The Internet has brought stock trading to the masses, created self-service travel planning and made just about everyone an instant antique collector. Now some Costa Mesa entrepreneurs hope it can transform the world of mergers and acquisitions.
Ronald Speyer and Gloria Rillera want to bring online economics to M & As; through their Costa Mesa firm, Emerge Corp., which is launching what the pair likens to the corporate equivalent of a dating service, EmergeXchange.com.
Call it eBay for wheelers and dealers. The matching service aims to connect small and midsized business owners with people and companies looking to purchase businesses. The site helps prospective suitors screen by financial performance, industry type and a host of other details designed to locate the best fit.
Sellers, who have been pre-qualified by Dun & Bradstreet Corp., describe their businesses by filling out a template that outlines everything from the type of business to specific financial data. Buyers search for potential acquisitions by entering specific criteria and bid on companies that pique their interest.
Speyer, Emerge’s chief executive, says he got the idea a few years ago after a 20-year career in M & As;, most recently with Geneva Cos., an Irvine firm that helps arrange such deals. He talked Rillera,Emerge’s chief operating officer,into joining him and the pair got financing from investors who believed in them as a management team, even before they had a formal plan.
Speyer “was always talking about getting into a pair of Bermuda shorts and heading for the beach,” Rillera said. “But I knew he wouldn’t. This is what he does and what he loves.”
Speyer said he left Geneva and decided on an Internet strategy because he was frustrated that he “couldn’t get far enough fast enough.”
He got his first taste of the M & A; world even before then while at chemical company W.R. Grace & Co., which was in the midst of overhauling its business through acquisitions. Much of that activity, he says, fell on his shoulders, so he developed a systematic way of evaluating potential purchases and managing the process.
Speyer said he’s seen a steady upsurge of M & A; activity since the 1980s, when investment groups and foreign investors began competing for the same U.S. deals, a situation that has benefited sellers and facilitators like him.
He hopes the Internet’s ability to bridge time and distance will spark even more action, particularly for smaller-sized business owners who don’t have the sophistication or exposure to seek out deals themselves.
And using an online service offers a level of confidentiality not possible with the local seminars catering to small and mid-sized businesses now.
But Emerge isn’t the only company with the idea. Several outfits already have set up online exchanges for buyers and sellers, including Cambridge, Mass.-based Merger Network, Seattle-based CBex, BizQuest out of Salt Lake City and more than a dozen others.
But despite the late start, Speyer is confident his company can hold its own.
He says the firm has 7,000 names and addresses of potentials buyers, many of them attracted to its no-cost listing. Emerge makes money by taking a “finder’s fee” when the transaction closes and by referring participants to lawyers, accountants and other M & A-related; services.
The company hopes to have more than $1.5 billion worth of for-sale companies by year’s end.
But Emerge will live or die by the number of participants who use the system, the classic “network effect,” making new and active users one of the officials’ highest priorities. The company is looking for $10 million or more to fund a promotional campaign, which will encompass a number of online and offline outlets.
Another advantage Emerge touts is its real-world experience. The company operates a traditional M & A; services firm Speyer says is already generating a profit, and M & A; specialists have closely directed the programmers developing the system, not the other way around. At least one investor is bullish on Emerge’s chances. Newport Beach-based Pacific Mezzanine Investors has pumped in $7.1 million.
The company employs about 30 people, including workers in its Seattle and Chicago offices. n
