Cascadia Capital’s New Managing Director, Michael Orbach, on Trends to Watch in IT Deals
Veteran software entrepreneur and investment banker Michael Orbach is joining Seattle-based Cascadia Capital today. As a new managing director in the investment bank, Orbach will focus on mergers and acquisitions, as well as capital raises, in software and services—all in the mid-market range of $20 million to $500 million deals. The new hiring looks to be a strategic move to strengthen Cascadia’s national and global presence in information technology.
Orbach comes most recently from Palo Alto, CA-based Pagemill Partners. But he is a Seattle-area resident and says he has been commuting to Silicon Valley for 12 years. In the early 1980s, he co-founded Simulation Sciences in the U.K. (he’s a native of Manchester), and took the company public in the early 1990s. After Simulation Sciences was bought by Invensys, Orbach joined Aspen Technology and handled mergers and acquisitions, moving to the Seattle area with that company’s purchase of Industrial Systems, Inc. in Bothell, WA, in 1995.
“We liked the place,” Orbach says. “My family was suffering major culture shock between Manchester and California.” Orbach also got his MBA at the University of Washington.
The professional rationale for Orbach’s latest move is equal parts opportunity and timing. “There’s a very large opportunity to build a software and services practice here at Cascadia,” Orbach says. Cascadia Capital has a strong national brand in capital raising, and it can use that strength to grow its mergers and acquisitions business. That sort of leverage between M&A and capital raising expertise, he says, “is very appropriate in the market today.”
And why is that? “You tend to build out new business models and get the best growth strategy when you’re coming out of a recession,” Orbach says. And because of the dearth of IPOs, startups looking for an exit have little choice but to get acquired, he says. That, of course, gives buyers the upper hand in negotiations. “The economics of buying companies has never been better. For the Oracles, SAPs, and Microsofts, less and less will they make internally, and more and more will they buy,” he says. What’s more, how they’re buying has changed radically in recent years. “M&A has become a national/global practice,” Orbach says. “The days of looking at specific geographies or specific verticals are gone, because the technologies cross those.”
What all this means is that the precise skills of bankers making deals in the technology space are more important than ever. “The days of watching lawyers doctor the deal are long gone,” Orbach says. Bankers have to position a company’s financials to a prospective buyer in the right way, which means having a deep understanding of where the technology and the business model fits into the market, and of what the buyers want. Orbach says he draws on his experience as an entrepreneur, as well as having lived in many parts of the world with diverse cultures (the U.S. and U.K., France, Germany, Switzerland, and South Africa).
We didn’t get a chance in this conversation to dive deep into software M&A trends yet, but Orbach did offer a hint at what he’s looking at. “Venture capitalists are focused on triage. Many businesses need something done. Not only here, but everywhere,” he says. “As we come out of this recession, the dealmaking will be done in countercyclical markets.” He points to a few specific areas to watch: IT infrastructure, virtualization, legal, and corporate governance, risk, and compliance. We’ll be watching to see what effect this all has on Cascadia’s dealmaking, and the broader IT world.
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