Martin Wolf News

February 22, 2012
martinwolf GigaOm feature  
Five Ways to Destroy a Company's Value  

 

In a recent issue of GigaOm, Marty Wolf poses the following question: "How can it be that a successful company with seemingly healthy revenue growth can decline in enterprise value? 

  

The answer is increasing sales alone rarely translates into value.

 

"Take a look at Cisco over the last decade," he writes.  "On July 31, 2001, the company's fiscal year-end sales were $22.3 billion, and its stock traded at $19.22 ($18.94 adjusted). With 61,467,392 shares outstanding, Cisco's enterprise value was $85.2 billion. On July 31, 2011, Cisco's year-end sales were $43.2 billion and its stock traded at $15.97 ($15.85 adjusted). With 66Value Destruction GgaOm 2-22-12,850,160 shares outstanding, Cisco's enterprise value had fallen to $60.2 billion."

Over the span of 10 years, Cisco's sales rose nearly 94 p
ercent while its enterprise value actually declined 29 percent. Cisco is not alone among legacy technology companies. Do the same calculation for any number of them and you'll get a similar result.  

 

When it comes to value, what you do matters - the business you're in, the markets you serve. And while sales growth is important, revenue mix and profitability also matter.

Marty adds, "There is one more thing: the enterprise value of your company is based not just on past performance - a fact that Investors in the public market are continually reminded of. To owners of privately held mid-market tech companies: Past performance is no guarantee of your company's value to a potential acquirer because value is also based on what that company can do with your collection of assets going forward."

 

To see the list and learn more about the Five Ways to Destroy a Company's Value, see the article here

  

To learn more about martinwolf contact Tim Mueller at tmueller@martinwolf.com.  

About martinwolf    

 

Based in Silicon Valley, martinwolf is a leading middle market M&A Advisory focused on companies with services-based business models. Since 1997, our team has completed more than 100 transactions in six countries. We are a five-year member of the Merrill Lynch PS Referral Network, and were selected as ICICI Bank's (India's leading private bank) exclusive strategic partner for acquiring U.S. IT companies. martinwolf is a member of FINRA and SIPC. For more information, visit www.martinwolf.com.

   

December 1, 2011

Softchoice Corporation (TSX: SO) announced it has it has fulfilled its regulatory requirements under the Competition Act and has now completed the acquisition of substantially all of the assets of UNIS LUMIN, one of Canada's most highly regarded Cisco networking and managed services companies. Softchoice was represented by martinwolf | M&A Advisors. The acquisition strengthens Softchoice's professional services capabilities while providing the technology foundation to support the Company's future cloud offerings.

Please click here to view the announcement.   

 

September 30, 2011

SPS, a leading Unified Communications Provider, announced that Court Square Partners has made an investment in the company. martinwolf advised SPS in this transaction. SPS is a premier unified communication services integrator, ranked 131 on the 2011 VAR 500 list with 2010 sales of $143 million. Court Square is a $4B+ New York-based PE Group, with more than 150 lifetime investments.  

Please click here to view the announcement. 

      

September 20, 2011  

Accel-KKR, a technology-focused private equity investment firm, announced that it had taken a majority stake in Infinisource. Infinisource is a leading benefits administration technology and services company. martinwolf advised the seller in this transaction.  

Please click here to read more.  

 

 

martinwolf | M&A Advisors 2012    

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