Tom Taulli
California - http://taulli.com
Tom Taulli is the author of various books on finance, including The Complete M&A Handbook (Random House) and Investing in IPO's (Bloomberg Press). In addition to his writing, Mr. Taulli has appeared on high-profile television venues such as CNN, CNBC and Bloomberg TV, and has been quoted in the various print media sources such as the Wall Street Journal, USA Today and LA Times.
Posted Jul 23rd 2008 4:57PM by Tom Taulli
Filed under: Electronic Arts (ERTS), Small business
The smart money continues to pour into social networking deals. The latest comes from a tier-one VC: Kleiner Perkins Caufield & Byers.
Today, the firm
announced a $29 million round for
Zynga Game Network. Essentially, the company combines two hot categories – social networking and casual games.
No doubt, this deal is a big validator. After all, Kleiner only cares about companies that have the potential of being game-changers.
So, what makes Zynga different? Well, for the most part, the company has devised innovative techniques to create highly addictive games (some say the process is scientific). Plus, there are opportunities to expand onto mobile platforms and to even create virtual worlds.
Keep in mind that Kleiner has invested in a variety of break-out gaming companies in the past, such as
Electronic Arts Inc. (NASDAQ:
ERTS). In fact, a Kleiner partner, William "Bing" Gordon – the former CEO of EA – will come on the board of Zynga.
Tom Taulli is the author of various books, including The Complete M&A Handbook
and The Edgar Online Guide to Decoding Financial Statements
. He also operates MergerBook.com.
Posted Jul 23rd 2008 4:33PM by Tom Taulli
Filed under: Earnings reports
Vocus, Inc. (NASDAQ:
VOCS) is one of the top on-demand companies in the world -- and one of the most profitable. Its technology helps PR folks with media campaigns, targeting, press releases and the like.
With a tough economy, it would seem that Vocus would hit some headwinds. But so far, there are no signs of trouble.
Just look at the company's
Q2 report. Revenues spiked 36% to $19.09 million (with a 7% sequential increase). It's the 36th consecutive quarter of revenue growth.
Net income was $5.66 million, or $0.30 per share. Moreover, cash flow from operations was $6.52 million.
Why the success? A key is that the company's products sell at competitive price points. In fact, in Q2 Vocus snagged 265 net new subscription customers (the total is 2,911).
It also helps that Vocus' product offering fits the needs of small business as well as large ones. For example, some of the Q2 customers included CITGO Petroleum, Deli Management, Easter Seals Chicago,
OfficeMax (NYSE:
OMX) and United States Olympic Committee;
Vocus has raised its guidance. The forecast for full-year revenues is $77.3 million to $77.8 million, with earnings of $0.73 to $0.75 per share.
All in all, it's good stuff. And, on news of the earnings report, shares of Vocus are up almost 4% to $33.84.
Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.
Posted Jul 23rd 2008 12:24PM by Tom Taulli
Filed under: Earnings reports
Jefferies Group Inc. (NYSE: JEF), a middle market investment bank, showed that it can deal with the treacherous credit crunch. While its latest quarterly report showed a 16% drop in revenues to $392 million, it wasn't as bad as the Street expected (the consensus estimate was $275 million). Taking out some charges, earnings came to $0.04 per share (the Street estimate was a loss of $0.16).
The major weakness came from the investment banking. However, there was strength on the trading side, such as with junk bonds.
Basically, Jefferies has taken a number of steps to maintain liquidity and protect its capital base. In fact, in April the company got a $434 million capital infusion from Leucadia National.
Continue reading Jefferies' (JEF) mantra: Preserve capital
Posted Jul 23rd 2008 11:24AM by Tom Taulli
Filed under: Earnings reports, Microsoft (MSFT)
No that long ago, VMware (NYSE: VMW) was a high-flier tech company. But since reaching $124 in late December, the company's shares have been on the descent. In today's trading, the stock price is off 11.51% to $33.60.
True, based on its Q2 report, things look pretty rosy. Revenues surged 54% to $456.1 million and net income was up 53% to $52.3million, or $0.13 per share.
Then again, VMware is a leader in so-called virtualization technologies, which help bolster data centers and complex corporate networks. Unfortunately, it looks like the deteriorating macroeconomic environment is taking a toll. For example, VMware is seeing slippage in close rates for software licenses.
Something else that's jarring: two weeks ago, VMware's CEO and co-founder, Diane Greene, left the company.
Continue reading VMware's (VMW) virtual stock price
Posted Jul 22nd 2008 2:38PM by Tom Taulli
Filed under: Deals, Private equity, Morgan Stanley (MS), Blackstone Group L.P (BX)
When UK mortgage lender HBOS Plc
went to market to raise capital, the outcome was a bust. The company sold only about 8% of the securities. In the end, HBOS's underwriters --
Morgan Stanley (NYSE:
MS) and Dresdner Kleinwort Ltd. -- were stuck with $7.6 billion in unwanted paper.
In light of this, it's going to be tough for UK financial institutions to bolster their balance sheets. But there is an alternative: private equity.
In fact, it looks like
The Blackstone Group LP (NYSE:
BX) is
taking a look at
Paragon, a UK mortgage lender. It appears that Paragon is opening up its books to engage in some initial due diligence.
Of course, this is still nascent, and deals can easily fall apart, especially in tough markets. However, investors are certainly excited. In London trading, Paragon's shares spiked 23%.
Even so, the value of Paragon is still down 87% over the past year, so it should be no surprise that the private equity folks sense opportunity.
Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.
Posted Jul 22nd 2008 10:56AM by Tom Taulli
Filed under: Deals, Cisco Systems (CSCO)
Foundry Networks, Inc. (NASDAQ:
FDRY), which builds networking technologies, went public in 1999. With the Internet surge, the stock price went over $200.
Of course, that was a temporary thing. Since then, Foundry's shareholders have suffered.
However, this week they got some cheery news. Foundry
agreed to sell out to
Brocade (NASDAQ:
BRCD). The deal comes to about $2.91 billion in a combination of cash and stock.
Essentially, the deal blends some key technologies. While Brocade has a strong footprint in fiber channel systems, Foundry is a top player in switches and 10-gigabit Ethernet offerings.
If anything, it's a necessary step to deal with the intensely competitive environment, especially against the mighty
Cisco (NASDAQ:
CSCO).
No doubt, Brocade has demonstrated success with M&A, such as with its acquisition of McData. However, networking deals can be tricky. After all, Brocade operates primarily on an OEM basis whereas Foundry has a large direct sales force.
There is some financial risk too as Brocade needs to borrow about $1.4 billion.
Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.
Posted Jul 22nd 2008 9:48AM by Tom Taulli
Filed under: Private equity, McGraw-Hill Companies (MHP)
The roots of
Reed Elsevier go back to the late 1800s. And since then, it has become a publishing empire. And a big part of the growth has come from M&A.
Well, now the company is engaged in another key deal. That is, Reed Elsevier is
engaged in an auction to sell its
Reed Business Information (RBI) division.
It's an attractive asset. For example, RBI has such publications like Variety and New Scientist. In all, there are about 80 publications and annual revenues come to about $2 billion.
As a result, a group of private equity firms are lining up to get the deal. These include 3i Group plc,
Apax Partners Worldwide LLP,
Bain, TPG, Candover, Cinven,
Permira, Advent International and
Providence Equity Partners.Now, RBI's goal is to get $2 billion to $2.5 billion. However, in light of the tough economic situation, this could be optimistic. Keep in mind that RBI may provide some financing help to potential buyers.
Then again, there may be a way to get a stronger valuation: it looks like
The McGraw Hill Companies (NYSE:
MHP) is interested. All in all, RBI would be a nice fit for the firm, with some revenue and cost synergies.
Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.
Posted Jul 22nd 2008 1:06AM by Tom Taulli
Filed under: Oracle Corp (ORCL)
According to independent tech research firm
451 Group,
SAP (NYSE:
SAP) has been trying to sell off its TomorrowNow division since January. Unfortunately, there were no bidders. As a result, SAP has decided to
shut down the business.
SAP purchased TomorrowNow in 2005. It looked like a smart deal. After all, the company developed systems to make it easier to use alternatives to
Oracle (NASDAQ:
ORCL)'s maintenance customers (known as the Safe Passage Program).
So why the dearth of interest for TomorrowNow? Well, Oracle filed a lawsuit against the company in March 2007. The allegation was that TomorrowNow made improper downloads from Oracle's servers.
No doubt, such a thing can be scary for any possible suitor.
The irony is that TomorrowNow customers – which amount to about 225 – will probably have no choice but to return to Oracle.
Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.
Posted Jul 21st 2008 6:22PM by Tom Taulli
Filed under: Goldman Sachs Group (GS), Wachovia Corp (WB)
For veterans of the finance world, the credit crunch is a mind-numbing conundrum. For example, Treasury Secretary Hank Paulson -- who was a former
Goldman Sachs Group, Inc. (NYSE:
GS) chief -- sometimes seems befuddled.
So, why not bring on board some other super smart finance folks?
Well, that's what Paulson is doing. In fact, this week he
snagged Ken Wilson, who is the vice chairman of investment banking and chairman of financial institutions business at Goldman. Interestingly enough, he's been structuring some of the key banking deals over the past year, such as the financing of
National City Corporation (NYSE:
NCC) and advisory work for
Wachovia Corporation (NYSE:
WB).
True, Wilson's stint will be short-term (lasting until January 1st, when George Bush will leave the White House). But, for the US taxpayers, it's a pretty good deal. After all, he is going to forgo any compensation.
Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.
Posted Jul 21st 2008 4:04PM by Tom Taulli
Filed under: Google (GOOG), Microsoft (MSFT), Small business
Some people are startup junkies. No doubt, they want to snag a job in a company that becomes the next
Microsoft (NASDAQ:
MSFT) or
Google (NASDAQ:
GOOG).
So, where can they go? Well, there's a new spot:
Startuply.
In fact, the service is free, a good thing for cash-strapped startups.
Basically, a company puts together a profile -- so far, there are 176. But it goes beyond the typical fare. For example, there's information on such things as the work environment , funding, names of investors, revenues and so on.
Besides a sophisticated search engine, Startuply has Web 2.0 features like RSS, widgets, Google maps and social bookmarks.
Startuply is still nascent – there are 690 job postings -- but it should be a good resource for the startup crowd.
Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.
Posted Jul 21st 2008 3:17PM by Tom Taulli
Filed under: Private equity, Initial public offerings
Rexnord Holdings has been busy with dealmaking over the past few years. For the most part, the company is an amalgam of $1.3 billion in M&A deals.
In 2006, Apollo Management bought Rexnord from
The Carlyle Group. Seven months later, Rexnord merged with Zurn. And things aren't over. Now, Rexnord has filed to go public.
Basically, there are two key pieces to the company. First, there is the power transformation division, which manufactures gears, bearings, seals and conveying equipment. Next, Rexnord has a water management division. This involves the handling of professional grade plumbing and water control products.
About 85% of the total sales of Rexnord come from products where it has the leading market share positions.
A key to Rexnord is its strong distribution network. For example, the power transmission business has more than 400 distributor customers and 2,200 branches. As for the water management part, there are 550 independent sales reps.
For the year ended March 31, 2008, Rexnord posted net sales of $1.9 billion and adjusted EBITDA of $382.7 million. Since 2004, the growth rate for sales has been about 27% (when you include acquisitions).
The proposed symbol for Rexnord's IPO is "RXN." What's more, you can locate the prospectus at the
SEC website.
Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.
Posted Jul 21st 2008 1:51PM by Tom Taulli
Filed under: Deals, Merrill Lynch (MER)
So far, sovereign wealth funds have had bad luck with investments in U.S. financial institutions such as with
Citigroup (NYSE:
C) and
Merrill Lynch (NYSE:
MER).
Despite this, there still may be interest in dealmaking. Just take a look at the situation with Merrill Lynch. There was talk that the troubled firm would unload its 49.8% stake in
BlackRock Inc (NYSE:
BLK), and apparently there was
interest from sovereign wealth funds, according to the
Financial Times.
The potential suitors: Kuwait Investment Authority and Temasek (Singapore).
However, one issue was valuation. Why sell when the markets are in dire straights?
But there were some other key considerations. For example, BlackRock has been able to escape much of the turbulence from the credit crunch. More importantly, the firm has a lot of growth potential in global markets.
BlackRock must give consent for a sale -- at least for the next 14 months. So, in the end, it has a lot of power in the situation.
Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.
Posted Jul 21st 2008 12:27PM by Tom Taulli
Filed under: Deals, Private equity, Morgan Stanley (MS)
HBOS Plc is the largest mortgage operator in the UK. And yes, it needs lots of money to shore up its balance sheet.
Unfortunately, raising capital has turned out to be an extremely tough task.
When HBOS
engaged in a rights offering, only about 8% of outside investors subscribed. As a result, the company's underwriters --
Morgan Stanley (NYSE:
MS) and Dresdner Kleinwort Ltd. -- are now stuck with $7.6 billion in unwanted securities.
Since this was a firm commitment offering, HBOS was able to get its much-needed cash.
However, the problem is that this deal is likely to chill further investment in the UK banking sector. After all, who would want to take on the risk?
Thus, while there may be more capital infusions from private equity firms, which have large amounts of capital, no doubt their term sheets are likely to be quite onerous.
Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.
Posted Jul 21st 2008 10:48AM by Tom Taulli
Filed under: Private equity, CIT Group (CIT)
It's been a brutal time for retailers. Some of the bankruptcies include: Linens 'n Things, Goody's Discount Clothing and Sharper Image.
According to a report in the
Wall Street Journal [subscription required], it looks like
Mervyn's LLC is also in trouble and may even shut down this month as a variety vendors are stopping shipments. There are also issues with financing from
CIT Group Inc (NYSE:
CIT).
Founded in 1949, Mervyn's is a low-priced retailer that's focused on young families. The typical store has 80,000 retail square feet. While there are 177 stores, they are concentrated in seven states, with a big concentration in California and Arizona -- both have suffered greatly from the real estate bust.
Back in 2004, a group of private equity firms, Sun Capital Partners Inc, Cerberus Capital Management, Lubert-Adler and Klaff Partners LP, purchased Mervyn's for about $1.2 billion, of which $400 million was in equity.
Are these folks suffering? Perhaps not. You see, the investors wanted to capitalize on Mervyn's real estate. As a result, the investment was structured into two sections. So while the retail component has lagged (and there has been lots of restructuring), the real estate component has done quite well.
Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.
Posted Jul 20th 2008 3:10PM by Tom Taulli
Filed under: Next big thing, Small business
Austin Logistics got its start about 15 years. And, perhaps the company was ahead of its time. You see, Austin Logistics is a leader in so-called event-based analytics solutions (EBAS).
It's a mouthful, but it's also a growth business. Essentially, EBAS analyzes customer interactions so as to boost profitability. And the focus is primarily on the collection of debts.
Well, this week Austin Logistics secured a third round of venture capital (the amount was not disclosed). The investors include Baird Venture Partners, Apex Venture Partners, Total Technology Ventures, and North Hill Ventures.
Moreover, Austin Logistics hired a new CEO, John Carreker III (prior to this, he was an executive vice president and managing director of Carreker Corporation, which was sold to Checkfree in 2007).
Keep in mind that Austin Logistics' technology can essentially predict -- in real-time -- the odds of an opportunity or the risk of an interaction (called Decision IQ). For example, in one case the system helped a company reduce charge-offs by $10 million (in a single portfolio). In another situation, there was a $1.8 million cost savings with collections.
No doubt, with the subprime mess and other credit implosions over the past year, there is certainly a big-time need for Austin Logistic's offerings.
Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.
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