Elizabeth Perry/White Bull:
Some time ago, I did an interview with Falk Müller-Veerse about this thing called M&A Madness. What’s your take? Do you think we’re experiencing Madness?
Peter Globokar/Mooreland Partners:
Well, I think there is certainly some kind of madness compared to where we were during the downturn. It’s true that, if you take a look at the volumes of M&A during 2009, and you compare those with today’s activity levels you could call it M&A madness. But, if you go back to 2006-2007, I think we’re sort of in equivalent territory now. At Mooreland we closed only half a dozen deals in 2009 and have already closed twice as many in the first six months of 2010.
The simple reason there is significant acceleration this year, is that if you’re a competitive technology company, and you don’t make any acquisitions, others will! If you don’t acquire, at some point you could start losing your competitive edge. On top of that, in areas like digital media distribution and mobile apps, there are a number of important megatrends against which companies need to position themselves, whether there’s an economic downturn or not. So, for now, buyers are back. And technology valuations appear to be holding up quite well anyway. I look at technology as a world apart: It doesn’t necessarily link into what the so-called real economy does. It continuously lives in its own ecosystem because the technology business is always about the future, about staying on top of your competitors and driving future revenue growth, rarely about preserving yesterday's profits, like in other mainstream industries.
WB:
Speaking of M&A, you say Mooreland is the most active technology M&A Boutique on the transatlantic link. How did you accomplish that and what does that mean?
PG:
At Mooreland, we believe that European tech companies need truly transatlantic advisors when they embark on an Exit. Most of the major buyers of tech companies are in the US. If you hire an advisory firm in Europe, you might get some access into the Silicon Valley, but it’s way better when your advisor has a local presence near these buyers and talks to them on a regular basis. You also want expertise close to you and having your advisor in the same time zone is a great advantage when it comes to transaction support. Companies come to us because they know we have a real “conduit” into the US with offices on both the East and West coast … and we also have a strong execution platform in Europe. The other key thing for Mooreland is that we operate as one integrated firm. So, whether a given client turns to one of us in London, New York or Silicon Valley, they can be assured of receiving our global knowhow, multi-geography transaction support and from a seamless firm infrastructure. That’s one of the reasons we are able to turn around about 25 transactions a year.
WB:
So, what you are telling me, is that no matter where we are and despite whatever technology we may have, we still need face time!
PG:
Yes. Of course you can try to get deals done over Skype, but, if you don’t meet face to face, you’ll never build the trust needed to win people over. You have to do it, because I think when you sell a company, you sell the future. You must gain the trust of your prospective buyer. The alternative is to constantly fly around the world. Although investment bankers are known for the size of their airmiles accounts and their huge carbon footprint, we think there is a more efficient way to get things done, with people on both sides of the Atlantic, covering the relevant time zones.
WB:
Well, we agree with you there! …
So, we’ve been asking people to talk about what we’re calling the European Innovation Ecosystem. What comes to mind?
PG:
I think of initiatives like Seed Camp which shows me that there is still a lot of innovation across all of Europe. I spend time in Eastern Europe where there is a lot of innovation, despite a lack of venture capital infrastructure.
However, there is a looming problem. European venture capital has underperformed as an asset class in the past ten years, and has not delivered the returns that investors expected. Most VCs are now very much driven by exits, in order to be able to raise a new fund. As a result, there is now less VC funding available in Europe, and startups need to fight harder for capital. Nonetheless, I am not pessimistic. In the past, you could say there were almost too many VCs for the amount of quality innovation around. That should not be the case going forward.
We are back to more bootstrapped innovation which, in itself, speaks for a healthier environment where only the best survive.
WB:
So, some would argue that, at least right now, there’s no real room for the “startup.” In other words, in order to attract funding, you’d better have already proven yourself to some extent. … Is this true?
PG:
If you want money from a main stream Venture Capitalist today, you need to have more track record and more revenue than before. That said, there are fewer and fewer mainstream VC’s, and more and more alternative funds showing up. Not necessarily your “every day” VC, but these types of investors that are a bit more flexible in the way they invest.
WB:
Oh, you mean like the Superangel?
PG:
Yeah, exactly. It seems to be a landscape that is taking over from the traditional VC. And, it’s simple really: As a Superangel you can invest in whatever you want, however you want. As a VC, you are usually more constrained and only invest in companies with a specific profile, size, life cycle, etc. In fact, that’s always been the issue for the VCs: Their investors have never said, “here’s the money, do what you want with it and bring me back some good return.” In fact, it has been quite the opposite. Now, with this “Superangel,” there’s a lot more flexibility.
WB:
You are focused on the communications technology space. Why that area of expertise? How did that come about?
PG:
Well, Mooreland does a lot of work a lot in enterprise software, digital media, technology based services and the electronics manufacturing industry but it just so happens that many of our partners have prior experience in and around the communications industry. From London to New York to Silicon Valley, we think that we cover this space better than anyone else … both in terms of domain knowledge, and deal experience and industry relationships.
WB:
In general, are you positive about the future?
PG:
Sure, as long as there are decent earnings coming from the publicly traded tech companies, and as long as the stock market holds up, I think we’re fine. There’s nothing telling me we’re going into another deep downturn on the tech side. That said, once the stock market goes down, buyers pause and think, “what’s going to happen to me tomorrow.” So, they’re not very inclined to make bets on the future anymore. And that’s what you do with technology M&A – you make bets on the future.
WB:
What does Europe have to learn from the US or vice versa?
PG:
I don’t think it’s really Europe vs the US. I think the more global a company is, the better equipped it is to get deals done. The more local a company is, the more difficult it is going to be to say, “I’d like to do deals in a different country, and get through that whole cultural change and effort.” Look at Japanese and Korean tech companies: many of them are among the largest tech companies in the world, yet they do virtually no startup acquisitions in the US or in Europe, just because they’re not equipped to deal with integration. On some level M&A is scary for them. European and US companies are different in that respect. They’re actually quite international in the way they think about deal making, and they have a good sense of how to integrate an acquisition.
I think we shouldn’t forget that the largest pool of buyers is in the States. That’s where you have your biggest technology buyers. So, when you start a European company, you need to make sure you build an international business … and you need to make sure you’re economically fit for being acquired by a US company. So, in other words, if you’re a French company today with great technology but only French customers and you conduct all of your Board meetings in French - you should know that no American buyer will look at you seriously.
WB:
What else should people know about Mooreland?
PG:
We set ourselves up specifically to address the transatlantic link – bringing a real platform for European companies that are looking for Exits in the US or closer to home. The way we’re making it work is through our uniquely strong and collaborative partnership. None of us is working for himself -- all of the firm’s partners share in the profits of the firm on an equal basis. This means that our clients get the benefit of the firm’s collective knowhow and contacts. In the banking industry, this is very unusual.
As far as deal size goes, we’re focused on small and mid tier transactions usually in the $25 to $250 million range. About half of our clients are European, and about half are US-based, and we also sometimes work with Asian companies.
WB:
So, one last question: What will you be looking for in Barcelona? What’s on your wish list?
PG:
One thing we’re looking for as a firm is to be able to provide sound advice to people we meet. We want to discover promising new companies, and find out what people are looking for in the market today. Our other objective, which is much more selfish, is that we want to spread the word and make sure Mooreland is recognized as a leading player in the tech M&A advisory business. We’ve been very busy since establishing our London base in 2005 and this is the first time in our history that we have decided to sponsor an event. So that’s a big deal for us. First time conference sponsor … and it’s White Bull!
WB:
Well, that’s a big deal for us too! It is fabulous to have you on board! Thanks, Peter, and we look forward to seeing you in Barcelona!