad revenue sharing model, including location-aware couponing, to incentivize its wireless carrier partners. In less than two years, Gypsii has deals with all three Chines carriers, nearly 3 million users and pre-load agreements with Nokia Corp., LG, Samsung, Lenovo and Huawei Technologies Ltd. Despite the slow 3G uptake in China, there are nearly 400 million active mobile Internet users in the Middle Kingdom. This includes the 50 million Chinese consumers earning $20,000 annually and spending at least $22 per month on mobile services. Web, mobile and e-commerce (still only $2.5 billion out of last year's $29 billion online eCommerce sector) companies seeking carrier relationships and a large base of consumers will be very interested in Gypsii.

5-Aurora Feint: While Apple may have its own social gaming network (GameCenter), third party social gaming networks like Ngmoco’s Plus+ and German business to business social gaming platform Scoreloop have built large user bases. Aurora Feint takes a multi-platform approach, with expertise in iOS (iPhone, iTouch, iPad) and Android and cloud-based game services like leaderboards, achievements and virtual currencies. Aurora Feint’s high traffic numbers in the United States – 3,400 games and over 45 million mobile gamers – make it the volume play in this sector and helped attract investment from major Chinese and Japanese gaming companies as well as Intel Capital. The company is poised to expand its user base with a deal announced last quarter with Verizon Wireless to curate and provide Android game recommendations. 

6-Vivox: Until the advent of video games, humans generally played games with other people. Vivox, and quite a few other players, recognized the importance of social interaction and created a platform for developers and social networks to integrate voice chat, video, instant messaging and presence within the visual experience. The advantage for Vivox is the installed base of 25 million users across 180 countries and 2 billion minutes of monthly voice chat. Even if voice is rapidly becoming a commodity, Vivox’s scale could compliment the expansion goals for large game publishers, virtual worlds or social networks.

7-Backflip Studios: Few studios consistently crank out hit games. Boulder, Colorado-based Backflip Studios has now had nearly 50 million downloads and a daily active user base of two million. In fact, its first four iPhone releases, including Paper Toss, Graffiti Ball, Strike Knight and NinJump, were all downloaded over four million times and ranked in the top five in Apple’s overall app store lists. Most importantly, Backflip is generating solid revenue through in-app advertising (iAd and AdMob) and cross promoting its paid games via its free games. Considering that research firm Flurry estimates the average revenue generated per online active daily user is $1.22, Backflip brings an interesting revenue base as well as its track record of making popular games. 

8-Free App A Day: Free App A Day is a website, app and community platform for the promotion of paid games on iPhone and Android that are free for a limited period. Apple’s App Store is now loaded with more than 240,000 apps, making discovery one of the biggest challenges facing publishers. The company has over a million active daily users and is now a King Maker for pushing games and apps into the top 10. Developers and publishers give away their apps for free for a limited time. Once these revert to paid status, the promotional effects from the daily push notifications offset the lost publisher revenue. Free App A Day then keeps a share of publisher paid app revenue for a fixed period.

9-Smule: No one is cranking out hit iPhone music applications like Smule. Having raised $13.5 million and achieved success with iPhone apps like “I am T-Pain,” “Ocarina,” “Glee Karaoke” and “Leaf Trombone,” the developers are now creating iPad versions. Given that 91% of iPad owners have downloaded an application and two thirds paid for these, it is no surprise that Smule already has its first iPad success story in “Magic Piano.” According to Smule, users played one of the songs, “Twinkle Twinkle Little Star,” more than 750,000 times. In fact, world-renowned pianist Lang Lang performed “Flight of the Bumblebee” on Magic Piano at the San Francisco Orchestra. This kind of engagement has many wondering if Smule will be the next Slide, which was acquired by Google in August for $182 million.

10-Flurry: Although virtual goods are the dominant form of monetization for online social games, until mobile application research firm Flurry released a report earlier this month, few knew that same trend has already come to mobile. Measuring its network of more than 50,000 developers across iPhone and Android, Flurry identified 80% of in-app revenue from micro-transactions, with the rest coming from ads. Despite a highly publicized spat with Steve Jobs earlier this year, as an analytics provider Flurry could be attractive to the likes of Nielsen, Comscore and NPD. Hedging its bets, Flurry has created its own set of tools for helping the developer community integrate virtual currency into their activities. 


Source: 
http://www.rcrwireless.com/article/20101110/OPINION/101109940

Louis Rhéaume
Infocom Intelligence
louis@infocomintelligence.com

AOL versus Time Warner, what is left?

I began to study "mergers and acquisitions of convergence" in the information and communications industries, 6 months before it became a hot topic in the media, with the merger of AOL with Time Warner (deal announced January 10, 2000). After this transaction the term "mergers and acquisitions of convergence" became widely popular and several M&A followed in few years, making combinations of content with pipes: i.e. Vivendi and Universal, Quebecor and Videotron, BCE and CTV and Globe & Mail, etc.


According to Wikipedia: Time Warner (formerly AOL Time Warner) is the world's second largest entertainment conglomerate in terms of revenue (behind Disney and ahead of News Corporationand Viacom), as well as the world's largest media conglomerate. Formerly two separate companies, Warner Communications, Inc. and Time Inc., (along with the assets of a third company, Turner Broadcasting System, Inc.) form the current Time Warner, with major operations in film,television and publishing. Among its subsidiaries are New Line Cinema, Time Inc., HBO, Turner Broadcasting System, The CW Television Network, TheWB.com, Warner Bros., Kids' WB,Cartoon Network, Boomerang, Adult Swim, CNN, DC Comics and Castle Rock Entertainment.


What was the value creation of AOL and Time Warner? In December 2009, Time Warner made a spin-off of AOL and they became two distinct firms.  You can see in the second chart that AOL-TimeWarner destroyed a lot of value for its shareholders, and after the spin-off, Time Warner started a recovery. The share of AOL is almost at the same level of the day of the spin-off, one year ago.  


The recent quarterly results of Time Warner showed that the firm raised its 2010 profits growth target from 20% to high 20s.  It appears that they had solid advertising and subscription growth.  New technologies appliances such as smartphones and iPad has helped to increase the demand of its content.  The new Harry Potter movie will start in November 19.  In publishing, the firm faced lower subscription levels but made big cost reductions.


The recent quarterly results of AOL showed that the company is deeply restructuring and in massive divesting of unsuccessful assets such as: ICQ messaging, travel website Kayak and social network Bebo. They newly redesigned web sites such as the portal www.aol.com, MapQuest and AOL Travel.   While, their advertising revenues has dramatically dropped from 27%, eMarketer estimates that overall advertising spending grew around 12% compared to Q3-2009.  The firm hopes that its new advertising system will create important shareholders' value.    One growth avenue resides also on selected M&A.  They bought recently the tech blog TechCrunch for $25M and 5min Media, which is a syndication platform for lifestyle, knowledge and instructional videos for $65M.


Sources: Yahoo news, Bloomberg, Wikipedia.


For more information on M&A of convergence see 
http://infocomanalysis.blogspot.com/2008/06/article-convergence-mergers-and.html


Louis Rhéaume
Infocom Intelligence
louis@infocomintelligence.com

Dealing with the Make or Buy innovation dilemma using Strategic Project Portfolio Management (SPPM)

My PhD thesis is not completed, even though I widely analyzed strategic innovation management for almost 4 years.   I am studying the dilemma Make or Buy innovation to create value, through Strategic Project Portfolio Management (SPPM).  It appears that few industries have what I call “highly dynamic” SPPM.  For instance, big pharmaceuticals such as Pfizer, have thousands of innovation projects and use a formal SPPM  to create more corporate value.  While the tendency in the past decade in this industry was investing massive internal R&D, a new trend has emerged with a more optimal mix between making innovation and buying innovation.  Big pharmas are acquiring more biotechnology firms and sub-contracting innovation, for a more “open innovation” system.

Another firm, which is probably using a systematic approach in SPPM, and moving toward a more highly dynamic approach, is Google.  Recently, David Lawee, the vice president of corporate development of Google said that the acquisition of the wireless-software start-up Android was Google’s “best deal ever”.  Furthermore, in buying innovation, integration is the key.  According to the VP, when Google buys a company, it’s up to the entrepreneurs behind that company to make it a success.  Android was acquired for around $50M in 2005, representing around 40% of total 2005 acquisitions.  The founder of Android stayed with Google and was the champion of the development of Android’s platform as an open-source operating system. It is now the fastest growing platform for high-end smartphones, a tough opponent for Apple, RIM and Nokia.

In infocom industries a key metric exist: Is the technology being used? A lot of it depends on the perseverance of the team coming in.  Google does not charge for the operating system itself, but the company profits from mobile ads displayed on Android phones. In 2010, mobile ads represent around $1 billion in revenues for Google.  These revenues come mainly from one of its latest acquisition: AdMob.  While mobile ad networks are very sexy and growing very fast, Google had to pay $750M for AdMob a mobile-advertising startup in 2010.  Timing and integration is almost everything in acquisitions and the payoff on this investment will be more long term.  Google is the leader in the number of acquisitions for 2009-2010 in infocom industries and made over $8 billion in acquisitions since its creation in 1998.

Louis Rhéaume

Infocom Intelligence

louis@infocomintelligence.com

Article Convergence mergers and acquisitions published in Information & Management

An article concerning the convergence of mergers and acqusitions in the info-communications industries will be published in the new issue of the scientific journal Information & Management Volume 45, Issue 5.

Notre article sur la convergence des fusions et acquisitions dans les industries de l'info-communication va être publié dans le prochain numéro du journal scientifique Information & Management Volume 45, Issue 5.

Value creation in information-based industries through convergence: A study of U.S. mergers and acquisitions between 1993 and 2005In Press, Corrected Proof, Available online 29 May 2008, Louis Rhéaume, Harjeet S. Bhabra

A B S T R A C T
According to the International Engineering Consortium (IEC), the realignment and consolidations currently underway in information-based industries is likely to result in the five traditional information industries (photography, publishing, computing, telecommunications and entertainment) converging into three new sectors: information content providers, information highways, and information appliances. We investigated the impact of mergers and acquisitions on value creation both within and across these sectors by estimating the stock market’s response to acquiring firms around the announcement date of their merger. Using data on 2421 mergers and acquisitions between 1993 and 2005 and employing the well-established event study methodology, we found that most acquirers received a target within the same sector or industry and that the related acquisition strategies brought synergistic gains resulting in positive wealth change for the acquiring firm’s shareholders. The few firms that pursued an unrelated diversification strategy that lowered operating risk experienced no significant change in shareholder wealth. Our results contrasted with the zero or negative wealth change found for
acquiring firms in general (as reported in the finance literature) but were consistent with the positive wealth change for acquirers in the telecommunications industry found in recent studies.

Revenue growth and profitability: when can you find both world?

A recent study by McKinsey: "The elusive goal of corporate outperformance" highlights the characteristics of the best performers among the global multinationals.

It appears that the top nine performers of a 20,000 firms database have experienced both revenue growth and performance. They strongly prefer organic growth over massive acquisitions to reach this good performance. It doesn't mean they didn't make acquisitions but these were more selective and were not involved in acquisitions boulimia. No acquisition or divestiture had a value exceeding 30% of the total market capitalization in the year before the deal.

The top performers had higher market-to-book ratio than their competitors. Their M/B ratios were 25% higher than firms that excel either by revenue growth or profitability. A key element is the leverage of intangible assets such as copyrights, trade secrets, strong brands, portfolio of strategic innovative competencies. Another key element was the country of origin of the firm and its industry.

Information and communications industries are famous for leveraging intangible assets such as collective intelligence, innovation competencies in order to reach superior revenue growth and profitability. They are also known for exhibiting strong networks effects while the first three leaders of the industries create most of the value of certain sectors.

Louis Rhéaume
Infocom Intelligence
www.infocomintelligence.com

The value of ICT mergers and acquisitions vs non-ICT from 1995 to 2005

The OECD has published its recent 2006 Outlook on the ICT sector. There is a very interesting graph in this report. The value of mergers and acquisitions has exploded near the 1999-2000 Internet bubble and has burst in 2000. However, the value of mergers and acquisitions in the ICT is still higher than non-ICT industries, from 2000 to 2005. Thus, it appears that the ICT sector is very attractive in consideration to its growth prospects. Over the last decade, 14,566 completed cross-border M&A deals targeted the ICT sector and the ICT sector was the acquirer in 11,634. Thus, non-ICT firms are also very attracted by ICT firms. The largest numbers of deals has been in IT services, followed by telecommunications and electronics.

Infocom Intelligence is doing research on the stock market reaction of ICT M&A on ICT bidders with Concordia University. Stay tune for further results.

Louis Rhéaume
Infocom Intelligence
infocom@videotron.ca

Quelques conseils en fusions et acquisitions

Les entreprises désirant croître par les fusions et acquisitions devraient s'inspirer de ceux qui ont beaucoup réussi. Cisco Systems est l'un de ceux là. La compagnie possède une université d'entreprise dont l'un des objectif est d'intégrer par la formation les compagnies qu'elle a acheté. Chez Cisco, l'innovation dans le secteur de l'internetworking est très fébrile. Concevoir soi-même l'innovation n'est pas suffisant, il faut l'acheter si on veut couvrir les secteurs les plus en croissance.

La compagnie a développé au fil des ans une expertise particulière en intégration mais aussi en sélection de cibles d'acquisitions. La compagnie fait appel aux firmes d'investment banking pour combler certains besoins mais la compagnie peut également s'en passer à l'occasion. C'est une nouvelle tendance d'avoir son propre département de finance corporative en Fusions et Acquisitions. Cisco a 40 employés dans ce département. Cela lui permet d'avoir sa propre expertise adaptée à ses besoins mais également de sauver les commissions exhorbitantes des investment bankers. La commission d'une acquisition est généralement entre 12% et 50% de la transaction. Cela est un des facteurs qui fait que la majorité des acquisitions détruisent de la valeur pour l'acquéreur puisque le retour sur l'investissement ne vaut pas la chandelle compte tenu de la prime, de la commission et des coûts d'intégration.

Aujourd'hui, la stratégie de Cisco est d'être le fournisseur privilégié du consumer home networking. La compagnie a acheté récemment, pour 7 milliards de $, Scientific-Atlanta qui fait les set-top box numérique de Vidéotron entre autre.

Enfin, Cisco fait aussi du capital de risque corporatif pour être à l'affût des nouvelles innovations et des nouveaux modèles d'affaires dans son secteur.