Posted on February 8, 2011
It has become increasingly clear that many large enterprises are not very good at innovation. The chart below, courtesy of Robert Ackerman, Founder of Allegis Capital, in the February 2011 issue of Global Corporate Venturing, shows that the share of U. S. Industrial R&D investment of corporations with 25,000 or more employees declined from 70.7% in 1981 to 37.6% in 2005. During the same period the R&D share of companies with 1000 or fewer employees increased from 4.4% to 24.1%.
This clearly supports the primary Capital Matters theme that future jobs growth will come from small and medium sized privately held businesses. But where will the capital come from to fund these businesses?
James Mawson has created an innovative new publication called Global Corporate Venturing which is built on two theses which may help answer this question. Mawson believes that global corporations have learned that smaller companies have advantages in innovation. He sees this knowledge playing out in two related trends:
- Even with today’s resurgence, IPO markets are a dim reflection of past glories. As a result both venture capitalists and private equity firms increasingly recognize that they must depend on acquisitions of portfolio companies by larger strategic firms as the only realistic exit for most investments. Increasingly strategic investment/acquisition has become a critical element in such firms’ growth paths as these larger entities control customer bases critical to the smaller firms’ success.
- The larger strategic entities are increasingly investing in early stage entities, often through formal internal venture capital organizations, to provide a window into new technologies and access to entrepreneurial talent.
Mawson estimates that there are now over 500 corporate venture capital organizations around the world. The largest of these, Intel Corporations venture capital arm, invests $1 billion per year in smaller firms. And the pace appears to be accelerating; … read the rest
Categories: Alternative Financing, Business Acquisition, Business Sale, Global Corporate Venturing, Growth Equity Financing, Innovation, Investment Banking, James Mawson, Junior Capital, M&A, Mergers, Mergers and Acquisitions, Venture Capital
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Posted on February 4, 2011
In the linked interview below George Shea, Partner and Information Technology Team Leader at Focus LLC, provides an update on the strong market in information technology deals. George shares a growing willingness in the Private Equity industry for firms to go beyond their traditional buyout structures to fund recaps that take out earlier stage investors and provide growth equity for their portfolio companies. This can be a superior option to strategic sales for management teams that want to keep control of their operations. Additionally George has found an increased willingness among the PE community to consider minority growth equity transactions and other innovative financing options for rapidly growing firms.
To see a the interview, click on the picture or link below:
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Posted on February 4, 2011
When I first started in the M&A business there were a few hundred private equity firms in the U. S. and virtually none overseas. Getting to know them was relatively easy. Today there are literally thousands of PE firms in the U. S., hundreds, if not thousands in Europe, and a rapidly growing complement of Asian and middle eastern PE firms focused on the emerging market countries. Picking the perfect candidate to acquire or invest in any particular lower middle market company has become an overwhelming challenge for intermediaries focused on a good ‘ole boy Rolodex approach to the M&A business.
AxialMarket (www.axialmarket.com) was created to fill that gap. Axial provides an online marketplace populated by more than 1500 intermediary firms and thousands of PE firms, strategic buyers, family offices, venture capitalists and other qualified private market participants who use Axial’s controlled, trusted marketplace to confidentially source and manage a pipeline of transaction opportunities across the private markets. Pre-qualified intermediaries have the opportunity to post blind listings of companies for sale or needing financing or recapitalization. On the buyside PE firms as well as strategic buyers pay monthly subscription fees to have access to thousands of qualified listings. Axial uses its sophisticated SaaS database to pre-select those buyside firms most likely to be interested in a particular deal. These firms are then presented to the intermediary for consideration and only approved buyers are permitted to see the deal summaries. The bottom line is that deals are getting down; more than three thousand business sales, including companies with revenues from $1 million to $400 million have been completed utilizing Axial listings since its inception.
Today we are pleased to have with us Peter Lehrman, the driving force behind AxialMarket. Highlights of Peter’s interview (4 1/2 minutes) as well as the full interview (about 30 … read the rest
Categories: Business Acquisition, Business Sale, Growth Equity Financing, Interviewees, Investment Banking, Junior Capital, M&A, Mergers, Mergers and Acquisitions, Mezzanine Debt, Middle Market, Peter Lehrman
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