| Xin's profileRandom thoughtsPhotosBlogLists |  Tools  Help |
Random thoughtsJuly 05 If you want money, ask for advice; if you want advice, ask for moneyThis is a smart sayings I learned two weeks ago at an early-stateg angel and VC conference in Boston. The conference, joined by 10-12 partners from large regional VC and angel funds, was held by New England investment communities to connect investors and entrepreneurers. It was no surprise that most of entrepreneurers I met at the meeting were from trendy industries: healthcare, clean-tech, and IT. One brilliant idea that striked my eyes was to eBay-nized education markets.
Here are some other good learnings from this one-day event.
1. Angel and VC investment are very regional acitivities. People do not like to travel long distance to take a look at their portfolio companies, so investors only invest in business close to their offices
2. VC investments have dropped dramatically this year. The chance a business proposal to get funded drops from 1/80 to approximately 1/150. VC funds do much more syndications than before
3. The industry will experience a time of contraction for a foreseeable future. Because VC funds lack of exit paths, future funds will have liquidity constrains
4. Since startup companies will not likely to get good evaluations at this period of time, they should focus on finding good long-term partners which will help themselves grow and get good evaluations in future fund raising rounds
5. Clean-tech is still a hot potato for VC funds. It requires long-term and large investments as pharma startups, but the exit strategy is still not clear to everyone. VC is very cautious in any investments in this fields
6. In a fast pace networking event like this, everyone tries to find out quickly: whom they need to spend some time with and whom they need to pass. Smooth talking is quite useful to transit in and out conversations.
7. The best way to break into VC world or find suitable VC investors starts from their portfolio companies
8. Crazy guys are everywhere - one guy talked with me very excitedly about his steel internal combustion engine that reached 100% efficiency and looked for $5 m investment. Sincerely, I think he should apply for the Nobel Prize or a Harvard Physics professorship by creating a new frontier in physics .... July 04 What make a company successful in Chinese sportswear marketAs simple as it may seem to be, the company's revenue is driven by number of stores and single store sales, and its profitability largely depends on its supply chains. If we bring these to a next level, a successful company needs to focus on its channels, brands, price, and supply chains.
(1) This has been a channel driven market in the last several years. The industry's revenue growth has been driven more by opening new stores, especially in Tier 2 and 3 cities, than by increasing single store sales. The consumer purchase power in Tier 2 and 3 cities has grown very fast over the last 5-8 years. The competition, however, was not intense in these cities, because most of established brands traditionally focused on Tier 1 cities. Value brands, e.g. Anta, 361, Xteps, have gained momentum in these markets since 5 years ago, and premium brands, e.g. Nike, Adidas, started taking major efforts to enter these markets, especially Tier 2 markets, in the last 2-3 years. Tier 2 and 3 markets still have a lot of potentials, so it will stay as a major force that drives the industry growth in the coming years.
If we look into more details, the ideal channels need to have the right format in the right regions and also tightly controlled. (a) The consumers in the south shop in street stores, and consumers from north shop in malls. If the company's stores are distributed accordingly, they are able to capture opportunities to grow their revenue. (b) Since this market becomes competitive now, if a company does not have strong control on its channels, or in other way, if the interests of this company and its channels are not aligned, it can quickly lose its ground.
(2) The brand is also important, especially in Tier 1 and partially in Tier 2 markets. The consumers in these markets are brand-driven shoppers. However, because most brand companies contract many celebrities or sponsor multiple events to promote their sales and, in fact, very few celebrities or sport events with true star power that are able to move markets these days, branding and marketing become a costly game that everyone has to participate even though it becomes less and less effective. Kappa, a newly raised fashion sportswear company, is an exception.
Multi-brands brand strategy is another way to gain substantially more market share in a highly fragmented market, and E-Land is a successful examples in Korean children apparel market.
(3) Price is more important when a company wants to explore the opportunities in Tier 2 and 3 markets. The consumers in these markets are very price conscious. Some surveys show that premium brands, e.g. Nike, Adidas, are popular in consumers age between 15 and 30. However, they don't sell as well in elder market, because elder consumers tend to be value-driven shoppers.
(4) Since most of the domestic companies have grown too fast in the last several years, their supply chains become a weak link that potentially damage their market positions and brand reputations. The potential risks include no corporate strategies, high cost and quality constrol risks, weak merchandise planning and product designing capabilities, lack of comprehensive and strategic sourcing and manufacturing plans, insufficient SOPs and no S&OP, and inefficient warehouse and logistics management. May 31 Magic pictureThis is an amazing picture! I see the girl making counter-clockwise turns, but chengcheng sees her making clockwise turns. So I am left-brain dominance, and chengcheng is right-brain dominance.
Here is the instruction on how to see the magic picture: first, open the "Magic Picture" folder in Photos (don't go to the slide show); then click the the picture until the itself is opened by Internet Explorer. You will see a girl in the picture making turns. Here is the original article from MITBBS:
如果你看见这个舞女是顺时针转，说明你用的是右脑；如果是逆时针转，说明你用的左脑。
耶鲁大学耗时5年的研究成果。据说，14%的美国人可以两个方向都能看见。 补充资料: 大脑就是你自己的智囊。科学研究证明，大脑分为左半球和右半球。左半球是管人的右边的一切活动的，一般左脑具有语言、概念、数字、分析、逻辑推理等功能；右 半球是管人的左边的一切活动的，右脑具有音乐、绘画、空间几何、想像、综合等功能。 人的左右半脑是不平衡发展的，统计显示，绝大多数人是左脑发达（其中大约一半的人比较均衡一些）。全球有10％的人是左撇子，即右脑比较发达。而左右脑的发育程度不同，隐含了你的很多特质和天赋的秘密： 理解数学和语言的脑细胞集中在左半球；发挥情感、欣赏艺术的脑细胞集中在右半球。 右半脑发达的人在知觉和想像力方面有可能更强一些；而且知觉、空间感和把握全局的能力都有可能更强一些。在各种动作上相对更敏捷一些。 右脑最重要的贡献是创造性思维。右脑不拘泥于局部的分析，而是统观全局，以大胆猜测跳跃式地前进，达到直觉的结论。在有些人身上，直觉思维甚至变成一种先知能力，使他们能预知未来的变化，事先做出重大决策。 左脑的记忆回路是低速记忆，而右脑的是高速记忆，左脑记忆是一种“劣根记忆”，右脑记忆则让人惊叹，它有“过目不忘”的本事。 处理简单的语言问题时人们左脑相对活跃；左脑发达的人处理事情比较有逻辑、条理。
左脑发达在社交场合比较活跃，善于判断各种关系和因果。 左脑发达善于统计，方向感强。 左脑发达善于组织。 左脑发达善于做技术类、抽象的工作（如电脑编程）。 男性是根据右脑和左脑各自不同的分工来使用大脑的；相比之下，女性却可以同时使用左脑和右脑。 男性和女性大脑的最大区别主要是大脑皮层的构造不同。女性大脑的沟通交流能力特别发达，她们细致、敏感，能够通过察言观色来了解对方的心理，直觉也很灵敏。从构造上看，女性左右脑的脑梁部分粗于男性，因此左右脑可以顺利地同时使用。 多数男性方向感天生就比女性强。 男性的语言表达能力和理解能力远逊于女性。 August 16 菲尔普斯夺得8金以后from MITBBS
菲尔普斯夺得8金以后： 各国对游泳比赛蛙泳、仰泳、蝶泳、自由泳×100、200、400、800、1500导致金牌过多 感到非常不满，纷纷要求增加自己优势项目的金牌数目。 巴西提出： 足球应该分为3人、5人、7人、11人×沙滩、室内、草地。 中国提出： 乒乓球应该分为直板、横板、直板双打、直板单打、直板横板混双。 英国提出： 马术应该分成黑马马术、白马马术、红马马术、褐马马术、黄马马术、斑 马马术。 肯尼亚提出：长跑应该分为10000米、11000米、12000米、13000米。。。 日本提出： 所有男女混合项目应该增加3p、4p、5p、6p、7p。。。群p。。。500p。 泰国提出： 除了男子和女子项目外，所有应该加上人妖组。 January 22 How to read a PE deal agreement - an educational article from NY TimesHow to Read a Private Equity Deal AgreementJanuary 18, 2008, 7:47 am
Reading merger agreements is like putting together a jigsaw puzzle. For those who like their puzzle a bit more complex, private equity merger agreements are the ones with more pieces. And since it is Friday and we’re all looking for a distraction, what follows is a how to guide for reading private equity agreements for closing risk.
The guide comes from a deal announced earlier this week, the agreed acquisition of Manatron, a provider of tax software for state and local governments, by an affiliate of Thoma Cressey Bravo, the private equity firm. The deal is a small one, valued at approximately $66 million, but as you will see there is much we can learn from it. So, let’s dive into the merger agreement. We start by determining what the agreement states about specific performance. In the Manatron deal, the relevant clause in the merger agreement is in Section 8.8:
So far, so good. This clause is the type that you would normally see in a strategic deal and which provides the seller the power to argue forcefully in a court that the buyer should be required to perform its obligations and complete the deal. However, in a private equity deal what one clause giveth another clause sometimes takes away (this is what caught United Rentals in its deal with Cerberus). So, the next thing to check is the remedies section in the termination clause. This section often contains a limitation on liability that restricts the scope of specific performance. Here, the relevant sections are 7.2(c) & (d):
So, for those who don’t normally read these agreements the above two provisions essentially provide that if all of the conditions to closing the merger are fulfilled and the buyer fails to complete the transaction, Manatron can terminate the agreement and receive a reverse termination fee. Here the fee is a payment in the amount of $2 million. However, reading these provisions together with the specific performance clause, if Manatron does not want to terminate the agreement it can specifically enforce the buyer’s obligations to close. So, at this juncture, it looks like a tight agreement, one quite favorable to Manatron. It is also an atypical private equity agreement which often have either a pure reverse termination fee with no specific performance or specific performance only of the buyer’s financing commitment letters. Here’s the catch. The acquirors here are Manatron Intermediate Holdings, Inc. (Parent), and Manatron Merger Sub, Inc. (Merger Sub). According to the merger agreement, Merger Sub is a shell company and there is no evidence that Parent is not also one. This means that neither company has any assets to collect upon other than the par value of their shares, probably no more than $100 at best. It is for these reasons that a private equity merger agreement must be reviewed with the fund guarantee and the debt and equity commitment letters. The fund guarantee is the private equity fund’s commitment to stand by any reverse termination fee and pay it from their fund. The commitment letters are the agreements by which Parent and Merger Sub secure the funds necessary to consummate the transaction. Without these letters, the merger agreement is largely unenforceable by the seller. Here, do a search of the Manatron merger agreement. There is no mention of a fund guarantee or an equity commitment letter. The only terms of relevance are in the Parent and Merger Sub representations. In Section 4.5 the two entities represent that:
The section on financing in 5.13 also only mentions only a debt commitment letter. According to the merger agreement, Manatron has 5,110,374 shares and 851,300 options outstanding and the unvested options included in the latter figure are accelerated in the merger. So, just to purchase the outstanding shares alone the buyer requires approximately $61 million (the per share purchase price is $12 per share). From their last quarterly earnings report, Manatron only has about $9 million in cash and marketable securities on hand, and the merger agreement requires Manatron to use part of that to pay off its debt prior to closing. This is all just plain odd. The deal appears to be short at least $15 million. The absence of any mention of an equity commitment letter makes it seem as if there is no equity commitment letter to cover this amount as again would be typical. This creates two problems. First, the debt commitment letter (which wasn’t disclosed) likely requires an equity infusion as a condition to the lender providing financing. So, if all of the above is true, Manatron’s specific performance right is meaningless because Wells Fargo, the financing bank, can simply refuse to fund if Thoma Cressy refuses to make up the remainder of the required equity funding. Again, though, there appears to be no equity commitment letter to force Thoma Cressy to do so. The second problem is that if indeed Parent and Merger Sub are true shells, as is typically the case, and there exists no fund guarantee, then the reverse termination fee is a mirage. There are no assets to collect. Thoma Cressy has a costless option on Manatron. I want to believe in my heart that all of these assumptions are merely that, Manatron simply did not disclose these documents, and the documents will eventually be disclosed in Manatron’s proxy statement. But if they do not exist Manatron has signed a true option to buy the company with no recompense. The board of Manatron has left the company in quite a vulnerable position. There’s another lesson here. Given the quirks of these agreements, sellers should retain experienced private equity law firms to represent them in these transactions. Manatron’s counsel on this deal, Warner Norcross & Judd, is an excellent Michigan firm, but how many private equity deals have they done recently? This is the second recently announced deal, Waste Industries being the other, where experienced buyer private equity counsel may have gotten the better of local counsel inexperienced in these types of transactions. Lesson over. Coda: The news release for the Manatron deal had the following statement: “The completion of the transaction is not subject to any financing contingency.” Sigh. –Steven M. Davidoff |
|
|||
|
|
