February 1, 2022
To Our Clients and Friends:
Today we mark the tenth anniversary of our launch as CapKey Advisors, and we formally announce the relocation of our principal Bay Area office, effective last month, from San Francisco to Menlo Park, one of the centers of professional, corporate, venture capital, and financial advisory activity in Silicon Valley. With this anniversary and move, we celebrate a time of change and continuity.
We started ten years ago with a simple philosophy: to deliver the highest quality legal and strategic advice and support, infused with business pragmatism and driven by unwavering client focus. We were, and remain, an all-partner-level team with many decades of experience in M&A, law, business and finance.
In these first ten years, we have advised buyers, sellers, senior executives, boards, and investors. We have acted as lead counsel and “deal counsel” in many transactions, and as special M&A co-counsel (“lawyer’s lawyers”) in many other transactions. We have also acted as shadow counsel for investors looking for another set of eyes or for focus on special concerns. Our work typically does not end with the closing of a deal, but continues to the resolution of post-closing follow-up and the integration and governance of the acquired business. Much of our work has been cross-border, assisting U.S. buyers in acquisitions in Europe and non-U.S. buyers in acquisitions in the U.S.
Although we have acted globally, we have never tried to be everywhere or do everything. We work with local counsel who provide support on local law and local market norms and with specialists who provide support in areas like tax, IP, privacy, labor and employment, secured transactions, insolvency, antitrust, and litigation. We have a deep bench of relationships to tap, and a network of other professionals who share our client-focus and philosophy. Long before the pandemic led others to experiment with “new” work models, we leveraged technology to create a “virtual” office network and to allow seamless remote work, collaboration and teams. To us, the “new” work models were not new.
We do not publish conventional deal “tombstones”, client names and logos or dollar figures. The matters we handle are typically sensitive, and confidentiality is paramount. We also take pride in the fact that CapKey Advisors is structured to handle “small” as well as “large” transactions. All of us at CapKey Advisors have handled nine- and ten-figure transactions in our careers, but we believe that dollar size is not a reliable indication of complexity or importance, which will often depend more on business and strategic value or avoided exposures. We also believe that the focus should always be on the advancement of client interests, not on self-promotion and publicity. If that’s a bit old-fashioned in an age of relentless advertising and social media, it’s one area in which we prefer to remain traditional, even as we strive to innovate in other ways.
We appreciate your loyalty and support, and look forward to continuing to work together.
Rod J. Howard, Chairman
For the CapKey Advisors Team
February 1, 2017
To Our Clients and Friends:
Today we mark the fifth anniversary of the launch of CapKey Advisors and take this opportunity to thank our clients and friends.
We started five years ago with a simple philosophy: to deliver the highest quality legal and strategic advisory support to our clients, with business pragmatism and unwavering client focus, and to offer cost structures tailored to the engagement. We started as a small, all-partner-level team with many decades of experience in M&A, law, business and finance. Today, five years later, we remain true to those roots. We are still, and plan to remain, an all-partner-level team, and we remain committed to our original philosophy.
In these first five years, we have advised on more than 50 M&A transactional engagements, representing over $1 billion in total value. We have advised buyers, sellers, senior executives and management teams, boards, and investors. We have acted as lead counsel and “deal counsel” in many transactions, and as special M&A co-counsel (“lawyer’s lawyers”) in other transactions. When appropriate, we enlist specialists from other firms who share our philosophy. We also act from time to time as shadow counsel for investors looking for another set of eyes or for focus on special concerns. Beyond M&A, we have advised on corporate governance, IP, and executive employment matters.
In these engagements, we have developed innovative structures to overcome daunting obstacles and to meet unique needs. At the same time, when the risks were not warranted or the obstacles were genuinely insurmountable, we have not hesitated to say so. We believe that sometimes the best deal is the deal you don’t do, and our focus is not on short-term gain, but on long-term relationships. In each instance, regardless of our role, our commitment has been to devote senior attention and deliver candid, pragmatic, world-class advice infused with business sense.
A description the types of engagements we have handled is enclosed. You will not see conventional deal “tombstones”, names, logos or dollar figures. The matters we handle are typically sensitive, and confidentiality is paramount. We also take pride in the fact that CapKey Advisors is structured to handle “small” as well as “large” transactions. All of us at CapKey Advisors have handled nine- and ten-figure transactions in our careers, but we believe that dollar size is not a reliable indication of the complexity of a transaction – or its business value, which will often depend more on strategic value or avoided exposures. Finally, we believe that the focus should always be on the advancement of the client’s interests and not on professional promotion and publicity. If that’s a bit old-fashioned in an age of relentless advertising and social media, it’s one area in which we prefer to remain traditional, even as we strive to innovate on the conventional models of professional services in other ways.
We appreciate your loyalty and support, and look forward to continuing to work together.
Rod J. Howard, Chairman
For the CapKey Advisors Team
February 2013
To Our Clients and Friends:
We began 2012 with a new firm and a commitment to deliver world-class legal support infused with deep practical business experience, and to deliver that support in a new way, a way that combines an “old-fashioned” focus on long-term relationships with our clients with an innovative cost structure that allows us to form engagement teams and structure engagement terms in ways that are more responsive to client needs and to the new realities of the business and economic environment. With the confidence and support of our clients and friends, we have:
· advised a Fortune 100 retailer on an asset acquisition;
· advised on the sale of a venture-backed technology company to a Fortune 50 technology company;
· advised a life sciences venture capital firm on the sale of a portfolio company’s assets;
· advised a venture-backed new media company on its acquisition of the new media business of a leading UK publishing company;
· advised a division of a global telecommunications services provider on a joint venture;
· advised a venture-backed game application company on the sale of the company to a social discovery company;
· advised a privately held technology company on a cross-border investment and joint venture;
· advised a privately held mobile applications company in connection with joint venture/sale discussions with a European partner;
· advised a privately held technology company on domestic minority investment structures;
· advised a privately held technology company on contentious IP matters, including the restructuring of licenses and the unwinding of a development arrangement.
We take pride in the fact that CapKey Advisors is structured to handle transactions of all sizes in a responsive, creative and economical manner, and that we devote the same high level of senior professional attention to “small” transactions that we devote to “large” transactions. All of us at CapKey Advisors have handled nine- and ten-figure transactions in our careers, but our sampling of 2012 transactions deliberately includes no mention of that favorite boasting point of “league tables” and marketing brochures – deal size, which we believe is not a reliable indication of the business value of a transaction (which may depend more on strategic value or avoided exposures than on nominal price), particularly in the current economic environment.
The political and economic uncertainties that weighed on the past year have begun to clear. At the same time, significant uncertainties in the business environment remain, and the long-term trends that led us to launch CapKey Advisors and form the premises of the CapKey Advisors model have not changed. So as 2013 begins and we complete our first year as CapKey Advisors, we extend our thanks to the clients and friends and renew the commitment that we made when we launched CapKey Advisors nearly a year ago: to deliver the highest quality of legal support, and to deliver it with business pragmatism and unwavering client focus.
June 30, 2013
To Our Clients and Friends:
Global M&A activity slowed in the first half of 2013, hitting lows not seen since 2009. M&A activity in Europe remains depressed by austerity and recession, and activity in and from China has stumbled in the face of slowing growth rates and rising credit and liquidity concerns. Against this backdrop, the largely flat levels of U.S. mid-market and small-cap M&A – which account for much of M&A in the technology sector – were a relative bright spot. At the same time, the domino effect of economic weakness overseas and the drag of a still-sluggish domestic recovery and slowing consumer spending are increasingly casting clouds over U.S. deal-making.
In this environment, close “diligence”, creative structuring, and disciplined drafting and execution play critical roles in confirming the value proposition of a deal and then shepherding it to signing and closing. Since the founding of CapKey Advisors in 2012, delivering that support has been our mission in the engagements we have handled. In those engagements, we have advised on a broad range of buy-side and sell-side transactions and other M&A matters, for clients large and small, in a variety of capacities:
· advised a privately held wireless technology company on a variety of complex acquisitions and investments, both domestic and foreign;
· advised a Fortune 100 retailer on an asset acquisition;
· acted as special M&A consulting counsel on the sale of a venture-backed infrastructure automation software company to a Fortune 50 technology company and the sale of a venture-backed cloud management software company to a Fortune 100 technology company;
· advised a speech analytics and workforce optimization company and its principal executives on the sale of the company to a private-equity portfolio company;
· advised a life sciences venture capital firm on the sale of a portfolio company’s assets;
· advised a venture-backed new media company on its acquisition of the new media business of a leading UK publishing company;
· advised a privately held game-sector company in a collaboration, licensing and option agreement looking toward an eventual business combination;
· advised a division of a global telecommunications services provider on various matters, including a major contract with a Tier 1 carrier and a joint venture;
· advised a privately held technology company on contentious IP matters, including the restructuring of licenses and the unwinding of a development arrangement;
· advised an insurgent stockholder group on efforts to promote board and policy change at a publicly traded software company;
· advised a venture-backed game application company on the sale of the company to a social discovery company;
· advised a privately held mobile applications company in connection with joint venture/sale discussions with a European partner.
The omission of names and deal values from our sampling of transactions is deliberate. All of us at CapKey Advisors have handled nine- and ten-figure transactions and advised household-name clients in our careers. Nominal size and name-dropping may be favorite boasting points of “league tables” and marketing brochures, but our focus is elsewhere – on the client, the client’s objectives and the business value-drivers of a transaction, which often depend more on strategic value or avoided exposures than on nominal price. While the AmLaw 100 pay lip service to the “new normal” and then continue to raise rates, we take pride in the fact that CapKey Advisors is structured to handle transactions of all sizes cost-effectively, with the same high level of senior professional attention on “small” transactions that we devote to “large” transactions.
In Perspective: 2012 Q3 M&A Decline in Activity
Presents Opportunities and Challenges
October 30, 2012
To Our Clients and Friends:
The slowdown in global merger and acquisition activity continued into the third quarter of 2012. Activity is down most sharply in mid-sized deals ($50 to $500 million), where reported deal volume is down 8% from Q2 and 14% from the year-earlier period, followed by small deals (under $50 million), where reported activity is down 5% from Q2 and over 10% from the year-earlier period. U.S. M&A held up better than cross-border and non-U.S. M&A, but global weakness took the worldwide number of M&A deals to its lowest level since 2005.
M&A activity is often a leading indicator of business sentiment and trends as well as a trailing reflection of current business conditions, ticking up as businesses see better times ahead and ticking down as businesses see tougher or more uncertain times ahead. M&A activity levels in Q3, including the trends in deal terms, seems to reflect the headwinds and uncertainties that businesses are seeing – headwinds that are clearly visible in the current earnings reporting season, even as consumer confidence has turned up. Some of the most cited reasons that we are seeing and hearing are (1) the looming fiscal cliff, (2) political and regulatory uncertainty surrounding the upcoming election, (3) softening revenue and earnings forecasts, (4) weakness in China and the ongoing debt and austerity crisis in Europe, which reflect and also affect demand and activity around the globe, and (5) in tech and other growth sectors, the tempering of investor enthusiasm as eagerly awaited IPO’s have stumbled and high-profile companies have fallen, in some cases precipitously, from their IPO valuations. Not surprisingly, business confidence and CEO confidence have deteriorated.
The main bright spot has been a rise in consumer confidence, but whether that confidence is sustainable will likely depend on jobs growth and continued stabilization and improvement in housing market conditions.
Where, then, does that leave M&A and what’s ahead?
For buyers with cash, conviction and tolerance for risk, the decline in M&A activity means fewer competing buyers, presenting opportunities to make acquisitions on more favorable terms. At the same time, buyers and their advisors need to be particularly vigilant in the diligence process to identify deeper company-specific problems that may be masked by general weakness in the global economy. In addition to longer due diligence and negotiation periods, we are seeing a trend toward terms that impose greater risk on sellers, including more asset deals, more purchase price adjustments, earn-outs and deferred and contingent payments, and more reverse break fees in strategic deals that give buyers greater ability to walk from the deal.
For sellers, weakness in M&A activity puts a premium on preparation and planning –
o to ensure cash sufficient to ride out the storm and give credible stand-alone viability;
o to identify and keep a clear and steady focus on stockholders’ key interests while accommodating the reality of buyers’ needs and leverage; and to present a clean profile to buyers in the due diligence and negotiation process, by anticipating and eliminating problems before they become deal points, by documented compliance with corporate, legal, and regulatory requirements, by protection of the company’s intellectual property and assets, and by planning and executing a selling process that maximizes alternatives and negotiating strength.
On both the sell-side and buy-side, closing conditions and walk rights will be a central focus, and outside-the-box solutions will be important in bridging gaps in valuation perceptions and terms. Fees will continue to be under pressure, as clients increasingly demand fees that respond to the realities of the economic environment, the circumstances of the deal, and business needs, all while maintaining high quality and producing desired results.
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