In our last post in the Nexit Ventures supported series we covered “why being sold to the US is a big deal“. This time round we cover the companis and the M&A activity in more detail. Basically, there are eleven large companies who do the majority of the buying. These companies are Apple, Cisco, Dell, EMC, Google, HP, IBM, Intel, Microsoft, Oracle and Qualcomm.
The big eleven are called the big eleven for the reason that their size and cash reserves enable them to do the majority of the acquisition activity in the States. There are a few key things that entrepreneurs should understand when looking at the M&A activity in the states.
One of the key issues is that almost all the companies acquire companies with the 80/20 rule. This means that 80% of the companies are US based, while 20% are foreign. Cisco goes a step further in this and their activity is even more US oriented, buying some 90% of companies in the States while acquiring 10% from overseas.
Nokia, which doesn’t make the big eleven – is making acquisitions at a distribution of around 70/30. Even Nokia, who is headquartered in Finland, is acquiring 70% of its companies from the US.
If we look at the Nordics as a source of acquired companies in the table above (M&A transactions 1/2000 to 6/2010), it is actually doing relatively well in comparison to other parts of the world apart from one exception. That exception is Israel. Israel’s share of acquired companies is more or less equal to that of the Nordics as a whole. In terms of GDP, Nordics are doing better than rest of the Europe.
I talked to Artturi Tarjanne of Nexit Ventures about the market. He mentioned that their key take aways from doing investing and selling of companies to the US are the following. First of all, it is clear that the majority of the acquisitions of venture backed companies is done in the US. Also, there are about 10 companies that do a lot of buying, but their focus is on American companies. Thirdly, these buyers pay good money for their acquisitions. Artturi states that these are true A-class exit candidates.
I asked him what are the concrete steps that Nexit Ventures helps companies with to prepare them for an M&A kind event. The key issue is to try and americanize the Nordic companies to a certain extent to make them more attractive for the buyers. These may include the relocation of the CEO to US, while the rest of the company may still work from the Nordics.
This post is part of a series of posts supported by
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 Paul Watson