LEA

LEA

Company Creation

In 1999, we were actively involved in supporting and financing select European research institutions, including ETIC, an incubator in Rennes, France. We worked with local partners to identify promising opportunities for investment. Eric Berthaud was a remarkable resident entrepreneur at ETIC, and fell in love with an exciting opportunity based on technology developed at EPFL (Ecole Polytechnique Fédérale de Lausanne). His vision was to use the technology to create products and solutions required for fast broadband distribution over existing wire line networks. The principle behind this approach was simple: to capitalize on existing infrastructure and avoid expensive re-cabling.

Financing

With modest initial seed financing, Laboratoire Européen ADSL (LEA) was founded. In 2000, its first year of operation, LEA introduced its first suite of products. Volume shipments began in late 2000 to customers including Alcatel, Nortel and France Telecom. Backlog grew rapidly to $10 million. To finance the growth of the company, Ossama Hassanein stepped up to lead a $9 million financing with a diverse group of foreign investors.

Corporate Governance

2001 proved to be a challenging year in which carriers cancelled purchase orders by the hundreds and LEA suffered along with everyone else. We worked closely with LEA’s CEO to reduce the Company’s operating expenses, renew its efforts to secure ADSL contracts, and acquire another company to diversify its product line. The concerted effort paid off. LEA multiplied its sales by more than eighteen times between 2001 and 2004, from $3 million to $56 million and market share grew from single digits to 90 percent in France, 60 percent in Europe and 25 percent worldwide.

Tricky Exit

Interestingly, sometimes a company’s spectacular success carries within it all-too-common risks. LEA was the undisputed market share leader. Curiously, its customers also enjoyed the same position in their end-user markets. We approached each of our three large clients (Alcatel, Nortel, and Huawei); none would acquire LEA, fearing the loss of contracts for LEA from the other competitors! Luckily, we were able to identify another acquirer in a retail oriented market. In May 2005, LEA was acquired by HF Company, a publicly traded French company that specializes in the design and sale of equipment for home automation. We helped conclude an agreement that returned $80 million to LEA’s shareholders.