May 19, 2001 Joe Dews [email protected]. Page 1 The M&A Market in Q1 2001.
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Transcript of May 19, 2001 Joe Dews [email protected]. Page 1 The M&A Market in Q1 2001.
May 19, 2001
Joe Dews
“M&A Banking for the Best Deal in the Current Market”
Including an Overview of the Technology IPO, Private Equity and M&A markets in
Q1 2001
Page 2
The M&A Market in Q1 2001The M&A Market in Q1 2001The M&A Market in Q1 2001The M&A Market in Q1 2001
Page 3
What a great time - Q1 2000What a great time - Q1 2000What a great time - Q1 2000What a great time - Q1 2000
• Large companies, with huge market caps and sky high stock multiples were bidding incredible prices for early stage companies
• There was unlimited and practically free cash available in the public and private equity markets – so what did burn rates matter?
• “You snooze, you lose” was the mantra
Only a year ago…
Page 4
M&A in Q1 2001M&A in Q1 2001M&A in Q1 2001M&A in Q1 2001
• M&A came to a virtual halt:
Buyers don’t know what to pay
Buyers have seen their own stocks punished
Buyers are focused on figuring out their own businesses
Burn rates and earnings dilution are again a focus
• There will be no buyers for many venture backed companies without clear business models
Q1 2000
Page 5
477
373
284246
103
0
50
100
150
200
250
300
350
400
450
500
Q1 00 Q2 00 Q3 00 Q4 00 Q1 01
No. of Deals
Source: SDC disclosed value global technology M&A deals over $20MM
Where have all the buyers gone?Where have all the buyers gone?Where have all the buyers gone?Where have all the buyers gone?
Page 6
Where are the big deals?Where are the big deals?Where are the big deals?Where are the big deals?
1422
63
2
135
0
25
50
75
100
125
150
1997 1998 1999 2000 Q1 2001
Source: SDC.
Tech M&A over $1 billion in value.
Page 7
Acquisition currencies have been damagedAcquisition currencies have been damagedAcquisition currencies have been damagedAcquisition currencies have been damaged
($ in billions) 3/31/00 Market
Cap
3/31/01 Market
Cap Decline
Ariba 43.8 1.6 -96 %
Cisco 523.0 118.3 -77 %
EMC 226.6 85.6 -62 %
Intel 509.3 195.8 -62 %
Lucent 215.3 34.9 -84 %
Oracle 260.9 95.3 -63 %
Sun Microsystems 210.8 55.7 -74 %
Yahoo 84.8 10.2 -88 %
Page 8
M&A Deals
Year 2000 Q1 2001
Cisco 28 0
EMC 3 0
Intel 18 2
Lucent 10 0
Microsoft 11 0
Nortel 9 1
Sun Microsystems 8 2
Number of M&A Deals Completed
The great buyers have stopped buying in 2001The great buyers have stopped buying in 2001The great buyers have stopped buying in 2001The great buyers have stopped buying in 2001
Page 9
Where we are today?Where we are today?Where we are today?Where we are today?
What was in - 2000 What is in - 2001
• PowerPoint presentations
• “Press Release” companies
• Multiple of pro-forma forecast 2005 revenues
• Investors who “got it”
• Public venture capital
• Momentum investing: Buy on chart moves and sell quickly
• “0 to IPO” in under a year
• Promoting the stock the primary focus
• ‘Twenty-something” fund managers
• “Twenty-something” IPO jockeys
• Real Businesses and Managements
• Demonstrated success
• Multiple of historical earnings and balance sheets
• Investors who didn't “get it”
• Tested companies
• Value investing: Buy on fundamental analysis and hold
• Long-term company building
• Operations the primary focus
• Adult supervision
• Experienced advisors
Page 10
M&A Banking for the Best Deal in M&A Banking for the Best Deal in the Current Marketthe Current Market
M&A Banking for the Best Deal in M&A Banking for the Best Deal in the Current Marketthe Current Market
Page 11
Points of DiscussionPoints of DiscussionPoints of DiscussionPoints of Discussion
(a) Leading firms working with software and Internet companies, and how to identify and engage a banker,
(b) Typical fee arrangements,(c) The range of services provided by bankers in the M&A
process, (d) How valuation is set from the target’s perspective – and how
valuations have changed over the past few months, (e) Issues in selecting the best acquisition partner,(f) Assistance, if any, that acquisition bankers might provide
following completion of the deal, (g) What type of companies Needham is now working with, and(h) What kind of deals we are turning away.
Page 12
Just in case I run out of time, here are the short answersJust in case I run out of time, here are the short answers
I Leading firms working with software and Internet companies, and how to identify and engage a banker,In general, more important than the firm is the people you will be working with
II Typical fee arrangements,Be aware that in general you will get what you pay for. The fee structure should provide
incentive for the desired outcomeIII The range of services provided by bankers in the M&A process
Various, but an overlooked point is that the M&A process is a process, a complex multi-variable process
IV How valuation is set from the target’s perspective – No acquirer will pay more than they have to, so it is ALL about leverage.
and how valuations have changed over the past few months, LOL
V Issues in selecting the best acquisition partnerDepends on a lot of things – big difference between a cash and a stock deal
VI Assistance, if any, that acquisition bankers might provide following completion of the deal.If you are counting on someone who gets paid when the deal closes to help you manage the integration process, you may want to think some more about that
VII What type of companies Needham is now working with (Broadly speaking)Representing buyers – Public Companies buying private or public companies that are a
strategic fit and are affordable with their current currency.Representing sellers – Adequately-funded private or public companies that don’t need to be sold, but for strategic or liquidity reasons want to be sold, and which have strong market
position, technology and customersVIII What kind of deals they are turning away.
Fire sales; companies which we think are unlikely to be sold due to high losses or lack of significant market position, technology and customers; companies where the valuation or our ability to add value will not support our minimum fee.
Page 13
Who are leading firms working with software and Internet companies, and how to identify and engage a banker
Who are leading firms working with software and Internet companies, and how to identify and engage a banker
• There are many investment banking firms that have both a strong effort in technology and focused M&A expertise
• There are a group of firms that have historically had a purely or heavily technology focus
• There has been a lot of change in the industry
• There has been a lot of consolidation
• Recently, there have been layoffs at most investment banks
• I think you should look for a firm that has expertise in your industry, expertise in M&A, with people that you feel good about working with, were you feel you will be a valued client and get the effort you want and deserve on your behalf. At the end of the day, as in anything else, you are working with a group of people.
• Sources of introductions/information: professional introductions (from your lawyers, your accountants); personal references (other entrepreneurs); seminars like this; advertising.
Page 14
Independent National Emerging Growth Firms
Needham & CompanyThomas Weisel Partners Wit / Soundview
Emerging Growth Firms NowOwned by Major Commercial Banks
Fleet / BancBoston / Robertson StephensBank of America Securities / MontgomeryChase / H&Q / J.P. Morgan / FlemingsDeutsche Bank / BT/ Alex. BrownSG / Cowen SecuritiesRoyal Bank of Canada / Dain Rauscher / WesselsFirstar / US Bancorp/ Piper JaffrayCIBC World Markets/ OppenheimerABN Amro / ING / Barings / Furman Selz
Major Bracket Institutional Firms
Bear StearnsUBS / Warburg / PaineWebber
Structure of the Investment Banking IndustryStructure of the Investment Banking IndustryStructure of the Investment Banking IndustryStructure of the Investment Banking Industry
Special Bracket Firms
Citigroup / Salomon / Smith Barney / SchroderCS / First Boston / DLJGoldman SachsLehman BrothersMerrill LynchMorgan Stanley / Dean Witter
Regional Firms
A.G. Edwards (St. Louis)Adams Harkness & Hill (Boston)First Union (Richmond)Janney Montgomery Scott (Philadelphia)McDonald & Company (Cleveland)Morgan Keegan (Memphis)Raymond James Financial (St. Petersburg)Robinson-Humphrey (Atlanta)Stephens Inc. (Little Rock)Sutro & Co. (San Francisco)Tucker Anthony Sutro (Boston)Wells Fargo/FSVK (San Francisco) William Blair (Chicago)
Page 15
What are typical fee arrangementsWhat are typical fee arrangements
• Case by case basis
• Typically a front end or retainer, and back end or success fee
• Typically related to the size of the deal, as through a success fee based on a percentage or variable percentage of the transaction value
• Typically subject to a minimum in the event of a completed transaction
• Be aware that in general you get what you pay for. The fee structure should be designed to provide incentive for the desired outcome.
Page 16
• “M&A” can cover a range of advisory services to clients on:
Mergers
Acquisitions
Divestitures
Fairness Opinions
Going Private
Recapitalization
Restructuring
Share Repurchases
Strategic Positioning
Takeover Defense
The range of services provided by bankers in the M&A processThe range of services provided by bankers in the M&A process
Page 17
Sale Process and Transactional IssuesSale Process and Transactional IssuesSale Process and Transactional IssuesSale Process and Transactional Issues
Valuation
Steps to successful transactions
Structuring
Negotiations
Due Diligence
•Analyze financial statements
•Discuss business history and
prospects with management
•Analyze comparable public companies’ trading multiples
•Analyze comparable transactions
•Value shares offered for
consideration (public co. only)
•Determine ability to use either
cash or stock
•Analyze respective proforma
effects of a stock or cash
acquisition
•Balance sheet
•P&L
•Goodwill
•In-process R&D
Write-offs
•Financial advisor or principal
•Cash or stock preferable
•Understand potential synergies
•Employee issues such as:
•Acceleration of options
•Employment agreements
•Non-compete agreements
•Key issues to be negotiated:
•Condition of closing
•Financing outs
•Reps & warranties
•Break-up fees
•Shopping restrictions
•Topping offers
•Material adverse change
•Shareholders’ vote
required (either company)
•Interview key management
•Financial due diligence
including analysis of historical
and projected financial statements; interview independent auditors
•Third-party interviews and
reference checks
•Facility visits
•Legal due diligence
Financial Positioning
•Press release announcing transaction
•Backgrounder on the acquisition
•Guidance for analysts’ forecasts
•Prepare and conduct conference call
•Plan and execute roadshow to sell the deal, if necessary
Page 18
What is some of the value a banker can provideWhat is some of the value a banker can provide
•Smooth orchestration of a process, saving time and energy, and increasing the likelihood of a successful deal
•Convert a serial process to a parallel process, to increase leverage and get a better price
•Credibility – implicit or explicit “threat of an auction”, to increase leverage and get a better price
•Ability to outsource the difficult negotiations, preserving the relationship of a CEO and the Buyer, to increase leverage and get a better price and have a harmonious relationship after the deal
•Experience and insight •Relationships and introductions
Page 19
Resources an Investment Bank can ProvideResources an Investment Bank can ProvideResources an Investment Bank can ProvideResources an Investment Bank can Provide
- A highly knowledgeable research analyst can be a resource, circumstance permitting
- Industry bankers with a strong understanding of the industry
- An M&A team experienced with the M&A process
- Contacts with the “right” individuals at potential acquiring companies
- Ability to leverage expertise and capabilities of various areas of the firm, including underwriting, research, mergers & acquisitions, and potentially private placements and venture capital, to produce maximum transaction value
Page 20
How valuation is set from the target’s perspective and how valuations have changed over the past few months
How valuation is set from the target’s perspective and how valuations have changed over the past few months
• Valuation is set by what the buyer believes they need to, and can afford to, pay to get the deal.
• Metrics (price/sales, price/earnings, price/book, premium to stock price) can measure valuation, can guide expectations, can at some level be constraints, but do not determine valuation.
• Valuation impacted by alternatives to the seller, such as the availability of, and cost of, private or public equity capital
• Valuation impacted by how the acquirer is valued, by the public or private markets
• No acquirer will pay more than they believe they have to, so it is ALL about leverage. Get the leverage on your side
Page 21
Sale Process and Transactional IssuesSale Process and Transactional IssuesSale Process and Transactional IssuesSale Process and Transactional Issues
• Competition
• Desire
• Necessity
• Resources
• Time
NegotiatingLeverage
(5 key elements)
Multiple Elements Drive Negotiating Leverage
Page 22
Sale Process and Transactional IssuesSale Process and Transactional IssuesSale Process and Transactional IssuesSale Process and Transactional Issues
NegotiatingPlan
CollectingInformation
AchievingResolution
DeterminingResponse
EstablishingExpectations
AssessingLeverage
Planning is an Important Component of Successful Negotiations
Page 23
Issues in selecting the best acquisition partnerIssues in selecting the best acquisition partner
• Think about this before you start the process, because depending on the answer the process may change
• Different stake holders may have different objectives and criteria, which needs to be managed
• Big difference between a cash deal and a stock deal
Page 24
Sale Process and Transactional IssuesSale Process and Transactional IssuesSale Process and Transactional IssuesSale Process and Transactional Issues
ValuationStructureLiquidity
Fin
anci
al T
erm
s
CultureCorporate Strategy
Non - Financial Terms
Buyer’s Minimum Terms
Seller’s Minimum Terms
Successful Negotiation Can Usually Result in aBroad Range of Outcomes
Page 25
Sale Process and Transactional IssuesSale Process and Transactional IssuesSale Process and Transactional IssuesSale Process and Transactional Issues
• Probability of Successful Sale Low Medium High
• Maximization of Sale Proceeds Low Medium High
• Time
- required to canvas prospective purchasers Low Medium High
- from canvas to conclusion High Medium Low
• Confidentiality High Medium Low
One-on-one negotiation
Full auction
Potential Tradeoffs
Sale Process Continuum
Page 26
Assistance, if any, that acquisition bankers might provide following completion of the deal
Assistance, if any, that acquisition bankers might provide following completion of the deal
• If you are counting on someone who gets paid when the deal closes to help you manage the integration process, you may want to think about that some more
• Strategize on positioning
• A lot of issues that appear after the deal is completed, depend on the due diligence, negotiation, pricing and structure of the deal, so make sure you get those right
• Liquidity
• Any surprises
• Integration
• Long term success
Page 27
What type of companies Needham is now working withWhat type of companies Needham is now working with
• Representing buyers – Public Companies buying private or public companies that are a strategic fit and affordable with their current currency.
• Representing sellers – Adequately-funded private or public companies that don’t need to be sold, but for strategic or liquidity reasons want to be sold, with strong market position, technology and customers
• Situations where we believe we can add a lot of value
Page 28
What kind of deals we are turning away.What kind of deals we are turning away.
• Fire sales – don’t wait until the last minute, leave yourself plenty of runway
• While deals can happen quickly, a full sale process can take 4 to 6 months or longer to close, and being almost out of cash does not help your leverage
• Companies without significant market position, technology and customers
• Companies where valuation or our ability to add value will not support our minimum fee
Page 29
Perspective on the current tech stock Perspective on the current tech stock marketmarket
Perspective on the current tech stock Perspective on the current tech stock marketmarket
Page 30
NASDAQ CompositeDaily Closing Price
November 5, 1984 - April 24, 2001
0
600
1200
1800
2400
3000
3600
4200
4800
5400
11/5/84 9/3/86 7/1/88 5/1/90 2/27/92 12/27/93 10/25/95 8/22/97 6/22/99 4/19/01
The current market for tech stocksThe current market for tech stocksThe current market for tech stocksThe current market for tech stocks
• The late 1990’s was an aberration in the public markets unlikely to reoccur in our generation
Forget this ever happened!
Welcome to 2001!
Page 31
Where have all the billions gone?Where have all the billions gone?Where have all the billions gone?Where have all the billions gone?
($ in billions)
Highest Market Cap
Current (5/2) Market Cap % Change
Akamai 35.7$ 1.0$ -97 %
Ariba 42.6 1.6 -96 %
Crossroads 12.2 0.2 -98 %
Inktomi 29.5 0.8 -97 %
Internet Capital Group 56.0 0.6 -99 %
Sycamore 51.9 2.4 -95 %
VA Linux 13.0 0.1 -99 %
Ventro 11.1 0.1 -99 %
Versata 3.8 0.1 -97 %
VerticalNet 13.5 0.2 -99 %
Vignette 23.8 1.5 -94 %
Page 32
• In the first half of 2000, the flow of cash into stock mutual funds reached an unprecedented pace. However, turbulence within equity markets during the second half of 2000, particularly the fourth quarter, has caused a sharp decline in mutual fund flows.
Overview of the Equity MarketOverview of the Equity MarketOverview of the Equity MarketOverview of the Equity Market
Net New Cash Flows Into Stock Mutual FundsJanuary 1997 through March 2001
(20.0)
(15.0)
(10.0)
(5.0)
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
55.0
Jan-
97
Mar
-97
May
-97
Jul-
97
Sep-
97
Nov
-97
Jan-
98
Mar
-98
May
-98
Jul-
98
Sep-
98
Nov
-98
Jan-
99
Mar
-99
May
-99
Jul-
99
Sep-
99
Nov
-99
Jan-
00
Mar
-00
May
-00
Jul-
00
Sep-
00
Nov
-00
Jan-
01
Mar
-01
($ B
illi
ons)
Page 33
• Large decreases in margin debt coincided with broad market sell-offs in the late summer/fall of 1998, in April 2000 and in the fall of 2000. Decreases in margin debt were of a higher magnitude in these periods than positive net cash flows into mutual funds.
Overview of the Equity MarketsOverview of the Equity MarketsOverview of the Equity MarketsOverview of the Equity MarketsOverview of the Equity MarketOverview of the Equity MarketOverview of the Equity MarketOverview of the Equity Market
Mutual Fund Flows and Net Change in Margin DebtFrom January 1997 Through March 2001
-40
-20
0
20
40
60
80
100
Jan-
97
Mar
-97
May
-97
Jul-
97
Sep-
97
Nov
-97
Jan-
98
Mar
-98
May
-98
Jul-
98
Sep-
98
Nov
-98
Jan-
99
Mar
-99
May
-99
Jul-
99
Sep-
99
Nov
-99
Jan-
00
Mar
-00
May
-00
Jul-
00
Sep-
00
Nov
-00
Jan-
01
Mar
-01T
otal
of
Flo
ws
into
Mut
ual F
unds
and
Net
C
hang
e in
Mar
gin
Deb
t ($
Bill
ions
)
Mutual Fund Flows Change in Margin Debt
Page 34
Historical Bear Market ComparisonHistorical Bear Market ComparisonHistorical Bear Market ComparisonHistorical Bear Market Comparison
Date P/E Bull/Bear Ratio* 12 Mo. Fwd. EPS Growth
06/26/62 13.8x
10/07/66 12.7x 33%
05/26/70 12.4x 34
10/03/74 7.1x 36
03/27/80 6.7x 29
08/12/82 6.8x 43
07/24/84 9.7x 45
10/11/90 13.8x 37 13.6%
12/08/94 16.3x 36 18.6
10/08/98 24.5x 47 15.8
03/23/01 24.2x 63% 7.4%
S&P 500 Bear Market Bottoms
*Among investment advisors.
Source: MSDW, MSCI, Datastream, Investors Intelligence, IBES
Page 35
Will history repeat itself?Will history repeat itself?Will history repeat itself?Will history repeat itself?
• This crash was the “big one” for tech stocks
• The market crash of 2000 - 2001 makes the earlier post WW II tech stock crashes looks like mere fender benders
• A frightening thought - The recovery time from the two prior tech stock crashes was each 8 years
Page 36
Boom period Bust Time required for the market to recover
1960’s 2 decade boom
Big iron computers
1969 8 years: 1969 – 1977
Economic misery
1980’s
1980 - 1983: small-cap growth stocks
The Mini and the Micro
Mid-1983 8 years: 1983 – 1991
MSFT, CSCO, SLR go public at $5.00-$6.00
1995 - 2000
Internet
Networking
Optics
Q2 2000
Early 2001: The maelstrom?
Eight-years?
Three years?
One year?
Over already?
And, which history?
Will history repeat itself?Will history repeat itself?Will history repeat itself?Will history repeat itself?
Page 37
Where is the market for tech stocks going?Where is the market for tech stocks going?Where is the market for tech stocks going?Where is the market for tech stocks going?
Positive factors Negative factors
• Favorable monetary, and fiscal outlook
• Continuing rapid obsolescence
• Productivity gains continuing based on recent information technology investments
• Strong world position of the US
• Interest rates lower than in previous downturns. Inflation tame
• Investors have not given up on equities
• Mutual funds have not yet seen significant outflows.
• Technology stocks have been trading at a slight discount to non-techs
• Still no “surprise” shock from left field
• Some renewed life in the stock and IPO markets in Q2
• Housing and automotive market sectors likely to weaken in 2001
• PE ratio’s are still not historically low. In 1973-74 stocks sold at less than book value (albeit, in a different inflation environment)
• High levels of consumer debt
• World economy weakening further
• No real capitulation yet by investors
• Tech stocks not truly cheap yet
• The NASDAQ has still doubled over the past 5 years and quadrupled over the last 10 years
• Still no “surprise” shock from left field
Page 38
The IPO Market in Q1 2001The IPO Market in Q1 2001The IPO Market in Q1 2001The IPO Market in Q1 2001
Page 39
Year to year change in volume of IPOsYear to year change in volume of IPOsYear to year change in volume of IPOsYear to year change in volume of IPOs
The number of IPOs in Q1 2001 was 15% of the 2000 level
* Nearly 50% ($3.6 Billion ) of the Q1 2001 IPO dollars were from one transaction, the IPO of Agere
1 Q 2001 1Q 2000
Deals $ Millions Deals $ Millions Change
IPO 20 7,347* 128 22,274 (67)%
ADR IPO 1 1,423 12 12,071 (88)%
Total 21 8,770 140 34,345 (74)%
Page 40
The tech IPO market dried up in Q1 2001The tech IPO market dried up in Q1 2001The tech IPO market dried up in Q1 2001The tech IPO market dried up in Q1 2001
Source: Securities Data Corporation
Total # of Completed Tech IPO Deals
102
70
114
33
9
0
20
40
60
80
100
120
Q1 00' Q2 00' Q3 00' Q4 00' Q1 01'
Page 41
Tech IPO backlog dropped awayTech IPO backlog dropped awayTech IPO backlog dropped awayTech IPO backlog dropped away
10
4836
6344
195
134
88
38
80
50
100
150
200
250
Q1 Q2 Q3 Q4 Q1 01
# of IPOs Withdrawn # of Filings
Source: CommScan.
Page 42
If this one didn’t work . . .If this one didn’t work . . .If this one didn’t work . . .If this one didn’t work . . .
Loud Cloud Inc.
Top Underwriters: Joint Leads: Morgan Stanley Goldman Sachs
Excellent Investors: Benchmark Capital Capital Research Integral Capital
Sizzling Story:
Top customers:
Internet Infrastructure
Ford, Nike
“Name” CEO: Marc Andreessen
Last Round Valuation: $800 million
Page 43
If this one didn’t work . . .If this one didn’t work . . .If this one didn’t work . . .If this one didn’t work . . .
Filed September 2000
Price Talk: $1.5 billion at the open
Priced March 8, 2001
Price: $6.00 per share$252 million pre-money
Trading March 30, 2001
Price: $5.50 per share$218 million pre-money
Page 44
The private equity market The private equity market in Q1 2001in Q1 2001
The private equity market The private equity market in Q1 2001in Q1 2001
Page 45
Impact of the markets on Impact of the markets on private equity investmentsprivate equity investmentsImpact of the markets on Impact of the markets on private equity investmentsprivate equity investments
• The “Crossover” hedge and mutual fund, foreign and corporate investors that gave the edge to valuations in 1999 - 2000 are largely on the sidelines
• Many private equity investors are wondering what exactly is it that they bought in 1999 and 2000
• Private equity funds face massive needs to continue to support existing portfolio companies that were expected by now to be public or be sold
• As a consequence, many established funds are focused on the needs of existing portfolio companies and not on adding new investments
Page 46
Private equity returns are coming downPrivate equity returns are coming downPrivate equity returns are coming downPrivate equity returns are coming down
• Expect time to liquidity now of 4 - 5 years
• Expect dramatically lower returns than over the past five years
• Many 1999 and 2000 funds will show negative returns
Page 47
US venture investmentsUS venture investmentsUS venture investmentsUS venture investments
11.7
13.7
16.8
18.919.4
0.0
5.0
10.0
15.0
20.0
25.0
Q1 Q2 Q3 Q4 Q1
2000 2001*
The impact is being felt in funding
* Preliminary Estimate. Source: VentureOne
Dollars invested by quarter (in billions)
Page 48
US venture investmentsUS venture investmentsUS venture investmentsUS venture investments
The impact is particularly felt in new financings as funds focus on existing portfolio companies
290
386
445
606618
0
100
200
300
400
500
600
700
Q1 Q2 Q3 Q4 Q1
2000 2001*
* Preliminary estimate. Source: VentureOne
New first venture rounds by quarter
Page 49
Valuations are coming down in many sectorsValuations are coming down in many sectorsValuations are coming down in many sectorsValuations are coming down in many sectors
• New rounds are difficult to raise at last round or, in many cases, at any valuation
• Desperate efforts to avoid write-downs on new rounds (e.g. 3x or more preferences on new rounds, large warrant packages) serve to reduce the effective valuation while still keeping the last round nominal price
• Pre-money valuations are dropping dramatically when new investors are needed
Page 50
It is a good time to be a private equity investorIt is a good time to be a private equity investorIt is a good time to be a private equity investorIt is a good time to be a private equity investor
• It is a much better time to invest in new investments than for the past three years (if you have any money and time left after caring for your investments of the past two years)