Key issues you should consider before signing an international merger deal

Despite the war in Ukraine, accelerating inflation and increasing interest rates, the technology sector has still seen M&A happening in the United States. In the first half of 2022, large tech M&A transactions included Microsoft acquiring Activision Blizzard for $69 billion, Google buying Mandiant for $5.4 billion, and Elon Musk bidding for Twitter for $44 billion.

Private equity was also active in the tech sector, with Thoma Bravo purchasing SailPoint for $6.9 billion and Vista Equity Partners acquiring Citrix for $13 billion. Cross-border tech M&A included Deutsche Telekom’s acquisition deal with SoftBank Group and T-Mobile U.S. for $2.4 billion and Siemens acquiring Brightly Software for $1.8 billion.

European and Asian companies can compete effectively against both U.S. companies and private equity by offering greater target management responsibility post-transaction, flexible transaction structures and global distribution of the target’s products sold with the acquirer’s sales team. By understanding the key issues in cross-border tech M&A, an international acquirer can close a successful transaction and achieve its commercial objectives in the United States.

Acquisition criteria

Management teams, boards and shareholders have had time to adjust to the drop in valuations and will be more amenable to an acquisition at a reasonable price.

Prior to approaching targets, it is important to establish detailed acquisition criteria.

Acquisition criteria can include the subsector, product set, revenue, profitability and customer profile. It should also include more intangible aspects, such as vision, culture and strategy. Management team strength is also important, particularly if the international acquirer is following the private equity playbook and acquiring a platform company with the intention of acquiring smaller add-on companies later. Finally, practical criteria should be considered, such as geographical location — if the international acquirer is in Paris, a flight to the East Coast is much shorter than a flight to California.

Target research

Once the acquisition criteria are established, in-depth target research is required. This research should include target financing, capital structure, leadership and industry reputation. Research should include databases such as Capital IQ, PitchBook and Crunchbase, as well as confidential discussions with industry leaders at other companies in the subsector and industry trade groups. This industry insider knowledge can be very powerful.

Acquirer’s presentation

More venture funds are betting on Central and Eastern Europe

Welcome to The TechCrunch Exchange, a weekly startups-and-markets newsletter. It’s inspired by the daily TechCrunch+ column where it gets its name. Want it in your inbox every Saturday? Sign up here.

Central and Eastern Europe have had less venture capital at their disposal than their GDP or population could warrant. But with new funds lured in by their startups’ talent pool, global mindset, and capital efficiency, this could be starting to change. Let’s explore. — Anna

What do UiPath, Vinted and Wise have in common?

Startup founders in Central and Eastern Europe will soon have more dry powder to chase.

In recent weeks, we learned that Underline Ventures was halfway through raising a €20 million fund to invest in Romania and nearby countries; that Poland-based Inovo VC was targeting €100 million for its third fund; and that Spanish-born Demium was launching a new fund to invest into Central European startups, with plans for a second close of €30 million to €40 million in September.

German startups could use more venture capital, but Germany’s government has a plan

Welcome to The TechCrunch Exchange, a weekly startups-and-markets newsletter. It’s inspired by the daily TechCrunch+ column where it gets its name. Want it in your inbox every Saturday? Sign up here.

Reading recently about Germany’s 30 billion plan for its startups, I was intrigued. Did the country start to envy La French Tech? Is it hoping to rival post-Brexit U.K.? Perhaps both, but it also has a national goal — making sure that profits from homegrown successes stay home. Let’s explore. — Anna

Second, third, or eighteenth?

European startups have been weathering the venture capital downturn quite well, and funding declined only slightly in the second quarter compared to the first three months of 2022.

German startups, however, had it worse: According to EY, they collectively attracted 20% less capital in the first half of 2022 than during the same period last year. This includes private equity, but venture capital declined even more sharply, from €4.44 billion to €2.89 billion (which is roughly the same amount in U.S. dollars.)

Law Commission proposes revolutionary rules for ownership of crypto tokens and NFTs

There is a major earthquake happening in the sphere of digital assets, which is expected to create shockwaves that will impact tech not only in the real world but also in the metaverse.

These potentially revolutionary changes appear in an innocuous-looking, if lengthy, consultation paper titled “Digital Assets: Consultation paper,” published by The Law Commission of England and Wales, the public body for reform of the law in the U.K.

What this document proposes is that digital assets are recognized as a new form of personal property, potentially creating an “internet of property,” which could have huge implications for the U.K.’s position as a hub for distributed ledger technology (DLT) and fintech.

Why are property rights important?

Property rights are indispensable to the creation and deployment of capital. A proper legal foundation for ownership of digital assets will have a host of real life ramifications, such as allowing the creation of security over digital assets — meaning they can be used as collateral for loans — providing people or businesses with greater protection in the event of fraud and enabling digital assets to be distributed like other property in the event of insolvency.

The Law Commission’s consultation paper has considered the many opposing views and settled decisively on one option: treating digital assets as a new form of property.

For instance, if somebody takes your NFT, you might want to start a legal action to get it back, seek to prevent the taker from transferring it to another account, report them to the police for theft or take action against somebody who helped them. None of this is possible without clear recognition of digital assets as property. If your NFT is then transferred to an innocent purchaser, should they get to keep it? There is no answer to this without knowing what sort of property is a digital asset.

The entire decentralized finance (DeFi) industry, which includes cryptocurrencies such as bitcoin, is based on transferring crypto assets to other accounts where they may then be deployed in accordance with smart contracts or other sets of rules.

Do these movements count as a sort of legal transfer of the asset or a security arrangement or a form of custody? These questions may seem unimportant when everything is working smoothly, but as soon as something goes wrong, participants will suddenly care about them enormously. They will determine who gets back any remaining assets and whether anybody else — cryptocurrency exchanges, developers and so on — might be liable for any losses. And again, there is no clear answer to any of this until the nature of digital assets as personal property is settled.

Is the future of the microchip industry going to be Made in America?

Welcome to The TechCrunch Exchange, a weekly startups-and-markets newsletter. It’s inspired by the daily TechCrunch+ column where it gets its name. Want it in your inbox every Saturday? Sign up here.

With all eyes on Taiwan and worries mounting around semiconductor supply, the U.S. CHIPS Act is particularly timely. But it is not unique: Other countries similarly aspire to reduce their reliance on imported chips. Let’s explore.Anna

From cheap as chips to billion-dollar incentives

U.S. president Joe Biden signed the CHIPS and Science Act of 2022 into law earlier this week after the bill received broad bipartisan support in the House and Senate.

The H and I in CHIPS stand for “Helpful Incentives,” hinting at the main component of the initiative: $52.7 billion in public subsidies.

Biden described the new bill on Twitter as “a once-in-a-generation law that invests in America by supercharging our efforts to make semiconductors here at home.”

5 reasons why Ukraine’s fintech sector is growing despite war

Ukrainians have often pioneered market-leading companies and built products that positively impact society, especially in the fintech sector.

Despite the hurdles of war, the Ukrainian fintech community is working to create better infrastructure and regulation for the country, which can attract valuable companies and institutional investors from different backgrounds.

It’s a valuable market

I’m sure many investors think the country’s IT sector is a risky investment right now. But it’s still business as usual at fintech companies here. They have proven their resilience even in wartime conditions, and impressively, 90% of Ukrainian tech startups are still hiring.

This March, Ukraine’s President Volodymyr Zelenskyy signed a bill to establish a regulatory framework for cryptocurrency in the country. While the bill doesn’t let you use digital assets as a form of payment, it seeks to create proper conditions to establish a strong cryptocurrency market.

Cryptocurrency exchanges can now claim a license to operate legally in the country. Banks will be able to open accounts for crypto companies, which can opt for different licenses depending on what they do.

The Ukrainian IT sector is still growing

In the first five months of 2022, Ukraine’s IT sector generated roughly $3.2 billion from exports — 27% more than the same period in 2021, and accounting for almost half of the country’s total volume of export services.

One of the main goals of the Ukrainian government is to increase the IT sector’s share of the country’s GDP from the current 4% to 10% by 2024.

The government’s backing and the strong growth together make for a strong signal of how the IT sector is ripe for investments.

Global finance and tech firms are supporting Ukraine

Earlier this month, the Ukrainian Ministry of Digital Transformation presented Digital4Freedom — a global initiative that is the primary source of charitable donations for tech companies to support Ukraine.

Digital4Freedom is part of the global UNITED24 effort and allows anyone across the globe to make monetary contributions to the restoration of the country’s economy.

The program consists of nine projects presented to 40 companies, of which the vast majority have agreed to help with monetary contributions or technology solutions.

Amazon, for example, will reportedly provide over $100 million in cloud hosting services for Ukrainian state registers and is planning to develop solutions for deploying artificial intelligence in courts.

Crypto exchange Binance will become an official partner of the Ministry of Digital Transformation of Ukraine to offer educational projects in the IT, web3 and finance fields.

Meta, with the support of the Ministry of Digital Transformation, recently launched a $1.5 million assistance program for the recovery of the Ukrainian economy, helping small- and medium-sized businesses with a specialized training centre.

Startups are an integral part of the Ukrainian economy

Ukrainian businesses expect a reduction in the production of goods and services due to the war. What’s more, company executives predict the next 12 months will bring inflation and devaluation of the hryvnia.

Ukrainian tech startups are dedicating their efforts to elevating the industry to new heights. They are set to become the foundational pillars for a new layer of technology companies that will add significant value to the economy.

Fintech is growing fast despite setbacks

This year, Ukrainian lawmakers introduced the Law of Ukraine on Payment Services (LPS), which will provide a better regulatory environment for the fintech sector, including for payment services.

Additionally, the Ukrainian Association of Fintech and Innovation Companies (UAFIC) became the first non-EU member to join the European Digital Finance Association (EDFA). Both organizations are collaborating to strengthen the fintech landscape in Ukraine.

I believe Ukraine’s resilience in the face of Russian aggression, and the tremendous growth of the fintech landscape despite the crisis has proven that investors should not hesitate to invest in the fast-growing industry.

Despite the difficult situation in the country, the industry continues to develop. While attending numerous conferences and fintech events, I meet investors from all over the world interested in companies from Ukraine. All this tells us that the prospects for fintech in Ukraine look good, and that now is an excellent time to invest in it.

Despite creaky markets, European edtech is showing its resilience

These are turbulent times. Given the circumstances, it’s hardly surprising that public markets are creaking and only niche sectors remain either unaffected or in a marginally positive position. Edtech is no exception.

Today, Brighteye Ventures published its Half Year European Edtech Funding report, built around Dealroom’s data. The report primarily focuses on investment activity in Europe but is contextualized with what we are seeing in other markets.

Global VC funding into edtech startups totaled $6.5 billion in H1 2022 compared to a total of $20.1 billion raised in 2021. This pullback in global funding can partially be explained by fewer edtech mega-rounds (over $100 million) in H1 2022 compared to previous periods.

The first half of 2022 saw 16 so-called mega-rounds, compared to 24 in the second half of 2021 and 30 in the first half of 2021. At the same time, the number of early-stage rounds, categorized as deals under $15 million, has fallen fairly consistently since a peak in H1 2018.

We expect the European edtech market to maintain some positive signs of resilience, but naturally, the ecosystem cannot be immune to the headwinds it faces.

Note that this doesn’t necessarily reflect lower activity in the ecosystem — it simply means that more early deals are being done by angels and via involvement with incubators and accelerators, which are not comprehensively covered in the data.

We were pleased to see that the European edtech ecosystem has managed to maintain most of its momentum, at least for the time being. The fact that the sector has secured $1.4 billion thus far in 2022, 40% more than a year earlier, demonstrates its resilience to maintain growth even amid challenging conditions.

This isn’t surprising given the inverse correlation between worsening macro employment markets and appetite for education, particularly in the market for post-18 education.