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For more than two decades all traffic in the internet was substantially treated equally (referred to as “net neutrality”). With the raise of global content providers like Netflix that drive bandwidth consumption and threaten the offerings of residential internet service providers, a war on quality and costs for internet traffic has begun. Today the principle of net neutrality is under attack. It represents a fundamental shift in power in the internet economy, which threatens to undermine the competitive market structure that have served internet users so well and acted as a strong catalyst of innovation.
In a management buy-out (MBO) transaction the owner sells its company to the existing managers (the “MBO-team”) and their co-investor. An MBO can represent a valid option for (family) business owners to realize a succession solution (or for corporates to carve-out a business unit). It provides certain important advantages compared to an alternative sale to a strategic buyer, such as retaining the independence of the firm, limited disruption of business and less dependence on M&A market cycles. However, it typically also involves specific challenges. What are the issues and the key success factors for business owners and the MBO-team to get to a successful MBO transaction? This article addresses the main challenges and how they can be overcome.
The discontinuation of the minimum CHF/EUR exchange rate triggered significant market reactions. On the announcement day, the Swiss franc appreciated by 20% and the Swiss Market Index (SMI) fell by 8.7%, the largest daily percentage drop in the last 25 years. In addition, the Swiss Gross Domestic Product (GDP) growth prospects for 2015 were cut by half, from 2.0% to just under 1.0% (source: SNB) Now six months after the initial shock the EUR has stabilized at around 1.04 CHF, still below the initial expectations of 1.10 CHF, and the SMI is back to pre-announcement levels. While the dust has somewhat settled down, the long-term effects of the Swiss National Bank’s (SNB) decision on the domestic economy are still much debated. This new situation creates substantial challenges but also opportunities for Swiss companies including those related to M&A.
The sale of a controlling stake in Sika by long-term family shareholder to its French competitor Saint-Gobain has been widely discussed since its announcement last December. It is in the spotlight as (i) it gives Saint-Gobain full control over Sika by acquiring only a minority capital stake (preferred voting rights) and (ii) Saint-Gobain does not plan a tender offer to the minority shareholders. As the opting-out clause allows to avoid a mandatory offer, the minority shareholders cannot sell their shares at the same premium offered to the family. At announcement Sika’s shares fell 23%. Ethos, the Swiss sustainable investment advisory, now urges abolishment of the clause. In our view, other measures should be taken instead.
A heat-up of valuations and transaction activity in the tech industry raises concerns that we have arrived in the next tech bubble. The fundamentals are different to 1999/2000 but the cheap money incentivizes investors to take riskier bets. History shows the vulnerability of the tech surge to an increase of interest rates. As entrepreneur you should prepare your operational plans to adequately respond to the possibility of a bubble and survive the next down-cycle.