So – how would you define affordable innovation?

Ask these guys…

(Sources: Youtube/Spark Africa)

Do you know of other examples of affordable innovation? Let me know…

Why are acquisition multiples a taboo subject in Portugal? [barrier]

Whenever a UK or US newspaper reports on an acquisition, one of the most usual subjects is a short analysis of the acquisition multiples. Why is this important? One of the main questions that arises when a company is acquired is whether the acquirer paid the right price.

One of the most bewildering facts about the way journalists report acquisitions in Portugal is that price and value multiples are almost never mentioned. I really cannot say for sure why this is the case – there could be several explanations.

One explanation could be that transactions in Portugal are comparatively small and there would be limited interest in the price. But then, why bother reporting at all? Perhaps journalists simply know that, if they were to ask questions about the value of the acquisition, they would not get a straight answer.

Another possibility is that journalists cannot be bothered to calculate an EV/EBITDA multiple. The maths are not challenging… The media sector is going through a difficult phase now with cost cutting and editorial staff limitations, which may explain why there are rarely in-depth articles about acquisitions.

While multiple analysis has a number of limitations, it allows analysts to draw certain conclusions. The lack of transparency in M&A in Portugal is yet another barrier to entrepreneurship. No-one really understands what a company is or could be worth, so why bother starting a business?

Yet there are positive developments. TTR is a financial information company which focuses on providing proprietary information about global M&A transactions which involve Portuguese and Spanish companies.

Should TTR data make its way into mainstream media in Portugal, this could indirectly act as an incentive to entrepreneurship. However, newspapers and TV stations have given up on actually hiring editors and are happy to use and reuse existing news so this could prove unrealistic.

Do you think that mainstream media and particularly newspapers should focus on acquisition multiples? Or would you find it too technical?

More about Apple’s acquisition of Nortel’s patents

It emerged today that Google bid Brun’s constant and Meissel-Mertens constant in the auction for Nortel‘s patents. These numbers are well-known to mathematicians. When the auction got to 3 billion USD, Google bid Pi. The press speculates that the company was either supremely confident or bored.

Here is a thought: Google was not bored and probably knew that there were other corporates in the run. Google’s only goals were to avoid that patent trolls such as Intellectual Ventures ended up owning the portfolio, as well as securing a role in the next stage of the process. Google can talk with Apple if needed but would find it more difficult to talk with a belligerent patent acquisition fund.

Google never liked formal auction processes organised by banks, either in the context of acquisitions or securities offerings. Google’s IPO avoided the usual bookbuilding process.

This is my theory – only the bidders and bankers involved in the process know what really happened.

Patent trolls and Apple’s acquisition of Nortel’s patent portfolio [hack]

There is much to be said about Apple’s acquisition of Nortel‘s patent portfolio. The deal size is impressive, keeping in mind that these are intangible assets.

This deal is proof that a company that fails to bring the results of its R&D activity to market  will face difficulties. Nortel filed for bankruptcy while sitting on a huge and valuable portfolio of patents. Innovation is about bringing new products and services to market and not (only) about filing patents.

Seen from the outside, this looks like a defensive move from Apple. Defensive action knowing that patent trolls were participating in the auction. The term “patent troll” designates acquisition funds and companies that focus on acquiring patents and then suing other companies that use those patents without paying royalties.

Are patent trolls a barrier to innovation or an incentive? There’s plenty of debate on this issue. It appears that Apple could not afford to see these patents fall into the “wrong hands”. There were two patent trolls in the auction according to the press, among them Intellectual Ventures.

This deal also shows the importance of access to competitors’ assets (in this case, intangible assets) developed by other companies. This is especially the case for technology companies. Innovation is not about a lone genius coming up with an idea but more like a collective effort, that involves various companies and experts working together to deliver a novel product or service.

The acquisition illustrates the central role that patents play in a technology company’s development as well as their enduring value.

Celebrating the 1,000 visits mark in June

The following charts shows monthly visits to this blog for the last twelve months.

Source: Google Blogger Stats

A big thank you to my readers. Limited number of visits, but growing steadily. June was a good month as the blog recorded over 1,000 visits for this first time since launch in 2008.