Tag: Europe

US online job companies shop abroad

The large online recruitment companies in the US, having found that their business models don’t always translate in other countries, are increasingly buying their way into foreign markets. In recent weeks, both Monster Worldwide and CareerBuilder.com have gone on shopping trips overseas.

In October, Monster acquired the remaining 55% stake it did not already own in ChinaHR.com for $174m in cash. ChinaHR is a key player in the Chinese online recruiting sector and represents a sizeable gamble by Monster to gain market share in the world’s most-populous country. Monster’s move into Asia came just three months after CareerBuilder picked up Paris-based Lesjeudis.com for an undisclosed amount.

Both Monster and CareerBuilder have said they will continue to look at international expansion. Monster currently gets some 42% of its revenue from outside the US. That’s up from just 23% in 2005. While CareerBuilder, which was recently acquired by Gannett, does not disclose its international segment revenue, it has emphasized that division with its acquisitions. The company’s past four deals, along with its partnership with MSN, show the company is looking abroad.

Number of overseas Monster Worldwide and CareerBuilder deals

Acquirer Number of acquisitions Value Target countries
Monster Worldwide 6 $380m France (2), Germany, Norway, People’s Republic of China, South Korea
CareerBuilder 4 Not disclosed France, Greece, the Netherlands, Sweden

Source: The 451 M&A KnowledgeBase

Indian acquirers on the go

Announcing its largest deal ever, Indian systems integrator Infosys offered $753m in cash on Monday for SAP consultancy Axon Group. The deal is seen as a way for Infosys to build up its consulting business as well as its sales in Europe, where the UK’s Axon gets roughly 60% of its revenue. Pending shareholder and regulatory approval, the acquisition is slated to close in November. Some Axon shareholders, however, are holding out for more. Shares of the company on the London Stock Exchange have traded above Infosys’ offer price since the deal was announced.

Infosys’ acquisition of Axon would be the second-largest purchase by an Indian services shop, trailing only Covansys India’s $3.2bn purchase of business process outsourcing firm Fortune Infotech in 2005. In addition, the deal would bring to more than 60 the number of deals by Indian acquirers so far this year. That’s up from less than 20 per year in the first part of this decade. Meanwhile, M&A spending by Indian companies is likely to hit its highest level since 2005. Already this year, shoppers have spent $1.8bn on deals, which is within striking distance of the $2.1bn spent in all of 2007. This year’s M&A total will inch even closer to that tally if Axon shareholders succeed in pressing Infosys to up its offer.

Deals by Indian acquirers

Period Deal volume Deal value
Jan.-Aug. 2008 57 $1.8bn
Jan.-Dec. 2007 86 $2.1bn
Jan.-Dec. 2006 78 $672m
Jan.-Dec. 2005 38 $3.7bn
Jan.-Dec. 2004 7 $104m
Jan.-Dec. 2003 8 $132m
Jan.-Dec. 2002 16 $228m

Source: The 451 M&A KnowledgeBase

UBS: You buy us?

Brenon Daly

As it reported an ‘unsatisfactory’ loss of hundreds of millions of dollars, UBS AG also said Tuesday that it will carve off its investment banking business. The move represents a retreat from the ‘universal bank’ model the Swiss giant has pursued. And despite management’s statements, it makes a sale of the banking unit more likely. (Just as Time Warner splitting AOL’s legacy Internet access division from its online advertising business clears the way for a sale of the dial-up unit. That is, if there are any AOL subscribers left to sell.)

Washed away by the gallons of red ink spilling from the investment banking department is that UBS actually has a fairly robust advisory business, particularly for transatlantic tech deals. In terms of deal value, it ranked fifth in our recent league tables covering transactions between North America and the EU from mid-2007 to mid-2008. The previous year, UBS placed fourth. (An executive summary of the report is available here; download the full report here.)

Far and away, UBS was the busiest bank, advising on 13 transatlantic transactions over the past year. Both Lehman Brothers and Deutsche Bank advised on eight transactions. And UBS has kept its momentum, already claiming another tombstone since we closed our survey period on June 30. (UBS served as sole adviser for IBM in its purchase of Paris-based ILOG for $340m.) But given how things stand now, the next big deal UBS advises on could be the sale of its own banking business.

Selected UBS-advised transatlantic deals

Date Acquirer Target Price
July 2008 IBM (sole UBS mandate) ILOG $340m
April 2008 Apax Partners TriZetto Group (sole UBS mandate) $1.4bn
Feb. 2008 Reed Elsevier (co-adviser UBS) ChoicePoint $4bn
April 2008 Diodes (sole UBS mandate) Zetex Semiconductors $176m

Source: The 451 M&A KnowledgeBase

Big Blue shops across the pond

Brenon Daly

Despite a lingering cold front in transatlantic M&A, IBM recently announced plan to shell out $340m for ILOG. We noted in a mid-year report that spending by North American acquirers of EU-based targets has declined by roughly two-thirds from mid-2007 to mid-2008 compared to mid-2006 to mid-2007. The reason: the slumping dollar and grinding bear market that has cut the value of acquisition currencies for U.S. companies. (Both the greenback and the Nasdaq have lost about 15% of their value over the past year.)

Big Blue’s purchase of the Paris-based vendor of business rules engine technology isn’t likely to signal a rebound in ‘eastbound’ M&A, at least not a significant one. My colleague Adam Phipps notes the IBM-ILOG deal isn’t even among the Top 10 transactions, when ranked by deal size. The proposed combination comes in twelfth place in terms of purchases made by North American companies of EU-based companies over the past year.

Post-acquisition decapitation

Brenon Daly

The write-offs from wrong-headed acquisitions just keep coming. And we don’t mean just financial write-offs. Instead, we’re referring to the practice of a company’s board ‘writing off’ the executives who crafted a deal. This week’s high-profile example came when Alcatel-Lucent finally tossed overboard the two architects of ‘la grande fusion.’ Since that deal was announced in April 2006, the combination has incinerated some $20bn over shareholder value, leaving the telco equipment vendor with a market capitalization of just $13.6bn. (That’s less than the sales the company posted in 2007.) That two-year performance finally got Serge Tchuruk, the company’s chairman who represents the Alcatel side of the combination, and Patricia Russo, the Lucent legacy, shown the door.

This house-cleaning at Acaltel-Lucent comes just two weeks after AMD kicked Hector Ruiz upstairs. In virtually the same breath that AMD announced Ruiz would be relieved of his CEO post but continue as chairman, the company said it will divest much of the business it picked up with its $5.4bn purchase of graphics chip maker ATI Technologies. Announcing the deal two years ago, Ruiz said his combination offered ‘limitless’ possibilities for innovation. Instead, the future of AMD looks rather limited, in large part because of the $2.5bn it borrowed to cover its disastrous purchase of ATI. AMD’s total debt stands at $5bn, compared with just $1.6bn in cash.

Meanwhile, a chief executive who we’ve always thought must be on the hot-seat for a misguided acquisition appears to have gotten a bit of a reprieve this week. Symantec CEO John Thompson said Wednesday that fiscal first-quarter sales of its backup products outpaced overall revenue growth. That reverses the recent weakness in the company’s storage offering, which Symantec acquired with its $13.5bn purchase of Veritas in December 2004. Wall Street applauded the company’s report, with shares up about 10% since Wednesday. Still, Thompson has yet to recognize much value from the three-and-half-year-old purchase of Veritas. Symantec shares, which changed hands at $21.74 midday on Friday, are still about $6 below where they were when the company picked up Veritas. Perhaps that goes some distance to explaining the loose rumors this week that something big – possibly the much-discussed divestiture of the storage business or even an outright sale of the company – was brewing at Symantec.

Leading the acquisition

Deal Stock performance since deal Status of acquiring company CEO since deal
Symantec-Veritas, Dec. 2004 Down 35% John Thompson, CEO since April 1999, continues to serve
Alcatel-Lucent, April 2006 Down 61% CEO Russo and chairman Tchuruk ousted this week
AMD-ATI, July 2006 Down 77% Long-time CEO Hector Ruiz replaced in mid-July
Secure Computing-CipherTrust, July 2006 Down 51% Chairman and CEO John McNulty replaced in April

Source: Company reports, The 451 M&A KnowledgeBase

Transatlantic cold front in M&A

Brenon Daly

In terms of North American tech companies shopping in Europe, the past year has been a case of overlooking deals rather than being over there looking for deals. Eastbound M&A (or North American acquirers of EU-based companies) totaled just $12.5bn from July 2007 through June 2008. That’s down two-thirds from the $45.2bn worth of deals inked from mid-2006 to mid-2007. The primary reason: a 15% decline in the Nasdaq and the US dollar (relative to the euro) over the past year that has sapped buying power.

Of course, the slumping greenback offered European acquirers a bit of a ‘rebate’ on their purchases. And they took advantage of that, pushing westbound M&A (or EU-based acquirers of North American companies) to a new record. From July 2007 through June 2008, European acquirers spent $30.2bn picking up North American-based companies, a 38% increase from $21.9bn in the same period in the previous year.

But even that record amount of eastbound spending wasn’t nearly enough to offset the utter disappearance of their North American counterparts. Overall spending on transatlantic tech M&A fell by more than one-third, dropping to $42.7bn from $67.1bn in the same period of the previous year. We look at the numbers and the trends in a full report that’s available here.

Transatlantic deals

Period EU to North America North America to EU Total
July 2005-June 2006 $14.5bn $19.4bn $33.9bn
July 2006-June 2007 $21.9bn $45.2bn $67.1bn
July 2007-June 2008 $30.2bn $12.5bn $42.7bn

Source: The 451 M&A KnowledgeBase

M&A cycles in France

Brenon Daly

 Our colleague Matt Aslett recently hit on an incredibly creative and entertaining series of posting on our sister blog CAOS Theory pegged to Euro 2008. He profiled the open source projects and policies in the 16 countries that took part in that soccer (errr, football) tournament. (A Brit, Aslett found himself with a fair amount of free time last month since his country didn’t qualify for the European championships.) Not only did Aslett review all the open source goings-on in the respective countries, he even had them square off against one another, as if they were on the soccer field (errr, football pitch). Eventually, he crowned France this year’s Open Source Champion.

We here at Inorganic Growth are decidedly less creative and industrious than our colleagues over at CAOS Theory. So, with that as back-drop, we try our own entry pegged to a major three-week sporting event in Europe: The Tour de France. The 2170-mile counter-clockwise trip around the country starts on Saturday in wind-swept Brittany. For the first time in 40 years, the Tour opens with a normal road stage rather than a ceremonial prologue. (It’s also the first time in about a decade that the defending champion will not be at the start, as cycling continues its lopsided fight against dopers and other cheats.)

When we punched up the numbers for French M&A in recent years, we have to say we were a bit shocked by how thin the peloton of deals has become recently. In the first half of 2008, we saw just 47 deals involving either French buyers or sellers, with total spending of just $1.2bn. That compares to 62 deals worth $7.8bn in the same period last year and 68 deals worth $18.4bn in the first half of 2006.

With that in mind, we decided not to award a yellow jersey, signifying a clear leader. Instead, we’ll got to the other end of the results and hand out an award for the ‘lanterne rouge’ – the designation for the last-place Tour de France rider. The winner of the ‘anti Yellow Jersey’: Alcatel’s $13.4bn purchase of Lucent. We put this deal, inked in April 2006, on top of the podium because the combination has destroyed more than $22bn of shareholder value in just two years. Felicitations, Alcatel-Lucent.

French deal flow

Period

Deal volume

Deal value

Jan.-June 2006

68

$18.4bn

Jan.-June 2007

62

$7.8bn

Jan.-June 2008

47

$1.2bn

 

Source: The 451 M&A KnowledgeBase

Emerald Isle M&A

Brenon Daly

Given that today is Bloomsday, we’ve given ourselves literary license to take a look at deal flow between the US and Ireland. (Don’t worry, if you’re like us and have never actually managed to get through James Joyce’s ‘Ulysses’ – despite taking more than a few cracks at the tome – this Insight will still make sense. Quick show of hands: Who’s actually read all the way to “…and yes I said yes I will Yes”?)

In any case, deal-flow between the two countries has been remarkably stable during the past four years, clipping along at about 30 deals each year. M&A spending in the most-recent year, however, has fallen to its lowest level, just half the previous year and one-quarter the level in the year before that. (Note: In three weeks, we’ll publish our annual Trans-Atlantic Tech M&A Banking Review. Obviously, the steady decline of the US dollar has had a big influence in deal-making. So far, we’ve seen European acquirers be even more active than the previous year, while US buyers have only spent about half as much as the same period last year. You can request a copy of last year’s report here.)

One company that may very well figure into the US-Ireland M&A tally very shortly is Iona Technologies. We noted in February that the Dublin-based company had attracted an unsolicited bid from an unknown company, which turned out to be Germany’s Software AG. Iona has retained Lehman Brothers, which led its IPO in the late-1990s, to advise it. At the time, we tapped SAP and Sun Microsystems as the most-logical buyers of Iona. More recently, an Irish newspaper reported that Progress Software or Red Hat is Iona’s ‘preferred’ buyer. Meantime, Software AG now says it’s out of the running. So it looks like we could very well be seeing an American company pick up another piece of the Old Sod. 

Irish-US M&A (year ending each Bloomsday)

Period Deal volume Deal value
June 16 2004-05 28 $1.2bn
June 16 2005-06 29 $3.8bn
June 16 2006-07 36 $1bn
June 16 2007-08 33 $860m

Source: The 451 M&A KnowledgeBase

How do you say ‘Tumbleweed’ in French?

Brenon Daly

About a year and a half ago, we heard Tumbleweed Communications was being shopped hard by private equity firms. The intervening credit crises – which bumped up the price of debt and trimmed the returns on LBOs – quite likely tabled any buyout. The email security vendor has struggled since then. It came up short of Wall Street estimates in every quarter in 2007. Shares that changed hands above $3 each in early 2007 dropped in a straight line to just above $1 this March.

Rather than a PE shop, however, it turns out Tumbleweed’s buyer will be the Sopra Group, a French IT consulting firm. Sopra will make the acquisition through its Axway subsidiary, paying $2.70 in cash for each share. With about 51 million shares outstanding, Tumbleweed gets a an equity value of about $138m, only slightly more than twice the sales it is expected to record this year. Sopra also got a discount from its currency: the Euro has climbed about 18% in value since we reported on Tumbleweed in February 2007. See full report.