Business Startup

The Executive Effect: How a Successful Executive’s Exit Impacts a Company

I recently read a New York Times article that discussed investor reactions to a successful chief executive deciding to exit a company. The article discussed how Manchester United’s coach, Alex Ferguson, announced Wednesday that he will retire at the end of the season. As a result, Manchester United’s shares fell nearly five percent Wednesday morning. Today’s post explores the impact of Ferguson’s exit, as well as the general impact of exiting executives.

A Brief Background Manchester United, the English soccer club, raised $232 million in its IPO last year. During the IPO process, there were serious concerns about the club’s financial projections once Ferguson retired. Many believed that the club’s success over the prior two decades was attributable in large part to...

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Mergers & Acquisitions

Due Diligence | Part 4 | Operational Issues

In today’s post we continue exploring the depths of the due diligence phase of purchasing a business. We’ve already discussed the financial issues and the legal issues, and today we’ll look at the operational issues surrounding due diligence. We’ve highlighted four important questions to answer regarding operational issues of a business you’re looking to purchase.

What products or services does the company offer? It may seem like a no-brainer to most, but it is important to acquire an in-depth knowledge of the products or services of the company you’re purchasing. In many cases, the purchaser is well aware of the products or services because it is the products or services of the company that attracted the purchaser to the deal. The better...

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Corporate Finance & Securities

SEC Fails to Prove its Case; “Where’s Waldo?” Defense Prevails

The SEC failed to prove that Citigroup banker, Brian H. Stoker, had violated securities laws. A federal jury found that the SEC did not meet its burden of proving that Mr. Stoker knew or should have known that his statements were misleading in the documents prepared for the sale of a collateralized debt obligation based on subprime mortgages in 2007.

Citigroup settled with the SEC to resolve the civil charges, agreeing to pay $285 million in penalties.

The SEC did not bring any Rule 10b-5 claims—arguably its strongest securities fraud weapon—which requires showing intentional or reckless behavior. However, the claims it did bring under Section 17(a)(2) and (3)  of the Securities Act of 1933 only require showing negligence in making the misleading...

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Business Startup

News Roundup Week 29: Venture Capital; Mergers and Acquisitions; Executive Compensation

Venture Capital

VC Firms Changing Promotional Tactics Nicole Perlroth wrote an interesting article in the New York Times this week on the changing approach VC firms are taking to public relations.

“A number of V.C. firms ranging from some of the oldest, like Bessenmer Venture Partners to some of the youngest, like Peter Thiel’s Founders Fund, are now seeking full-time marketing experts. Even Sequoia, which sniffed at the notion when the trend began, has hired P.R. staff.”

Ms. Periroth suggests that the paradigm shift is the result of a few different forces: (1) the approach has been massively successful for firms such as Andressen Horrowitz; and (2) the V.C. industry has consolidated–there are 50% fewer V.C. firms now as compared to 2000, and as...

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