Thursday, 31 May 2012

BlackBerry-maker RIM: So the banks are hired. What happens next?

May 31, 2012 Josh Rubin
BlackBerry-maker RIM has hired investment banks to review its options. So what happens now?
Now that they’ve been hired by struggling BlackBerry-maker Research in Motion, investment bankers at J.P. Morgan and RBC Capital Markets are likely knee-deep in meetings with RIM executives and potential buyers as they help the firm figure out its future, finance experts say.

Tuesday, RIM announced it had hired the two banks to give advice on “partnerships, licensing opportunities and strategic business model alternatives.”
The first step in that review, which may have already been taken, is going over the company with a fine tooth comb, says Louis Gagnon, a finance professor at the Queen’s University School of Business. And that involves a lot more than just glancing at the balance sheet, Gagnon says.
“They’re looking at every single detail of what the company does, every single project,” said Gagnon. “They’re asking ‘What are the challenges? What are the options?’”
They’re doing that for two reasons — to offer better suggestions to RIM on how it could transform itself, and so they’re better prepared to answer questions from potential suitors. And they’ll be dealing with plenty of those now that a for sale sign has effectively gone up.
“They’re knocking on doors. But every company that’s looking at RIM will be coming to them now that they’ve been hired,” said Gagnon.
And make no mistake, says one banking industry insider, those bankers will be doing their best to put together a sale or licensing agreement, because that’s where the payoff is.
“They might get a retainer which would cover their expenses, but they probably also get a percentage of any deal. That’s where the real profit comes,” said the source.
Their extensive contacts in the tech industry — developed through previous dealmaking — may also mean the two banks have got their own ideas on potential buyers.
This year alone, J.P. Morgan has worked on three tech industry deals worth $1 billion or more each, including advising CISCO on its $5 billion purchase of video services firm NDS.
RBC Capital Markets, meanwhile, has some tech experience of its own, having advised Ottawa-based Zarlink Semiconductor on its sale to California firm Microsemi last year. RBC also advised private equity fund APAX Partners on three separate technology company purchases, among other recent deals.

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