by Gary Mintchell | Aug 15, 2019 | News, Organizations
Here is a little bit of merger and acquisition activity of interest. One involving industrial cybersecurity; the other IT-oriented. Owl Cyber Defense and Tresys are coming together. I have been anticipating some consolidation in that space. Lots of startups. Can’t be that much business. In the other Dell Technologies appears to be rationalizing its organizational and investing complexity.
Tresys and Owl Cyber Defense to merge
Tresys Technology was recently acquired by DC Capital Partners, a private equity firm, and placed in a common holding company with Owl Cyber Defense. “The intention is to merge the two companies in the coming months, creating what we believe is the number one boundary security product and services company in the world. To both of us, nothing makes more strategic sense than this combination, and with DC Capital’s support we will be exploring additional strategic acquisitions to broaden our investment in innovation, geographies, and vertical markets. While we will continue to operate as separate businesses in the short term, over the coming months we will work on merging all operations and we will keep you fully apprised of those changes.”
Further from the message I received, “What does this mean for you? Both companies are fully committed to customer service excellence. You will continue to have access to our industry leading expertise in technology services and support; to help you select, configure, customize, maintain, and accredit solutions for any network separation issue. With our new ownership, there is a commitment to grow our international presence and resources, while markedly increasing the investment in R&D and integration services. You can expect to see an acceleration in the development and availability of new technologies, with deeper absorption of specific business use cases.”
The current plan with our investors is for Robert Stalick, CEO of Tresys, to lead the merged company. Michael Timan, CEO of Owl Cyber Defense, will continue to actively work alongside Bob in developing the vision, applying diligent process focus, and maintaining the sales and services engagement excellence for which we strive. “Our shared goal is nothing less than defining the future of network boundary security technology for the coming decades.”
VMware To Acquire all outstanding shares of Pivotal
I saw this story on Launch Ticker newsletter from CNBC.
Pivotal Software surges after VMware says it’s in talks to acquire the company.
Highlights:
- VMware contributed to the formation of Pivotal in 2013.
- Pivotal stock has fallen 66% in the past year.
Pivotal shares rose as much as 72% premarket Thursday August 15 after VMware said Wednesday it’s proceeding with an agreement to acquire all outstanding shares of Pivotal’s class A stock at $15 per share in cash, an 80.7% premium on Pivotal’s $8.30 closing price.
VMware also said in a regulatory filing that it has requested that Dell exchange all outstanding shares of Pivotal’s class B stock, other than class B Pivotal shares owned by VMware, for Class A VMware stock. Dell controlled almost 81% of VMware’s outstanding common stock and more than 97% of the combined voting power of VMware’s outstanding stock as of May 3. Dell and Pivotal are negotiating an exchange ratio for the shares.
The transaction could contribute to the further diversification of VMware, which has moved to collaborate with cloud infrastructure providers like Amazon in order to enable existing customers to run their computing workloads in whatever environment they like.
Shares of Pivotal have declined 66% in the past year. On June 5 Pivotal stock declined 41% after the company issued guidance that was below what analysts were expecting.
Pivotal went public in April 2018. VMware and DellEMC both contributed assets when Pivotal was established in 2013.
As a result of an agreement with Dell, VMware is the selling agent for certain Pivotal products, such that VMware collects cash that is then remitted to Pivotal, net of a contractual agency fee. As of May 3, VMware had a 16% financial interest in Pivotal and a 24% voting interest in the company.
In a statement of its own, Pivotal said on Wednesday that although it is in talks with VMware about a “potential business combination,” an agreement has not been made.
by Gary Mintchell | Apr 10, 2018 | Commentary, News
The industrial market—including both manufacturing / production companies and their suppliers—is experiencing continued consolidation through mergers and acquisitions as companies seek to grow and don’t see an organic alternative. This is true, not only in the US, but also globally according to data and analytics company GlobalData.
The Asia-Pacific (APAC) region’s share in the global mergers & acquisition (M&A) deals jumped to 31.6% in the fourth quarter (Q4) of 2017, a sharp rise from the 5% recorded in the previous quarter. According to GlobalData’s latest report, ‘Smart Money Investing in the Consumer Packaged Goods Industry in Q4 2017’, strong growth in APAC’s emerging economies offers a potential goldmine of opportunities to players in the CPG industry.
M&A deals in the region are primarily driven by the growing demand for healthy and convenient food and drinks amidst rising health consciousness and increasing income levels. Major players in the region are taking M&A route to expand their geographic presence as well as increase product portfolio to broaden their reach in potential new markets. For instance, ThaiBev acquired a 75% stake in Myanmar Distillery Company and Myanmar Supply Chain and Service, in an effort to expand its overseas reach to other Asian countries, while Zhejiang Huatong Meat Products acquired 100% stake in Xianju Guangxin Food to expand its portfolio.
The food sector accounted for 54% of M&A Deals in Q4 2017, followed by the beverages sector, which accounted for 31% during the same period, according GlobalData’s analysis on sector-wise investments.
The VC funding (VCF) activity took a dip in Q4 2017 compared to Q3 2017 in terms of value. North America recorded the highest share of 73%, while APAC recorded 15% of total value of the activity in Q4 2017. Investing in emerging technologies was the major factor driving VCF activity. For example, China-based Greybox Coffee managed to raise US$15mn through Series A Funding, capitalizing on the growing coffee culture in China, a predominantly tea drinking nation; while FYRE, a one-shot energy drink brand, managed to raise US$500,000 in seed funding.
Most of the PE investments registered in Q4 2017 were focused on companies planning to expand their product offerings, especially in the food industry, suggesting the ability of these companies to focus on creating products that meet evolving consumer preferences. For instance, Korea-based Sung Gyung Food secured funding from Standard Chartered Private Equity, allowing the investor to capitalize on the strong demand for seafood snacks in South Korea.
by Gary Mintchell | Dec 19, 2017 | Commentary, News
Is it any wonder about the wisdom of dropping my graduate work in political science while returning to manufacturing and technology?
Try these pieces of obfuscation this week from Washington.
The big tax cut and simplification bill turns out not to simplify anything. Manufacturing organizations sending information to me believe it offers financial rewards to companies who keep workers offshore. Many of us will see little or no tax cut. Do you ever wish like I do that people would mean what they say and say what they mean?
This from FACT. A letter to Congress persons.
On behalf of the Financial Accountability and Corporate Transparency Coalition (FACT) Coalition, we write to urge you to oppose H.R.1, the Tax Cuts and Jobs Act (TCJA). This bill would create significant new tax incentives to move U.S. jobs, profits, and operations overseas, while exploding the deficit. The bill’s complicated structure also creates multiple new loopholes to allow for expanded tax avoidance by large, multinational companies at the expense of small businesses and wholly domestic companies.
The FACT Coalition is a non-partisan alliance of more than 100 state, national, and international organizations working toward a fair tax system that addresses the challenges of a global economy and promoting policies to combat the harmful impacts of corrupt financial practices.[1]
The final conference bill would move the country to a territorial tax system. The primary goal of a territorial system is to permit offshore corporate profits to escape U.S. tax. Taxpayers already lose an estimated $100 billion every year to aggressive tax avoidance by multinational companies.[2] These changes would further incentivize corporate profit shifting abroad — leaving regular taxpayers to pick up the tab.[3]
This is an item from Sara Fischer writing in the Axios Media Trends Newsletter.
Why it matters: Multi-billion-dollar deals — along with regulatory changes such as the repeal of net neutrality rules — are often justified as ways to spur innovation and increase consumer choice, but consumer advocates argue the actions could actually make access to some popular content more expensive. The real question: Is choice at the expense of price really giving consumers what they want?
Those of us who have been around the block a few times know a couple of things. 1) Big companies don’t really innovate—they acquire smaller innovative companies to develop their portfolios. 2) Industry consolidation (mergers) occur during a period when innovation runs out of energy and companies are beginning to fail. What we’re waiting for is the new innovation area.
Climate, Environment, Business
As politicians debate political theory—most likely with an eye toward electoral votes—regarding environmental policy, businesses have long ago discovered that a sound environmental policy reduces costs and improves operations. Try this item from Axios Generate’s Ben Geman.
Coal and climate tussle: Mining giant BHP said Tuesday that it plans to abandon the World Coal Association, and may also leave the U.S. Chamber of Commerce over differences on climate policy, including the Chamber’s opposition to pricing carbon and its attacks on the Paris climate deal. BHP’s newly published review of its membership in trade associations is here. Quick take, via the Financial Times: “The move reflects the growing importance of environmental, social and governance standards within multinationals, which want to protect their brands and insulate themselves from threats posed by activists and consumer boycotts.”
Just for fun.
Here’s one Fun Thing gleaned from the latest Axios newsletter.
Listening to Mozart is said to raise your IQ. Does playing his music make you a better employee? AP’s David McHugh answers from Frankfurt:
- “Definitely so, say many global companies and their workers, above all in Germany and Asia, where accountants, engineers, sales reps and computer specialists bring violins, cellos, oboes and trombones and gather in their spare time to rehearse and perform lengthy, complex pieces of classical music.”
- “A conspicuous number of big German corporate names — along with a handful in Japan and Korea — have their own company-linked symphony orchestra.”
- Why it matters: “The orchestras serve as public relations tools, playing charity concerts and livening up corporate events. … [And] a symphony orchestra is an excellent model for the creative teamwork companies need to compete.”
Well, we have the people from Emerson Automation playing rock and roll at every Exchange these days. Time to pick up that guitar again.
by Gary Mintchell | Oct 31, 2017 | Commentary, News
I was putting together this piece on mergers and acquisitions when I received word that Emerson had been in conversations to acquire Rockwell Automation. Final price was $27.5 billion. That wasn’t sweet enough. The Rockwell board turned it down.
Note: I feel vindicated. I told an investment company once that they could never touch Rockwell with their war chest of $1 billion. Figured I was safe on that one.
I don’t see Rockwell as wanting to sell. Despite a friend telling me for 15 years that it had to sell, I just never saw that necessity. But I do think that consolidation is rampant in the industry right now. Schneider Electric and ABB have been acquiring strategic companies to compete with Siemens. An Emerson / Rockwell combination would have awesome market share.
Because of weaknesses elsewhere, I’m not sure either really needs the deal to survive. But I think the industry is coming to that point. My thoughts were that the most logical suitors for Rockwell were Emerson and ABB. Sources at ABB have told me that they did the evaluation (of course) and figured that Rockwell would be hard to digest. So, it went with B+R Automation.
My feeling is that this deal is not finished. But it will settle for a while until Rockwell’s share prices stabilize. Then we’ll see. Trying to integrate that Rockwell culture would be a supreme challenge for the best managers, though. It’ll be interesting.
Meanwhile, I received a quarterly update from PwC regarding global industrial manufacturing deals with disclosed values greater than $50 million.
What follows is from the PwC report.
Industrial manufacturing M&A results for Q3 2017 displayed much of the same as the previous quarter with relatively flat value and volume levels. Deal value came in at $16.5 billion while the number of deals announced were 57 compared to 55 in Q2 2017.
Cross sector global and US deal volume has modestly increased for the third consecutive quarter indicating the appetite to seek out M&A plays is still active and healthy. US cross-sector deal volume is substantially up for the first nine months of 2017 vs. 2016 which correlates with
the double digit volume increases seen in the industrial manufacturing sector over the same period.
Although there is an eagerness to investment in technology and innovation, industrial manufacturing remains somewhat risk-averse, especially as it relates to targeting larger size investments. As highlighted in our second quarter report, the slowness of implementing
trade, regulatory and tax reform in the US and the uncertainty of its implications continues to be a barrier to some. Conversely, others have accepted its existence and shifted their investment strategies to mitigate against these uncertainties.
• Deal value for the first nine months of 2017 was $52.6 billion, 18% lower than the first nine months of 2016, while deal volume saw an increase from 150 deals to 170 deals from the first nine months of 2017 vs. 2016.
• Deal value for Q3 2017 was $16.5 billion compared with $16 billion in Q2 2017. Deal volume increased slightly from 55 deals in Q2 2017 to 57 deals in Q3 2017, a 4% increase.
• The average deal size in Q3 2017 was 21% lower than the 2017 YTD quarterly average of $367 million, indicating a preference towards smaller transactions.
• There were four megadeals (deals greater than $1 billion) in Q3 2017 with an aggregate transaction value of $7.7 billion. Three of the deals were crossborder deals.
• The largest deal announced in Q3 2017 was the Swiss firm ABB acquisition of US-based GE Industrial Solutions for $2.6 billion.
• Asia and Oceania remains the most active region, accounting for 56% and 35% of M&A deal volume and value during Q3 2017.
• There were 14 megadeals announced in the first nine months of 2017 ($24.3 billion) compared to 17 in the same period of 2016 ($55.9 billion).
• Seven of the top ten megadeals in the first nine months of 2017 include China or the US as a part of the transaction vs. four over the same period in 2016.
Strategic investors continue to account for the largest share of deal activity in the sector with $12.9 billion of value and 27 deals for the quarter. As shown below, this reflects 78% of value and 65% of volume. Financial investor deal value for the first nine months of 2017 was $15.9 billion vs. $12.8 billion over the same period in 2016. This contribution is consistent with previous quarters and implies the market is more attractive for companies who can create synergies.
Deal value in the industrial manufacturing sector continues to be constrained as deal makers are still wary of the current investment playing field. Many of the same political uncertainties, particularly in the US and Europe, linger and have been the primary influence in declining average deal size over the last three quarters of 2017.
For foreign investors looking to capitalize on attractive businesses in the US there are positive and negative factors simultaneously working against one another. On the positive side, the Federal Reserve sees confidence in the US economy and plans to gradually continue to increase the federal funds rate. However, negative influencing the deals environment is the current administration’s inability to progress its agenda related to tax, trade, and healthcare.
We project the industry will close out the year in similar fashion to each of the three quarters of 2017 unless we see a catalyst event in the market such as tax reform.
Authors
Paul Elie, US Industrial Manufacturing Deals Leader
Bobby Bono, US Industrial Manufacturing Leader
Barry Misthal,Global Industrial Manufacturing Leader
by Gary Mintchell | Dec 17, 2015 | Commentary, News
A news item from the Department of the Blindingly Obvious. Aveva’s board has called off discussion for the “reverse merger” with Schneider Electric Software. It cited two reasons: the structure of the deal was overly complex and software integration issues. Yep, they are certainly correct on both counts.
You may recall that Schneider would give Aveva its software businesses (Wonderware, Avantis, SimSci, Indusoft, Citect I presume) and a huge chunk of cash in return for a 53% stake in the “New Aveva.”
I have watched many software mergers over the past 10 years. None ever achieved technology integration. They were all organizational and technical nightmares.
Then think about all the Wonderware technology embedded in Foxboro products. I’d get a headache even trying to sort through the legal and organizational problems.
A good software company
Wonderware (perhaps with other pieces of the software portfolio) would make a marvelous software company with adequate investment behind it. I still think that Schneider Electric will find a way to divest it. Running software is qualitatively different from running an electrical components and process automation business. Right now Schneider is still investing in the business, and that is a good sign.
