Global Startup Blog

Quick Headlines: M&A, Possible IPO and Venture Capital

Michael DiSanto — Thu, 25 Feb 2010 16:52:11 -0500

A few quick headlines on a Thursday afternoon:

Just a few days after VMWare completed its acquisition of Zimbra, the Silicon Valley technology darling announced its intention to acquire certain assets from EMC. The deal focuses on software products and expertise from EMC's Ionix IT management business in an all-cash transaction valued at up to $200 million. Ben Verghese, Chief Management Architect, Virtualization and Cloud Platforms Business Unit, gave a bit of insight into the transaction on his executive blog. VMWare is certainly keeping my former colleague and current Sr. VP and General Counsel Dawn Smith busy these days.

Deutsche Telekom didn't rule out spinning out T-Mobile USA and taking it public later this year, though the global telecom giant did rule out trying to gain market share buy acquiring one of its competitors in a "multi-billion-euro" deal anytime in the next two years, according to a BusinessWeek article today. An IPO of that magnitude could certainly serve as a nice shot of adrenaline for the still-stalled US IPO market.

SecondMarket closed another round of funding. Li Ka Shing Foundation and Hutchison Wampoa Ltd. each invested $7.5 million, joining an investor base that includes FirstMark Capital, New Enterprise Associates and Silicon Valley Bank. The raise was for expansion into the Asian markets. SecondMarket certainly seems focused on scaling its operations and really making the secondary trading market for traditionally illiquid securities part of everyday life in Silicon Valley and beyond.

CollabNet Extends Market Leadership with Acquisition of Danube Technologies

Michael DiSanto — Tue, 23 Feb 2010 21:55:16 -0500

CollabNet, the leader in Agile application lifecycle management, announced today that it has acquired Danube Technologies, the worldwide leader in Scrum project management solutions. Danube offers the industry-leading ScrumWorks Pro software for Agile project and program management and provides training, certification, coaching, and consulting services to organizations implementing Agile. The Danube acquisition uniquely positions CollabNet as a leader in the emerging Agile ALM market. CollabNet and Danube assist more software development teams with collaborative, distributed, and Agile ALM projects than any other company in the world. The terms of the deal are confidential. Reed Smith's Silicon Valley office advised CollabNet in the acquisition. I was the lead partner on the deal (yes, a shameless bit of self promotion; I know).

Are Secondary Private Offerings and Facilitators like Second Market Changing the IPO Game?

Michael DiSanto — Wed, 17 Feb 2010 18:29:25 -0500

Over the last few months, three technology darlings, Facebook, Zynga and Yelp, have closed deals with venture capital funds that included both an investment in new shares and also the acquisition of existing shares from employees and other major stockholders. The secondary piece of those deals is somewhat unique because it gives those employees or stockholders the opportunity to liquidate some or all of their equity positions without the company filing for its initial public offering. Illiquid securities sales facilitators like SecondMarket are also providing the opportunity for early liquidity by matching equity holders in venture-backed companies with willing buyers outside of the public markets.

The question, of course, is whether this new trend in venture capital investing or the emergence of SecondMarket is going to radically change the IPO market.

If by radically change, we are talking about reducing the numbers of offerings by elite technology companies, I'm not sure that anything can really move the needle significantly compared to the last two years when technology IPOs were about as common as Bigfoot sightings. The fact remains, though, that employees often choose to join hot venture-backed companies and take annual base salaries below the current market in exchange for the dream of a quick infusion of cash thanks to an IPO or acquisition. The market meltdown in late 2008 has dramatically affected the personal finances of those individuals, who are now forced to hold on to what has traditionally been illiquid stock for far longer than they would like. The lack of exits certainly has hurt venture-backed companies attracting rock-star employees. But the emergence of secondary pieces to late stage venture capital investments and facilitators like SecondMarket helps solve that problem. It also dramatically reduces the pressure on a company's board of directors to take a company public.

As a result, I think that hot technology companies will now wait until there is a compelling reason to begin the IPO process. IPOs have always been expensive transactions to consummate, both from a dilution standpoint and also in terms of legal and accounting fees. But the maintenance fees for public companies weren't that big of a deal, until Sarbanes Oxley came along and completely changed the game on operating as a public company from a cost perspective. And that change certainly wasn't to the benefit of companies, though the protections add a good layer of protection for stockholders of listed companies. Thus, companies haven't been rushing to the IPO gates like in the pre-SOX days, and the emergence of the new liquidation avenues discussed above will only slow that race even more.

Nevertheless, I don't think that either secondary pieces to venture investments or illiquid securities sales facilitators will completely derail the need for companies to go public. Indeed, both VCs and facilitators need robust exits for their strategies to continue to work, which is why these liquidity strategies aren't implemented in very young companies, opting instead to work with startups that have been around for several years and look like excellent IPO or acquisition candidates. If anything, I think that the market for exits will be more robust, maybe not in terms of numbers of deals but in terms of quality of deals, as a result of these new liquidity strategies.

Entrepreneur DNA

Michael DiSanto — Mon, 15 Feb 2010 21:40:40 -0500

I came across a very interesting blog post on Both Sides of the Table while browsing the blogosphere last night -- yes, Silicon Valley corporate lawyers have time to browse the web and read the occasional blog; don't listen to claims to the contrary. The blog is written by a two-time entrepreneur who now sits on the other side of the funding table as a venture capitalist. The post describes what the author believes are the 12 attributes that makes an entrepreneur, and each enumerated attribute leads to a separate post on that focuses on that individual attribute. It is a well-written, interesting blog post with great information for entrepreneurs.

The one thing that I think the author should add to the list is the ability to do the most with the least. From my perspective dealing with entrepreneurs on a daily basis and spending more than two years as the founder and CEO of an Internet startup, that is a crucial attribute for just about any entrepreneur.

Raising money is tough in any environment. In the current economic climate, it is next to impossible for first-time entrepreneurs with little more than a business plan. That means entrepreneurs are forced to actually develop the some part of the technology and often have some sort of customer validation before they will get funded. That is a far cry from the golden days of the late 90s when entrepreneurs had to do little other than add DOT.COM to their corporate name and start a website to have the funding spigot busted wide open. We can sit around and sulk about the good old days all we want, but the reality is that the game has changed, whether permanently or temporarily. Today's entrepreneurs really need to know how to stretch the dollar. They need to know how to build a company on less than a shoestring budget. In other words, they need to find a way to take modest sums of friends and family money and accomplish more than entrepreneurs of the previous two decades did with their first round of outside investment.

Entrepreneurs who can do the most with the least stand a far better chance of succeeding, in my opinion, than those who require large initial cash infusions--unless, of course, the entrepreneur is either flush with cash or has close friends who are flush with cash.

Reed Smith Represents BNY Mellon in $2.31 Billion Acquisition

Michael DiSanto — Wed, 10 Feb 2010 20:10:43 -0500

Longtime Reed Smith client Bank of New York Mellon recently announced its pending acquisition of the global investment servicing business from PNC Financial Services Group for $2.31 billion in cash. The deal makes BNY Mellon the second-largest provider of fund accounting, administration and transfer agency services. The deal is expected to close in the third quarter. We advised BNY Mellon in the deal and Wachtell Lipton Rosen & Katz advised PNC.

Green Plug Closes Series B Round

Michael DiSanto — Wed, 03 Feb 2010 21:32:58 -0500

Green Plug, the first developer of digital technology enabling collaboration between electronic devices and their power sources, recently announced that it has closed its Series B financing. The investor syndicate included Herald Investments UK, Killik & Co. and Peninsula Venture Partners. Reed Smith advised Green Plug in the round of financing.

Reed Smith Recognized in Daily Journal's "Top Deals Under $50 Million for 2009"

Michael DiSanto — Fri, 15 Jan 2010 20:41:24 -0500

The Daily Journal recently announced its Top Deals Under $50 Million for 2009. Daewoo Shipbuilding's $49.5 million acquisition of DeWind topped the list. My partner, Catharina Min, represented Daewoo, which is headquartered in Korea. DeWind is a wind turbine manufacturer based in Irvine, California and Lubeck, Germany. This deal is a vivid example of the benefits of Reed Smith's global platform for clients looking to execute cross-border deals. Min, who is a corporate partner in our Silicon Valley office with a vibrant corporate practice representing Korean companies doing business in the US and Europe, staffed the deal with corporate attorneys in our Silicon Valley, Los Angeles and Munich offices.

Intel Capital Tops List as Most Active Venture Firm of the Last Decade

Michael DiSanto — Wed, 30 Dec 2009 09:37:37 -0500

According to a recent survey of PE Hub's VentureXpert Database, Intel Capital invested in more U.S.-based companies than any other venture capital fund. That may come as a surprise to many, particularly since Intel Capital the corporate investment of the technology giant, Intel, not a traditional venture capital firm. Interestingly, number two on the list, JP Morgan, isn't a venture capital firm, either. The traditional venture firms begin to appear at number three with NEA. DFJ, Sequoia, KPCB, Bessemer, USVP, Goldman Sachs (the second investment bank on the list) and Venrock round out the list.

Friday Five: Hijackers, Industry Survey, Funding and Exits

Michael DiSanto — Fri, 18 Dec 2009 11:10:57 -0500

After a multi-week hiatus due to the holidays and, of course, the ever-present demands of deal making as the year comes to a close, Friday Five is back to highlight a few of the top stories from the week.

A group of hackers commandeered Twitter's DNS for about an hour on Thursday night, directing traffic to their own webpage. According to the social media giant, its website and micro-blogging that plugged into Twitter's API were not affected. This is the second time in less than six months that Twitter fell victim to a DNS attack, though it is the first time that a "Cyber Army" took credit for the fiasco. What is a "Cyber Army" anyway? Do they attend boot camp, wear uniforms and otherwise follow unquestioned orders from superiors? I digress.

Earlier this week, the National Venture Capital Association released its yearly Venture View Survey. The survey polled more than 325 venture capitalists across the country, and the results were as expected with the industry professionals remaining somewhat bullish about the short-term future. 63% expected the total dollars invested in 2010 to stay the same or increase. 50% predicted an increase in the number of companies receiving funding. The survey pointed to clean technology and Internet as the industries best positioned for higher investment levels in 2010. Asia will continue to be a growing focus for investment dollars. 74% predicted an improved IPO market. And the overwhelming majority predicted that funds raised in 2010 will be smaller than previous funds and the overall number of funds would decline over the next five years.

Regado Biosciences yesterday closed its Series D financing, raising $40 million from an investor syndicate led by LCF Rothschild Group that also included existing investors Domain Associates, Quaker Bioventures, Aurora Funds and Caxton Advantage Life Sciences Fund. The New Jersey-based company is developing antithrombotic therapeutic aptamers with active control agents. Regado's successful raise is a nice feel-good moment for emerging companies in light of the continued talk of general venture capital industry contraction.

Russian investment firm Digital Sky Technologies is leading a group that is buying a $180 million stake in Zynga, a social gaming company that produces popular online games such as Mafia Wars. The deal comes off the heels of DST's $200 million investment in Facebook. DST is certainly making a major bet on the social media space with those two deals.

The Wall Street Journal's Venture Capital Dispatch contains an interesting blog post titled "Exit Conundrum: Wait For An IPO Rebound Or Sell To An Acquirer?" that focuses on Acclarent's $785 million sale to Johnson & Johnson. Until the IPO markets come roaring back, which may be quite some time, it seems likely that many companies will opt to go the safer route chosen by Acclarent.

That is all for now. We won't have the same radio silence over the next few weeks that we did in late November. Enjoy your weekend!

Valuation of Media and Technology Companies in Today's Environment

Michael J. Young — Tue, 15 Dec 2009 12:43:18 -0500

Reed Smith's Corporate Media and Technology group held an interactive breakfast panel discussion regarding the valuation of media and technology companies in today's challenging business environment. Attendees included executives from a range of high profile companies in the media, technology and investment industries. The panel featured leading individuals from the media, investment banking and financial services sectors who shared their insights into various aspects of factors affecting the valuation of media and tech companies in the current environment, while also discussing current trends and future outlooks for what looks set to be an uncertain marketplace going into 2010.

Key features of the discussion included:

Positive signs - increased activity in many sectors in Q3 2009 regarding potential transactions
Difficulty in accurately valuing companies in the current conditions
Managing the contrasting opinions of owners and potential buyers regarding valuations
The sectors most likely to see an upturn first in 2010

The panel members were:

Chris Whiteley - Ingenious Media, Robert Lees - Strata Partners, Chris West - Deloitte. The discussion was chaired by David Boutcher - Reed Smith.

The attached slides provide an outline of the key discussion topics.

Anti-Social? I'll Still Share Our Social Media Presentation

Michael DiSanto — Fri, 11 Dec 2009 22:22:36 -0500

OK. You caught me. I'm not that clever. It's not my title. Our Advertising, Technology and Media group pens a very informative and entertaining blog -- LegalBytes -- that first used that title, so I have shamelessly plagiarized it. I did, however, attend the social media presentation in Palo Alto on Tuesday, and it was a resounding success. Joe Rosenbaum and Anthony Traymore filled their allotted 90 minutes with extremely useful, interesting and entertaining information for relating to the impact of social media on a company's brand. That can be of particular relevant to emerging companies, since their tech savvy founders and employees. The power of a tweet, Facebook page, etc. is a bit overwhelming when one really sits down an thinks about it. United Airlines certainly learned that fact the hard way after an its baggage handlers damaged musician Dave Carroll's guitar--a quick Google search will give you some background. Joe and Anthony discussed that case study and more during their presentation, as well as giving companies effective steps to deal with the phenomenon known as social media. The presentation (It's 10pm: Do you know where your brand is?) goes hand in hand with the white paper on social media that we published on this blog a few weeks ago.

Enjoy the presentation and, if it hits home with you, to steal from Joe's blog post one more time:

If you are interested, please contact me (Joseph I. Rosenbaum) and we can work with you to help you engage us in your social media conversation with topics that are relevant to you. We will also be updating the research work already released in our Social Media White Paper with some of the materials and further work we continue to do in this area. Stay tuned – social media is not a fad.

Norwest closes $1.2 billion fund; is there light at the end of the tunnel?

Michael DiSanto — Wed, 18 Nov 2009 13:08:57 -0500

In a continued run of positive news for the emerging company, venture capital industry over the last few weeks, Norwest Venture Partners just announced that it closed a $1.2 billion fund to invest globally in private companies across a number of industry sectors. Norwest's new fund is particularly impressive considering that the entire venture capital community only raised $1.7 billion in new or follow-on funds in the third quarter of 2009, according to the National Venture Capital Association and Thomson Reuters. The Q3 results marked the second consecutive quarterly decline in terms of the total number of venture funds raising capital and aggregate dollars raised by those funds.

We obviously don't want to get ahead of ourselves with optimism. A few lucrative exits and a massive raise by a Silicon Valley stalwart doesn't necessarily mean that the industry is poised for a turnaround. It is certainly the case that the two are not related, as Norwest has likely been working on this raise for months. Yet, the timing couldn't be better, in my opinion, because it feels like momentum is beginning to swell. The emerging company, venture capital industry is very circular in nature. Increased exit opportunities enable funds to raise additional capital from existing and new limited partners. As those cash coffers grow, more and more private companies receive funding, which will help the newly funded companies grow into attractive exit candidates. Wash, rinse, repeat.

Are we in the midst of a turnaround? We'll all know soon enough.

New Social Media White Paper and Seminar

Michael DiSanto — Mon, 16 Nov 2009 19:21:43 -0500

Last Thursday, Reed Smith and Boyden Executive Search Agencies co-sponsored a well attended seminar in our New York offices where Douglas J. Wood, head of Reed Smith’s Media & Entertainment Industry Group, Sarah Needleman from The Wall Street Journal, and Kathy Ewing, assistant general counsel at Benjamin Moore, discussed the legal, social and economic implications of the social media and social networking revolution.

If you missed the event, don't fret. We have three MCLE-friendly seminars planned in our California offices on December 8th and 9th (details below) to discuss an industry-leading white paper that we just released entitled: Network Interference: A Legal Guide to the Commercial Risks and Rewards of the Social Media Phenomenon. The white paper, which includes contributions form our social media task force consisting of Reed Smith lawyers across many disciplines affected by or involved in the social media revolution, is an interdisciplinary piece that explores the compliance and litigation risks of social media from a broad spectrum of topics, including advertising, data privacy, employment, government contracts, product liability and securities. This is a must read for anyone working in (or merely intrigued by) the world of social media.

As mentioned, we will be hosting a seminar entitled: It's 10:00p.m., Do You Know Where Your Brand Is? The discussion will include:

Best practices for corporate engagement in social media;
How to approach workplace policies;
The current and potential legal landscape evolving around social media platforms;
Case studies -- social media successes and failures;
Highlights of Network Interference: A Legal Guide to the Commercial Risks and Rewards of the Social Media Phenomenon; and much more.

Joe Rosenbaum and Anthony Traymore will be speaking at the seminar, and for those with law degrees looking to satisfy their mandatory continuing legal education requirements, you will receive MCLE credit. The times and dates of the seminar are as follows:

Session I

Tuesday, December 8, 2009
Breakfast / Registration: 8:30am - 9:00am (yes, free food); Program: 9:00am - 10:30am
Reed Smith's San Francisco Office: 101 Second Street, 18th Floor, San Francisco

Session 2

Tuesday, December 8, 2009
Lunch / Registration: 12:30pm - 1:00pm (yes, free food); Program: 1:00pm - 2:30pm
Reed Smith's Silicon Valley Office: 1510 Page Mill Road, Suite 110, Palo Alto

Session 3

Wednesday, December 9, 2009
Breakfast / Registration: 8:30am - 9:00am (again, free food); Program: 9:00am - 10:30am
Reed Smith's Century City Office: 1901 Avenue of the Stars, Suite 700, Los Angeles

Feel free to email me if you would like to be included on the event's email invitation list.

Friday Five: Microbrews, Social Gaming, More M&A Activity

Michael DiSanto — Fri, 13 Nov 2009 18:26:01 -0500

It's Friday the 13th, so horror film aficionados and those deeply consumed with urban lore are probably champing at the bit to leave the office and begin their evening, whether at home or out on the town. I considered tossing in a headline or two about Jason Voorhees in this week's Friday Five, but for now at least, I'll resist that temptation.

While fictional murderers won't take up any more space on this blog entry, another Friday topic of regular interest, beer, will take center stage. BusinessWeek penned an interesting article on Castle Harlan's $655 acquisition of United Malt Holdings, resulting in an 80% internal rate of return on CH's $90.5 million equity investment. An interesting statistic from the piece is the fact that the sales of microbrews in the US increased 9% in the first half of 2009, following a 6.3% increase in 2008. It appears that high-end beer may be the one market that was immune to the recent recession.

Social gaming continues to be the buzz this week. We previously blogged about EA's acquisition of PlayFish. Since that time, Playdom announced that it raised $43 million on a $260 million pre-money valuation from an investor syndicate that included NEA, Norwest and Lightspeed. And now another social gaming company is jumping on the good news train with the yesterday's announcement that Wooga closed on a $7.5 million round from Balderton Capital.

Global Entrepreneurs Week kicks off on Monday, November 16, and runs for the balance of the week. I'm not exactly sure what the events of the week will entail, though those interested can register at the host website.

BusinessWeek gets two entries in this week's headlines with an interesting article on how the tough economic conditions of the recession should provide for fertile grounds for new startups. There is certainly makes sense that tough economic conditions create a Darwinian atmosphere for startups, which forces some entrepreneurs to focus on profitability very early in the game. In terms of short-term exits, though, it seems more plausible that boom times create far greater opportunities for all startups, whether elite or run of the mill. Then again, I'm a corporate attorney, not a market analyst, so take that comment with the appropriate grain (or tablespoon) of salt.

Quick M&A hits: HP announced its intention to acquire 3Com for $2.7 billion in cash. Google confirms its acquisition of Gizmo5. Logitech to buy LifeSize for $450 million. Are you starting to feel the warmth emanating from the rapidly heating acquisition market? I'm certainly tossing out my hand warmers for the time being.

Have a great weekend!

Venture Capital Industry Shows Uptick in Returns

Michael DiSanto — Wed, 11 Nov 2009 14:01:32 -0500

For the first time in nearly a year, the venture capital industry showed a positive return, according to Cambridge Associates, LLC. The Cambridge US Venture Capital Index returned 0.2% for the three-month period ended June 30, 2009, ending three consecutive quarters of negative returns. Of course, in an economy still clouded in doubt and pessimism, the positive news was paired with a cautionary outlook. Managing Director Peter Mooradian raised questions about whether the asset class can generate sufficient exits to provide healthy long-term returns.

It will be interesting to see the figures for the current quarter after Google's recent acquisition of AdMob for $750 million and EA's recent acquisition of PlayFish for $300 million (with an additional $100 million in earnouts).

Google Acquires AdMob for $750 Million

Michael DiSanto — Wed, 11 Nov 2009 13:42:55 -0500

Google recently announced its acquisition of AdMob, self described as the "world’s largest mobile advertising marketplace, offering solutions for discovery, branding and monetization on the mobile web less than three years the company was founded. The purchase price was $750 million, making it the third largest acquisition in Google's history, behind only DoubleClick ($3.1 billion) and YouTube ($1.65 billion), according to TechCrunch. Sequoia and Accel were early investors in AdMob, so one must assume that they enjoyed tremendous returns with this quick-hit investment.

AdMob's reported $100 million revenue run rate certainly made it a standout among its startup peers who were founded in the last three or so years, thus is difficult to say whether this extremely lucrative deal was a unique set of circumstances or a positive sign of things to come in the world of technology startup exits. Whatever the case, the deal has to serve as a shot of adrenaline for technology entrepreneurs around the globe.

Friday Five: IPOs, Venture Capital Funds, Exits and More

Michael DiSanto — Fri, 06 Nov 2009 20:05:50 -0500

We are adding a new feature to the blog. Each Friday, we will link to the top five headlines for global entrepreneurs. Of course, the bulk of those will often involve Silicon Valley, since that tech-concentrated center remains the global front line of technology and venture capital. Enough intro banter. Let's jump right into it.

Talk about a long time in the making. On Wednesday, Ancestry.com, a website that allows people to trace their roots by searching online documents, priced its IPO of 7.4 million shares at $13.50. By my math, that will bring in approximately $100 million in aggregate gross proceeds, assuming that the round is fully subscribed. It took Ancestry.com a scant 26 years from the time it was founded until it priced its IPO, making it the oldest venture-backed IPO of 2009. Talk about patience and perseverance! Read more.

Who said that it was next to impossible for venture capitalists to raise additional funds in this economy? Greylock Partners obviously missed that memo, as the Silicon Valley stalwart recently announced the closing of Greylock XIII, a $575 million fund. They also announced the addition of Reid Hoffman, co-founder and current Executive Chairman of LinkedIn, as a new investing partner. Read more.

I wonder what ridiculously expensive champagne former British investment bankers Eldar and Roy Tuvey will be drinking in celebration this weekend after selling their company, ScanSafe, to Cisco for up to $183 million earlier this week? The founders are set to spit up to a cool $60 million between them. With an exit like that, they can afford to take a bath--literally--in 1990 Louis Roederer Cristal Brut, which is priced around $2,500 per bottle. The exit was also a good win for London-based venture capital fund Balderton Capital. Yahoo Finance estimates that Balderton enjoyed a four times return on its four rounds of investment in ScanSafe. Not bad, indeed. Read more.

The government of the People's Republic of China doesn't seem squeamish about the future of its venture capital market. China's key economic planning body recently launched 20 venture capital funds to develop China's growing technology sector. Read more. That news certainly seems to support estimates that China's private equity industry will grow by ten-fold over the next five years. Read more. Yes, I know that is two headlines combined into one, but who is truly counting anyway?

When Google head honcho Eric Schmidt talks, people tend to listen. When he talks about his view of the employment trends in Silicon Valley's technology sector, even more people turn an inquisitive ear or two. Read more.

Enjoy your weekend!

China Updates

Michael DiSanto — Wed, 04 Nov 2009 15:56:51 -0500

Our colleagues in China recently launched the China Media & Entertainment Blog. We will, of course, keep everyone up to date on any developments, news or issues that pertain to the world of startups by linking to the blog entries here. No better time to start that exercise than the present, so without further adieu, here are three recent blog posts for your reading pleasure:

World of Warcraft Controversy leads to War of Words between Government Regulators. The latest move in the continuing saga betewen the Ministry of Culture in China and the General Administration of Press and Publication over popular online game World of Warcraft has led ot the Ministry of Culture reiterating its sole responsibility for the administration of China's online games market. Read more.

Trading Culture in Shanghai. China has established an exchange devoted entirely to trading in companies that own or deal with culture. The Shanghai Cultural Equity Exchange, whose investors include the Shanghai United Assets and Equity Exchange, Jiefang Daily Group and Shanghai Jingwen Investment Co., Ltd., was established with the approval of Shanghai Municipal Government in June. The newly established exchange is expected to be a platform for the trading of property rights, creditors’ rights, equities, and intellectual property associated with cultural assets. Trading will cover a wide range of cultural products, services, and companies operating in the press, publishing, film, television and Internet sectors, among others. Read more.
Ministry of Culture Outlaws Online Mafia Games. On July 27, 2009, the Ministry of Culture issued the “Circular on Investigation into ‘Gangs’ and Other Illegal Online Games.” The Circular notes that some popular online games based on the themes of gangs, the mafia, or “godfather” concepts advocate obscenity, gambling, or violence and undermine morality and traditional Chinese culture. It goes on to note that these games encourage people to deceive, loot, kill, and glorify the lives of gangsters, providing a negative influence on youngsters. The Ministry of Culture has prohibited websites from running, publicizing, or offering such online games, and has also ordered its law enforcement bodies to step up oversight and harshly punish any sites that continue to offer such games.

Foreigners and Internet Games in China: "Unfair" Play Results in New Rules. Foreign companies and their Chinese partners have always been major players in the Chinese online gaming market. The partnership normally is has the foreign company licensing rights to a Chinese partner. The Chinese partner is then responsible for developing the local market. The Chinese partner is required to apply to the Ministry of Culture’s Content Censorship Commission and the China’s General Administration of Press and Publication for pre-approvals to distribute the game. The Commision censors game content and reviews the license agreement, which becomes effective upon the Commission's approval. Chinas General Administration of Press and Publication examines the qualification of the Chinese partner to provide foreign online game services and decides whether to issue a License for Internet Publishing Service to the Chinese partner. Read more.

Market Recovery?

Michael DiSanto — Mon, 02 Nov 2009 16:30:35 -0500

After a two-day trip to Boston to represent three of the four US gold medalists in beach volleyball from the 2008 Olympic Games in Beijing in their efforts to reform the governance structure of USA Volleyball (I know, not exactly a Silicon Valley technology deal, but nonetheless an very enjoyable and, in my opinion, worthwhile endeavor), I am back in the heart of Silicon Valley. The most recent installment of the monthly technology newsletter from Morgan Joseph & Co (a middle market technology investment banking firm) monthly technology newsletter was sitting in my inbox upon my return. Of course, virtually everyone doing business these days, particularly companies and investors considering funding events or acquisitions, is extremely aware of what is happening in the markets, so I thought this may prove to be a good read for those interested. The "Market Highlights" introduction sums up Morgan Joseph's current view (at least, as of printing) of the market, as follows:

All eyes were on U.S. third quarter corporate earnings as investors anxiously waited to see a return of top-line revenue growth, demonstrating that the economy has turned and that a recovery is well in place. The reports of Google (GOOG: $551.72),Microsoft (MSFT: $26.37) and Amazon (AMZN: 94.98) as well as many others exceeding third quarter revenue and earnings expectations provided some additional momentum to the current equity market rally and provided further signs that the economy is indeed recovering.

I sure hope so.

Delaware Raises the Bar for Third-Party Consents

Michael DiSanto — Fri, 23 Oct 2009 15:31:21 -0500

When structuring an acquisition, the tax analysis tends to carry the day. After all, tax-free structures, if available, make a deal much, much more palatable for everyone involved. Nonetheless, the question of obtaining required third-party consents, if any, almost always arises during the due diligence phase and can have a material impact on the structure of a deal, or in extreme cases where a required consent cannot be structured around or otherwise obtained on reasonable terms, crater it altogether. In any case, the parties to an acquisition need to carefully craft the third-party consent language in the acquisition agreement so that it matches the business agreement among the parties. A recent decision by the Delaware Court of Chancery was less than sympathetic regarding a drafting error by counsel.