AngeBlog by Basil Peters

Charles Rim from Google on Corum 20091105 Transcript

Thanks again to Corum for putting on this part of their M&A School.

The full webinar is available from Corum at http://www.corumgroup.com/Software-MA-Webinar-Archive.aspx

I've posted an excerpt of the webinar online here.

The underlines and emphasis are mine.

(Introduction) when we roomed together studying at the University of Pennsylvania and after graduating in the early 80s, Charles went on to get a law degree and was a practicing lawyer in New York a few years before heading over to Asia to begin his banking career focusing on M&A and IPO Advisory with posts in Hong Kong, Jakarta and Singapore, In the 90s, Charles shifted over to the operational side.  First a CFO, at Korea Thrunet that was Korea’s first broadband carrier, later went to NASDAQ and then merged with another enterprise, then over to Yahoo! Korea in charge of strategy and corporate development there before coming to Google where he is one of their five principals responsible for all corporate development at Google worldwide.  It is my and our pleasure to have Charles here at this month’s M&A class.  So I hope your audio is on and over to you Charlie.

Okay, thanks Neo for the introduction.  Good morning, everyone, it is morning here in California.  As Neo mentioned, I have been with Google now for about four years.  I have largely been responsible for coverage over Asia with our large focus on North Asia, Korea, Japan, and China and since the beginning of this year I have moved back here to California and in addition to Asia, I am also working on U.S. field now.  Given that we don’t have a lot of time, I thought I’d just try to go through three quick areas and to give a little bit of insight in terms of Google.  First is the process of M&A within Google, second, I’d like to cover our areas of interest, and third, wrap up with a brief discussion about the environment and the mood here at the company.

In terms of process, I think the corporate development team here is relatively thin for the size of the company.  You know the [number of employees at] Google today is, you know, (inaudible) 20,000 but our CD team is still less than 20.  With a large portion of that going towards integration, we have a very big integration team within corporate development and I will state a little later why integration is so important to the process. 

I think although CD our corporate development is responsible for leading and driving M&A acquisition transactions here within the company, we do so with a very close working relationship together with the product and engineering leadership, and that will be leadership over product group or project, here internally. 

Most of the deals I would say still are results of bottom-up management procedure.  A number of the deals that are completed here are brought to the table by the corporate development team but I still say there is a large majority of the deals that are actually spotted by our product and eng. leadership who are out there in the market watching the competition in terms of what is being built against the product that they are trying to build.

I think one of the positive things is that within that process of course, you know, we were work and collaborate together with that leadership.  It is also important to get executive sponsorship but I think within Google as a company and having worked in places like Yahoo! and elsewhere, we are very open here internally and we still have very easy access to top executives.  So that is relatively easy to get that sponsorship and I would say at the operating committee level this is a very senior level of executives here in Google, we have weekly access, a very good access to the top executives to make sure that these ideas are vented out and acted upon very promptly. 

Because of the vertical operating structure we still here at Google maintain a vertical operating structure where engineering reports straight up to engineering, sales to sales, and on and on.  So, I think that also allows for the flexibility, one, for idea flows and also two, to be able to gain access to the appropriate executives without having to worry about cross-functional hierarchy and things like that (inaudible) here.

Next, I’d like to go on to talk about the areas of interest in the key plots for Google.  I think lot of this information may be already out to the market but clearly, you know, it is hard to [estimate] a percentage but 90% plus of our transactions are small transactions.  So that would be less than 20 people, less than $20 million and that is truly the sweet spot because for the most part, we are quite interested in acquisitions for IT or a talent.  So technical staff, engineering, a strong engineering team, these are the things that we think are very important to the future success of Google and important for us to use acquisitions in that manner.  For that reason you could imagine we do prefer companies that are pre-revenue. A lot of the times the acquisitions that we make, it is not about the organization or about the money that they are generating it is more about the product or potentially the team, what they can do to help internally create product and we have our own road map. 

Of course you have seen the big deals.  You know we have done deals like YouTube and DoubleClick.  A deal like YouTube you can say is more something that is top-down. So rather than the kind of bottom of build saying that this is what we are trying to build, and you know at the time we did have Google Video out there as a product, but it was a top management decision that we needed to do something to accelerate our position in that space.  So I think going forward our CEO Eric Schmidt has been public about our desire and intent to be more active in the M&A market.  

It was correctly pointed that we were not that active last year.  I think, given the economic environment, there is a lot of, I think tightening of the belts here within the company and lot of reassessing in terms of where our focus should be.  So, I think (inaudible) CEO say nothing itself that we are actively participating in the market and we do see good value out there.  I think that is the part and function of the fact that, I think, we are still confident about the business going forward.  We feel, I think, that we have seen the bottom and that you know valuations seem attractive at this stage. 

In terms of sectors, you know we still internally very much consider ourselves a search company.  So the core focuses of what we look for is still search but that is very extensive, you know we do many things within search, you know certain areas we could talk about that are important are obviously video and also local or maps are the two very key components that are drivers for search going forward. 

The other areas obviously is advertising the ad networks that’s how (inaudible) engine.  We continuously look for improvements there in addition to other areas that have seen very strong pros in our businesses such as Enterprise. 

I kind of lost track of time here I don’t know if I have done 10 minutes or not but I hope that gives a general idea of Google’s processes, the areas that we are interested in looking at today, and again the environment, the fact, that we are seeing this as a good environment to be acted in.

Okay, thank you Charles.  You are fine on time.  So if you had any other contemporaneous comments, feel free to make them or we can move directly to Q&A now.  Before we do so, I want to address a couple of comments.  So, if you have anything more that you want to say Charles go ahead and do it now.  Otherwise, I will take over.

Okay, I’d just see one question (inaudible) I did want to talk more about it.  I kind of lost over the fact that our integration team is a part of the corporate development group and the reason why that is, is because they mentioned a lot of our deals are talent deals.  So, it’s very critical that we see eye to eye together with the team that is coming in.  Many of our acquisitions we do take the right to interview all employees and staff and select which employees and staff would come over as part of the deal.  So to make sure that we see eye to eye the incoming staff, to make sure they are going to be happy with the role is very critical to whether we succeed in the deal and in no deal success is not measured by really how much money we make against the day during acquisitions but how long that staff stays here with us at Google and how productive they are here.  So, I will just end with that comment.