ࡱ> 7 bjbjUU 7|7|l d 4։  (       $   T  " + ' +++> + ++P { }E&t 0 btEkE+ The Role of Competitive Intelligence in Strategic Partnerships Arik R. Johnson  HYPERLINK "mailto:arik@aurorawdc.com" arik@aurorawdc.com Mergers and acquisitions, joint ventures, corporate alliances, technology transfers and licensing, and even consortia participation between otherwise distinct and separate firms, sometimes even competitors, are the single most important strategic use of business strategy in business today. However, the track record of companies' use of competitive intelligence input in identifying, executing due diligence, selection of partners and ultimate decision-making about such relationships has been poor ... and sometimes even disastrous. Rather than selecting partners carefully based on product/service synergies and long-range market prospects, many such relationships are built on matters of convenience -- in other words, marriages done for all the wrong reasons. As a result, a statistical majority of such relationships ultimately fail to produce the value once envisioned by their strategists. But by adding their unique appreciation for long-range competitive advantage to the skills of financial and legal priorities, CI practitioners at the strategic level have a new set of responsibilities for their organizations -- helping to leverage the core strengths of the firm in partnership with others to create value for shareholders and long-term competitive advantage in the marketplace. Sometimes, this can result in new industries or hegemonic domination of emerging markets (and their profits). This half-day session focuses on the specific techniques and objectives used by some of the world's most fearsome competitors; how to use CI more effectively to exploit opportunities and avoid common threats of failure that so often plague the average strategic partnership; how to build specific Strategic Competitive Intelligence products to support M&A, Alliance, JV and other relationships; which processes are highest-impact for creating strategic, corporate support services ... and which ones to avoid; which Organizational Models are best for specific types of activities; analytical tools used to realize value; what actions are most important to realizing the best return on investment and to track/measure results of CI participation; and more. What CI Can Contribute to the M&A Process Selected Bibliography Blumenthal, Barbara (1995), The Right Talent to Make Mergers Work, Mergers & Acquisitions, September/October, 26-31. Charting a Course Through Turbulence: IPOs, M&A, and the Pursuit of Shareholder Value, (1999), Broadview White Paper, September, Broadview International, LLC, New York. Chaudhuri, Saikat and Behnam Tabrizi (1999), Capturing the Real Value in High-Tech Acquisitions, Harvard Business Review, September-October, 123-130. Dashman, Lisabeth (1998), The Value of an In-House Competitive Intelligence Department: A Business Plan Approach, Competitive Intelligence Review, Vol. 9(2), 10-16. Galli, Joseph and Tony Corsillo (1999), Going Beyond CI: Mergers/Acquisitions & Market Expansions, 14th Annual SCIP Conference, May, 1-31. Goldblatt, Henry (1999), Ciscos Secrets, Fortune, November 8, 177-181. Henry, Brian (1994), Mergers, Acquisitions, and Joint Ventures, Competitive Intelligence Review, Vol. 5(2), 45-47. Herring, Jan (1994), Business Intelligence Aspects of Alliances, Directors & Boards, Winter, 50-52. Hooke, Jeffrey C. (1996), M&A : A Practical Guide to Doing the Deal, John Wiley & Sons, New York, NY. Horne, Margaret (1999), Competitive Intelligence in the Business Valuation Profession: A Case Study, Competitive Intelligence Review, Vol. 10(3), 33-42. Infinite Variations on the Theme of Financial Buying, Mergers & Acquisitions, November/December, 21-33. Levitas, Edward, Michael A, Hitt, and M. Tina Dacin (1997), Competitive Intelligence and Tactic Knowledge Development in Strategic Alliances, Competitive Intelligence Review, Vol. 8(2), 20-27. McGonagle, John J. and Carolyn M. Vella (1990), Outsmarting the Competition, Sourcebooks, Inc., Naperville, IL. Mergers, Acquisitions & Divestitures, (1998) KPMG Peat Marwick LLP, New York, NY. Marren, Joseph H. (1992), Mergers & Acquisitions : A Valuation Handbook, Irwin Professional, Burr Ridge, IL. Reed, Stanley Foster and Alexandra Reed Lajoux (1999), The Art of M&A : A Merger/Acquisition/Buyout Guide 3rd edition, McGraw-Hill, Burr-Ridge, IL. Smith, Raymond W. (1996), Business as War Game: A Report from the Battlefront, Fortune, September 30, Vol. 134 (6), 190-194. Weber, Yaakov (1996), Corporate Cultural Fit and Performance in Mergers and Acquisitions, Human Relations, Vol. 49(9), 1181-1202. Wendorf, Nile (1999), CIs Role in Screen Candidates for Mergers, Acquisitions, and Alliances, (1999), 14th Annual SCIP Conference, May, 1, 1-22. in-situ Business Relationship Checklist The Company Present legal name Address and phone number of main office Date and company origination State of incorporation List of subsidiaries and/or divisions Addresses of all facilities List of shareholders if publicly held The names and addresses of all: Accountants Executives Names Backgrounds Board members Executives Outside Venture capitalists Founders Lenders Attorneys Banks and bankers Relationships with other firms Customers Suppliers Strategic alliances Interlocking directorates Owners Names Percentage of Investment(s) Percentage of Ownership Controlling Interest (votes) Complete Organization chart Historical Summary How company was originally formed Reason for founding Name of founders and successors Financial Financial Sources of Cash Liabilities Taxes Short and Long-term Three Year pro formas Sales Forecast by Product Income Statement Balance Sheet Cash Flow Compounded Annual Growth Rate (CAGR) Projections for the next five years Sales and profit Cash flow Sales Breakdown by product last three years Breakdown by product next three years Methods of distribution Distributors or dealers Geographic or vertical markets covered (maps) Logistical mapping Sales force information Number of employees Sales methods List of top 20 customers and sales volume Sales compensation Sales incentive programs Sales expenses Sales administration expenses New business development activities Sales strategies Increasing customer sales Increasing average order size Special promotions Returns and allowances policies Sales Efficiency Sales to product-market mapping Marketing and Products Advertising and sales promotion: Advertising agency(ies) Quality of existing agency(ies) List of advertising media Dollar amount of advertising budget As percent of sales Breakdown of budget for magazines, newspapers, trade directories, mail orders, phone directories, radio, TV, trade shows, special promotions, premiums Description of public relations programs Publicity releases for last two years Advertising themes Measurement of direct advertising results Products and Services Feature Advantage - Benefit Chart for each Comparison to our products Marketing plans for next three years Sales levels Targeted major customers Product lines: List of principal product lines and products Market shares last five years If retail or distributor: Identify suppliers Exclusive arrangements/contract Length of the relationship All collateral material Pricing All price lists Stability of prices Future pricing considerations Bidding conditions Overall product line evaluation Management, Personnel and Policies Corporate Strategy (Governing) Strategic Business Unit or Divisional Strategies Information on principals and key employees Indication of strengths of secondary management Indication if management will stay if there is a change of ownership Rates of compensation for management Number of employees by department Operations labor: Names of unions Past labor relations Present or future labor problems General employee moral Union contract expiration dates Employee benefits: Incentive plans Pension plans Vacation plans Number of paid holidays Medical, life insurance, dental Stock options Bonuses Profit sharing Recreational facilities Employee discounts Employee social functions Operations Operation costs: Labor costs as a percentage of sales Material costs as a percentage of sales Overhead as a percent of sales Future cost prospects for labor, materials, and overhead Cost and profit by product Production procedures: Manufacturing resources Production schedules Flexibility to increase and decrease production Minimum production required for breakeven Efficiency of assembly procedures Percent of product purchased outside Quality control and inspection process Maximum capacity with existing equipment Type of cost controls Facilities Land and building: Plans for existing facilities Location and zoning Legal description and ownership Mortgage (amounts, terms & conditions) Description of lease(s) Condition Amount of square feet in the building Amount of rent Amount of property taxes Amount of office space versus operations Amount of warehouse space Service by common carriers and couriers Equipment: List of major equipment Value of all equipment Own vs. Lease Legal Considerations Litigation or Pending Legal Action Environmental Issues or Liability State and local laws: State in which incorporated States in which qualified to do business Shareholders: Number of voting shares required to merge Dissenter's rights Notice requirements Preemptive rights Board action required for sale or acquisition Mergers Restrictions with respect to foreign and domestic corporations History of compliance with federal laws Anti-pollution laws Labor laws Other regulatory rules Tariffs and quotas SEC requirements Government contracts Labor considerations: Union rights Pensions Discrimination Issues Technical, Research and Development Patents: License agreements Trademarks Copyrights List of patents with numbers List of pending patents Research in Progress New product development process Engineering, research, and development: R&D cost as percent of sales Description of major research programs Other Acquisition Basis Company Image, as seen by: Customers Competitors Suppliers Industry Media Extended SWOT Analysis Insert Company Name Here V3.0  TIME \@ "M/d/yy h:mm:ss am/pm" 6/1/01 12:14:23 PM Group Member Names Strategic Fit With Our Company STRENGTHS WEAKNESSES OPPORTUNITIES THREATSAbility to Gain Market Share or Entry into new MarketsIntro into other product/markets with a standard products family No product history, only promise Products may have more capabilities than the market wantsProduct Market 1: CAGR 250% Product Market 2: CAGR 54% Product Market 3: emerging market Product Market 4: emerging market Company CAGR 450% over three years Major competitors Standard product to micro controller unit customized product-based path Design with targeted company, buy another chip Strategic Fit With Our Company (cont) STRENGTHS WEAKNESSES OPPORTUNITIES THREATSKnowledge Acquisition Potential Existing IP Competitive differentia Has patent apps pending for future product extension 9 more pending Has access to Product Market 4 memory license via Holding Company Has Company H SW for Product Market 4 set Designing for Product Market 3 and Product Market 4 Viable Technology/Product Road map Patents have not been granted Need Product Market 4 controller IF license Not including customized product in total product strategyLeverage targeted company design with our customized productsUnclear if patents will provide long term competitive advantage Customized product migration Market may overtake patent applications (OTBE)Financial GPM ROI CAGR GPM >50% (Y1) ROI >100% (Y3) CAGR >450% (Y3)GPM based on Holding Company transfer price ROI based on stock price assumptions Enhance our company overall ROI Company CAGR 450% over three years based on market growth IPO offers real financial potentialInherent risk in venture Strategic Fit With Our Company (cont) STRENGTHS WEAKNESSES OPPORTUNITIES THREATSLeverage of Products/TechnologyData Communications is targeted company primary market for Product Market 1, Product Market 2 Synergy with customized product and Inter-market business unit Provides intro into Product Market 1, Product Market 4, Product Market 3 mkt Electronic data processor is not an our company primary market for 98 Products require software support- our company cant helpWould be able to offer Product Market 1/Product Market 2/Product Market 3 cores to our customized product customers Take time to convert to customized product May spread resources too thin Strategic Fit With Our Company (cont) STRENGTHS WEAKNESSES OPPORTUNITIES THREATSPurchasing targeted companyEnhances our companys image in industry Gets us back into standard products with a promising prod line Can be run as separate business unit Standard product to customized product synergy Cash producer Will require more mgmt maintenance than previous acquisition Will require $17M+ cashProduct Market 1 product would produce $5.3M in profit in 1st year of production Have standard product new product development path Could leverage new product development excitement to our company Create sense of urgencyDetract mgmt time/energy/focus from core business unitsFuture DirectionBroadens our companys product offering Increases our company revenue potentialIntroductory products (Product Market 1, Product Market 4, Product Market 3) in emerging mktsAs Product Market 1, Product Market 2, Product Market 4 becomes real, we can leverage this to future customized product business Product Market 2 in more established mkt (cost reduction opps) All but Product Market 2 are emerging markets Strategic Fit With Our Company (cont) STRENGTHS WEAKNESSES OPPORTUNITIES THREATSOur company vs. Holding companyHolding company claims will have .25( for Product Market 4 intro Our company much smaller than holding company Our company not cost leaderClear technological and product road map Holding company may steal designSales ChannelsUses Reps, some overlap with our companyTargeted company reps just starting to sell product Sales Mgmt team is questionable No experience in Retail/Disty channels Strength to achieve $100M in sales is questionable Comm: 7% Y1,4% afterOur reps can sell standard products (conflicts?) Rep review (consolidation) Move sales to our company regional sales manager/rep org? Have our company person inside targeted company in salesCompetitors have stronger sales resourcesMarketing Team/ResourcesVery strong and experienced Clear vision Planning for only 4% of any given marketMarketing mgrs double as sales mgrs No allocated marketing communications budget Reducing some sales overhead Acquire mktg expertise May lose mktg expertise in transition Strategic Fit With Our Company (cont) STRENGTHS WEAKNESSES OPPORTUNITIES THREATSSeparate initial public offeringKeeps entrepreneurial excitement environment within targeted company Provides future cash for our company if needed in future Return on investment based on stock price at time of saleOur company may use targeted company stock for future purchases Strong future cash generator (See ROI chart)Market could turn down at time of initial public offering Targeted company may not achieve $100M target, $13M rev target OverallProvides captive customer for fab Leverages for emerging growth markets Our company not in standard product Our company not in electronic data processor Requires $17M+Provides a family of standard products Provides long term custom products development Opps Major competitors The Deal STRENGTHS WEAKNESSES OPPORTUNITIES THREATSOwnershipThree owners Two parties 65% holding company, 35% owners/founders Majority owned by holding company, KoreansHolding company did not have cash/desire to buy Series C on schedule (12/99) Targeted company is currently seeking other buyersVoting RightsPreferred Shares have Common voting rights based on above %s Common stock voting rights has been transferred to Preferred stock To purchase Preferred Shares onlyCo-Sale Rights Unclear as to who has co-sale rights Unclear as to proportion to sellPayoff Founder 2 Need to limit deal to holding company buyout + any co-sale If Founder 2 sells 50% of his stock he loses his seat on Board Additional cash needed to pay off Founder 2 May have to buy other stockholders shares Need legal reviewFuture Cash NeedsQuick turns products could produce cash quickly if successfulPositive cash flow pushed out from 10/99 to 3/00 Break-even has been pushed out from 1/00 to 6/00 Estimated additional cash required:$2-4MThis weakens the holding company value position Just in time Tight financial mgmt will be required to prevent further slippageWe may not be able to support future cash needs The Deal (cont) STRENGTHS WEAKNESSES OPPORTUNITIES THREATSBuyout IssuesShould founders request IPO, investors have option of purchasing all of founders stock at fair market valueIf, after 8 years, no IPO, then founders or investors may request sale of targeted companyCan be fairly simple deal As long as any Series A,B,C was outstanding, no sale can occur By-laws state that no amendment can occur that does no protect rights of Common Stockholders. Protective Provisions No more than 6.5M shares of Common can be issued Could restructure stock at IPO Could issue more Preferred Stock to inflate valueHolding company and subsidiaryTargeted Company has access to Holding companys Product Market 4 memory license Access to holding company .25( libraries Holding company deeply in debt Selling $1.9B in assets Holding company is trying to sell subsidiary (6/15) High incentive for holding company to sell targeted company Leverage Product C efforts with Product Market 4 effortsHolding company is quite capable of duplicating targeted company designs and producing their own chips Holding company is trying to become an custom product supplier  The Deal (cont) STRENGTHS WEAKNESSES OPPORTUNITIES THREATSIntellectual PropertyHas applied for five patents Expects 5/yr Questionable if patent protection will provide competitive advantageInclude holding company licenses as part of deal (Product Market 4, etc.) if possibleLicensing agreement may allow holding company to duplicate/design around targeted company chip set Targeted company has $100K licensing agreement with Company B to develop Product Market 1 core Employment AgreementsKey employees can be secured with agreementsEmployment agreements may require legal defense Schmuck stuckNon-compete agreements can be executed with employees May lose key individuals during transitionBoard of Directors (founders: 1 seat each) (targeted company: 3 seats)Board must vote for the sale of the company Venture capitalist has lots of experience in semiconductor deals Venture capitalists Board experience includes Company D and Company E Two founders, two targeted company, one outsider Venture capitalist is brokering for founders and targeted company Venture capitalist will look out after targeted company interest firstOur company can hold 3 seats May be able to play founders against targeted company Can expand Board Venture capitalist is far more experienced than we are at this The Deal (cont) STRENGTHS WEAKNESSES OPPORTUNITIES THREATSFoundersSeasoned experienceNo significant equity investment by foundersGood deal for holding company, not necessarily good for founders Possibility of sour grapes after deal by foundersOverallOur company does not have to deal directly with Koreans Definitive product positioning for our companyOther suitors Products STRENGTHS WEAKNESSES OPPORTUNITIES THREATSProduct AFirst to market using Product Market 1 as SOHO LAN (Ethernet substitute) Attractive design Shipping 7/00Current design is two chip solution Manf by Company C Product not patentable? May need separate/different sales structure than chip reps (NA, Disty mgrs, etc.) Need coherent retail/partner strategy Retail sales Distributor sales Catalog sales Internet sales OEM bundling sales (NEC laptops) Could use as leverage to set targeted company as Product Market 1 standard Single chip solution Company D is already out with similar, more bulky product (product status unknown) Products (cont) STRENGTHS WEAKNESSES OPPORTUNITIES THREATSProduct Market 1Excellent SW makes it easy to implement and debug Much more versatile than competitors chip Only soft solution at present(?) Primary cash flow producer for next 36 monthsNot designed with custom product migration in mind Would require re-synthesis for megacell Test vector and reliability issues May require mods of features for custom products Conversion of targeted company Product Market 1 chip to custom product may be as difficult as any other license deal Eventually Product Market 1 runs out of bandwidthMicrosoft and Intel as perif IF std Windows 98 proliferation of Product Market 1 (220 companies announced Product Market 1 products at Windows 98 roll-out) Dedication to Product Market 1 by every major PC manf 2-3 years: 1.5 Product Market 1 perifs per PC 3-5 years 3-6 Product Market 1 perifs per PC Integrated Product Market 1 into custom product designs Customers could develop with targeted company then choose less expensive chip Controller manfs may absorb Product Market 1 onto micro controller unit custom product quickly Products (cont) STRENGTHS WEAKNESSES OPPORTUNITIES THREATSProduct Market 2Remote cache interface with Product Market 2 interface Better price-performance than leading competitor: Company JNot major contributor to revenue stream software is contracted out No experience in software support (targeted company or our company)Targeted company market expected to grow to 75M units in 98, dies in 02 Targeted company aiming toward communications, not PC mkt Product Market 2 moving from PC to non PC platforms Established competitors: Company J, Company K, etc. 3rd party software is not exclusive to targeted companyProduct Market 3General purpose Direct Product Market 3 infrared controller Derived from Co-Mem product Positioned to take advantage of Intel endorsement Architecture design phase completed Uses megacell from holding company (licensing issue?) Need Product Market 4 License in future All major PC manf have announced Product Market 4 implementation in 99 Emerging market Extend Product Market 4 technology to Product Market 8Emerging market Products (cont) STRENGTHS WEAKNESSES OPPORTUNITIES THREATSOverallProducts in Introduction phase of product life cycle Product road map: Product Market 1 to Product Market 3, Product Market 2 to Product Market 4 Complete standard product organization Do not have a lock on any market Targeted company has an standard product orientation-not a customer orientation Our company does not have end-user product strategy Products will eventually go to custom products Long term opportunities with custom developmentMany competitors in all markets Product Market 6 absorbing Product Market 1 function Technical Capabilities STRENGTHS WEAKNESSES OPPORTUNITIES THREATSTechnical StaffVery experienced, dedicated, enthusiastic Driven by potential initial public offering No experience in our matching technologyOther employment opps in area Startup mentality (may quit after initial public offering)Design Expert in Product Market 1, Product Market 2 Gaining experience in Product Market 4, Product Market 3 Experience with supporting product A Concurrent software and hardware development Can do simultaneous simulation of hardware and software Development Schedules are longCan leverage this experience to our custom products Current staffing levels allows for continuous new product developmentIntellectual PropertyProduct Market 2 Product Market 1Soft solution less protectable?Development areas could open up customized oppsUnclear if patents will protect, Larger competitors could mimic and trounce in mktplace  Management & Personnel STRENGTHS WEAKNESSES OPPORTUNITIES THREATSPresidentExperience in Product Market 2 design Highly technically capable, understands each system in detail Architectural father May need executive directionShare of ownership is completely vested 11/01 Can be retained with employment contractVP, COO, CFOExecutive experience Required for initial deal Serves as Presidents mentorAdds little value after our company deal Does not serve CFO functionProbably do not need CFO replacement If terminated, company has right to buy back stock at cost w/in 30 days Share of ownership is completely vested 11/01 Opp to put our company CFO in Future competitor? Will continue to communicate with PresidentVP Sales20+ yrs sales exp BSEE/MBAQuestionable ability to get to $100M May need to be replaced Future competitor Create ill will among targeted company customers/prospects Management & Personnel (cont) STRENGTHS WEAKNESSES OPPORTUNITIES THREATSRep OrganizationUsed to selling SPs Reps just now selling product Weak rep support system Rep review (consolidation) Two rep orgs? (standard product & customized product)Could lose developing customer relationshipsController CPA Knows applications Clear direction Down-to-earth Wants to stay at targeted company More passive than aggressive Doesnt know entire design to manf processCould keep as Controller with aid from Financial Services Would not need CFO immediatelyDesign MgrHighly technically capable, understands each system in detail Set up targeted company design system (hardware & software) BSEE (MIT) Very specialized in IFsNeed to retain with employee agreementMay ask for more $$ May lose after initial public offeringMktg/Sales 1Product Market 1 Market Mgr Far East Sales Mgr 20+ yrs exp BSEE/MBA Potential for marketing synergy with our company Management & Personnel (cont) STRENGTHS WEAKNESSES OPPORTUNITIES THREATSMktg/Sales 2Product Market 2 Market Mgr Domestic Sales Mgr 15+ yrs exp MSEE Potential for marketing synergy with our companyDir of OpsBSEE/MBA 23 yrs experience in semicon Knows targeted company manf process OverallMost are motivated by stock options and future initial public offering Very focused sense of purposeUnclear if all stockholders have co-sale rightsKeep key employees with options and employment agreementsMay be some ill feelings from our company employees about targeted company stock options Some employees could convert stock options, use co-sale rights and leave company  Financial STRENGTHS WEAKNESSES OPPORTUNITIES THREATSAudit Summary Financial Statements Legal Expenses Bank Reconciliations Disbursements Accounts Receivable Fixed Assets Accounts PayableData integrity appears very good on initial review; all details tested tie to the financial statements No evidence of hidden liabilities on surface-level review of invoices Well supported bank reconciliations Detail supports legitimacy of operations Well-supported asset listings, conservatively short depreciable lives Well supported accounts payable High percentage of overdue accounts receivable, although these are from some start-up developments with low dollar volumen/aEvidence of issues in 1999 regarding their lease. No issues evident in 1998.Information SystemsSystems are completely independent from parent firm.Lacks a work in progress system, backlog and reserves are excel-based and not tied in to Order-Entry on Great Plains software. They will need better systems to facilitate inventory tracking, on-time-delivery and reserve efforts. Financial (cont) STRENGTHS WEAKNESSES OPPORTUNITIES THREATSDebtNo long-term debtVery high short-term debt due to the loans. Should be eliminated with purchase. Loan covenants include comments on matching shares to holding company in event of equity financing.Customer OrdersTargeted company did not provide Purchase Orders for any backlog items. Backlog is very small, less than $200K.Third-Party ContractsThey were not able to provide a copy of the Company H contract, which is still in negotiation No evidence of targeted Company having exclusive rights to software used by contractors for key products.Cash FlowThey have needed $2.61 million in bridge loans through early June 98. $500K/mo burn rateThey may require continued financing to support operations. We have little means of determining for how long. Significant VendorsMandatory furloughs for all U.S. employees at Company C, a significant contractor. Criteria for Acquisition Candidacy CriteriaDefinitionFit CriteriaAcceptable ExceptionsReturn on InvestmentFor business older than 5 years, ROI must be greater than zero at a 13% discount rate. For businesses 3 to 5 years old ROI must be greater than zero at a 16% discount rate. For businesses less than 3 years old ROI must be greater than zero at a 24% discount rate. Pro formas should be at least 36 to 60 months by month. ROI > 0, 13% ROI > 0, 16% ROI > 0, 24%Tax loss carry forward can be consideredBreak-evenBreak-even should occur before EOY3 Must be profitable Y1. B/E < 36 monthsLeveraged buy-out.Compounded Annual Growth RateCAGR must be greater than industry forecast CAGR must be greater than our forecast CAGR > Ind, CAGR > Our ForecastThere might not be forecasts available for certain market segments.Fill the FactoriesAcquisition should provide an additional 1,000 units per week through plants 7 or 8. Prod > 1,000 units/wkIf manufacturing process is outside of our current technology and can be produced at our existing costs of goods level. CriteriaDefinitionFit CriteriaAcceptable ExceptionsProducts and ServicesAcquisition should strengthen our presence in a designated core market or create a presence in a complementary market segment to a designated core market. Acquisition should strengthen designated future core market. The products must possess significant competitive differentia within their market segments. Intellectual PropertyThe firms IP should strengthen our existing IP base particularly in the areas of AAAA and BBBB. People and Knowledge AcquisitionFirm should contribute significantly to our expertise and technological base either through education, or technology transfer processes. Gross Profit MarginConsolidated GPM should be greater than 50%. This GPM should be sustainable over the life of the pro forma GPM > 50%GPM could be smaller if market penetration strategies are in effect.Investment ScaleTotal investment should be less than $50M. I < $50MGreater investment would be considered with additional, outside partners. Investment ScopeInvestment must provide us controlling interest in venture/firm.IS ( 50.1%Where minority investment would provide significant strategic alliance with other firms or would fill the factory.  Company Overview June 6, 1999 Company Name Address City, State Zip Phones Contacts  Description: Fabless Semiconductor firm 1999 Sales: $3M pro forma GPM: 47% at EOY NIAT: 2% Employees: 37 Sales/Emp: 178K Processes: bipolar, CMOS Market Cap: Private Controlling Interest (51%): TDB Stock Price: n/a Cash and Short-term Investments: $2.8M Founded: 1992 IPO date: n/a Overview Company has patented a technology it calls ARA used in its custom chips that offers significant performance enhancements to traditional programmable logic. This technology is a programmable inter-connect designed to eliminate bottlenecks in complex designs that boosts custom chip clock speeds regardless of the process technology. It is based on configurable SRAM that it hopes will broaden the custom chip market for high performance applications including high-speed data-communications, telecommunications, computing, emulation and automatic test. Founded MV founded this company in September of 1992. Initially, $14.2M was raised from GPW LLC and by Team2 VC along with a syndicate of VC firms. MD was named company president and chief executive officer in August 1997. Somewhere between $30M-$49M has been raised (and spent) in the last six years. Investors The company completed its third round of financing that raised $11.5M in August 1998, with additional private investments from PCI, VT Partners, WI Harper, CapitalOne and WR Group. Other investors included a pension fund, JAFCO and New York Life. Management VM - Chairman and Chief Technology Officer MD - President and CEO SPT - Vice President, Finance and Administration RTT - Vice President and IC Design TM - Director of Operations QWA - Director of Software Development FRR - Director of Product Architectures RTP - Vice President of Marketing REL - Vice President of World Wide Sales Products This company has two chips, the Able and the Baker. The Able supports system clock frequencies up to 200MHz and provides up to 55,000 usable gates. Fast I/O with LV-TTL, GTL, and GTLP interface levels, 8 ns on-chip, 2 clock, dual port RAM, 2 Phase Lock Loops with programmable latency and 10 clock trees with worst case skew of 200 ps make these devices ideal for high speed applications in telecommunications, data-communications, computing and ASIC emulation. This is a CMOS product family. Customers Clearwater designed the chip into its next test generation equipment line. It offers systems that are fast enough to test high-speed chips such as Rambus memory and high-resolution graphics interfaces. Competitors Company is paired with Fencer as another start-up company trying to differentiate itself in the programmable logic market. However, Company indirectly competes against any of the programmable logic suppliers including Altera, Xilinx, Actel, Atmel, Chip Express, and Mitel. Patents Two patents were identified for this company. Company holds rights to patent US555555555 and US 58666666 in March 1999. Issues This company is heavily backed financially by MANY investment firms. Therefore, Company could come with a lofty price tag. Agent has stated that these investors have been informed that they will not get back their investment. The company stated in September of 1998 that it planned to go public in late 1999 depending upon market conditions and the company's revenue ramp-up with its Baker and next generation product families. It planned to initiate a fourth round of financing in the meantime if necessary. Its exit strategy has apparently shifted to that of being acquired. Investors own 75%, founders 25% CMBR ( $900K MD thinks that they need $14M in WC if they have to develop their own sales and marketing channels/reputation, $7.5M if they dont. Need 100+ design wins/year @$100K. Currently at 1 a week. (However, they need 111 design wins just to B/E.) The 2nd round of funding required the review of the president of one of their competitors and their CTO. Competitor is more than aware of what Company is doing and is capable of doing. Want to close a merger or sale on 8/99 or before. They have less than 4 months of cash remaining. Is there any synergy with our Division Four? FK thinks that they need $3-5M in WC We may be able to purchase Company for $10-$15M and will probably need to provide up to $5M in additional WC. Some overhead costs can be eliminated. Financial Notes: (See current financial statements and pro formas attached at end of this document.) At April, 99, they are only at 25% of planned income for the year. (April closed out at only 11% of forecast.) They are forecasting a 61% GPM during Q499 rising to 76% in Q400. They are riding their Payables (up 23% over plan). A credit check showed that they were slightly slow pay, but nothing critical or in dispute. Net Shareholders Equity is $3.8M. This is the max that stockholders would receive at liquidation. It is probably closer to 50% of that. This is what the investors are facing without an imminent buyer. According to pro formas, they dont begin producing cash until Q300. However, they are still projecting a cash drain through Q499. This is primarily due to increases in Accounts Receivable and Inventory, which may be managed better. (These estimates are not stable- reason is unknown at this time.) They are anticipating an influx of $10M during Q399 to sustain them otherwise the pro formas will not work. OF INTEREST Could Launch us into emerging market Could provide front end for sales process by offering custom products to customers Could provide revs of $18M in 99. REVENUE HISTORY 1999 pro forma1998199719961995199419931992Revenues$3.0NIAT($9.3)CAGR600% to 2000(Previous years financial data not available at this time. We have 4/99 financials and pro formas for 99-00.) ACQUISITION CRITERIA FIT Contribute to our Current Strategic Plan NO Adds to our top and bottom line PERHAPS if pro formas are met Private or Market Cap < $50M FIT Need for Cash FIT Need for Relationship with Us FIT: need stronger sales and marketing Amenable to friendly acquisition FIT Current Sales >$35M NO NPV > 0 at 22% within 60 months NA GPM > 50% FIT CAGR > Industry Growth FIT CAGR > Our Growth FIT Acquisition Candidate ListFor the Period of: 2/1/00 - 3/1/00Company Name TypeF'ndedContactAddressPhoneProduct- MarketsProductsCompetitiveCompetitorsFundingRecent Rev's# of EmpSales StructureExisting Relationship?SourceFish n' ChipsPrivateJun 98Eric LaStrade Pres, CEO221b Baker Street London, UK T: 5-512-552-2810 F: 5-512-552-2830The network processor market is expected to reach almost $2B in 2001.Network ProcessorsNAR's technology is flexible and is claimed to be "blazing fast".C-Systems1st rnd funding, $8M from LTVent and UK Gov't. Additional funding will probably be sought Q2-01.none30+CustomerFT 11/3/99Norse CodePrivateJan 99Gere Fjori - PresidentGustfallendwn 21 0555 Oslo, NorwayT: +47-22-96-66-55 F: +47-22-96-55-66Software for handheld devices specializing in Bluetooth technology.CustomSmaller compile space.Blueware Composite SystemsFounded as a subsidiary of Viking Group, Norway. SW may not be part of their plans.$3M13Through Viking Group, not a good match.noVC Times, Dec. 99Norman American Rockwell Corp.PrivateMar 97Dr. Don "Hot" Pepper F'der, Pres, and CEO3700 SE Post Cover Suite 260 Alameda, CAT: 555-555-1657 F: 555-555-2764SW for cell phones management.Talk-a-log.The company claims that its product is only one of kind designed for large corps.???The company received funding from undisclosed private investors. <$1M?unk.noST 0599 ?PQxyz * q  ]dp#BQpc%4 ~EP jm!!J$U$&&I(^(** , ,,CJCJ5CJ5CJ 56CJ H*6560JOJQJ^JjOJQJU^JjOJQJU^J OJQJ^JJ?@P * @ A B e1{VW 0^`0$a$$a$ $&d P a$$a$ $7$8$H$a$ $7$8$H$a$WIJM  ,Tq`$a$$a$0&d P ^`0'.;IT]qz -Eb~ ^``^#9Pl 0Vn22Far7Ijk3/Zp^` ^`p  E d  !!8!L!l!m!!!! 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JohnsonWilliam SpenceZOh+'0 4@ \ h t?The Role of Competitive Intelligence in Strategic Partnershipshe Arik R. Johnsonrik Normal.dotnWilliam Spence2llMicrosoft Word 9.0t@F#@@$4~Z՜.+,D՜.+,t0 hp   Aurora WDC @ ?The Role of Competitive Intelligence in Strategic Partnerships Title 8@ _PID_HLINKSAlEtmailto:arik@aurorawdc.com  !"#$%&'()*+,-./0123456789:;<=>?@ABCDEFGHIJKLMNOPQRSTUVWXYZ[\]^_`abcdefghijklmnopqrstuvwxyz{|}~      !"#$%&'()*+,-./0123456789:;<=>?@ABCDEFGHIJKLMNOPQRSTUVWXYZ[\]^_`abcdefghijklmnopqrstuvwxyz{|}~Root Entry F {Data 1TableEWordDocumentSummaryInformation(DocumentSummaryInformation8CompObjjObjectPool { {  FMicrosoft Word Document MSWordDocWord.Document.89q