February 2020 – Page 2

Non-stopping Cybersecurity Acquisitions: 3 Deals Over One Billion In 2020 So Far

Following up on a previous post of M&As in the cybersecurity space – interests and activities are still strong.

RSA for $2.1bn

Another private equity firm Symphony Technology Group (STG) just announced the acquisition of RSA from Dell for $2.075 billion in cash. STG partnered with Ontario Teachers’ Pension Plan Board and AlpInvest Partners in the deal.

Dell acquired RSA when it bought EMC in 2015. RSA has over 12,500 customers according to the statement.

Forescout for $1.9bn

Earlier this month, Forescout was to be acquired by Apax and its partner Crosspoint Capital for $33 per share in an all-cash transaction valued at $1.9 billion.

The purchase price represents a premium of approximately 30% over Forescout’s closing share price of $25.45 on October 18, 2019, the last full trading day prior to the release of the 13-D filings by Corvex Management L.P. and Jericho Capital Asset Management L.P. on October 21, 2019, which disclosed they had formed a partnership to approach Forescout and accumulated a combined 14.5% ownership in the company.

Forescout recorded fourth quarter revenue of $91.3 million, compared to $84.7 million in the fourth quarter of 2018 (+8% growth); full year revenue of $336.8 million, compared to $297.7 million in the full year 2019 (+13% growth).

Armis Security for $1.1bn

In January, Israeli IoT security firm Armis Security announced that it agreed to be acquired by NY-based Insight Partners at a valuation of $1.1 billion.

Insight will pay cash for the cybersecurity company, with participation from CapitalG for $100 million and rollover from some existing stockholders.

Banking Headcount Cut

HSBC recently surprised the outsiders with a 35,000 job cut plan in three years.

The largest bank by asset in Europe, London-based HSBC does most of its business in Asia.

Financial Times reported last year in October that HSBC has embarked on a cost-cutting drive that threatens up to 10,000 jobs, as its new interim chief executive Noel Quinn seeks to make his mark on the bank.

It will now cut the headcount from 235,000 to about 200,000 in 2022.

It is also not a surprise as fintech companies are becoming more compelling and providing more superior services efficiently.

The long-term trend is inevitable. For example, in retail banking, every major bank is shutting down branches. The previous “comparative advantage” of having more footprint in the last century has become a liability. The bigger they were, the more pain they were feeling.

In a Jan 2017 report, The Guardian said HSBC “will be left with 625 branches by the end of the year [2017], which means it will have more than halved its high street presence since June 2011 when it had 1,301 branches.”

And in today’s report, HSBC US said the bank will close about 80 branches this year in the U.S. alone, a reduction of about 30%.

Other retail banking services such as trading and wealth management are also shifting online + automation. Younger generations just don’t need much face-to-face financial services and digital infrastructure has become more potent than ever. The industry’s reduction in cost structure leads to lowering fees and squeezes every player who couldn’t adapt (fast).

Many Institution services are also digitalized/automated.

Not surprisingly, many parts of the investment banking world such as trading are cutting headcount as well.

Last August, Financial Times reported that

Almost 30,000 lay-offs have been announced since April at banks including HSBC, Barclays, Société Générale, Citigroup and Deutsche Bank. Most of the cuts have come in Europe, with Deutsche accounting for more than half the total, while trading desks have been hit hardest.

A graphic with no description — Source: FT

「What’s News In China」

On Feb 14, Oaktree Capital Management, a Los Angeles-based distressed debt manager, became the first foreign company to set up a wholly owned unit in China under a trade accord with the U.S. The Beijing-based subsidiary has a registered capital of $4.55 million. // Caixin

On Feb 17, OYO reported a $951 million revenue globally for the financial year ending March 31, 2019, growing 350% yoy. In 16 month, OYO China has grown into an annual revenue of $307 million (~1/3 of total revenue). While facing more pressure, OYO China now has expanded into 3 brands and signed up 19,000 hotels. // TechCrunch | FT

Coronavirus has pushed many industries in China to go digital. In the past few weeks, there are booms in enterprise remote working apps 远程办公 (DingTalk surpasses WeChat to rank first in the App Store in China on Feb 5), online house tours 云看房 (of the top 100 residential real estate developers, 92 have launched the online selling services), online grocery shopping 生鲜电商 (Miss Fresh GMV grew by 321% yoy during the Chinese New Year), etc.

Tesla (NASDAQ: TSLA) is in advanced stages of talks to use batteries from Contemporary Amperex 宁德时代 (SHE: 300750) that contain no cobalt – one of the most expensive metals in electric vehicle (EV) batteries – in cars made at its Gigafactory 3 in China. Tesla started to deliver cars from that factory in December 2019. // reuters

「News of the Week」Zuckerberg Ready For Facebook To Pay More Tax In Europe

Reuters – Zuckerberg ready for Facebook to pay more tax as welcomes rules review

Venturebeat – Zuckerberg ‘accepts’ that Facebook may have to pay more tax in Europe

Reuters – Treat us like something between a telco and a newspaper, says Facebook’s Zuckerberg

Dots to connect: global tax reform for tech companies, tech companies go beyond countries/regions, potential indirect trade war in digital world, tech ultimately benefits as it can balance between nations, the leading companies may make it hard for others to expand globally and follow suit, social medias as media & telecom companies, UK’s digital taxes, etc.

「Video of the Week」Global Warming By 4+ °C

Industries For Reducing Greenhouse Gas

Greenhouse gases trap heat and make the planet warmer.

Several of the major greenhouse gases occur naturally but increases in their atmospheric concentrations over the last 250 years are due largely to human activities. Other greenhouse gases are entirely the result of human activities. [IPCC’s Fourth Assessment Report]

Carbon dioxide (CO₂) is the primary greenhouse gas emitted through human activities.

Global GHG emissions by gas: 65% is from carbon dioxide fossil fuel use and industrial processes. 11% is from carbon dioxide deforestation, decay of biomass, etc. 16% is from methane. 6% is from nitrous oxide and 2% is from fluorinated gases. — Based on global emissions from 2010 | Source: IPCC, EPA

In 2017, CO₂ accounted for about 81.6 percent of all U.S. greenhouse gas emissions from human activities.

Emissions of CO2 from fossil fuel use and from the effects of land use change on plant and soil carbon are the primary sources of increased atmospheric CO2.

For total U.S. CO2 emissions, which mainly come from the combustion of fossil fuels (coal, natural gas, and oil), by economic activity types, transportation accounts for about 34.2 percent, electricity accounts for about 32.9 percent, industrial processes accounted for about 15.4 percent.

Pie chart of U.S. carbon dioxide emissions by source. 33% is from electricity, 34% is from transportation, 15% is from industry, 10% is from residential and commercial, and 7% is from other sources (non-fossil fuel combustion). — Source: EPA

1. Passenger Vehicles Going Electric

An analysis by the International Council for Clean Transportation (ICCT), shows an estimate of lifecycle emissions for a typical European conventional (internal combustion engine) car, the hybrid conventional car with the best available fuel economy (a 2019 Toyota Prius Eco), and a Nissan Leaf electric vehicle (best-selling EV overall in Europe for 2018) for various countries, as well as the EU average.

An electric car using average European electricity is almost 30% cleaner over its life cycle compared to even the most efficient internal combustion engine vehicle on the market today

In most countries, the majority of emissions over the lifetime of both electric and conventional vehicles come from vehicle operation – tailpipe and fuel cycle – rather than vehicle manufacture. The exception is in countries – Norway or France, for example – where nearly all electricity comes from near-zero carbon sources, such as hydroelectric or nuclear power. Lifecycle emissions for electric vehicles are much smaller in countries such as France (which gets most of its electricity from nuclear) or Norway (from renewables). [carbonbrief]

There is an important variable here – how the batteries of EVs are produced, as the largest part of the emissions, around 50%, is currently from battery (including cell) manufacturing.

Producing batteries in a plant powered by renewable energy – as will be the case for the Tesla factory – substantially reduces lifetime emissions. The IVL researchers estimate that battery manufacturing emissions are between 61 and 106 kg CO2-equivalent per kWh.

With the technology advancements and cleaner energy sources for plants, the marginal and average cost of producing batteries will continue to go down.

Commonwealth of Nations 英联邦

The Commonwealth is one of the world’s oldest political associations of states.

Its roots go back to the British Empire, when countries around the world were ruled by Britain.

Over time different countries of the British Empire gained different levels of freedom from Britain. Semi-independent countries were called Dominions.

The 1926 Imperial Conference was attended by the leaders of Australia, Canada, India, the Irish Free State, Newfoundland, New Zealand and South Africa.

At the 1926 conference Britain and the Dominions agreed that they were all equal members of a community within the British Empire. The United Kingdom did not rule over them.

This community was called the British Commonwealth of Nations or just the Commonwealth.

Source: thecommonwealth.org

Birth of the modern version

Originally, the Commonwealth members all owed allegiance to the British king or queen.

When India and Pakistan became independent in 1947, King George VI ceased to be Emperor of India. India wanted to become a republic which didn’t owe allegiance to the British king or queen, but it also wanted to stay a member of the Commonwealth.

At a Commonwealth Prime Ministers meeting (the Prime Ministers of the United Kingdom, Australia, New Zealand, South Africa, India, Pakistan and Ceylon, and the Canadian Secretary of State for External Affairs) in London in 1949, the London Declaration said that republics and other countries could be part of the Commonwealth.

According to the Declaration, India would be a sovereign independent republic, while continue her full membership of the Commonwealth of Nations and accept of The King as the symbol of the free association of its independent member nations and as such the Head of the Commonwealth.

The modern Commonwealth of Nations was born.

King George VI was the first Head of the Commonwealth, and Queen Elizabeth II became Head when he died.

But the British king or queen is not automatically Head of the Commonwealth. Commonwealth member countries choose who becomes Head of the Commonwealth.

Essentially, the Declaration separates the responsibility of Head of the Commonwealth from the King/Queen.

Meanwhile, there are 16 Commonwealth realms. A Commonwealth Realm (英联邦王国) is a country which has The Queen as its Monarch.

Current

The Commonwealth is a voluntary association of 54 independent and equal countries.

The most recently added member is The Gambia, which originally joined on 18 February 1965, withdrew on 3 October 2013, and rejoined on 8 February 2018.

The most recently joined new member is Rwanda in 2009. It is the second country to be admitted without a British colonial past or constitutional link to Britain. Mozambique, which joined in 1995, is the only other Commonwealth member without historic UK ties.

Rwanda will also host the 26th Commonwealth Heads of Government Meeting in 2020.

Her Majesty Queen Elizabeth II is Head of the Commonwealth.

The Commonwealth Heads of Government Meeting 2018 appointed Charles, Prince of Wales to be her designated successor.

Current Charter.

The Union Flag

UK’s national flag might be the one that records the most amount of world history.

The official full name of UK is “The United Kingdom of Great Britain and Northern Ireland”, while Great Britain is the island consisting of England, Scotland, and Wales.

UK’s flag consists of three elements.

Flag of England

The origin of the flag, the Cross of St. George, its association with St. George (the patron saint of England), and its adoption by England lack thorough and clear documentation.

The end result is that St. George finally rose to the position of the primary patron saint of England during the English Reformation when all religious flags, including all saints’ banners except for his were abolished.

Flag of Scotland

The flag is associated with the Cross of St. Andrew. The tradition of Saint Andrew being the patron saint of Scotland develops in the 13th to 14th centuries.

In 1286, when Scotland was ruled by the Guardians of Scotland in the absence of a king, the saint was depicted on the Guardians’ seal, used to authenticate their legal documents and communications to the rest of Europe.

Image of the seal of the Guardians of Scotland, Facsimile of the seal of the Guardians of Scotland showing St Andrew on the cross, 1292 (Crown Copyright, National Records of Scotland, RH5/55) — Source: nrscotland.gov.uk

The Parliament of Scotland decreed in 1385 that every Scottish and French soldier (fighting against the English under Richard II) “shall have a sign before and behind, namely a white St. Andrew’s Cross”.

Wales

Wales virtually became an English colony after the invasion (The conquest of Wales by Edward I) between 1277 and 1283.

Ireland

Henry (King Henry VIII of England) was proclaimed King of Ireland by the Crown of Ireland Act 1542, an Act of the Irish Parliament, which placed the new Kingdom of Ireland in personal union with the Kingdom of England.

The Union Flag

In 1603, the year of Queen Elizabeth I‘s death, England and Scotland existed as completely separate nations, each with their own monarch and parliament. Elizabeth, being a spinster and therefore childless, expressed a deathbed wish that her cousin, King James VI of Scotland, be named as her successor to the English throne. Thus, the Scottish monarch was projected into the unique position of ruling two nations simultaneously. He ruled Scotland as King James VI and England as King James I.

In the spring of 1606, to symbolize the monarchical unification of the two nations under himself, James created a banner to this end, by fully superimposing the English red cross (with a narrow white border to represent its normal white field) upon the Scottish flag. This became known as the Union Flag (the Union Jack), and it was the forerunner of the present flag of Great Britain.

In 1707, during the reign of Queen Anne, the parliaments of England and Scotland were united to form the new nation of Great Britain, and Anne officially adopted the 101 year old banner as the national flag of the newly created nation.

Saint Patrick’s Saltire

The St. Patrick’s Saltire, also known as the Cross of St Patrick, after Saint Patrick, the main patron saint of Ireland. “The Saltire became an established Irish symbol in 1783 with the founding of the Order of Saint Patrick by King George III to mark the legislative independence of the Kingdom of Ireland which lasted from 1783 to 1801.

In 1801, when Ireland became a part of Great Britain, the Union Flag was redesigned to include the Cross of St. Patrick (red, diagonal), the patron saint of Ireland. It is in this form that the British flag exists today.

Casper’s IPO And Valuation

DTC is a buzzword that attracts capital in the private market.

However, public market usually doesn’t have much patience or appetite for future stories.

Casper, the magical mattress unicorn, which raised $100 million in March 2019, marketing itself as a “Sleep Economy” company, is receiving a market cap of $400 million (EV ~$300 million).

The main problem though, is not about the DTC model.

Brands such as Canada Goose and Lululemon are counting on DTC to grow.

The slowing revenue growth rate is also okay. Public market is not relentlessly looking for 100% or 50% growth.

Indeed, Canada Goose and Lululemon, which grew at sub-25% in the last 12 month, are valued at over 4x and 8x sales respectively.

Casper, which is expected to grow at 23% for 2019, has EV/Revenue below 1x.

The cost structure is where things are different.

From 2019 April to December (FY20Q1-Q3), Canada Goose‘s SG&A expenses are 31.2% of revenue.

From 2019 February to October (FY19Q1-Q3), Lululemon‘s SG&A expenses are 36.4% of revenue.

That ratio is 70.5% for Casper from Jan to Sep 2019.

Plus the differences in gross margin, the unprofitable DTC brand growing at sub-25% still needs additional efforts to prove its business is viable/sustainable.

A CBInsights Report: The Most Well-Funded Tech Startups In Europe

Read the original report here.

The top-funded startup in Europe is global communications company OneWeb in the UK, with almost $3.5B in total disclosed equity funding.
Rounding out the top 3 most well-funded startups in the region are online payments service provider Klarna in Sweden ($1.1B in disclosed equity funding) and mobile banking platform N26 in Germany ($683M).
Eight of the 37 companies featured in our map are unicorns, with disclosed valuations of $1B+ (all tracked in real time on the CB Insights global unicorn club tracker). These unicorns are: Klarna ($5.5B valuation, Sweden), N26 ($3.5B, Germany), BlaBlaCar ($1.6B, France), Vinted ($1.1B, Lithuania), Acronis ($1B, Switzerland), Glovo ($1B, Spain), OutSystems ($1B, Portugal), and Bolt ($1B, Estonia).
The region is home to 16 countries whose most well-funded tech startup has raised over $100M in equity funding. Only OneWeb and Klarna have raised more than $1B+ in equity funding.
The least well-funded startup on the map is Serbia-based data analysis tool Content Insights, which has raised $3.6M.
Since our last update of this map in April, only 1 featured startup has exited: Switzerland-based Veeam Software, which was acquired by VC firm Insight Partners in January 2020 at a valuation of $5B+.

STARTUP CONTINENT: THE MOST WELL-FUNDED TECH STARTUPS IN EUROPE
Company	Country	Total Equity Funding ($M)
OneWeb	United Kingdom	3469
Klarna	Sweden	1122
N26	Germany	683
Glovo	Spain	513
BlaBlaCar	France	449
OutSystems	Portugal	422
Picnic	Netherlands	329
Vinted	Lithuania	260
RELEX Solutions	Finland	222
AMCS Group	Ireland	202
Trustpilot	Denmark	179
Acronis	Switzerland	178
Bolt	Estonia	177
Tricentis	Austria	174
DocPlanner Group	Poland	137
Odoo	Belgium	104
Job Today	Luxembourg	81
ivi	Russian Federation	81
Kolonial.no	Norway	61
AImotive	Hungary	51
Satispay	Italy	50
Mews Systems	Czech Republic	42
PDFfiler	Ukraine	30
Lidyana	Turkey	25.17
Capital.com	Cyprus	25
Netdata	Greece	21
Software Group	Bulgaria	17
FintechOS	Romania	16
Gambling.com Group	Malta	16
Banuba	Belarus	12
Minit	Slovakia	11
TripCreator	Iceland	10
Gjirafa	Albania	8.7
Mintos	Latvia	7.8
Gideon Brothers	Croatia	5.7
Eligma	Slovenia	4.4
Content Insights	Serbia	3.6