One-on-one with Michael Maxworthy
Inside Middle Market Tech Advising
Michael (Max) Maxworthy has nine years of investment banking and private equity experience working with and advising Digital Information Economy companies in sectors such as Financial Technology; On-line databases and content; Enterprise Software; Digital Media; and eCommerce. Max joined M&A from Veronis Suhler Stevenson, where he led the team that provided in-depth research on companies, industries, transactions, and valuations. His research was a cornerstone of the Communications Industry Report, and communications Industry Forecast (published by VSS) as well as in industry publications such as Investment Dealers' Digest Magazine, The Daily Deal, Securities Industry News, Corporate Finance Week, and Mergers & Acquisitions Magazine. Max began his career as a Research Assistant at Morgan Stanley and a Financial Analyst at American International Group.
Q: What is your usual deal size?
A: What we want to do here is stay underneath Goldman Sachs' radar. We're trying to stay under $200 million. We just completed a $100 million deal and we're working on another. It's a space we know and feel comfortable with.
Q: How much of your M&A work involves private equity now?
A: We just completed two deals involving private equity. Some of our work is on the sell-side and some is on the buy-side. We just helped a San Francisco-based private equity firm, Vista Equity Partners, acquire Global Energy Decisions, a company in Colorado that deals with energy trading and the energy information market.
On the sell-side we're looking to connect a company to as many well-known prestigious buyers possible. We've worked with ABRY, the media firm set up by Andrew Banks. We're dealing with private equity all the time, sometimes working with their portfolio companies, sometimes divesting, sometimes looking for acquisition candidates or product extensions. And we're always on the lookout from the sell-side, always talking to private equity players to see if they're interested in buying.
The only problem on the sell-side with private equity is that the companies we're representing are typically fastgrowing companies and private equity groups can't compete on price. They're just not willing to pay as much as strategics will pay.
Q: How much of your work has a cross-border element? And where are buyers/sellers coming from?
A: That runs the whole gamut. Lately they've been European but we're in talks with South African companies, Indian companies, Asian companies, Australian companies and South American companies who just are not getting attention from other banks. They contact us. The last five or six deals we've worked on had parties from seven or eight different countries, from Australia to Norway to the UK to France and the like. I'd say about 40-50% of our deals involve some type of overseas aspect.
Q: Are almost all of your M&A deals involving auctions now?
A: If you're asking me about M&A in general, I couldn't say, but for me when I'm on the buy-side, my goal is to not to be involved in an auction. That's how I'll get the lowest price, by staying out. On the sell-side I'm going to push to get into an auction to get the highest price.
Q: So on the buy-side, how often are you forced into an auction nowadays?
A: It just comes down to the seller and how sophisticated the board is. If they've got a lot of experience, they'll push for an auction.
Q: How often are you working with public companies?
A: The majority of our clients are private, but we're showing deals to the public market. We just did two deals in the public sector. One is a financial models company, FMC, which sold to SS&C. We were hired by its CEO on a take-private deal. In a more recent deal we were hired by Switzerland-based Brain Power, a financial technology company, and we sold it to Bloomberg. We've very proud of the fact that we're the only investment bank in history to sell anything to Bloomberg, let alone a private company.
Q: What sectors do you focus on?
A: We work on the digital information economy, companies with information and technology that helps slice and dice information. We focus on the analytics around that information. Lately we've done a lot with online marketing, the financial technology market, the legal technology market and the banking market.
Q: You must see companies taking on record amounts of debt — how often is it to a worrying degree?
A: No, I'm not worried at all. I'd say that banks are lending debt at a higher multiple than we've seen in a long time and there's more debt. There's the highest valuation of debt multiples since 2001. What is interesting to me is that 10-15 years ago banks and private equity didn't understan the technology market and now more private equity and debt markets are coming into the information technology market and they are lending.
Q: Do you work on turnarounds – companies having serious financial problems?
A: No, we don't. We're very selective about the clients we take, and we don't serve that market.
Q: Do you work with hedge funds?
A: Not really. I know there's been a lot of talk about hedge funds getting into private equity markets, but in our space, the middle market space for information technology companies, they're just not around. They're more into the other industries like manufacturing and retail. We're not getting a lot a lot of exposure to hedge funds.
Q: To get a sense of your work, what were the last few deals you worked on in terms of type of deal and who you represented?
A: I'll tell you about the last four. We recently helped Applied Financial Technologies get sold to Fidelity National Information Systems. That was a very good deal in the mortgage technology space.
We also helped, as I said before, private equity firm Vista Equities acquire Global Energy Decisions and that was a big portfolio tuck-in for them.
We just worked for Xcitek in New York, which is a service that provides news information that affects stock price. We sold their market data division to Interactive Data Corp.
And regarding online investor relations and PR information, we worked for Hugin, which is based in Oslo and was VC-backed, as it sold to Euronext. That was really interesting because our deal was going through right in the middle of Euronext being acquired by NYSE.
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