November 2016

The CyberWire Special Edition: Venture Capital

  |   Allegis News, The Latest

In this CyberWire Podcast Special Edition, we examine the current state of investment in cyber security, speak to experts in the field, and learn from top cyber security-focused venture capitalists what they expect before they invest.

The CyberWire | November 29, 2016

There’s no question that cyber security remains a hot industry, and that attracts investment. What are venture capitalists looking for, and how do they decide which deals to make? How did we get here, and what’s the outlook for the future?

We round up some experts, as well as some of the top cyber security venture capitalists in the industry to find out how they choose, and what they expect once the deal’s been made.

  • Robert R. Ackerman, Jr. is founder and managing partner at Allegis Capital. They describe themselves as, “a leading seed and early stage venture capital investor in companies building disruptive and innovative cybersecurity solutions for the global digital economy.” allegiscap.com
  • Alberto Yepez is co-founder and managing director at Trident Capital Cybersecurity. In their own words, “We know cybersecurity. It’s all we invest in. And we care about making the world a more secure place to live.” tridentcybersecurity.com
  • Tom Kellermann is CEO of Strategic Cyber Ventures. They say they are, “the industry’s first investment vehicle for synergistic cybersecurity technologies focused on disrupting the adversary.” scvgroup.net
  • Tami Howie is executive director of the Chesapeake Regional Tech Council. Prior to that, as a lawyer, she has been involved with the successful exits of over 150 companies and has represented technology companies, investors, SBICs and underwriters such as JP Morgan, Goldman Sachs and Morgan Stanley. chesapeaketech.org
  • Dr. Christopher Pierson is general counsel and chief security officer at Viewpost, an electronic payments and invoicing company. Prior to joining Viewpost, Chris was the Senior Vice President, Chief Privacy Officer for the Royal Bank of Scotland’s U.S. banking operations. viewpost.com
Cylance Logo

Cylance

Cylance is revolutionizing cybersecurity with products and services that proactively prevent, rather than reactively detect the execution of advanced persistent threats and malware. Learn more at cylance.com.

Article found here https://thecyberwire.com

Read More

Inphi Corp. (IPHI) to Acquire ClariPhy Communications in $275M Deal

  |   Portfolio News, The Latest

 

November 1, 2016 | Streetinsider | Inphi Corporation (NYSE: IPHI) announced that it has signed a definitive agreement to acquire ClariPhy Communications Inc., a leading provider of ultra-high-speed systems-on-chip (SoCs) for multi-terabit data, long haul and metro networking markets for $275 million in cash as well as the assumption of certain liabilities at the close. The acquisition is expected to close in December of 2016, at which time ClariPhy’s employees are expected to join Inphi.

“With the acquisition of ClariPhy, we are completing our product portfolio as the leading component and platform supplier for optical networking customers,” said Ford Tamer, president and CEO of Inphi. “The ClariPhy coherent DSP complements Inphi TiA, driver, optical PHY and silicon photonics components to provide system OEM and module customers high-performance and low power platform solutions. Following closing, we expect to have platform offerings for long haul, metro, DCI edge, and intra-data center applications. We believe this will provide customers with faster time-to-market, proven quality, and competitive cost.”

As the world turns toward optical networking, the ability to communicate in “coherent” DWDM technology over both long and short distances is becoming increasingly important. ClariPhy is one of only three merchant suppliers with this coherent DSP technology in the world today. On the product front, following closing, Inphi expects to be able to offer customers (1) coherent DSP, TiA, drivers for long haul, and metro, (2) direct detect PAM DSP-based solutions for DCI edge between data centers, and (3) NRZ and PAM short reach solutions for inside data centers. On the component front, following closing, Inphi expects to be able to offer TiA, driver, silicon photonics, coherent DSP, PAM and NRZ physical layer devices.

IHS estimates the total available market for 100G & 200G coherent optical network hardware will grow at 18% CAGR, from $3.2 billion to $7.4 billion, between 2015 and 2020. This growth will be driven by several concurrent, powerful tailwinds: the optical super cycle, a growing and expanding SAM (serviceable available market), opportunities in regions such as China and with new markets such as Cloud. Inphi believes that this acquisition will position the company to be one of the most comprehensive component and platform suppliers across all three optical market segments inside/outside data centers, metro and long haul.

Strong Additions to the Inphi Team Inphi enthusiastically welcomes the addition of the ClariPhy employees who are expected to join our team as a part of this acquisition. Nariman Yousefi, ClariPhy’s current CEO is expected to join Inphi to run the Coherent DSP business unit. Additionally, the company’s already strong design team is expected to be augmented by ClariPhy’s well-known VP of Engineering and DSP architect, Oscar Agazzi.

Further details of the transaction and arrangements are set out in Inphi’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 1, 2016.

Article found here: streetinsider.com

Read More

Why tech M&A fails so often: The three most common mistakes

  |   Allegis News, The Latest

 

 

 

By Bob Ackerman | November 1, 2016 | PE Hub

 

It was a failure. That’s what we learned in September about semiconductor giant Intel’s acquisition of antivirus software maker McAfee five years ago. Intel agreed to sell a majority stake in its $7.7 billion acquisition to a private equity firm at a price that showed that McAfee’s assets had increased only marginally, if at all.

There is an important message here.

Far too many technology companies are doing a poor job pursuing acquisitions. Strategic planning is insufficient and integration is largely bungled, and companies usually value acquisitions based on project potential and end up overpaying when that “potential” fails to materialize.

bob

Robert R. Ackerman Jr., founder and managing director, Allegis Capital. Photo courtesy of the firm

A technology company should acquire another only if the acquisition is highly likely to enable or enhance growth prospects indefinitely. Acquirers sometimes say this will be accomplished, but it usually turns out to be a pipe dream.

Most experts say the failure rate of acquisitions is at least 50 percent. Harvard Business Review has estimated it to be 70 percent to 90 percent.

It’s not as though companies decide to pursue an acquisition out of thin air. Their motivation is usually reasonable.

Companies may turn to M&A to embrace a new or emerging market opportunity or, concerned about their deteriorating competitive position, as a means to reinvigorate themselves. In other cases, a company may decide that it is better to buy new technology than to make it, or that it needs an outside company under its wings to enhance its domain expertise. Some acquisitions are sparked by several of these factors.

Too often, however, the strategy is flawed and key tactical steps miss the mark. Companies put on blinders and conclude that their particular deal will somehow buck the negative historical trend.

More often, the result is that the wrong companies are purchased for ultimately an unrealistic reason, and deals are improperly priced. If the marriage doesn’t fail outright, the financial performance of the acquirer declines.

Why deals fail

Even if the right acquisition is made, lots of things tend to go wrong. Corporate cultures clash. Or too much attention is focused on tactics and too little on strategy. Or, in the case of startups, new employees who are unwilling to swap the dream of being a key player in the growth of a successful startup to merely become a cog in a corporate wheel don’t buy into the deal and depart.

Consider another, recent technology acquisition that has looked shaky from the get-go. Microsoft’s purchase in the summer of LinkedIn for more than $26 billion, almost 50 percent more than the value of LinkedIn’s stock. Synergy is lacking. Small wonder given that Microsoft’s M&A track record is weak. It has written down multibillion-dollar purchases of the Nokia handset business and the aQuantive advertising business. And its $8.5 billion purchase of Skype is widely viewed as disappointing.

In many cases, mergers and acquisitions don’t flat out fail. They just underperform. According to an analysis last month of acquisitions by the S&P Global Market Intelligence team, post-deal returns among Russell 3000 companies making significant acquisitions generally did worse than their peers. Profit margins, earnings growth and return on capital all declined, relatively speaking, while interest expense rose as debt soared.

The three most common M&A mistakes

So what happens most often to undermine M&A deals?

  1. Integration is weak. The strategic partnering and business development executives who find companies and negotiate the deals are notthe executives who actually manage the acquisition or integrate the target company. Most of the time, it is the acquirer’s chief technology officer or the operating executive who wanted the acquisition who determine the fate of the startup. The success of an acquisition often depends on whether the acquiring company wants to keep the new company as a standalone division or integrate it into the corporation. Standalone divisions tend to have a better shot at success. The reality, however, is that if a company is being acquired for its intellectual property, typically the case, the usual strategy is to integrate the company and quickly assimilate it.
  2. Executives fail to distinguish between deals that might improve current operations from those that could dramatically improve the company’s growth prospects. Companies then pay the wrong price and integrate the acquisition poorly. A deal designed to boost a company’s performance is generally insufficient to significantly change a company’s growth trajectory. It usually requires something seldom done, working to successfully integrate the acquisition in terms of its business model.

Business models are multifaceted, but their most important component is the resources, such as employees, customers and products, used to deliver customer value. In an ideal case, these resources can be extracted from an acquired company and plugged into the parent’s business model. The problem is that additional business model components, such as the profit formula and business processes such as manufacturing, R&D and sales, are imbedded and generally not transferrable.

  1. Acquisitions don’t have a specific mission and targeted goals. Much more typical is the Microsoft-LinkedIn acquisition, in which the corporate combination simply hopes to improve corporate prospects by scooping up a new business.

M&As that have worked

It’s not impossible for corporate combinations to work. Some have.

One example is Apple’s purchase of chip designer P.A. Semi in 2008. Before then, Apple procured its microprocessors from independent suppliers. But as competition with other smartphone companies increased the importance of battery life, it became imperative for Apple to optimize power consumption by designing processors specifically for its products. Apple had to purchase the technology and talent to develop an in-house chip design capability. Predictably, the combination fared well.

Another successful example was EMC’s acquisition of VMware in 2003. EMC is a manufacturer of hardware storage. Its marriage with VMware substantially strengthened the company’s reach into its customers’ data centers. This merger turned out to be a stunning success.

The bottom line is that executives need to become far more discerning in eyeing potential acquisitions. This is precisely why Salesforce.com, Walt Disney Co and Google parent Alphabet Inc recently took a hard look at acquiring Twitter and, in each case, walked away.

Robert R. Ackerman Jr. is founder and managing director of Allegis Capital, a Palo Alto, California-based early-stage venture capital firm specializing in cybersecurity.

 

Article found here: Pehub.com

 

Photo of logos taken in June 2016 when Microsoft announced its $26.2 billion purchase of LinkedIn. Reuters/Dado Ruvic

 

bob

Read More