Private equity players seeking to bolster their portfolio of technology assets should follow the lead of industry titans by thinking long-term and targeting mature tech companies before buying up startups that could eventually become the next big thing, experts say.
Howard Berkower, a partner with the corporate practice at McCarter & English LLP, named Germany as a key place when it comes to both mature tech companies and fledgling technology, saying the country that produced the likes of e-commerce giant Rocket Internet AG, music streaming site SoundCloud and website-building service Jimdo is an “attractive place [for firms] to go for investment.”
Berkower also named Israel as one possible location for firms to look at when seeking out bolt-on technology transactions, saying that he’s seen a lot of U.S. money directed toward smaller tech firms there.
“They have a lot of tech being created there,” he said. “[Israel is] very entrepreneurial.”
Israel developing technology is nothing new, he noted, but firms struggling to find tech deals would do well to take a glance at the region.
Berkower also mentioned Cuba as a potential destination for tech deals because of the country’s abilities related to medical technology, though that may still be more of a future endeavor because the door for U.S. companies to do business with Cuba is not even fully open yet.
“That’s hot off the presses,” he said. “In the last month or so I’ve had a number of inquiries in that regard.”
Once Cuba is completely open for business, private equity and venture capital firms could swarm the country in hopes of beating others to businesses that are on the smaller side but may have lots of potential if financially backed in a proper fashion, Berkower said.
“Cuba is a very poor country relative to the industrialized world, so their businesses are probably on a much smaller scale,” he explained. “They may be real businesses that generate real revenue though, and there may be an opportunity to import a lot of modern management techniques that could be complimenting some of their technology to make some of those enterprises grow.”