Last year, non-tech companies spent nearly $10 billion on venture capital-backed businesses. These days large companies are increasingly partnering with, investing in, and acquiring startups that disrupt their own core business -and doing so at a price premium. Here are several examples of corporate giants thinking outside of the box that provide a lesson to both startups as well as entrepreneurs looking to sell their businesses.
Wal-Mart’s Acquisition of Jet.com
At $3.3 billion, Wal-Mart’s acquisition of Jet.com in the largest deal to date for an online startup. Jet, despite its promised $1 billion run rate, is still burning cash and often not making a profit on sales.
What we miss when we focus just on the above is that Jet is a way for Wal-Mart to counter its greatest weakness and make a play against one of its strongest competitors—Amazon. Despite six decades of success as a brick-and-mortar retailer, Wal-Mart has consistently had issues competing online.
Jet is a real innovator, incorporating dynamic pricing based on warehouse location into its model and incorporating the best of AI to ensure that the client experience is exemplary—a very different selling point than Walmart has traditionally focused on.
The lesson for entrepreneurs: Pay attention to the weak spots of would-be acquirers. How would your strengths complement their weaknesses? If you can identify and demonstrate the ways you can help them patch those holes, you instantly become a more attractive acquisition candidate.
General Motors Acquisition of Cruise Automation
Last spring, automotive giant GM closed on its $1 billion acquisition of Cruise Automation, a startup that hadn’t even launched a product yet. The San Francisco-based startup develops software for self-driving vehicles, a technology that on the surface threatens GM’s core business as a legacy automobile manufacturer.
Some might say GM didn’t have much choice but claim a stake in the self-driving vehicle industry. Its competitors are working to develop new technology for autonomous cars—with Cruise, GM at least has a chance to compete against front-runners like Google and Tesla. GM has high hopes for its self-driving vehicle initiatives. Last January it entered into a partnership with ride-sharing service Lyft that it hopes will result in a fleet of robo-taxis—a pilot program for driverless non-taxi cars to come.
The lesson for entrepreneurs: Don’t be afraid to compete with the big names in your industry—even if they have a head start. When Cruise was founded, Google had already been working on self-driving cars for more than 5 years. But automakers are hungry to own the technology that they see as the future of their industry, and buying Waymo from Google is not an option. It’s no surprise that Cruise got such a high price even in a crowded field.
With over 25 years’ experience consulting with industry-leading companies, we understand the challenges facing entrepreneurs with generating and protecting income. Whether you’re looking to improve your profitability, build your brand through a business transaction or capital raise, Talley is the consulting and financial services firm dedicated to strategic business solutions that deliver meaningful results.

While most of the retail industry is focused on scaling back their brick-and-mortar presence, Target said earlier this week that their stores, both existing stores and small-format stores to come, will be critical to the growth of the company’s core business.  Given the current trend of shopper’s focusing more and more on e-commerce websites to satisfy their shopping demands, many analysts wonder if the company should consider first shutting down of its low performing assets to free up funds for the many ambitious projects the retail giant has planned.

During the company’s financial community meeting, Target outlined its strategy for the future, which includes a $7 billion investment over the next three years. In that time, the company plans to revamp more than 600 of its approximately 1,800 locations, and open more than 100 small-format stores.

The small-format stores will be focused on metropolitan areas with large populations and college campuses. Thirty of these stores will open in 2017. Target began rolling out smaller stores in cities in 2012, and opened 13 of them in places like Chicago, New York and Philadelphia in 2016. The company is also revamping its supply chain and the way merchandise moves across its network.

The focus on growing stores is a departure from the store closures we’ve heard from major retailers like J.C. Penney, Macy’s and Sears.   While analysts are generally supportive of the changes that Target outlined, some believe a few closures could be a good thing:

“We do have some concerns that Target should consider more aggressively seeking to prune lower productivity stores despite the fact that they are likely cash flow accretive and profitable on a four-wall basis,” said Cowen & Co. in a note published Tuesday. “If this is conducted thoughtfully, store pruning/closing can drive a better overall brand experience, free up capital investment for more productive stores, and improve resource allocation.”

With over 25 years’ experience consulting with industry-leading companies, we understand the challenges facing entrepreneurs with generating and protecting income. Whether you’re looking to improve your profitability, build your brand through a business transaction or capital raise, Talley is the consulting and financial services firm dedicated to strategic business solutions that deliver meaningful results.

Yahoo Inc. announced Monday it will shakeup its board after completing its $4.8 billion deal with Verizon Communications Inc., and several longtime directors, including CEO Marissa Mayer and co-founder David Filo, will step down as directors. After the sale of its core internet business, the company will also change its name to Altaba Inc., according to a regulatory filing by Yahoo.

All those changes depend on whether Yahoo can actually close the sale: The Verizon-Yahoo deal has become less certain after a second breach of one billion accounts was disclosed last month. The highly publicized breaches have caused Verizon to weigh their options, including potentially paying less than the agreed-upon $4.8 billion.

The pending deal marks a dramatic fall for Yahoo, one of the best known names of the internet boom in the late ‘90s. Prior to the dot-com collapse in 2000, Yahoo, then valued at over $100 billion, was in a position to buy a fledgling Google for $1 million but passed on the opportunity. After declining over the next decade, Yahoo famously turned down a buyout offer from Microsoft for an attractive $45 billion in 2008. Yahoo’s market value is currently close to $40 billion, with a large portion of that value propped up  byits 15% stake in Chinese company Alibaba, a company worth close to $241 billion.

Yahoo remains a major force online, but has struggled with an identity crisis and has fell behind rivals in its ability to ‘monetize’ its audience through advertising that is linked to customers’ browsing and other online activities. 

The Verizon deal is the first major step toward unwinding Yahoo. Next up is a trove of about 3,000 non-core patents, which Yahoo is selling in a separate auction that is expected to fetch upwards of $1 billion. 

Talley & Company understands the challenges facing entrepreneurs with generating and protecting income. Whether you’re looking to improve your profitability, build your brand through a business transaction or capital raise, Talley & Company is the consulting and financial services firm dedicated to strategic business solutions that deliver meaningful results.

Professional athletes aspiring to dethrone Cristiano Ronaldo as Forbes’ richest athlete might have to put in some extra time gym time. News broke last month that Ronaldo inked a contract with Nike that will reportedly yield him an estimated $24 million per year for the remainder of his life. Ronaldo stands to make more than $1 billion from the landmark deal.

Nike’s lifetime deal with global soccer icon Cristiano Ronaldo is only the third deal of its kind for the $31-billion-in-revenue sports giant, and represents the first non-basketball player to acquire one. The two other athletes are LeBron James, who inked his own lifetime contract (for an undisclosed amount) 12 months ago, and Michael Jordan, who is presumed to have a “lifetime” deal as the name and logo of the Nike-owned Jordan brand.

A contract worth a potential dollar amount north of $1 billion might seem like a lot, but according to a news report from Hookit, a firm that measures the social and digital media value for brands, Nike’s contact with Ronaldo is a steal. They found that Ronaldo’s massive social media presence generated a staggering $474 million in value for Nike this year alone.

“Cristiano is one of the top influencers on the planet who has effectively leveraged his social following and engagement into a media powerhouse to drive tremendous value for his sponsors,” says Hookit co-founder Scott Tilton. “He’s been incredibly effective at integrating his sponsors into the content he shares with his over 240 million global followers.”

Ronaldo’s most valuable post from 2016 was on Instagram after Ronaldo led Portugal to the Euro 2016 title as team captain. Nike’s slogan “Just Do It” was the hashtag, while the same slogan as well as the Nike Swoosh were both in the image for a post with 1.75 million likes and nearly 13,000 comments. Acording to Hookit, the payoff was a staggering $5.8 million in media value for Nike.

While social media marketing metrics and KPIs have been notoriously nebulous with respect to their effects on a company’s bottom line, it would appear the value of Ronaldo’s social media presence combined with the cleats/boots and apparel he helps Nike sell is above and beyond the value of Ronaldo’s contract with Nike. Soccer generates more than $2 billion annually in revenue for Nike.

Whether an endorsement contract or an M&A transaction, every negotiation is unique and needs to be approached with the proper strategy and insight. Talley & Company is uniquely equipped to provide the technical and managerial expertise to help you plan, negotiate, structure and execute on your acquisition strategy.

After months of rumors, the Ultimate Fighting Championship (UFC) announced on Monday that it would be sold for $4 billion to a group of private investors. The deal represent the largest of its kind in the history of professional sports, topping the $2.1 billion the LA Dodgers were bought out of bankruptcy back in 2012. It also marks a staggering profit for the investors who bought the organization back in 2002.
What is remarkable about the sale is that casino operators Lorenzo and Frank Fertitta bought the nearly bankrupt organization in 2000 for $2 million. The $4 billion sales price represents a 72% annual return, every year, on that modest original investment.
“We saw an opportunity,” Lorenzo Fertitta told CNN’s Rachel Crane late last year. “We felt like there was a void in contact sports. We felt…if we put in the right rules and regulations…we could create an opportunity for business.”
UFC is now the world’s biggest and most successful mixed martial arts league. The sport combines all different types of fighting including boxing, wrestling and martial arts.
While UFC was once considered a violent, fringe sport banned in many states, the Fertitta brothers made great strides making the league more mainstream and accepted as a legitimate sport during the 15 years they have owned it. UFC fights now draw stadium crowds of up to 70,000 fans as well as large broadcast and pay-per-view audiences. Bud Light, Reebok, Harley-Davidson, MetroPCS, EA Sports, Toyo Tires and FRAM auto filters are among their many sponsors.
The price paid for UFC is roughly seven times its gross revenue, as chairman Lorenzo Fertitta told CNN that the organization took in about $600 million in 2015.
UFC is being bought by a group led by talent agency WME-IMG. The group includes major private equity firms Silver Lake, Kohlberg Kravis Roberts, as well as the private investment firms of Michael Dell. The Fertitta brothers will retain an undisclosed minority stake in the company after the sale. President Dana White, who owned 9% of UFC, has signed on for five years with the new ownership group, and will receive 9% of the company’s net profits during that time instead of an ownership stake.
Talley & Company understands the challenges facing entrepreneurs with generating and protecting income. Whether you’re looking to improve your profitability, build your brand through a business transaction or capital raise, Talley & Company is the consulting and financial services firm dedicated to strategic business solutions that deliver meaningful results.
Microsoft recently announced that it will scoop up LinkedIn for $26.2 billion in the largest acquisition in its history, placing a bet that the professional social network can rivitalize the tech giant’s software offerings despite recent struggles by both companies.
Microsoft’s Chief Executive Satya Nadella is ponying up a hefty sum of cash for a firm that has suffered its fair share of setbacks. Although LinkedIn is the largest professional social network, with around 430m registered users and 100m visitors to its site each month, some analysts have questioned how much growth is left in its tank. While LinkedIn’s revenue growth has been slower than expected, if Microsoft’s CEO can make this deal worth the money and the effort, he could improve Microsoft’s questionable track record with acquisitions. So what potential challenges are standing in his way?
There are three major hurdles Microsoft will have to deal with:
Many analysts are questioning if the deal makes financial sense. Microsoft is spending the equivalent of approximately $260 for each monthly active user of LinkedIn. To keep shareholders content, it will need to grow LinkedIn’s user base amid concerns about slowing growth, or be more explicit on how Microsoft can capitalize financially from obtaining LinkedIn’s data.
Microsoft’s recent history of acquisitions leaves something to be desired. Its purchase of Skype in 2011 for $8.5 billion has not been as fruitful as once predicted. Microsoft squandered over $6.3 billion on aQuantive, an online-advertising firm that it bought in 2007, and $7.6 billion on Nokia’s handset business in 2014. Nadella, not at the helm when these acquisitions took place, is looking to steer the ship in a positive direction with the acquisition of LinkedIn.
A shift in workplace culture and behavior will be required. Nadella wants LinkedIn to become the go-to hub for news and other details about people’s professional lives, but firms are unlikely to want to give their employees more of an excuse to spend time on a social media site, regardless of its professional nature. It’s not uncommon for large firms to block or restrict access to LinkedIn on their networks, which might have something to do with executives fearing that recruiters scouring LinkedIn are out to poach their staff.
While many are questioning the purchase of LinkedIn, only time will tell if Nadella will be able to capitalize on Microsoft’s latest acquisition.
Talley & Company understands the challenges facing entrepreneurs with generating and protecting income. Whether you’re looking to improve your profitability, build your brand through a business transaction or capital raise, Talley & Company is the consulting and financial services firm dedicated to strategic business solutions that deliver meaningful results.
Game 1 of the NBA Finals, a rematch of last year’s duel between the Golden State Warriors and the Cleveland Cavaliers, kicked off Thursday night with the Warriors coming away with a decisive 104-89 at-home victory over the Cavs.
While the league’s two most popular players, Lebron James and Stephen Curry, battle it out on the biggest stage in the post season, not making it to the finals isn’t the only thing that is causing some elite NBA athletes to feel excluded.  Case in point: New Orleans Pelicans forward Anthony Davis is widely recognized as an elite rising star in the NBA, yet last Thursday the NBA announced Davis would not be selected on any of the three All-NBA teams. His pride was probably wounded by the news, but his wallet took the biggest hit.
Davis had a clause in his contract that would award him $24.8 million as part of a requirement for the “Rose Rule.” Davis needed to make one of the All-NBA teams in order to complete requirements for a big bonus.
The Rose Rule stipulates that a player coming off his rookie contract is eligible for a higher raise structure if he accomplishes two of the following: wins MVP, is selected as an All-Star starter, or is selected for All-NBA. Earlier this year Davis was not selected as an All-Star starter after an injury-plagued season with the Pelicans, and was questionable to make the All-NBA team. Now that the NBA announced the official rosters for the three All-NBA teams, which did not include Davis, he will not earn that extra $24.8 million.
Davis’ five-year deal is now worth $121 million, instead of a possible $145 million. Davis, the No. 1 pick in the 2012 NBA Draft, was a member of the 2014-2015 First-Team All-NBA squad. Had his rookie contract been up last year he would have earned the $24.8 million he missed this year.
While the devil is always in the details, what a missed opportunity for Davis!
Whether a player contract or an M&A transaction, every negotiation is unique and needs to be approached with the proper strategy and insight. Talley & Company is uniquely equipped to provide the technical and managerial expertise to help you plan, negotiate, structure and execute on your acquisition strategy.

Tesla’s CEO Elon Musk is one of the more ambitious entrepreneurs the world has ever seen, routinely drawing comparisons to Steve Jobs, with some even putting him ahead of the late Apple co-founder and CEO. Now Musk is trying to accomplish something few manufacturing companies could ever dream of: Musk recently announced plans to ramp up capital expenditures to support an incredibly aggressive plan to increase the current production capacity of 20,000 vehicles in the current quarter to 500,000 per year by 2018.

“It’s not a question of demand,” Musk said. “Demand is not our issue, production is our issue. We have more demand than we can address and levers we can pull to increase demand, and we’re not doing it.”

Musk’s point was that if Tesla engaged in conventional advertising (they do very little advertising outside of PR events), it could increase demand, but its more prevalent issue now is being able to produce its cars, and build them well.

“It’s worth saying that making one of something is quite easy,” Musk said. “Making lots of something consistently that’s going to last a long time is extremely hard. In fact, it is way harder to make the machine that makes the machine that it is to make the machine in the first place.”

From his perspective, Tesla has people lining up around the block to buy its cars and is far more worried about being able to build the vehicles and properly support them than it is about seeing demand drop off.

Scaling is hard. As many seasoned entrepreneurs will tell you, once you’ve achieved a certain level of success (it might take form of earning a few million in revenue, hiring more than 10-20 employees, etc.), the hard work really begins. A business in growth or scale mode faces a whole new set of different challenges and opportunities that may require a change in attitude and approach. Your ability to recognize this can mean the difference between spinning your wheels and achieving your next milestone.

Talley & Company understands the challenges facing entrepreneurs with generating and protecting income. Whether you’re looking to improve your profitability, build your brand through a business transaction or capital raise, Talley & Company is the consulting and financial services firm dedicated to strategic business solutions that deliver meaningful results.

John Elway: 2004 Inductee to the Pro Football Hall of Fame. Back to back Super Bowl wins. It would be hard to argue that the number one pick of the 1983 NFL Draft did not have an illustrious career as a football player. One thing he wasn’t quite as good at apparently though, was investing his money.
Back in 1998, Broncos owner Pat Bowlen proposed a no-brainer deal to Elway. In the deal Bowlen offered Elway the right to buy a 10 percent share of the Broncos for $15 million. But that wasn’t all. Elway would also be given the option to buy another 10 percent of the franchise by forgoing the deferred salary Bowlen owed him on the condition Elway would become a special assistant to Bowlen, which would lead to a COO position. The amount of deferred salary on the table? $21 million.
If Elway wasn’t pleased with his investment in the Broncos, Bowlen offered him the opportunity to back out by selling back his interest in 2-5 years for $5 million more than the original purchase price. In addition, Elway would receive eight percent interest on his investment a year. He would also have right of first refusal to buy any other stake in the team if the family sold to another interested party.
So, what did Elway decide after having nine months to mull over this seemingly no-lose deal? He walked away from it and decided to invest his money elsewhere, often with mixed results.
Fast forward to 2011: Elway is named Executive Vice President of Football Operations and General Manager for the Denver Broncos but has no stake in the franchise. According to a Forbes estimate, the 20 percent stake he passed on, based on a Forbes 2015 valuation of the team at $1.94 billion, is now worth $388 million, which would have been a whopping 646 percent return on the 1998 investment, adjusted for inflation, had Elway accepted Bowlen’s offer.
While only John Elway and his closest advisors can say for certain why he would pass up what seemed to be a “touchdown” deal, it sounds like he fumbled the snap on a very good investment opportunity.
Founded in 1989, Talley & Company is the premier consulting and financial services firm dedicated to advising high net worth individuals and their closely held entities with the strategic business solutions that deliver meaningful results.
After years of resisting, eBay has finally broken the silence on what it earns from StubHub, the popular ticket-selling marketplace it required for a reported value of $307 back in early 2007. While the e-commerce giant continues to guard StubHub’s impact to its overall business by choosing not to disclose the profit StubHub generates, or its margins, the information released highlights the ticket reseller’s strong performance at a time eBay’s marketplace business is slowing down
It turns out StubHub is eBay’s fastest growing business, generating 34% year-over-year sales growth and annual revenues of $725 million, roughly 9% of total sales. In the fourth quarter of last year, StubHub generated over $1 billion in gross merchandising volumes (GMV), a 30% year-over-year rise.  During the same quarter, eBay’s total GMV remained flat at $21.8 billion.   
The disclosure of StubHub’s strong performance also comes six months after eBay spun off its highly profitable payments arms, PayPal. Carl Icahn, billionaire activist investor, successfully campaigned for eBay to spin off its PayPal business, a move that already appears to be bearing fruit for investors. 
Talley & Company knows how critical structuring and financing buy/sell transactions are to entrepreneurs and family-owned businesses. We are here to help connect you to the right lender or equity group to fit your unique growth plan, present your company’s financials and “story” in a manner that increases favorability with lenders/equity groups and structure the transaction in the most tax-efficient manner. 
For more information about how Talley & Company and its affiliates can help you plan, negotiate, structure and execute on your growth strategy, contact us today. 

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