Caught in the middle (note from London)
I moderated the Private Equity Panel at the November 17th World Financial Symposiums conference in London. There were about 80 people in the room – mostly CEOs – and healthy give and take of ideas for building value in the current market. Google’s Anil Hansjee echoed the strategy we have been discussing with Google’s US corp dev team – most of their acquisitions have been and will continue to be talent buys – under $20 million, fewer than 20 employees. Most of the balance will be made up of acquisitions of category leaders, like Admob. The tough deals for Google to take on will be the companies in the middle, that have developed a business around a technology but don’t dominate a sector. The CEO of Player X made a similar point: he had an early offer for the company that would have delivered a higher return to him than he ultimately got by selling after 5 years. Here is the problem for VCs, from my perspective: 99% of VC-backed deals will fall into that middle ground, the no-man’s land where acquisitions don’t make sense because the buyer has to overpay for talent, yet won’t gain significant market share. Entrepreneurs need to take a hard look at selling early, before taking institutional money and creating a preference stack that will dilute their return.
Posted by NatBurgess, President on 18 November 2009
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