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Ex-Veronis Suhler Banker Forms Firm Targeting Software M&A

May 06, 2002

Mergers & Acquisitions Report
May 6, 2002
by Mark Cecil

Ex-Veronis Suhler Banker Forms Firm Targeting
Software M&A

Earlier this year, former Veronis Suhler Stevenson Partners LLC banker Ken Marlin left to form his own M&A boutique, focusing on digital information and software deals.

Marlin, whose Marlin & Associates (M&A) moved into Madison Avenue offices in February, said in a recent interview with Mergers & Acquisitions Report that two just-closed deals show promise for increasing M&A activity in those sectors: Moody's Corp. buying KMV LLC and E*Trade Group Inc.'s acquisition of privately held Tradescape Corp.
Moody's completed $210 million cash purchase of KMV, a provider of risk management tools, on April 15. E*Trade announced its own $280 million stock deal on April 10.

The two deals are indicative of what could usher in a "flurry" of smaller deals in the sector, as digital information buyers regain their sea legs, said Marlin. Buyers are still risk averse after the tech bubble popped in March 2000, said Marlin. But, he added, they are gaining enough confidence to make deals in the $20 million to $100 million range-just the size deal MA specializes in.

Marlin, who works with three colleagues, targets firms with under $100 million in sales. Without bringing any clients over from Veronis, Marlin has so far picked up three sell-side assignments, all under $50 million, which should be completed by year-end, but he did not want to add any more details about those assignments. He said he would like to add one more deal to this year's tally.

Marlin added that the difference between buyers' thinking before and after the tech bubble burst can be illustrated by a single buy-side question. Through March 2000, Marlin said, the buyer was asking, "How do I add value to the target company, make it stronger and help it grow faster?" But now, the question is, "How does this help strengthen my existing portfolio?" Both the Moody's and E*Trade deals exemplify buyers answering the second question, he said.

Don't look for many larger deals coming up, unless there is a strong strategic rationale, such as there was in Ameritrade Holding Corp.'s April 7 agreement to purchase Datek Online Holdings Corp., said Marlin. That $1.3 billion stock deal is an expensive one for Ameritrade, said Marlin, but it was "strategically very important. A very astute move." An Ameritrade spokesman said the multiple used for the deal was 9.9 times earnings before tax and marketing.

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