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Dear Clients and Friends: Document Transcript

  • 1. Winter 2008 Transaction Advisory and Strategic Consulting to the Digital Information Economy “Middle Market Investment Dear Clients and Friends: Banking Firm of the Year” W elcome to the New Year! And, thank you for making last year such a some recent staff additions to help us be ready, including Jason Panzer, former Skadden strong one for us. As you Arps deal lawyer, JCF CFO M arlin & Associates was again awarded top honors by The M& A Advisor, may know, we were named “Middle Market Investment and FactSet VP Business Development (more on a conference producer Banking Firm of the Year” page 6); Brian Siebenburgen and newsletter publisher and won other awards, as formerly with PWC; Mike for buyers and sellers of well. We’re keeping good Guadano and George middle-market firms. company, as you can see by Nanidzhanyan. We look In December, Marlin was the table on page 6. We’re forward to working with named “Middle Market proud of our successes…and you in the New Year. intend to keep it up. Ken Marlin, Managing Partner Investment Banking Firm of Marlin & Associates Sincerely, the Year.” Marlin also was Several of you have asked recognized for leading three for my outlook on mid-market (London) to Morningstar. A other middle-market deals- tech m&a. While I detect profile of Veronis Suhler of-the-year (below $100M): some anxiety in the air, I am Stevenson, which controlled “International/ Cross Border on record as reasonably Hemscott, is on page 3. A Deal of the Year,” “Financial bullish in our niche. It isn’t week later, Reuters completed Services Deal of the Year,” and because I haven’t noticed the acquisition of our client, In This Issue “Computer and Information the credit crunch impacting StarMine Corporation. We Marlin’s Michael 2 Technology Deal of the Year.” some mega deals. It’s negotiated this deal as Reuters Maxworthy In July, The M&A Advisor because, globally, while the was being acquired by the Mergers & Acquisitions 2 named Marlin “Middle Market value of m&a deals is down, Thomson Corporation. Then, Transactions Financing Agent of the Year – the volume of deals is up. we announced that Netik Profile: Veronis 3 Equity,” and also presented Smaller deals are still getting LLC acquired the Capco Suhler Stevenson the firm with awards in three done! (It also helps us that Reference Data Services Brainpower N.V. 4 middle-market financing we work internationally). (CRDS) and replaced The Case Study deal-of-the-year categories. You can read my comments Bank of New York Mellon Gaining Leverage in 5 in The Wall Street Journal with Symphony Technology the m&a Process The M&A Advisor recognizes top deal-makers (“Tech Merger Meter”) in Group as the primary investor M&A Welcomes 6 Inside Reference Data (“The in the business. Shortly after New Team Members serving the $10 million to Future of m&a”) and on our that, Bankrate acquired our Financial Adviser Ratings 6 $1 billion (sales) market. “Deal of the Year” awards web site. client Lower Fees, which has ’08 Starts With Four 7 We’ve already closed four an interesting patent-pending Transactions are based on the importance, difficulty, unique characteristics, deals in 2008. We started platform to help manage and industry impact of each right after the New Year complex real estate fees. transaction. with the completion of the While I can’t predict what sale of the Hemscott Group 2008 will bring, we’ve made 1
  • 2. Inside M&A: Michael Maxworthy “Globally, 2007 was a strong year for Digital Information Economy company mergers and acquisitions. In spite of the well-known credit woes, most industry participants continued to generate strong profitable growth, which contributed to impressive sale prices — for good companies. U.S. buyers and investors remained active in the An avid skier and motorcyclist, Max thrives market and a strong Euro attracted a number of on challenging situations. international buyers.” — Michael Maxworthy, Co-Founder, Marlin & Associates M ichael “Max” Maxworthy, one of Investment Dealer’s Digest Magazine’s “40 Under 40” list of top on many successful mergers, acquisitions, capital raises, strategic partnerships, valuations and public debt offerings. “Middle Market Cross-border Deal of the Year.” Max has advised numerous other international deal-makers, co-founded Among other important deals, Max Marlin & Associates clients, including Marlin & Associates with Ken Marlin and helped lead the M&A team that advised StarMine on its recent sale to Reuters; two others, in 2002. Brainpower S.A. (Netherlands/ Vista Equities’ acquisition of Global Max and Ken had worked together Switzerland) on its sale to Bloomberg Energy Decisions; and Ipreo’s recent at Veronis Suhler Stevenson, the Media LP—the only financial technology sale of Hemscott to Morningstar (story Merchant Bank, where he headed the acquisition in Bloomberg’s history. In on page 7). research team that provided in-depth 2006, the Brainpower/Bloomberg He is a former director for the research on companies, industries, transaction was recognized as the Upward Bound Program at Binghamton transactions and valuations. “Middle Market Financial Technology University and is a member of the Young He began his investment banking Deal of the Year.” Executives Board for the National Down career 10 years ago as a Research He also advised Hugin ASA (Norway) Syndrome Society. He holds degrees in Assistant at Morgan Stanley and as a on its sale to Euronext just as Euronext Finance and Management Information Financial Analyst at American International itself was being acquired by the NYSE. Systems from the School of Management Group. Since then, he has advised clients That transaction was recognized as the at Binghamton University. Digital Information Economy Mergers and Acquisitions 25 500 20 400 Number of Transactions Trim Mean Multiples 15 300 10 200 5 100 0 0 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 Q1 ’07 Q2 ’07 Q3 ’07 Q4 ’07 Implied EV / Trailing Revenue Implied EV / Trailing EBITDA Total Number of Annual Transactions Sources: Marlin & Associates, PQ Media, Capital IQ These figures may be skewed by the inclusion of certain high multiple Internet-related transactions. 2 Marlin & Associates Highlights © 2008 Marlin & Associates New York LLC.
  • 3. Profile: Veronis Suhler Stevenson Building the next generation of leading middle-market media companies V eronis Suhler Stevenson (VSS), a premier mid-market private equity firm with a $2.8 billion portfolio, is focused “We chose Marlin because their knowledge of, and relationships within, the financial information sector is extremely solely on the media, communications, deep,” says Nick Veronis, Managing information and education industries Director, Veronis Suhler Stevenson. in North America and Europe. The The M&A team provided expert firm’s professional staff includes former strategic and financial advice that helped operating executives and investment VSS present the three core Hemscott bankers with specific media industry businesses in ways that were easy for experience to assist its portfolio companies buyers to understand; identify potential with business planning and development, buyers for each of the businesses; and acquisitions, financing and structuring. manage a challenging process involving Through more than 700 transactions multiple parties from multiple countries over the past 25 years, VSS has gained and assisted with multiple simultaneous a reputation as a knowledgeable, value- negotiations. Seven months after engaging added investor, more akin to a strategic M&A, all three Hemscott units were partner than strictly a financial investor. acquired in a single transaction by “We chose Marlin because their knowledge of, and Their formula for building long-term relationships within, the financial information sector is Morningstar, Inc., (NASDAQ: MORN) value is to start with a solid platform extremely deep.” — Nick Veronis, Managing Director, a leading provider of independent Veronis Suhler Stevenson company, led by a strong management investment research. team and help them make acquisitions of like-kind businesses. Eventually they “Marlin did a great job of grasping seek to exit and obtain superior results the key issues and then proactively helping to resolve them, particularly “This is a good time to for investors. Applying this approach, the firm has invested in 58 platform when it came to technology-related have capital and a flexible companies and 235 add-on acquisitions matters. It’s a tribute to Ken’s approach to deploying it. throughout its history. background in the industry and his We are entering a period VSS engaged Marlin & Associates to direct experience in managing financial that may present some help them divest certain assets within information and technology businesses— not many bankers have that hands on interesting opportunities.” Ipreo Holdings LLC, a VSS portfolio company which is a leading global experience,” says Veronis. “He also provider of capital markets and investor knew the landscape very well, and any relations solutions. elements that he wasn’t familiar with he says Veronis. “We are entering a got a handle on quickly.” period that may present some interesting VSS looks for prospective portfolio opportunities and VSS’s goal is to “Marlin did a great job of companies with strong management, partner with owners and operators grasping the key issues and proprietary data and/or applications, who want to take their companies to then proactively helping to high recurring cash flow, and the the next level. We would happily use potential to execute add-ons. Marlin again—both on the sellside or resolve them.” “This is a good time to have capital the buyside—and plan to maintain and a flexible approach to deploying it,” regular contact with them.” 3
  • 4. M&A arranged meetings with six Case Study: companies from the U.S., France and the U.K. Within a month, three submitted serious bids, including Bloomberg, the Brainpower N.V. ultimate winner. Although Bloomberg is not known for making strategic acquisitions, M&A Proper positioning, industry credibility believed that they would be open to and a compelling message lead to a the idea. “Over the years, we have successful transaction. shown Bloomberg several deals that they seriously considered,” says B rainpower offered leading edge technology, but it was not an easy company to understand or to value. Marlin. “We knew what they were looking for and had their confidence that we would not present anything M&A helped communicate a clear value inappropriate.” proposition and conducted a process that produced multiple bidders and superior results. “Selling Brainpower was all Headquartered in the Netherlands, about message, connections publicly traded in Germany, with key and experience.” employees in Switzerland and many of its largest customers in Italy, Switzerland and Germany, Brainpower N.V. was Negotiations and due diligence not a simple company to understand were conducted in three languages. from the outside. Nevertheless, just six months from the Brainpower had developed a world- first negotiations, the transaction was class platform aimed at meeting the needs Rocco Pellegrinelli, Brainpower CEO: “M&A opened completed at a premium of 59% to the door for us at Bloomberg and other firms and of European asset managers whose got us talking to the right people.” Brainpower’s volume-weighted average multiple portfolios often contained a trading price during the previous three variety of financial securities issued in “When we tallied the scores, M&A months. The total price was about five different currencies and countries. was far ahead of all the others. They times Brainpower’s reported revenue After years of battling on their own, clearly know the space, who to talk to for the prior calendar year. the idea of partnering with an organization and how to close a deal.” with ample resources began to appeal to M&A crafted Brainpower’s value the founders. When several acquisition proposition and helped present it to the “Fortunately, we had M&A.” overtures ended without a deal, they right people in a format that was easy sought professional advice. to understand. “We showed that Brainpower’s “M&A’s strategy, advice and follow re-investment in technology and product through enabled us to get the best “They clearly know the enhancements was beginning to pay partner, terms and price and to close in space, who to talk to and off,” says M&A Managing Partner, Ken record time,” says Pellegrinelli. how to close a deal.” Marlin. “From our knowledge of the “Selling Brainpower was all about industry, we knew that Brainpower’s message, connections and experience,” portfolio tools and analytics were recalls Pellegrinelli. “If you don’t have a “We met with strategic advisors in uniquely suited to serve a market that strategic advisor who understands the Europe and the U.S and evaluated was attracting some very big players. market, is adept at positioning the assets them on criteria such as: track record, Even though the company’s profits were of the company and is experienced at experience in financial technology, not strong, we were confident that a closing successful deals, you’ll have a ‘chemistr y’ and the amount of high clear presentation of their strengths hard time getting in front of the right level attention we could expect,” says would interest several key players and buyer or getting an appropriate price. Rocco Pellegrinelli, Brainpower’s CEO. net a fair price.” Fortunately, we had M&A.” 4
  • 5. Gaining Leverage in the m&a Process? A short time ago, we were approached by the CEO of a large technology company that was having trouble selling How to get the other side one of its divisions. The seller couldn’t to come to reasonable terms — get the buyer to closure, let alone get them to increase the offer. The buyer in a reasonable time frame. couldn’t get the seller to agree on a price or other terms. The deal had If the other side doesn’t see that buying we try to avoid auctions. If there are dragged on for months and frustration or selling the business will benefit other businesses that would equally fit was rampant. No one was adequately them, the deal will not happen— the buyer, then the sellers won’t have motivated to get the deal done. The regardless of the price. Fit matters. much leverage. Managing the perception buyer had cash and wasn’t in a hurry. For example, imagine you want to of scarcity is critical to gaining and The seller wanted closure but on their get a new suit to wear at an maintaining leverage. own terms. To us, the problem was important event. You go to a store clear: no one had any “leverage.” and the store owner tells you about “Imminent Loss” Completes We hear about lack of leverage all the fabulous fabric and workmanship the Ultimate Leverage the time, yet, somehow we seem to on one suit. Do you buy it? Not if it So, how much should you pay for get deals done in a reasonable time doesn’t fit. Not if it’s not the size, that “scarce” business that “fits” your period, and at reasonable values. Are color or style you want. Not if it doesn’t needs so perfectly? It’s simple: As little our deals so different? Not really— fit your self image. as you have to – and not a penny more. it’s our process that is different. In So, in order to get leverage, it is And how much should you sell for? our view, increasing the odds for a critical to understand how well the As much as you can get—and not a successful transaction is a matter of merchandise fits the buyer’s needs. penny less. But, how do you achieve proactively managing the process and Whether we are working with a buyer such Nirvana? By managing the last knowing how to gain and use leverage. or a seller, our first step is to assess, element of leverage: the perception The better you understand and understand and manage the other of “imminent loss.” manage the drivers of leverage, the side’s perception of that fit. Ultimately, the buyer gets the most higher your probability of success. leverage when the seller sees that he “Scarcity” Confers Leverage is unique—and may soon be gone. “Fit” Matters Once “fit” is established, a buyer gains Similarly, the seller gets the most When we work with a seller or a buyer some leverage when the seller perceives leverage when the buyer comes to of a business, part of our job is to identify them as the only or best buyer out believe that others are waiting to buy the parties that we believe should be there. Conversely, a seller gains some the business and once that happens excited about the potential fit and— leverage when the buyer perceives it will be gone forever. It is the here’s the key—help them see that fit. that this business is the best fit for their perception of fit and scarcity combined needs and that finding another as good with imminent loss that produces the won’t be easy. ultimate leverage. In both cases, leverage is significantly For us, it really comes down to Managing the perception of increased by the perception of scarcity. managing the perception of supply scarcity is critical to gaining When there are many buyers, no one and demand in an intelligent, competitive and maintaining leverage. of them has much leverage. That’s why market place. In the next issue of we advise sellers to run “auctions.” On Highlights we’ll discuss how we approach the other hand, when we advise buyers, and manage this disciplined process. 5
  • 6. Welcome Aboard: Jason Panzer Joins Brian and Mike Marlin & Associates B efore joining M&A, Brian Siebenburgen worked at PricewaterhouseCoopers in the Financial W ith the addition of Jason Panzer, formerly Vice President of Business worked on numerous transactions, including public and private mergers, Due Diligence group as an advisor to Development for FactSet Research stock/asset acquisitions, tender offers, private equity and corporate buyers on Systems Inc. (NYSE:FDS), Marlin & LBOs and private equity investments. both small and large transactions. Among Associates affirms its position as one of Some of his notable deals were the Long- his more recent assignments, Brian the leading financial and strategic Term Capital Management bailout; the worked with the team that supported advisors to U.S. and international Citigroup/Travelers merger; and LBOs Cerberus on several transactions, middle-market digital information and with KKR, Soros and other top private- including the purchase of Chrysler technology companies. equity firms. Later, Jason spent three years Corporation. His other clients included “Jason’s extensive U.S. and international as the CFO of JCF Group, a Paris-based the hedge fund Och-Ziff. Brian is transaction expertise and long-term focus provider of global earnings-estimates and on the digital information economy has other financial data. In 2004, he helped to originally from Cincinnati, OH. Prior given our firm another ‘unfair’ competitive manage JCF’s merger with FactSet. After to graduation, Brian worked for the advantage,” says Ken Marlin, M&A’s founder helping to integrate the two firms, he Cincinnati Reds and for Delta AirElite and Managing Partner. “He is a great became FactSet’s Vice President of Business Business Jets. Brian earned his BS in addition and brings a lot to our team. We Development and managed the acquisition Commerce with concentrations in are very pleased that he chose to join us.” and integration of three other businesses. Finance and Accounting from the McIntire Jason has more than ten years of Jason has an MBA from Columbia, a School of Commerce at the University of hands-on experience in mergers and law degree from Fordham and is a CFA Virginia. He has passed Level 1 of the acquisitions. He began his career in the charterholder. He lives in Connecticut with CFA exam and has passed the exam to Mergers and Acquisitions Group at the his wife and two children and competes in be a Certified Public Accountant (CPA). leading global law firm of Skadden, Arps, marathons and triathlons—when he finds Slate, Meagher and Flom, where he the time and energy. A native New Englander, Mike Guadano was born and raised in Durham, New FINANCIAL TECHNOLOGY: Hampshire. He graduated cum laude FINANCIAL ADVISER RANKINGS from Duke University with dual degrees January 1, 2007 to December 31, 2007 in Electrical Engineering and Computer Science, a minor in Classical Civilizations, Firm Number of Deals and was a member of the Electrical Credit Suisse (USA) Inc. 7 Engineering Honor Society. After Goldman Sachs & Co. 5 graduation, Mike moved to California and went to work as an electrical J.P. Morgan Securities Inc. 5 engineer in the defense industry. For the Marlin & Associates New York LLC 5 next few years he worked in the Bear Stearns & Co. Inc. 4 Advanced Concepts Branch for a naval Lane Berry & Co. International LLC 4 research laboratory in San Diego, where he designed, developed and fabricated Lehman Brothers Inc. 4 fully integrated prototype systems, Citigroup Global Markets Inc. 3 including hardware, software and Deutsche Bank Securities Inc. 3 firmware. After growing restless, Mike moved to New York City and joined Jeffries & Co. Inc 3 Marlin & Associates. Whenever he can Merrill Lynch & Co. Inc. 3 find the time to get away, Mike likes to Morgan Stanley 3 head north to places like Vermont and Wachovia Securities LLC 3 New Hampshire where he can do some serious skiing and hiking. He also enjoys Source: SNL Financial and Marlin & Associates. an occasional hand or two of poker. Compiled by Marlin & Associates using data as of Jan. 22, 2008. 6
  • 7. Marlin Starts the New Year with Four Successful Transactions N EW YORK, NY (February8th, 2008) Marlin & Associates (M&A), the New York and Washington DC-based boutique In January, M&A client StarMine investment banking advisory and Corp. was acquired by Reuters plc (LSE:RTR; NASDAQ: RTRSY), the global consulting firm, affirmed its information company. M&A acted as leadership in advising U.S. and StarMine’s exclusive strategic and In February, M&A client Lower Fees, international middle-market financial advisor. StarMine is a privately Inc. (aka “Fee Disclosure” of Westlake digital information and technology held provider of analytics and equity Village, CA) was acquired by Bankrate, firms by starting 2008 with four research tools and objective Inc. (NASDAQ: RATE), which owns successful transactions. M&A performance ratings to securities Bankrate.com, a leading internet analysts around the globe. StarMine is consumer banking marketplace. M&A initiated these transactions, helped based in San Francisco and has offices acted as Lower Fee’s exclusive strategic to manage the process, assisted in New York, London, Paris, Boston, and financial advisor. Fee Disclosure, in the negotiations and acted Chicago, Hong Kong, and Tokyo. which is based in San Francisco, has as strategic and financial advisors. The company received funding from developed an online platform (patent More details can be found at American Century Ventures, pending) to create an open marketplace www.MarlinLLC.com. Hummer Winblad Venture Partners to breakout and manage complicated and Instinet Group. vendor fees associated with the mortgage process. In January, Morningstar, Inc. (NASDAQ: MORN), a leading provider In January, Netik, LLC, (London and M&A New York Office: of independent investment research in the New York), a leading global provider 330 Madison Avenue United States and in major international of financial data warehouses to the Ninth Floor financial markets, completed the previously securities industry, acquired the New York, NY 10017 announced acquisition of M&A client Capco Reference Data Services (CRDS) P: 646-495-5141 Hemscott Group (London, England), a division of Capco and simultaneously F: 646-495-5144 well-known provider of financial data and replaced The Bank of New York E-mail: contact@MarlinLLC.com investor relations services. Hemscott was a Mellon with Symphony Technology www.MarlinLLC.com wholly owned subsidiary of Ipreo LLC, Group (STG) of San Francisco as the the global provider of high-quality data, primary investor in the business. M&A Washington, DC Office: expert insight, and productivity solutions to Capco is a leading global provider of 7720 Wisconsin Avenue investment banking and corporate clients. integrated transformation services and Suite 213 Ipreo is majority owned by private-equity solutions designed specifically for the Bethesda, MD 20814 firm Veronis Suhler Stevenson LLC. M&A financial services industry. M&A acted P: 301-469-0441 acted as the exclusive strategic and financial as the strategic and financial advisor to F: 301-468-3651 advisor to the sellers. Netik’s management. 7
  • 8. They chose us to advise them on their most important strategic move. San Francisco, California Atlanta, Georgia has sold New York, New York a portfolio company of San Francisco, California Oslo, Norway was acquired by was acquired by was acquired by was acquired by London, England to San Francisco, California has acquired Chicago, Illinois London, England Boulder, Colorado Jacksonville, Florida Bedford, Massachusetts Amsterdam, Netherlands Chicago, Illinois East Sussex, England Lugano, Switzerland Sydney, Australia London, England Westport, Connecticut was acquired by was acquired by was acquired by was acquired by has sold a majority interest to was acquired by Boston, Massachusetts New York, New York Norwalk, Connecticut Stockholm, Sweden Paris, France Norwalk, Connecticut Jersey City, New Jersey Morristown, New Jersey Boston, Massachusetts Washington, D.C. was acquired by Summit, New Jersey M&A provided Austin, Texas valuation services invested in for GovPX, Inc., was acquired by was acquired by a new round of financing in was acquired by which was acquired by Denver, Colorado a division of Toronto, Canada Port Washington, New York Milwaukee, Wisconsin Minneapolis, Minnesota London, England Our awards in the Middle Market Category include: Middle Market Investment Banking Firm of the Year Financing Agent of the Year – Equity International Cross-border Deal of the Year • Financial Technology Deal of the Year • Financial Services Deal of the Year Computer and Information Technology Deal of the Year • Financing Deal of the Year – Equity Financing – Financial Services Deal of the Year • Financing – Computer, Technology and Telecommunications Deal of the Year 330 Madison Avenue, 9th Floor | New York, NY 10017 T 646-495-5141 7720 Wisconsin Avenue, Suite 213 | Bethesda, MD 20814 T 301-469-0441 www.MarlinLLC.com