News
Maria McGuire, Principal in the firm's Commercial Finance Group, is featured in the "Need to Meet" section of the Nov. 7, 2016, edition of Buyouts Magazine.
In the article Maria talks about her significant experience with technology deals as well as lending activities in the tech industry in general. Maria exclusively represents lenders, coordinating due-diligence reviews and negotiating loan documents.
Recently she has been watching for signs of a second tech bubble, but it doesn't seem to be coming. “When I talk to clients in this area, they have not had a lot of workouts or troubled deals," she says. "Interest from private equity and other lenders has allowed them to easily refinance. And so there’s talk about whether we should expect a bubble? Are we coming to the top and starting to turn?"
Tech firms have a bit more protection these days than in the past, Maria says. In the mid- to late-1990s, tech firms were narrowly focused, either on consumers (e-commerce) or companies just getting into web-based services (Internet consulting). Now these companies apply their models across all sectors of the economy.
Maria has worked on deals in construction, healthcare, healthcare IT, education and telematics, and says this diversification is unlike what we saw in the dot-com bubble. However, the tech sector is still vulnerable.
“What could affect [these companies] as a whole would be any sort of retraction in available credit,” she says. “What they do have in common is that their products easily become stale. They either need to be investing in their product to stay ahead of the competition, which requires capital, or they need to acquire.” A recession might threaten future financings, as would new regulations affecting lenders in the space.
“Some of those deals have zero EBITDA or negative EBITDA,” she says. “If it became more difficult to do these types of deals, then it would affect a lot of these smaller or growing businesses.”
The same diversification that might safeguard tech against bubble status is also what draws Maria to the tech space. “It’s interesting to be able to work on deals that have similar components, but still involve all of these different sectors,” she says.
And within sectors, traditional businesses are being transformed. McGuire mentions a deal with an academic publisher that started to license its indexing software to educational institutions: “So you take something like publishing and turn it into a SaaS company.”
The article concludes with Maria saying that PE firms buying or investing in tech targets are still in a strong position in terms of bargaining power, and they generate repeat business. "A lender likes to develop a relationship with a PE firm and be their go-to lender as they continue to build their portfolio.”
