1. Telecom Mergers and Acquisitions: The VC angle
Oren Zeev
Apax Partners
January 18th, 2001

2. Agenda About Apax Partners Why M&A? What are buyers looking for?
Prepare your business
Strategic Investor as a step to an M&A
During the transaction

3. Apax Partners: Telecom Activities 25 years, $7B, 150 investment professionals, 3 continents
Butterfly (TI) Ceragon Networks
Coreteck (Nortell) EZChip
tdSoft Jazztel
Esprit Telecom (GTS) IPG Photonics
Dialog Semiconductor Webraska
Fore Systems (Marconi) TelDaFax
Apax Partners Israel is part of the international Apax Partners Group, founded in 1972 by Ronald Cohen in the UK, Maurice Tchenio in France, and Alan Patricof in the USA (Patricof & Co. Ventures).
The group is comprised of regional and country funds in the Europe, the US, Israel and most recently also in Japan totaling about $6B.
These funds are managed From the respective locations in each of the countries.
The group shares a common balanced portfolio strategy, investing in all stages of companies’ development,
From seed and early stage, through development capital to management buyouts.
and focuses on 5 industry groups.

4. Why M&A? Buyer’s perspective: Buying a business
Integral part of R&D strategy
Seller’s perspective:
Exit
Liquidity – easier to lock in value
Selling products to telecom operators is extremely challenging
Leverage marketing, distribution, financial power, manufacturing and reputation

5. Erosion In Value Of Tech IPOs
Source: Broadview

6. What Are The Buyers Looking For
Technology lead
Management and technical team
Market opportunity
Competitive opportunity/threat
Fit with buyer’s business/channels
Customer validation/momentum
Strategic Partners – could be a plus, could be
a liability

7. Prepare Your Business
Build it and manage it like a sustainable business
Fit with potential buyers’ customers and channels
Avoid aggressive vesting accelerations
Avoid problematic commercial agreements
- use assignment/termination clauses
Capital structure – take into account taxation and accounting considerations
Chief scientist – limit/avoid
Play hard to get – but don’t overdo it
Timing is everything!

8. Strategic Investor As A Step To M&A
Try to get a supportive, but not too dominant strategic investor:
Let a VC lead the round
Be ware of valuation “kiss of death”
Be extra careful in the commercial deal
Preferably 5%-15%
Option/ROFR/ROFN/ROFO
Observer/Director
Get 2-3 if you can

9. During The Transaction
Manage your shareholders consensus
Take care of your employees
Manage the process – don’t let your lawyers/accountants manage it
Get interest/offers from more than one – create a sense of urgency and competition
Keep your alternatives even after you have a term sheet
Focus only on the important issues
In stock deals registration rights are very important
Leave your ego at home

10. Oren Zeev
Apax Partners