Participate, Profit & Celebrate:
Q.: In your observation, what are the prominent mid-market M&A themes in the technology, digital information and healthcare sectors in a slow growth economy of today?
Mr. Marlin: In this economy, in all the sectors that we serve, we see buyers and investors putting emphasis on finding companies that combine unique and strong products, and great technology with a track record of strong growth and profitability. It certainly helps if sellers can demonstrate significant growth potential and have a strong management team. We also see very high levels of interest revenue models that are recurring as opposed to the classic model of license, maintenance and professional services and we see high levels of interest in cross-border M&A.
Q.: We noticed that many of your clients are based outside the US, and close to half the transactions involve non-US participant. Is this a conscious strategy or is it driven by increase in cross-border deals at large?
Mr. Marlin: Yes and no. We don't chase non-U.S deals per se. Rather, we have taken pride in not defining our business geographically. We have consciously set out to build a company with a mind set and an infrastructure that can support transactions with clients and counterparties anyplace in the world.
Many of our transactions are between U.S firms and some of them involve a U.S and a foreign participant. For example, we recently advised a U.S firm in acquiring a Japanese company. At the same time, many of our deals involve non-U.S clients such as advising a Norwegian Company that was sold to a Netherlands company; an Australian company that was sold to a Swedish firm, a Belgian company on the acquisition of another Belgian firm, etc. We are going where the deals are, and see strong trends in cross-border transactions especially in the U.S and Western European markets.
Q.: Marlin & Associates has advised several stock exchanges related deals. What do you believe are the underlying pressures driving M&A activity among exchanges?
Mr. Marlin: It's true that we have advised a number of stock exchanges including Deutsche Börse and NYSE and we advised companies that were sold to others such as Euronext and to Nasdaq. But, I'm not sure that makes us the expert on what is driving them. We do note that there is a fair amount of change going on in the exchange arena right now as well as with other firms that provide technology and data to capital markets participants. We have seen a move from regional exchanges to national ones and to international ones, and we've observed the demand for exchanges to provide ever increasing services to facilitate liquidity to listed firms. Now, we are seeing increasing use of technology to allow for things like cross-border trading, derivative trading and trading in non-traditional venues. The combination of all these forces puts an intense pressure on vendors and exchanges to adapt or die – and they know it.
Q.: Do you think this"intense pressure" will continue to drive deals?
Mr. Marlin: Yes, as a result I believe we will see more consolidation among exchanges and other liquidity pools around the world. And I also believe that we'll see exchanges and other technology vendors continuing to look to acquire companies that helps them provide a wider range of services themed around the idea of facilitating liquidity in markets. We live in a cross-border, cross-asset class world where most of the established firms long ago figured out that they needed to change and are working hard to do so.
Q.: Which sub-sectors among technology such as healthcare, financial services, etc are top M&A performers per deal activity for the year ahead?
Mr. Marlin: Right now, we are seeing considerable activity in healthcare-related technology, particularly technology related to bringing order to the chaos that exists between providers such as doctors, nursing homes, therapists and hospitals and the payers - largely insurance companies. It's a huge problem area that a lot of money is being thrown at. It's a market opportunity that will get even bigger with the aging population; the government's interest and the large amount of investment pouring into this sector. We continue to see high levels of interest in M&A from people who want to consolidate firms that offer technology or data to capital markets participants.
Q.: Are there similarities between the drivers of deals in these two sectors?
Mr. Marlin: There are few similarities but on the whole they are quite different. In the healthcare technology arena, we see a ton of new money coming into the system--new companies emerging and a strong interest by financial sponsors to fund the platforms of the future. It's largely a country-by-country market. In the US, there are huge pockets of activity that are either still done by hand or in a uncoordinated, semi-automated silos that are uncoordinated with what is going on in other silos. Emergency room systems that don't talk to the hospitals regular systems, etc. We see a land-grab going on as people try to establish technology based standards for the future.

In the capital markets arena, the dynamics are very different. Most firms have some sort of automated solution. They often do talk to each other, and we have a global eco-system. But, we also have hundreds of uncoordinated software and data vendors, consultants and others none of which offer complete solutions. So, the end-user organization is forced to either build some systems internally or contract parts of the solution or system integration to a host of external 3rd party vendors. It's not unusual for a large asset manager or a large broker to do both--support large in-house IT departments and have 100 or more technology vendors plus a few consulting firms. In this sector, the driving force is for consolidation around fewer vendors that offer a more complete solution.
Q.: Where are valuations headed given the competition in the mid-market technology sectors?
Mr. Marlin: So far they have been steadily rising since the low point in late 2008 - early 2009. In the sectors that we follow, the drivers are less about competition and more about rising confidence of buyers and investors in their own businesses; large amounts of cash in the system; greater availability of debt and leverage; and perceived opportunities to buy at rates that are cheaper and less risky than building it themselves. Some recent deals on which we have advised were transacted at multiples that we have not seen since 2007.
Q.: What geographical regions of the world are most talked about, and why?
Mr. Marlin: Everyone likes to talk about China, India, and the rest of Asia; Russia and Eastern Europe; the Middle East, and Latin America. And it is true that some of these are areas of great promise. When we advise sellers from those regions, we always have significant interest. But, that's in part because there aren't a lot of good companies that are in our sectors from those regions that come up for sale. On the other hand, we have not seen a lot of buyers come out of these places for firms that are long on intellectual property and short on hard assets. Clearly, there are exceptions. Last year we helped a company controlled by the Government of Qatar acquire a UK-based firm. We're now talking to a Latin American firm about advising on the sell side. But, for now, it's still mostly the US and Western Europe based players.
Q.: Congratulations on establishing presence in Hong Kong earlier this year. What perpetuated this decision?
Mr. Marlin: Obviously, we believe in the long-term potential to advise buyers and sellers in China and other Asian markets. That's why we opened the office in Hong Kong. We know that building this business won't be a fast process. For now, our focus is on getting to know Asian businesses that may someday be buyers or sellers as well as helping US and European businesses that may want to acquire companies in the region. Recently, a large western company has asked us about helping them to acquire in China--we like this and hope it becomes a trend. We have also advised three Australian companies and are building that part of the practice. With the new Hong Kong office we're already talking to several potential clients in Australia, Singapore, Hong Kong, and Shanghai that we would not have know.
Q.: In nearly 10 years since founding Marlin & Associates, your firm has been extraordinarily successful, not to mention advised on transactions that have won the prestigious M&A Atlas Awards. What is your secret?
Mr. Marlin: Well the secret starts by careful client selection. We turn away at least a client or two each month and we agree to advise on less than 10 clients a year. Once we have a client, whether it is a buyer or seller, we then employ a very disciplined process to service the clients in their request. But, I believe that our true competitive advantage comes from our focus, deal-making expertise, operational experience, international capabilities and a track record of success. We are a group of 16 professionals who are focused on advising buyers and sellers in a very narrow set of verticals that we know well. We have helped clients execute more than 200 deals around the globe. We believe that when you look at this combination of strengths, it puts us in a fairly strong position.
Q.: On a personal note, how has your diverse background in the US Marine Corps and nearly two decades as a CEO running technology companies, helped you build your firm as well as advise on M&A transactions?
Mr. Marlin: My Marine Corps background helps me in all kinds of things. But, I believe that our firm's relevant mix of U.S and international operating and transaction experiences is the most important part of our secret sauce. It shows that we are able to advise in the way the clients have the right to expect - from a base of hard-earned knowledge. That is to say, we've been there. We've had to make payroll, we've had to deal with limited resources, and sometimes with angry clients.

As you pointed out, I've been a CEO of several tech firms. I've raised capital for my own firm, bought my own firm, made acquisitions and divestitures; had VCs on my board. I also spent considerable time in corporate M&A and as a senior executive at private equity firms. Several others in our firm have similar backgrounds that combine actual operating experience with transaction experience. If nothing else, we can understand the industry dynamics, and can anticipate issues, suggest solutions and empathize with our clients.
Q.: In closing, required, what book are you currently reading?
Mr. Marlin: I usually have a few books going. Right now it's Jon Krakauer's Into thin Air and Joseph Conrad's Heart of Darkness. Both books deal with perseverance when others say you shouldn't – or can't. Both note the hazards of relying on others less qualified or committed; that there are times to lead up the mountain or up the river into danger and bet on yourself. Both focus on people with clear goals and a plan to achieve them. They are practical, driven people who aren't afraid to take risks and they find a way to survive and thrive in spite of the challenges.

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