The deal with Yahoo, the company that purchased Tumblr, is the largest acquisition of a social networking company in years, passing up even Facebook’s purchase of Instagram last year. Why did Yahoo purchase the blogging platform? According to CEO Marissa Mayer, to give the company a new appeal to young people and missing out on years of revolutions in social networking and mobile devices.
]]> It is not yet clear, however, that Tumblr will be able to make the company money. Though Tumblr has a following and has been able to attract well-known investors, it hasn’t proved to be particularly profitable, nor is it clear that it will work for mobile devices.The deal is not yet approved, but if it is, CEO Mayer faces the challenge of proving that the deal was a wise decision. As it is, Mayer has purchased a number of small start-up companies—including Flickr and GeoCities—and not all of them have been successful.
There is potential with the acquisition, experts say, but it isn’t entirely clear how Tumblr will help Yahoo reach its goals as a company. Needless to say, if the deal closes and goes forward, Yahoo has challenges ahead.
Source: Source: New York Times, “Yahoo to Buy Tumblr for $1.1 Billion,” Michael J. de la Merced, Nick Bilton, Nicole Perlroth, May 19, 2013.
]]>The first movie was released in 2009, and the defendants began to plan a follow-up. While no one inked a contract with the writing team for the sequel, the defendants did, according to the complaint, ask them to come up with ideas for the next movie in the franchise.
]]> The team prepared a treatment (a story outline) and presented it to the defendants. Their pitch included "original plotlines, themes, characters, relationships, settings, scenes, sequences, dialogue, mood, pacing and fictional inventions," the complaint says. In December 2009, the defendants signed a contract with a different team of screenwriters.When the sequel opened in March 2013, the plaintiffs noticed distinct similarities. In the complaint, they say that their treatment and the movie were "substantially similar in everymaterial way." The defendants lifted the plaintiffs' compelling inventions, the complaint continues, in order to infuse the sequel with "the blockbuster power of plaintiffs' work."
Interestingly, the plaintiffs did not copyright their 2009 treatment until May 2012. The filing may not have been related to any pending litigation. If, in fact, the two were not under contract to any of the defendants at the time they made their pitch, the defendants cannot claim that the material was "work product" and, so, the defendants' property.
"G.I. Joe: The Rise of the Cobra" was the 18th highest grossing movie of 2009, according to Box Office Mojo. Foreign and domestic gross earnings exceeded $302 million. In the two months since its release, the sequel has grossed almost $360 million.
Source: Courthouse News Service, "'G.I. Joe' Writers Sue Studio for $23 Million," May 7, 2013
]]>California's venture capital community wants to know. If this relatively new -- and soon to expand, thanks to U.S. Securities and Exchange Commission rule changes -- platform going to replace the shrewd business people who have especially deep pockets with the armchair investor who has a little left over at the end of the month?
]]> The data from the same crowdfunding company shows that crowdfunding attracts a broader spectrum of businesses and investors than traditional venture capital firms do. California businesses looking for funding under this model will likely attract money from around the country, and that didn't happen as much before.The data also shows that businesses tapping into crowdfunding are not always businesses that would have knocked on venture capitalists' doors. These are companies that focus on consumer and business products and services, territory venture capitalists seldom venture into.
Venture capital focuses more on tech companies nowadays, and the data shows that 75 percent of the businesses using crowdfunding are not tech companies. The crowdfunded companies are also looking for smaller investments than venture capitalists generally consider. These are true startups -- the companies that got started in someone's garage and now need more space, new equipment and additional personnel to grow.
It seems to crowdfunders, then, that the marketplace can support both their model and the traditional venture capital model. Their customers are just different enough that there is little competition for business.
Source: Upstart Business Journal, "Crowdfunding takes the rug out from under VCs, angels," Kent Bernhard Jr., May 2, 2013
]]>In the decades that followed, venture capital would evolve as markets changed and the Internet took hold. The bursting of the tech bubble and the financial meltdown of 2008 would winnow the field of funders to a precious few. So, if Warren Buffet is busy, who ya gonna call?
The answer is, "Everyone." You are going to call everyone. The Internet has introduced The Crowd to the funding mix, and The Crowd (our term, capital letters intended) could spell extinction for venture capital firms that are not on a par with Warren Buffet.
]]> Crowdfunding companies connect smaller investors with investment opportunities. Instead of making a pitch to three or four heavy hitters, an entrepreneur or a small company looking to expand makes its information available on a crowdfunding website where a larger number of investors can buy in for less.At the moment, only accredited investors can participate. The Securities and Exchange Commission will soon issue rules that will open up crowdfunding to The Crowd, just regular folks who see a good business opportunity and want to help make it happen.
According to a study conducted by a crowdfunding company, the strategy has helped companies raise more than $200 million. About 20 percent of that activity has been in the western U.S., including California. The question for venture capitalists is whether The Crowd is a competitor, a collaborator or a chimera?
We'll discuss that in our next post.
Source: Upstart Business Journal, "Crowdfunding takes the rug out from under VCs, angels," Kent Bernhard Jr., May 2, 2013
]]>Companies in the EMC category reported $96.2 billion in merger, acquisition and other business combinations in 2012, a whopping 43 percent increase over 2011's $55 billion. All of those assets changed hands in fewer deals, too -- 839 in 2012 versus 931 in 2011. The Softbank Corp. acquisition of Sprint Nextel Corp. was the largest deal by far at $20.1 billion, more than three times as large as the next biggest deal of the year.
]]> High profile deals included the acquisition of AMC Entertainment Holdings Inc., the company that operates movie theaters across the U.S., and two Walt Disney Co. purchases. Disney bought Lucasfilm Ltd. for $4.1 billion and partnered with Hearst Corp. to purchase A&E Television Networks LLC. A&E is the global media content company that owns a number of cable networks.PwC does not expect the pace to slow in 2013. The report identifies a few key themes that will drive merger and acquisition activity in the EMC industries this year, and the first is consumer demand for bandwidth. Americans are spending more time downloading, streaming and connecting through the Internet than ever, and that trend will likely continue. As a result, PwC's analysts say, businesses will continue to consolidate to meet demand.
Along with bandwidth, consumers will be looking for expanded content offerings. PwC sees the Disney acquisitions as the first in a string of business combinations as major players look to maintain or to expand market share.
That being said, the tension between content and the technology that delivers content will continue, with more technology companies looking to strengthen ties to content producers. Technology continues to change the way consumers access content. While some technology companies have dabbled in producing their own content, it is more likely that tech will direct resources to building relationships with existing content producers.
Sources:
Hollywood Reporter, "Report: M&A Activity Surges 75 Percent in Entertainment and Media," Paul Bond, April 22, 2013
PricewaterhouseCoopers, "2013 Deal insights for the Entertainment, Media and Communications industries: 2013 Outlook & Analysis of 2012 US deal activity," April 2013
]]>Pearson is an international company that owns a number of famous imprints, including Penguin, Dorling Kindersley and Rough Guides. Bertelsmann describes itself as a global media conglomerate whose publishing arm is Random House. Regulators are naturally concerned that a combination of two large companies could impede competition in the marketplace, in this case the English-language publishing marketplace.
]]> Pearson PLC approached Bertelsmann SE & Co. KGaA last year after Rupert Murdoch's News Corp. made a bid for Penguin. The companies announced the merger in February and set about the regulatory approval process in the United States and abroad. The new company will be called Penguin Random House.The European Commission examined the deal from a couple of different perspectives before giving its blessing. First, the commission looked at how the business combination would affect authors and the publishing industry both within and outside of the European Union. Next, the commission examined the potential impact on distribution and production; Bertelsmann is involved in both printing and distribution, while Pearson has no printing facilities.
The analysis showed that Penguin Random House will have plenty of competition in the marketplace for its English-language products. The commission found, too, that neither Pearson nor Bertelsmann controls a large enough portion of the printing/distribution markets to have an adverse impact on the new company's competitors.
The deal will combine various divisions of each company into the new entity, Penguin Random House. In exchange for control of its educational division, the Financial Times newspaper division and the Penguin publishing business, Pearson will hold 47 percent of the new company. Bertelsmann will give up its English-language Random House divisions for its 53 percent stake in the business.
Source: Courthouse News Service, "Penguin's Random House Merger Clears EU Probe," William Dotinga, April 9, 2013
Our firm helps clients with mergers like the one discussed in this post. Please visit our website for more information about our Orange County, California, business law practice.
]]>To illustrate, Motorola filed a lawsuit in the U.S. District Court for the Southern District of Florida in January 2012 accusing Cupertino-based Apple of infringing upon 12 patents to which Apple responded by accusing Mountain View-based Google of infringing upon 10 patents.
Since that time, the lawsuit has ballooned to 180 claims relating to the 12 patents and legal disputes over the definitions of more than 100 patent terms stemming directly from these claims.
While the two sides acknowledged that the case needs to be streamlined through the voluntary dropping of both patents and claims, they were unable to reach a resolution and ultimately petitioned the judge to hold a case management conference. Here, the purpose of such a conference would be to narrow the scope of the case with the assistance of the federal court.
]]> To say that the presiding judge denied the request would be a bit of an understatement."Without a hint of irony, the parties now ask the court to mop up a mess they made by holding a hearing to reduce the size and complexity of the case," wrote the judge in his sharply worded order. "The court declines this invitation."
The judge didn't stop there, however, saying the two companies readily engaged in "obstreperous and cantankerous conduct," and accusing them of using the federal courts as a business strategy.
"The parties have no interest in efficiently and expeditiously resolving this dispute; they instead are using this and similar litigation worldwide as a business strategy that appears to have no end," reads the order. "That is not a proper use of this court."
The judge ultimately gave the two sides until Sept. 20 to make the size of the case more manageable, and indicated that the failure to reach a resolution would have significant consequences. Specifically, he stated he would bring the entire case to a grinding halt until all of the lingering disputes over patent term definitions were resolved by the court.
It should be interesting to see if the two sides are able to come to an agreement.
Sources:
Bloomberg, "Apple, Google not interested in settlement, judge says," Susan Decker, April 10, 2013
PC World, "Judge says Apple, Motorola pursuing business strategy in court," John Ribeiro, April 11, 2013
The company, headquartered in Orange County, California, stopped production on its hybrid cars last November. The U.S. Department of Energy shut down its loans to Fisker, thanks in part to the poor performance of the company's debut vehicle, the highly anticipated, deeply disappointing Karma. Without federal funding, work on the second model, the Atlantic, cannot move forward, and the company has to figure out how to pay back the almost $200 million in loans it's already collected.
]]> The employees who remain are said to be looking for interested buyers or investors. If Fisker can forge a strategic alliance or bring a significant investor on board as a partner, production can resume and the loan payments will seem less daunting.Still, Fisker has a couple of years of trouble behind it that likely cannot be turned around in a few weeks. The company's plans to start manufacturing at an old General Motors plant on the East Coast were heralded in 2009 but have since gone nowhere. A shipment of Karmas was lost in Hurricane Sandy last fall, and litigation against the company's insurer followed, swallowing more time and money.
When things still looked good for the Karma, Fisker had attracted more than $1 billion in private equity since its 2007 founding. Now that the future is less rosy, the chances of finding a buyer or investor may not be as good.
Sources:
NJ.com, "Electric car maker Fisker lays off 161 workers," Associated Press, April 6, 2013
The New York Times, "Henrik Fisker Resigns From Fisker Automotive," Bradley Berman, March 13, 2013
We work with businesses on investment and financing matters similar to the ones discussed above. You can find out more about our Orange County, California, practice at our corporate and business law page.
]]>This is not the first sign of trouble, of course, for the company. Co-founder Henrik Fisker resigned his position as executive chairman last month, citing differences with the company's management team over business strategy. He ceded the post of chief executive officer last August, following a number of disappointing developments at the company.
]]> Fisker Automotive initially impressed the industry with its preproduction version of the Karma plug-in hybrid. The car has not lived up to expectations, though, receiving mixed reviews from critics and being the subject of a number of recalls. In all, only 1,800 Karmas sold. The company stopped production last November. Problems at A123 Systems, the manufacturer of the cars' batteries, contributed to the production halt as well; A123 declared bankruptcy in October 2012.Problems with the Karma poured over into production of the company's next car, the Atlantic. Federal fuel-economy ratings and the car's all-electric range both failed to meet expectations, prompting the federal government to freeze $336 million in loans. Without the Department of Energy's support, the Atlantic would not roll off the assembly line. That lack of support also may have discouraged other non-governmental investors from buying into Fisker.
It isn't just the money the company will not receive that is dogging the remaining staff. The company is also on the hook for the first part of the Department of Energy's loan: a daunting $193 million.
We'll wrap this up in our next post.
Sources:
NJ.com, "Electric car maker Fisker lays off 161 workers," Associated Press, April 6, 2013
The New York Times, "Henrik Fisker Resigns From Fisker Automotive," Bradley Berman, March 13, 2013
Our Orange County, California, firm handles business matters for clients like the ones discussed in this post. If you would like to learn more about our practice, please visit the corporate and business law page of our website.
]]>Apparently the issue with the $20 million severance deal is not its value but the timing. The trustee would not explain more, saying only that his reasoning would be laid out in a written decision.
]]> The package would include $19.9 million in cash and stock, as well as a perk unique to the travel industry: free first-class tickets on the surviving airline, which will also be American, for life for the CEO and his wife. The plan now is that he would hand over the reins of the organization to the chief executive of US Airways Group Inc. and move to a board position as soon as the merger is final. The board position would last a year, at which time the executive would retire.Nevertheless, the bankruptcy court's approval of the merger moves the process one small step closer to completion. Next up is approval from the U.S. Department of Justice that the merger will not violate antitrust laws. The shareholders of US Airways must also approve the deal.
Business analysts suggest that the timing issue could be solved by asking the board of directors of the new organization to approve the severance deal. Until the trustee releases his written decision, though, no definite plans are being made.
Severance packages for executives and top managers can be sticking points in a merger or a business acquisition. The advice of an experienced M&A attorney can help to resolve questions like this before problems arise.
Source: Madison.com, "Judge approves American-US Airways merger," Associated Press, March 27, 2013
Our clients come to us with questions about business combincations like the ones in this post. Please visit our Southern California mergers and acquisitions page for more information about our practice.
]]>Warner Bros., a division of Time Warner Inc., acquired the film rights to the books in 1969. According to the lawsuit, the estate also OK'd Warner Bros. rights to online video games in the late 1990s. The trouble started in 2010, when the parties were working on a "regrant agreement" and the question of the rights came up again. The confusion meant a delay in launching the online games and, according to Warner Bros., cost the company millions of dollars in lost revenue.
]]> But the Tolkien estate and HarperCollins Publishers Ltd. have a different story. In a November lawsuit, they claimed that Warner Bros. owed them about $80 million in damages for licensing activities that went beyond the limited scope of the rights granted in the contract. The argument goes that Warner Bros. had only purchased some, not all rights to the characters and situations in the books; the company collected royalties on those products that rightfully belonged to the estate.The estate and publishing house claim that the initial agreement did not contemplate online video games -- they hadn't been invented yet -- so Warner Bros. breached the contract by developing Gollum-themed slot machine games, for example. Warner Bros. claims that the contract made them "successors-in-interest" to merchandising and other rights connected to the film rights; the images on the games are from the movies, after all.
Meanwhile, the company that owns the film rights has sued the Tolkien estate for breach of the implied covenant of good faith and fair dealing. The company is a co-defendant in the estate's case against Warner Bros.
It could be years before the court calls it a wrap on these claims.
Sources:
EOnline, "'Hobbit' Lawsuit: Warner Bros. Countersues Tolkien Estate, Alleges Breach of Contract Over Gaming Rights," Rebecca Macatee, March 14, 2013
EOnline, "'Lord of the Rings' $80 Million Slot-Machine Smackdown: Tolkien Estate Sues Warner Bros. Over Merchandising," Josh Grossberg, Nov. 20, 2012
The company's Joint Plan of Reorganization was approved by the U.S. Bankruptcy Court and went into effect two weeks later. The benefit for the company: the debt of the business has been drastically reduced and the long-term financing of the company has been secured. Now, the business will be able to remain afloat, pleasing their shareholders, employees and customers alike.
]]> For a manufacturing-based company like Beechcraft, staying in business is of the utmost importance. The CEO of the company stressed that the company would be able to continue to provide service, maintenance and parts for their products and customers. The private aviation market is a small one, though affluent, and so the ability to remain in business to provide new product and service existing product ensures return customers.Chapter 11 bankruptcy may not be the ideal solution for the debt of every company. Consulting a corporate and business law attorney familiar with commercial loans and commercial lending can help to secure the needed funds to avoid filing for bankruptcy and remain in business to continue to serve existing customers and gain new ones.
Source: Forbes, "Back In Business: Beechcraft Emerges From Chapter 11," Mark Patiky, Feb. 20, 2013
]]>Annual business climate predictions from a variety of sources have pointed to 2013 being a big year for regulatory compliance. California companies will have both state and federal regulations to work on. And with more regulations coming online and enforcement efforts ramping up at federal agencies like the Consumer Financial Protection Bureau, small businesses especially will be scrambling for cash and resources to keep up. The financial services industry will be no different, says PwC.
]]> With interest rates so low, though, cash is not that easy to come by. Insurance companies in particular will be looking at mergers or acquisitions as a way to bolster their bottom lines, making up for lower than expected returns on investments.The insurance industry spent most of 2012 stuck in neutral, the report says. Not much changed from 2011 until, again, the fourth quarter, when large insurers began to act in anticipation of Solvency II requirements. Solvency II is part of the European Union's regulatory response to the 2008 financial meltdown and ensuing global crisis. In the property and casualty sector, the year's natural disasters challenged the viability of smaller insurers, making them excellent prospects for larger companies to acquire as well as great potential partners for mid-sized insurers looking to expand their holdings.
All financial services will continue to deal with valuation issues, though. The number of deals may increase, but with valuations, the story will differ from sector to sector: Banking and insurance saw deal values decline, but asset management saw values increase. Again, a lot depends on interest rates and the costs of compliance.
So, while everything may not be coming up roses, M&A should show more buds in 2013.
Source: Insurance Journal, "Despite Uncertainty, Momentum Building for M&As; in 2013: PwC," Feb. 21, 2013
Our Orange County firm helps companies of all sizes with business deals like the ones described above. If you would like to learn more about our practice, please visit the Southern California Mergers and Acquisitions page of our website.
]]>In 2011, Martha Stewart signed a deal with J.C. Penney that would allow her to sell some of her home goods in mini shops within the retailer. Macy's sued Martha Stewart Living for breach of contract. They also filed a lawsuit against J.C. Penney.
]]> Under the contract with Macy's, Martha Stewart Living products are allowed to be sold in standalone stores. The core issue of this case is whether or not the mini stores within J.C. Penney are the same thing.The case is being overseen by Justice Jeffrey Oing of the New York Supreme Court. Earlier this week, Macy's chief executive officer took the stand. Martha Stewart reportedly called the retail giant's CEO the night before the deal with J.C. Penney was announced. The company's CEO reportedly hung up on Stewart and says the two haven't talked since.
It is unclear what the outcome of the case will be. However, one retail analyst says a win for J.C. Penney could mean a huge boost in sales.
This case is particularly unique because many business disputes are settled before they reach the courtroom. It appears in this situation that neither side has been willing to give up without a fight.
Source: CBS News, "Martha Stewart, J.C. Penney vs. Macy's: Inside the lawsuit," Feb. 27, 2013
]]>The $11 billion business deal is on paper, but most of the details are still up in the air. American Airlines and US Airways still have to combine their workforces, their reservation and baggage handling systems and all the internal systems that any other merger requires. When all is said and done -- if all is said and done -- the new American Airlines will serve 6,700 passengers every day with the help of 113,000 workers.
]]> What the merger has in its favor is the experience in the industry and at US Airways of previous business combinations: US Airways and America West merged in 2005, Delta and Northwest Airlines in 2008 and United and Continental in 2010. Industry analysts say that leadership learned lessons in each case, so, while the transition may not be painless, it should go more smoothly.Leadership with both companies believes regulatory approval for the deal will not hit any turbulence. The airlines share very few routes, and leadership expects few job losses.
U.S. and European regulators will have to wave the merger in, but so will the U.S. Bankruptcy Court. American has been in Chapter 11 since late 2011. It is, in fact, American's creditors who will have control of the merged operation. US Airways' management team will be in charge.
Source: Thomson Reuters News & Insight, "American Airlines, US Airways unveil $11 billion merger," Soyoung Kim and Karen Jacobs, Feb. 14, 2013
Our firm handles mergers similar to the one discussed in this post. If you would like to learn more about our Irvine-based practice, please visit our Southern California mergers and acquisitions page.
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