Edocs.Inc
Duisenberg School of Finance
Amsterdam 2 March 2010
| |
|edocs, Inc. |
| |
|Entrepreneurial Finance Assignment |
|Ellie Abdali |[ovu15189] |
|Natalie Shriber |[0433926] |
|Nikola Tadic |[ovu68532] |
1. Why does CRV ask edocs not to shop around the deal? What are the costs and benefits of “shopping around” the term sheet? Should edocs do it?
A no shop clause is common primarily in M&A and private equity transactions and prevents the seller or investee/entrepreneur from looking for another bidder/investor- the reason for the inclusion of a no shop clause is that a buyer or investor plans to spend considerable time and resources conducting due diligence and does not want to run the risk of losing the deal or getting out-bid, hence the prevention from “shopping around.” CRV realizes that this is a hot market (VC commitments 21% CAGR for last 5 years) and that edocs represents a unique, high growth/return potential investment and wants to secure the deal for itself. CRV knows that edocs could take their term sheet and try to get other VCs to outbid/offer better terms to edocs and CRV wants to avoid a bidding war which would drive up the valuation (cost) and reduce CRV’s stake. This is also an important transaction for CRV, particularly for Jonathan Guerster, as this is his first VC transaction for CRV, so he wants to be sure he will not lose the deal. The CRV term sheet signifies instant certification and validation of the edocs business
Amsterdam 2 March 2010
| |
|edocs, Inc. |
| |
|Entrepreneurial Finance Assignment |
|Ellie Abdali |[ovu15189] |
|Natalie Shriber |[0433926] |
|Nikola Tadic |[ovu68532] |
1. Why does CRV ask edocs not to shop around the deal? What are the costs and benefits of “shopping around” the term sheet? Should edocs do it?
A no shop clause is common primarily in M&A and private equity transactions and prevents the seller or investee/entrepreneur from looking for another bidder/investor- the reason for the inclusion of a no shop clause is that a buyer or investor plans to spend considerable time and resources conducting due diligence and does not want to run the risk of losing the deal or getting out-bid, hence the prevention from “shopping around.” CRV realizes that this is a hot market (VC commitments 21% CAGR for last 5 years) and that edocs represents a unique, high growth/return potential investment and wants to secure the deal for itself. CRV knows that edocs could take their term sheet and try to get other VCs to outbid/offer better terms to edocs and CRV wants to avoid a bidding war which would drive up the valuation (cost) and reduce CRV’s stake. This is also an important transaction for CRV, particularly for Jonathan Guerster, as this is his first VC transaction for CRV, so he wants to be sure he will not lose the deal. The CRV term sheet signifies instant certification and validation of the edocs business