Navellier thoughts
by: randy_cooper2000 (39/M/Atlanta)
Long-Term Sentiment: Buy 01/21/04 10:25 am
Msg: 60738 of 60765
Okay, I've spent a few minutes digging around on the PR regarding M&A with Navellier from last week.
First, a little on my background. I have started several technology companies and have extensive experience in the private capital markets, M&A and IBs.
My first thoughts when I saw this PR was that ONT was making an interesting move. When you can't get big quickly yourself, buy into the growth. The PR says all the right things to lead me to believe they are looking for more of an M than an A. They are small, no cash horde, and looking for accretive transactions. The PR also said "specifically in the area of multimedia software".
After looking at this a little more though, I think there is more to it. When a small, unproven company wants to buy a larger, profitable company - that is a difficult thing to pull off. The stars have to be aligned if you want to do a no cash deal. Typically, this only works if you are trying to buy a non-core division of a much larger company that is trying to divest itself for focus purposes.
Looking deeper at the PR, the advisors are not your typical IBs that might advise on a deal.
Navellier Dynamic Opportunities fund is a private hedge fund. That means they aren't just shopping deals for the IB fee, they are looking for investments.
NDOF is run by Frank T. Troise, formerly of SoHo Capital. Prior to Soho, he was CEO of The Market Channel (TMC). The Market Channel Company provides a leading Web-based financial streaming media service to the global investment community. TMC's streaming media platform provides the most compelling, convenient and cost effective channel for the origination, aggregation and distribution of proprietary rich audio and video content and services, between the portfolio manager and the institutional investor. TMC is partnered with Yahoo!NetRoadshow, a leading provider of Internet broadcasting solutions and tools to the financial services community. Combined, TMC and Yahoo!NetRoadshow have produced more than 1,100 multi-media presentations for clients.
Should also be mentioned that an initial investor in TMC was Building 2 Investments - a Japanese accelerator fund.
So you have:
1) an "advisor" that is really a hedge fund
2) run by a guy that has a background in streaming video
My conclusion is that ONT is going bear hunting. NDOF is working in an advisor role to help ONT locate a strategic acquisition target. It will be a company much larger than ONT and profitable (or paying large royalty fees for a codec - i.e. would be profitable once integrated with ONT) that is viewed as an underperformer.
I would suspect this relationship was developed with one concrete target already in the sights and possibly more. Should they succeed in courting and performing DD on a target, I think NDOF would make a large investment into ONT to support the acquisition of the target.
But all this furthers the question - What type of companies could they be looking at? The PR specifically says "multimedia software". It further quotes "We are at a stage now where we believe that we can offer customers an end-to-end solution for multimedia software beyond the codec, player and servers that we build now". Okay - I'm confused. End-to-end solution? What other part beyond "codec, player, and servers" is there? Delivery or hardware would seem the only further extensions. But the PR says "software".
Hoping this little discussion will get some minds thinking out there of potential targets.
Regards,
