M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Monday, November 22, 2010

Quattrone's thoughts on M&A exits

One of the more surprising developments over the past couple of years has been the rehabilitation of Frank Quattrone.  During the Internet bubble, Quattrone was investment banker to Netscape and Amazon among others.  He got caught up with spinning hot stocks and when the Feds went looking for a scalp, Quattrone found himself in their cross-hairs.  The case, ultimately, was a bust and died about four years ago.  

Recently, Quattrone has been busy.  Among other recent deals, he shepherded 3Par during its sale to HP (and the bidding contest with Dell), and Isilon's recent sale to EMC.  Now, Quattrone is speaking out and giving his M&A exit advice to entrepreneurs.  In a conversation with Ben Gurley (Benchmark Capital) at the Web 2.0 Conference last week in San Francisco, Quattrone noted the changed M&A lanscape.  IPOs are no longer the preferred exit for VCs - although they used to account for 50% of liquidity event, they are now less than 10%.  That's probably not be choice given the fact that IPO multiples remain higher than M&A multiples.  Nevertheless, with the state of regulatory affairs post Sarbanes-Oxley, there isn't a lot of interest in taking small companies public.  

On the M&A side, according to Quattrone the tech market is also more mature and has consolidated considerably - the top 10 tech companies now have 70% of the tech market cap and 70% of the cash (Microsoft, Google, Apple, Amazon, eBay, and Yahoo among others).   That means the market is, on the one hand, potentially less competitive for sellers because the number of obvious buyers has shrunk to just a handful.  On the other hand, the buyers who are left may be more willing - as in HP/Dell - to bid aggressively against each other as the big techs are all consolidating vertically.    

In the conversation with Gurley (below) Quattrone provides some interesting insights into thinking strategically about selling a startup tech firm and directions that M&A in the tech sector are taking.  Quattrone is optimistic about the near future prospects of M&A.  Of course, he's an M&A banker, he has to be optimistic!  In any event, this conversation is worth watching when you have time -- maybe between turkey and dessert, or at halftime.



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