Betting on the M&A momentum in the fintech sector, D.A. Davidson Cos. will bring in a team of fintech investment bankers via its recently announced acquisition of Marlin & Associates Holding LLC.
The Great Falls, Mont.-based financial services firm announced the deal June 14, and it is expected to close in the third quarter.
D.A. Davidson has been growing its technology investment banking practice for the last four years, and competed against Marlin & Associates on a number of deal mandates, said Joe Morgan, head of technology investment banking at D.A. Davidson. The bank was seeking talents to expand in fintech, data and analytics, and initiated dialogues with the team at Marlin & Associates last year, which resulted in the deal, Morgan said in an interview.
"Part of what got us excited is that we've gotten a taste of how large the fintech market was, and very openly wanted to accelerate our growth into that market," Morgan said.
D.A. Davidson does not expect to take cost-cutting measures following the acquisition, and the technology team instead plans to add three partners over the next 12 months focusing on different end markets and amp up the hiring of junior bankers associated with them, Morgan said. The technology team is seeing growth from not only M&A but also private placements, growth equity raises, initial public offerings and follow-ons, as well as financing for companies' mergers with special purpose acquisition companies, he said.
Marlin & Associates was founded in 2002 by Ken Marlin, a Marine Corps veteran and a former executive at several information services companies. The firm specializes in M&A and strategic advisory for middle-market companies in capital markets technology, payments, insurance technology, financial data and analytics, regulatory technology, and other financial software verticals. Marlin will become the vice chairman of D.A. Davidson's technology platform.
As a boutique advisory firm, Marlin & Associates was attracted by D.A. Davidson's full-service investment banking capabilities, said Michael Maxworthy, co-founder of Marlin & Associates. In addition to M&A and strategic advisory, D.A. Davidson also has resources in debt and equity financing and financial sponsors coverage, as well as in wealth management, trust services, trading and investment management.
"The fintech market has been quite hot even during COVID," Maxworthy said. "This is great for us and for Davidson. We're hoping we can keep the momentum."
D.A. Davidson plans to integrate Marlin's team with its own and they will go to market together on pitches based on vertical specialties, Morgan said. The combined team will have 60 professionals focusing on technology equity capital markets, including deal advisory, public offerings and equity research. Morgan and Maxworthy will be the co-heads of D.A. Davidson's technology investment banking team.
With fintech companies weathering the pandemic, the sector will continue to draw interest from private equity and strategic buyers, Maxworthy said. The remote work environment has prompted more financial services professionals to deploy technology solutions, and some institutions are more willing to outsource the technology component, such as using third-party compliance solutions, he said. Verticals that encountered downturns last year, such as point-of-sale payment solutions, are also expected to get back on track this year with re-opening plans in place, he added.
D.A. Davidson's acquisition of Marlin & Associates is the latest example of investment banks scooping up sector-focused boutiques. In the financial services sector, Raymond James Financial Inc. in 2019 acquired Silver Lane Advisors LLC, a boutique i-bank specializing in wealth and asset management. Houlihan Lokey Inc. expanded its footprint in financial services and data and analytics through its acquisition of Freeman & Co. LLC in 2019 and the acquisition of Quayle Munro Ltd. in 2018, respectively.