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Case Studies

Peter A. Sokoloff & Co. regularly analyzes transactions which occur within the industries covered. An archive of these case studies is kept online as a courtesy to our colleagues. To receive by e-mail new case studies as they are prepared, please e-mail [email protected] with your contact information.

Archives > Transaction Case Study 60

SOKOLOFF & COMPANY CASE STUDY
March Networks to be acquired by Infinova

DATE ANNOUNCED:  December 9, 2011
BUYER:   Infinova (Shenzhen: 002528.SZ)
SELLER:  March Networks  (Toronto: MN.TO)
PURCHASE PRICE: $88.2M           
FORM OF PURCHASE PRICE: Cash $4.90 per share

SELLER’S FINANCIAL INFORMATION AND M&A MULTIPLES


Year
FY 2010 (5/31) FY 2011 (5/31) Trailing Twelve Months
Year Ending
October 31, 2011

Revenue

83.44M

97.52M

94.73M

EBITDA

(Negative)

(Negative)

(Negative)

Cash

 

 

44.33M

Debt

 

 

0.00

Purchase Price

 

 

88.2M

Enterprise Value

 

 

43.87M

Multiple of Revenue

 

 

.46

Multiple of EBITDA

 

 

N/A

TRANSACTION DRIVERS
According to March Networks:  “Growth is expected to accelerate for both companies through the complementary product and service offerings.  Further, as a combined company they will rank in the top 10 companies in the global security and surveillance industry.”  Infinova, which is listed on the Chinese exchange also offers March Networks a speedy delivery into the Asian market as well as giving them the chance to move some of their manufacturing from Mexico to China.

SOKOLOFF COMMENTARY:
Good deal for all.  March has struggled to build market share in a highly competitive environment.  Infinova is fresh off a $300 million IPO on the Shenzen exchange and has strong Chinese manufacturing  capabilities and a strong footprint in the robust China surveillance market.  With Infinova’s help, March will improve its gross profit margins, making it price competitive and more able to squeeze a higher rate of business wins out of its existing markets.   And Infinova will have an expanded product line and a respected North American partner to showcase with its Chinese clients.

The devil is in the details.  Infinova has announced that they will leave March pretty well alone with  minimal brand, executive and marketing integration while merging R&D and manufacturing efforts.  However, as with most M&As, it will be necessary to eventually build a truly integrated corporate culture.  Today. the cultural divide between the two companies is extremely wide and could overwhelm  efforts to integrate.

“An army without culture is a dull-witted army, and a dull-witted army cannot defeat the enemy.”

Mao Zedong

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