The price of start-up high-tech companies in Switzerland, especially those in the information technology and telecommunications sectors, has plummeted, experts say.
According to Peter Ohnemus of The eFirm, a Zug-based consultancy that works with emerging high tech firms and investors, the value of these firms has gone “straight through the bottom”.
Typical of the trend is the recent sale of key assets of the start-up company, Fastcom Technology, a venture-backed spin-off of the Swiss Federal Institute of Technology at Lausanne.
Its investors include MicroValue, a Zurich based investment fund that invests in private and public firms, such as Phonak and Micronas.
The five-year-old firm sold off its process automation technology - intelligent cameras for process automation and inspection systems - to AKAtech SA, a privately owned company that sells components and sub-systems to vendors of industrial automation systems.
The price paid for the unit was undisclosed but industry insiders suggest the company had been struggling to focus its resources due to a lack of capital, making the sell off a necessity.
The camera-on-a-chip technology it produces enables a camera to read information or detect movement without needing the processing power of a PC.
This makes the camera “smart” enough to be installed into a larger system without the need for space, power, or extra programming earlier types of cameras required.
The Fastcom process automation components are typically sold to makers of automation and manufacturing inspections systems that read or analyse information on the surface of a product, such as a product code or quality symbol.
Today, venture capital companies that have halted investment in struggling high tech firms continue to put assets up for sale at cost or even lower.
Investors with capital to spare are picking up the assets of technology firms at prices unimaginable a few years ago when technology investments were so popular that prices were in the stratosphere.
There is a sense that the prices are not going to get any lower, which has awakened the acquisition instinct among some private equity firms and individuals with money to invest, say industry observers.
“It is clear that present climate is very favourable to investors with cash on hand,” says Alain Nicod of Venture Incubator, also based in Zug.
Some new investment companies have emerged to capitalize on the bargain prices. For example, Germany-based management firm, Arques Executive, which has at least one fund
structured in Zug, is investing in struggling telecommunications firms. It recently acquired the fixed line assets of Cable&Wireless in Germany, as well as 100 percent of Tesion and
“There is a market out there for consolidators,” says Nicod, a founding shareholder of Smart Telecom, which has acquired Onspirix and C&W assets in Switzerland. He says the firm acquired the businesses at “unbeatable conditions”.
Nicod says Smart Telecom will continue to acquire these “as long as the market continues to be where it is”.
But buying cheap does not mean that you are “going to sell expensive”, because most of the exits are with industrial buyers, or trade sales, according to Nicod. (Such as the Fastcom unit trade sale.)
With valuations as low as they are now, venture investors face a new challenge: how to keep
founders and existing shareholders motivated, added Nicod.
“It takes a good five years to get a company into a sustainable profitable situation. Investors need to be patient,” he said.
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