Thursday, November 29, 2012
Sunday, November 25, 2012
25 surprising facts about the increasingly mobile nature of online and in-store retail - Quartz
25 surprising facts about the increasingly mobile nature of online and in-store retail - Quartz
132% more money was spent by UK marketers on mobile advertisements in 2012 than 2011
88% of ecommerce in the world is still conducted on PCs; in the US, that figure is 81%
Thursday, November 22, 2012
The HP/Autonomy Kerfuffle: Why Due Diligence Doesn't Matter
HP should have known all about Autonomy - FT.com
I find this HP/Autonomy $8B write down fascinating. How can a large company like HP lack the resources to execute thorough due diligence? HP hired "blue chip" accounting firms like KPMG to conduct due diligence. You would assume that blue chip i/banks and accounting firms would be able to uncover egregious shenanigans hidden in a target company. Apparently, it doesn't matter.
1. Deferred Revenue: From my experience in telecommunications, there are NUMEROUS ways to fabricate, inflate, extract, derive, book, include, communicate or accept revenue. I've seen many directors and sales personnel book revenues from all sorts of angles, in an effort to meet quota, or even worse, YEAR END goals. The only way to drill down actual sales, is to monitor churn rates from lines of businesses. Good luck with that.
2. Due Diligence: Due diligence doesn't really mean anything. For i/bankers it means make sure you make it easy for the acquirer to sleep at night pre-acquisition. For accountants it means, make it easy for the acquiring company to use audited financials for securing financing for the acquisition. For the acquiring company it means make it easy for our board of directors and shareholders to justify our rationale for acquiring the target company (and increase our bonuses! :) ).
3. Post-Acquisition Integration: Most mergers and acquisitions erode shareholder value for one main reason: company culture. Company culture is synonymous with individual personalities. Marriages fail mostly for the same issues - lack of compatibility. In HP's case, they should have kept Autonomy as a standalone entity, and kept Autonomy's managers as-is, with a bulk of the purchase price in an earn-out. Earn-outs are crucial for techie companies because of the issue with revenue recognition.
I really can't blame Autonomy for this debacle. In my opinion, HP is to blame, mainly due to their decision to integrate and their addiction to growth via acquisition. Growth by acquisition can work if the acquiring company is growing organically and is seeking to increase their market share WITHIN their industry. It can work if a company is seeking to defend their position or to enter a new market. It doesn't work if a company isn't growing organically or if a company depends on it solely for top line purposes.
I find this HP/Autonomy $8B write down fascinating. How can a large company like HP lack the resources to execute thorough due diligence? HP hired "blue chip" accounting firms like KPMG to conduct due diligence. You would assume that blue chip i/banks and accounting firms would be able to uncover egregious shenanigans hidden in a target company. Apparently, it doesn't matter.
1. Deferred Revenue: From my experience in telecommunications, there are NUMEROUS ways to fabricate, inflate, extract, derive, book, include, communicate or accept revenue. I've seen many directors and sales personnel book revenues from all sorts of angles, in an effort to meet quota, or even worse, YEAR END goals. The only way to drill down actual sales, is to monitor churn rates from lines of businesses. Good luck with that.
2. Due Diligence: Due diligence doesn't really mean anything. For i/bankers it means make sure you make it easy for the acquirer to sleep at night pre-acquisition. For accountants it means, make it easy for the acquiring company to use audited financials for securing financing for the acquisition. For the acquiring company it means make it easy for our board of directors and shareholders to justify our rationale for acquiring the target company (and increase our bonuses! :) ).
3. Post-Acquisition Integration: Most mergers and acquisitions erode shareholder value for one main reason: company culture. Company culture is synonymous with individual personalities. Marriages fail mostly for the same issues - lack of compatibility. In HP's case, they should have kept Autonomy as a standalone entity, and kept Autonomy's managers as-is, with a bulk of the purchase price in an earn-out. Earn-outs are crucial for techie companies because of the issue with revenue recognition.
I really can't blame Autonomy for this debacle. In my opinion, HP is to blame, mainly due to their decision to integrate and their addiction to growth via acquisition. Growth by acquisition can work if the acquiring company is growing organically and is seeking to increase their market share WITHIN their industry. It can work if a company is seeking to defend their position or to enter a new market. It doesn't work if a company isn't growing organically or if a company depends on it solely for top line purposes.
Tuesday, November 20, 2012
Friday, November 16, 2012
Hostess Brands Files Bankruptcy
There are 12 different unions, with some 15,000 members, 40 separate pension plans, and $2 billion in unfunded pension liabilities. (Whew!) That's what Hostess claims is at the heart of the company's woes. The unions say management was fine with those pensions after the first bankruptcy and may go on strike if they feel they're being made the fall guys in any court-ordered restructuring. That would be the end of Hostess as we know it.
THE PE FIRM
Run by Tim Collins, a financier with Democratic Party connections, private equity firm Ripplewood Holdings acquired control of Hostess as it came out of its first bankruptcy in 2009. Ripplewood pumped a total of $170 million into the company, but the string of CEOs it appointed could not keep Hostess from sliding back into Chapter 11 (cheekily called Chapter 22 in some circles). While it still retains some debt, Ripplewood has little chance of recouping any of its investment.
THE HEDGE FUNDS
Silver Point Capital and Monarch Alternative Capital, hedge funds that specialize in distressed companies, are both said to hold about 30% of Hostess's debt. Sources say their current stake is between $50 million and $100 million apiece, though they originally invested more. The goal now: renegotiate the Teamsters' contract and get out as soon as possible. Or liquidate the company and just take what they can get. As the holders of Hostess's senior secured debt, either way the hedgies will walk away with plenty.
CAKE WRECK: HOSTESS FROM ICON TO BUST
- 1925: Continental Baking Co. buys Taggart Baking, maker of Wonder Bread. Continental becomes the largest bakery in the U.S.
- 1930: Continental baker James Dewar gets the idea to make an inexpensive cream-filled sponge cake using strawberry shortcake equipment that sat idle in the off-season. The Twinkie is born.
- 1930: Wonder Bread becomes the first large-scale baker to sell loaves of presliced bread. The company's advertising is thought to be the origin of the phrase "the greatest thing since sliced bread."
- 1947: Mascot Twinkie the Kid is introduced.
- 1947: Hostess introduces white Sno Balls. It takes about three years for the company to add the cream filling and distinctive pink color.
- 1950s: Hostess Twinkies sponsors The Howdy Doody Show, reinforcing its status as a ubiquitous lunchbox treat.
- 1967: Hostess introduces Ding Dongs and Ho Hos.
- 1979: "Twinkie defense" is coined during the trial of Dan White, who binged on junk food before killing San Francisco's mayor and city supervisor Harvey Milk.
- 1992: Seinfeld's Newman reveals a passion for Drake's Coffee Cake, now part of Hostess Brands.
- 1995: Interstate Bakeries Corp. acquires Continental, the country's largest wholesale baker, for $220 million in cash plus stock. Interstate becomes the nation's largest bakery company.
- 1999: Hillary Clinton approves the inclusion of Twinkies in the Millennium Time Capsule, alongside Ray Charles' sunglasses and a piece of the Berlin Wall. The Twinkies are removed, however, because of rodent concerns.
- 2004: Citing pressure from carb-conscious consumers, rising ingredient costs, and climbing expenses for employee pensions and health care, Interstate Bakeries files for Chapter 11.
- 2009: Woody Harrelson risks his life in an obsessive search for Twinkies in the post-apocalyptic hit Zombieland.
- 2009: Backed by private equity, the company exits bankruptcy as a private entity and changes its name to Hostess Brands.
- 2012: Hostess again enters bankruptcy, this time with 19,000 employees and $860 million in debt
Wednesday, November 14, 2012
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