Industry Q&A – Marc Cooper & James Butcher

Industry Q&A Marc Cooper with James Butcher

by CEO Marc S. Cooper

James, welcome to Solomon Partners. Can you tell us a bit about your background?

Thank you, Marc. I am excited to be joining Solomon Partners. Prior to making the move, I was at Moelis & Company for over 13 years, where I worked with clients across Media & Technology, recently focusing on the Information Services and Business-to-Business (B2B) subsectors. I started my professional career as a chartered accountant at PwC in London before moving into investment banking, transferring to New York in 2017.

After 13 years at Moelis, what led you to join Solomon Partners?

I was excited at the opportunity to join a fast-growing organization and to help Craig Muir build the Technology Group. I have been impressed by the team of highly talented bankers that Craig has assembled, and believe we can collectively create something that is, to borrow a banking analogy, more than the sum-of-its-parts.

I see a unique opportunity to deliver a differentiated proposition in the marketplace, leveraging the team’s deep subject matter expertise while also remaining true to the Solomon ethos of always putting the client first and a focus on integrity. The strength of the Solomon culture, its track record of developing market leading teams in other industry verticals, and its growth mindset were also key factors in my decision.

Which areas within Technology will you focus on and can you provide a quick overview for the uninitiated?

I will continue to focus on Information Services and B2B. In simplistic terms, Information Services companies sell research, data and increasingly software solutions to other businesses typically on a subscription basis. Best-in-class companies in this space operate in large addressable markets, with a strong “moat” and have highly predictable, recurring revenues, high retention rates, and the ability to grow through new client wins, pricing increases and product “upsells”. Increasingly these companies resemble software businesses, with the crucial difference that their product has research, data and / or analytics at their core.

B2B companies provide technology and services that allow other businesses to reach, inform and ultimately win new customers. Products can range from digital solutions, including lead and demand generation, account-based marketing and digital advertising, to offline products such as in-person events.

What have been some of the key trends affecting these sectors?

The Information Services sector has experienced tremendous growth over the past 20 years driven by an increased demand for data-driven insights, a transformation in how products are delivered and consumed – from print to software tools and now Generative Artificial Intelligence (GAI) enabled chatbots – and the use of technology to perform advanced analytics and derive insights from structured and unstructured data at scale. This business model transformation has resulted in significant value creation in the sector and has made it a highly attractive category for investors in both the public and private realms.

With respect to B2B, as business professionals spend more of their time online, there has been an explosion in the number of marketing platforms that seek to access and influence key decision-makers through digital channels. Data, while not the product in its own right, plays a critical enabling role in this category by, for example, facilitating the delivery of targeted advertising or the identification of business prospects and their level of intent around purchasing decisions.

Data privacy and integrity are key issues in the B2B sector, with growing fraud concerns resulting in a “flight to quality” and some recent rebalancing in marketing dollars away from digital channels. Benefitting from this trend are in-person events, which – pandemic aside – have proven to be highly resilient and offer a proven and effective channel for reaching decision-makers away from the digital clutter of their daily lives.

You mentioned the impact of AI on Information Services. Can you expand on that?

AI is already having a transformative effect on the Information Services industry in three ways. First, as our colleague Joe Watson has explained, GAI companies increasingly require access to high quality data sets in order to train and differentiate their models, creating significant revenue opportunities for companies that own proprietary data assets. Second, AI is creating huge efficiencies in data collection, reducing timelines, eliminating manual processes and enhancing data quality. Finally, AI is transforming the product experience, through the introduction of chatbots and new analytical tools, creating upsell opportunities, increasing engagement and boosting retention. Many Information Services companies are already capitalizing on these opportunities and, as a result, are well-placed to experience a structural uplift in both growth and profitability.

What is the outlook for M&A in these sectors?

In general, the resilient nature of Information Services businesses has made this a relative bright spot in what has been a comparatively subdued M&A market. In fact, valuations for best-in-class Information Services assets have remained stable, if not increased, due to the defensive nature of these businesses and their relative scarcity value. Given the more cyclical nature of the Advertising & Marketing and Real Estate & Construction end-markets, M&A activity in these verticals is more closely correlated to the macroeconomic environment.

We are cautiously optimistic that, with interest rates coming down and as we move beyond the US elections, M&A activity for Information Services companies serving these end-markets should experience an uptick, particularly given the significant backlog of sponsor-owned assets that will need to be monetized.

In B2B events, the more resilient nature of in-person interactions should drive M&A activity in the near-term, with a number of sponsor-owned assets due to come to market. Given the more cyclical nature of digital B2B marketing platforms, M&A activity is likely to be more subdued until the macro environment improves, although we do see the opportunity for value creation through consolidation as a possible near-term catalyst for transaction activity.

Thank you, James. We are looking forward to serving more clients in these growing sectors.

Thank you, Marc. I am excited to be joining and am looking forward to contributing to the continued success of the Technology Group and the wider Solomon Partners platform.