posted by Andrew
REANNZ (which operates the Kiwi Advanced Research and Education Network, or KAREN for short) has announced that it has selected FX Networks to provide the national network for KAREN from December 2010:
http://bit.ly/cQTjfR http://bit.ly/bHaHRb
The deal with FX:
- secures the continuation of KAREN’s existing 10Gb/s backbone connectivity and footprint around the country for an initial term of 3-years through to December 2013, with two 2-year renewal options, and
- provides REANNZ with an option to purchase dark fibre from FX to replace that managed service, giving REANNZ an all important route to the economics of fibre ownership.
We advised REANNZ throughout this procurement process, the planning for which started 18 months ago. Assisting REANNZ to negotiate its dark fibre option with FX was a particularly interesting element of the transaction, as this is a relatively new area of commercial activity within New Zealand.
Published Tuesday June 2010 in Companies and deals In the news Stuff we're working on
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posted by Andrew
2009 was a difficult year for early stage companies looking for funding in NZ (or offshore for that matter). Friends and family money was generally a distant memory, VC’s doors were shut, and angel investors were largely focussed on the health of their existing investments. In the absence of fresh capital, many companies were forced to restructure and cut costs aggressively – or in the worst case, shut up shop completely.
2010 has started on a much more positive note. Our tech clients are reporting significant improvment in sales pipelines and revenues both in NZ and internationally, and we are seeing a big uplift in the number of early stage capital raising deals hitting our inbox.
Some clear trends are:
- Less “business plan” based investment propositions, more companies with customers, and even the odd company that is close to or at break even (the early stage investor’s dream)
- Greater realism about valuations. Companies are particularly willing to offer lower valuations for investors who bring expertise and/or industry connections to the table
- A decrease in the amount of money sought - less ambitious/high cost business plans in order to maintain founder shareholding %’s that would otherwise be under pressure from lower valuations
- A strong focus on operating costs, obviously learnt through the hard times of late 2008 and 2009
- The Angel clubs becoming active again, after a year or so of hibernation.
Some of the deals we have been involved in are tiny by international standards – eg acting for an investor in Glenn Andert’s 8Interactive Ltd alongside Angel HQ.
The limited amount of cash released by these “micro deals” means more pressure on legal fees, and greater enthusiasm on the part of entreprenuers to pay their lawyers in shares as part of the overall capital raising. Although we haven’t been quick to do this sort of deal in the past, we agreed to reinvest our fees in 8Interactive as we’ve known Glenn for a while and were involved in the establishment of Angel HQ which made it interesting for us.
At the other end of the spectrum, we have been acting for Pacific Fibre on its establishment and capital raising programme. This is an exciting and important project for NZ, particularly in light of the Government’s investment in regional fibre companies. The level of interest in Pacific Fibre is massive – there was a waiting list of over 100 people wanting tickets to Unlimited Potential ‘s Great Broadband Debate, at which Lance Wiggs (one of the founders of the company) was speaking.
More in later blogs on some of the interesting companies and deals we are seeing this year.
Published Wednesday May 2010 in Capital raising Companies and deals Start ups Stuff we're working on Tech sector
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posted by Andrew
Victoria and I had a great time at the Hi-tech awards on Friday last week. Lots of friends and clients in attendance.
Two Simmonds Stewart clients were category winners, and one received a “highly commended”. We were particularly pleased to see Palmerston North software company Unlimited Realities win the Innovative Software Product category, for their FingerTapps product that powers Dell’s new touch screen laptops and computers. Achieving that kind of business success as an early stage company from Palmerston North is extremely impressive.
It was also encouraging to see the event booked out, and lots of people talking about business growth and deals. There will be plenty to be excited about in the tech sector over the coming few years.
Published Monday May 2010 in Companies and deals Tech sector
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posted by Andrew
The Financial Advisers Act is due to come into force later this year.
There has been a lot of publicity about the significant problems with the Act. Some of the problems relate to the retail financial services industry which the Act was meant to be targetting, but alarmingly for those of us who are involved in private equity, venture capital and M&A activity, the Act applies equally to financial advice given in the non-retail sector. See for example (http://bit.ly/bS6cNB).
In response, the Minister of Commerce yesterday released a detailed Cabinet Paper proposing further policy changes to address the most pressing problems with the Act (http://bit.ly/bLvmGk). These changes include new rules exempting financial advice given in certain “wholesale” investment scenarios. Those changes, and the many public submissions made on the Act, will be considered by the Commerce Select Committee this week.
The sentiment of the policy changes proposed in the “wholesale” sector is good. However, in my view the proposed exemptions are too narrow and, because they only partially align with the non-public exemptions in the Securities Act, they are flawed.
To illustrate the point, if the Act it had been in force when Trade Me was in the process of being sold, even with the amendments proposed by the Minster of Commerce it would have prevented:
- The Trade Me board from taking valuation advice from freelance financial experts Lance Wiggs and Nina Gene – because Trade Me’s revenues at the time the advice was taken were only $14m and below the Minister’s proposed $20m “large company” threshold
- Lance and Nina providing that valuation advice to Trade Me’s shareholders, because many of those shareholders were friends and family of the Morgans and would not qualify as “eligible investors” as proposed by the Minister
- Trade Me directors from giving shareholders advice and guidance on the Fairfax’s offer – the exemption proposed for the benefit of the company and (I assume) its directors on occassional transactions only applies to capital raising, not sale transactions.
Even if Trade Me had revenues of over $20m, the process of vetting Trade Me’s 20 or so shareholding groups involving almost 50 individuals (because most shareholders held their shares jointly with spouses and trustees) would have made the process of engaging Lance and Nina impossible.
The choice by the Trade Me board to take advice from Lance and Nina was deliberate and well informed. The company had tested what was available from traditional investment bankers and corporate finance advisers, and found they came up short. Yet if the Act was in force, they would have been forced to use the sources of advice they had rejected (unless, of course, Lance and Nina could have been bothered registering as an “authorised financial adviser” including passing some exams, which I doubt).
This is ludicrous. The legislation has no relevance to investment banking or M&A activity, and private companies and their shareholders should be left to seek advice (or not) from wherever they chose.
Requiring our innovative, nimble companies to jump through complex analysis of detailed and ultimately arbitrary exemptions will increase costs and stifle commercial activity. This is why the Capital Markets Taskforce recommended a major redraft of the public/private offer definitions – complexity and uncertainty is highly undesirable if we want to promote a vibrant start up and high growth company sector.
I certainly don’t think the former Trade Me shareholders are complaining about the advice they received.
Published Saturday May 2010 in Business law Capital raising M&A
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posted by Andrew
Simmonds Stewart will have been up and running for four years as of 1 July, and that seemed as good a reason as any to start our own blog.
Plus I’d lost the Adobe Contribute disc needed to manage the content on our site, so decided to kill two birds with one stone and arranged for one of our web developer clients, Webstruxure (www.webstruxure.co.nz), to handle the changeover. I’m delighted with the end result – WordPress is so easy to use.
Four years ago I was a partner at Buddle Findlay and had closed $1b of M&A transactions in the preceding 6 months. One thing led to another, I decided big corporate law firms and I were no longer compatible, and within 8 weeks I was sitting in serviced offices launching a new boutique law firm with Victoria Stewart having successfully negotiated two weeks’ gardening leave and the loss of my blackberry.
We started with around 20 clients on day one and a good book of project work for the ACC IT Services team, the Ministry of Justice and the Queenstown Lakes District Council. Most of my start up and innovation sector clients followed us, and we had a great network from which to grow our client base.
Four years on and Victoria and I are heading up to the Hi Tech awards with our clients Unlimited Realities (www.ur.co.nz) and Metservice (www.metservice.co.nz). One third of the finalists are Simmonds Stewart clients, and in total we’ve been involved with over half of the finalists in one way or another since we started up. It should be a fun night.
Although we are well networked in the technology and early stage company sector, we continue to be amazed by the inventors, entreprenuers and companies we come across all round NZ. There are are many, many early stage companies flying under the radar as they develop smart products and services with global application. A lot of those companies are already networking and doing business in far flung parts of the world.
So while small start ups aren’t going to move NZ’s numbers in the next year or two, we think they are bound to in the longer term. Remember, Trade Me’s revenues were less than $40m when the company was sold, yet the price was close to $750m.
We’re excited to be involved in this sector, and enjoy being able to make a difference to our clients’ commercial outcomes. And we’re looking forward to sharing our thoughts on the technology and early stage company sector, and on business generally, via this blog.
Andrew
Published Thursday April 2010 in Commercialisation Simmonds Stewart Start ups Tech sector
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