Nexit Ventures is one of the most prominent mobile and wireless investors around. They naturally do a lot of research to analyse their business and opportunities. We’ve managed to get our hands on some of their research material and we want to share it with you. One of the key issues in venture businesses is how you build your business towards an exit (and how you prepare for it). For entrepreneurs looking at the US market, this post is good news.

The reasons
There are basically two very good reasons for Europeans to consider or trying to sell their company to the US (I know the attitude should be that “companies are bought”, but let’s play along for the sake of the matter). Firstly, the valuations create a position of arbitrage as well as the sheer amount of M&A activity in the US.

The image above, which has been created from DowJones VentureSource reports (2005), pretty much sums up the arbitrage position well. Pre-money valuations in Europe are substantially lower than in the US. Furthermore, M&A valuations are substantially higher in US compared to those in Europe. The increase in prices can be partially accredited to the higher competition in the US.

This position creates a very attractive opportunity for all European digital startups from a valuation perspective. While this is a view only into the valuations, one must remember that the US market is naturally more competitive to that of in Europe.

US is also a lot more active in the M&A market as well. In the image below, the trend can be clearly seen how M&A has dominated over the IPO market in the recent years. Furthermore, according to Nexit’s studies – access to the US M&A market increases the European exit opportunities over 4-fold.

So who’s doing the shopping?
In the first six months of 2010, 451 Group Research indicates that Google has gone on a shopping spree with 15 acquisitions. Oracle and Playdom come as good runners up with 7 and 6 acquisitions respectively.

When put like this, it is clear the big boys are buying property off the market at a relatively high pace. While there’s some M&A activity in Europe as well – it’s clearly higher in the US. Just last week we reported on Apple acquiring the Sweden based Polar Rose, more proof for the claim.

While it may not be easy to plan for all these before hand, it makes sense to seize the opportunities if they exist.

This post is part of a series of posts supported by
Nexit Ventures.

Nexit Ventures is a mobile venture capital firm focused on wireless technologies and services. Leveraging its extensive network in the global mobile marketplace, Nexit invests primarily in Nordic and US-based earlystage companies with products and services for a global market. For Nordic mobile companies, Nexit provides a bridge to Silicon Valley markets and exit opportunities.

Image by tacker

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