“2020 was quite the roller coaster ride for almost everyone in our industry. While the low valleys were often the main focus, we experienced numerous peaks along the way as well.”

Each month, Charles Town Holdings profiles a member of our investment banking team. This month we get to know Robert Taylor.

Robert focuses on business development and distribution across the multiple industry verticals covered at CTH and also leads the firm’s private equity coverage. Robert has spent the majority of his 15-year career within the finance sector, having served in multiple capacities across securities trading, investment banking and private equity with such firms as JPMorganChase, Wells Fargo Securities and Bayview Asset Management. In 2017, he founded Bray Ventures to support lower-middle market companies with implementation of strategic, operational and capital efficiencies within their existing business models. Robert holds an MBA from Wake Forest University and a BA in Journalism/Mass Communication from the University of North Carolina at Chapel Hill. He maintains a FINRA Series 7 securities license.

2020 turned out to be a pretty good year for CTH. Tell us about some of the deals you worked on.

2020 was quite the roller coaster ride for almost everyone in our industry. While the low valleys were often the main focus, we experienced numerous peaks along the way as well.  Bringing a new growth capital placement mandate to market in mid-March was quite challenging, especially with the nearly-complete shutdown of new deal activity in the 2nd and early 3rd quarter.  We started to see renewed momentum toward the end of summer and early fall, and fortunately ended with a successful 4th quarter push with several closings at the firm.

As head of CTH’s PEG coverage, what are you hearing from funds regarding expectations for 2021?

The response I receive from most funds when asking this question is overwhelmingly bullish as they look toward 2021 and even into 2022. Many firms closed on new funds prior to COVID, but it has been surprising and quite reassuring to the strength of the market to also hear how many persevered and elected to raise and close on new funds amidst the pandemic. There is an obvious appetite right now, as I receive inbound requests and engage in continual discussions with financial and strategic investors and buyers each week who are actively seeking a place to land their capital.

What are some of the deals you are currently working on?

I am very encouraged and excited about several of the growth equity and M&A deals we are working on at the firm to start the first quarter of 2021. We have several mandates in the DTC consumer and apparel space, one in retail, a commercial landscape supply company, direct-to-home food delivery platform, amongst others. One of the more interesting active engagements is in the live entertainment space, believe it or not. This particular company was able to thrive under the dark shadow cast across the live show industry by providing a drive-through experience that appealed to the health and safety standards in place for its customers.

What should a client expect when moving forward with an M & A engagement or private placement?

The most important aspect of any deal continues to be setting proper expectations with the management team for what a distribution is going to look like once in market, including estimated timeline, valuation and potential deal structures. Obviously, timing and valuation expectations were difficult conversations to have last spring and summer since the market was very fluid and in flux, but with the recent swing back to ‘normal’ conditions, setting those proper and more accurate expectations is once again paramount. We are hired to lift the burden of finding an investor or buyer off our clients’ shoulders so they can continue to work on and in their business during this time.

Tell us three things that most people don’t know about Robert Taylor. 

1. I started my career in pursuit of the sports and entertainment industry from the marketing/PR side, having worked for the UNC Athletic Department and US Olympic Committee during my undergrad studies in Chapel Hill. This is one of the big reasons why I was so attracted to the CTH platform, because of the experience and focus we as a firm have in the sports, media and entertainment space. 
   
2. As a native to Asheville, NC, I have a passion for traveling to both the Appalachian and Rocky Mountains, so it’s been challenging dealing with limited opportunities to do so during the pandemic.
   
3. But in the end, it’s all about family. I love spending free time with my wife and two daughters (8 &11yrs) and getting lost in all of their weekly activities, as they definitely keep us busy!

“Private equity is investing substantial amounts in industry and there are large financial gains for rolling up firms.”

Each month, Charles Town Holdings profiles a member of our investment banking team. This month we get to know Jack MacDonald.

Jack leads the Asset and Wealth-Management Sector for Charles Towne Holdings. Jack has more than 30 years experience serving the needs of growing asset management firms. His expertise crosses many sectors, including institutional asset management, mutual funds, wealth management and alternative asset management. Previously, he was a MD at Raymond James, Inc. Prior industry experience includes seven years as the principal and co-founder of Xpl Advisors LLC. He spent five years with Putnam Lovell Securities Inc., first as MD and co-founder of fixed-income capital markets, and subsequently as MD, asset management mergers and Acquisitions. Earlier he served as a senior banker in the financial institutions group for Citicorp Securities, Inc, and Director of Corporate Finance at PepsiCo, Inc. He began his career as a CPA. Mr. McDonald holds a Master Of Management from Kellogg Graduate School of Management at Northwestern University with a BBA and a focus in accounting from Saint Norbert College. 

You were one of the early bankers to focus on Asset Management. Share your background with firms you worked for. 

I spent 10 years with Baxter International and PepsiCo in corporate finance roles. In 1989 I moved to Citibank to oversee the Asset And Wealth-Management space. The first deal I proposed was turned down by management because it was not “not a real industry”. Eventually, we became one of the very early banks to cover the industry. We financed some of the early LBOs in both the loan and high-yield markets. Later we combined our credit experience in the sector with Citibank’s structured finance skills to create the industry’s first structured finance solution. I later lifted-out a team and joined Putnam Lovell and created a structured finance group. This group was the forerunner to the firms that now buy revenue shares in the asset and wealth-management space. I left Putnam Lovell with a colleague to start our own firm called XPL Advisors where our first transaction was one of the earlier alternative investment manager deals. I later joined Raymond James to add asset and wealth-management coverage to their financial institutions group. While there, we co-lead one of the early IPOs of a large wealth management company.

M&A activity really picked up in the last quarter of 2020. What are your expectations for 2021?

2021 is off to a very strong start and we see M&A activity in asset and wealth-management continuing at a record pace. For buyers, conditions are favorable as capital is very plentiful and interest rates are at historical lows. The 10-year bull market has been very favorable for the sector. Private equity is investing substantial amounts in industry and there are large financial gains for rolling up firms. There are over 5,000  RIAs in the US with many of their founders nearing retirement age and, thus,  in need of a succession plan. In addition, small and mid-sized firms can no longer afford to be at the forefront of investment and technology solutions. Potential changes in capital gains tax rates may also motivate transaction activity. 

What can RIA firms expect to sell for in the current market?

Despite the covid-19, valuations are at all-time highs and I don’t see that changing in the near-term valuations in the sector are driven by a number of factors, including size and scalability, growth rates, client demographics, operating margins and quality of the team. At the low end of the range, firms might sell at 5X to 8X EBITDA.  firms with assets under management over 1 billion may be valued in the 9X to 12X EBITDA, or more. Goldman was said to have paid 16X  for United Capital. 

You currently have a few buy-side mandates. What are the ideal targets for your clients? 

Generally, these two buyers are looking for wealth managers in an AUM range of $500 million to $3 billion, or more. Both are focused on specific geographic locations — one in the South and the other in the North Central region of the country. We also see strong demand for wealth managers with AUM $250 million, or more.

Tell us three things that most people don’t know about Jack McDonald. 

1. I was a user of investment banking services the first 10 years of my career. 
2. I completed my first half marathon in 2019.
3. When I was 8 years old, I met Vince Lombardi, Bart Starr and Jim Taylor — There could be no bigger thrill for a small town Wisconsin boy! Like many Wisconsin natives, I own several shares in the Green Bay Packers.

“The pandemic has helped drive the growth  in the Telecom sector as people use video and telephone means of communication as opposed to being in the office or traveling.”

Each month, Charles Town Holdings profiles a member of our investment banking team. This month we get to know Hubert Holmes.

Hubert leads the Telecom and Financial Data sectors for CTH. Previously, he was a senior director managing the $150mm Reference Data Business of ICE Data Services. He came to ICE as the Chi-X Global Executive Vice President responsible for the company’s global business development strategy. Chi-X Global owned and operated MTF and ATS markets around the world. The Chi-X has trading infrastructure technologies and services were created through the acquisition of Cicada Corporation of which Hubert was a founder. As EVP, he was responsible for relationships with major exchanges and financial institutions around the world. Hubert started his career at Reuters Group PLC, where his position was as EVP / Director of Global Securities Markets, responsible for the global product marketing of all equities and fixed-income products. Hubert holds an MBA from Columbia University and a BA in Economics and German from Rice University. 

You recently served as the sell-side advisor to SkySwitch. Tell us about the deal process.

The SkySwitch deal process was divided into standard deal presentation, documentation and preparation including the building of a comprehensive virtual data room with over 6 GB of corporate documents and information which facilitated an extensive due diligence process. The other and more difficult part of the SkySwitch deal with managing the vastly different agendas of the various stakeholders. We went through several deal processes with three potential buyers and on the third attempt we were able to bring all deal participants together for a successful outcome. The multiple processes took in aggregate two years to complete but valuation continued to grow during the process.

Do you expect continued consolidation in the space?

Yes, the Telecom space is structurally, shifting from onsite / in-office infrastructure to cloud-based services. This structural shift is driving great growth for those firms that can facilitate communication as a service. This structural shift is driving a grab for market share and that’s driving a substantial uptick in acquisition activity. 

How has the global pandemic affected these sectors?

The pandemic has helped drive the growth  in the Telecom sector as people use video and telephone means of communication as opposed to being in the office or traveling.

What are your expectations for the VIOP and Telecom markets in 2021?

For the reasons above - new structural environment and the move from Office based infrastructure to the cloud will drive growth. Also, due to enhanced use of Telecom due to the pandemic as well as new enhanced bandwidth such as 5G, I think 2021 will be another good year for telecom. 

Tell us three things that most people don’t know about Hubert Holmes. 

1. 1. I am a pilot
   2. I love fly fishing
   3. I come at investment banking from having been a user of banking services in my prior businesses not because I have previously been a banker.

“I am cautiously optimistic and believe 2021 could be a monumental year for the entire cannabis industry.”

Each month, Charles Town Holdings profiles a member of our investment banking team. This month we get to know Garrett Hale.

Garrett leads CTH’s focus on the Cannabis & Hemp Markets. Previously, Garrett was with Roth Capital Partners, advising and providing  capital formation for growth-stage private companies in verticals including technology, software, healthcare, med-tech, cannabis / hemp, and consumer sectors. Before that he founded the San Diego Trade Organization, SD Sport Innovators in partnership with NBA Hall of Famer, Bill Walton. He led SDSI’s mission to provide capital formation, mentorship, and networking opportunities to sports and active lifestyle companies in Southern California while growing membership to 80 + companies, ranging from service-sector providers to large sports-centric organizations and companies. He is a graduate of Southern Methodist University. 

Tell us about your work in the cannabis space in 2020.

This year has been all about the slow and steady approach as the Cannabis industry has gone through its ups and downs. Debt and M&A deals dominated the industry for much of the year as equity investors were meticulously looking for value opportunities as valuation slowly came back down to realistic levels. I’ve worked on an array of deals this year that include capital raises for a Texas-based vertically integrated medical license holder looking to become the major player in what should be one of the biggest cannabis markets in the US, a secondhand smoke filtration technology company that has created a new product category, a dominant CA  retailer looking to bolster its already impressive dispensary footprint in California, and advising a few clients on a M&A opportunities around the country.

This past election is going to bring significant change to the Cannabis space. What do you expect to see in 2021?

I am cautiously optimistic and believe 2021 could be a monumental year for the entire cannabis industry. The “green wave” continues to sweep the nation as five additional states (AZ, MT, NJ, SD, MS) passed pro-cannabis legislation bringing the total to 44 states having some sort of pro-cannabis legislation (adult-use, medical-use, and or CBD oil only).  According to recent cannabis industry statistics, about two-thirds of the population supports Federal legislation of marijuana. President-elect Joe Biden has said he would support Federal decriminalization of cannabis, Vice-president-elect Kamala Harris sponsored a previous version of the MORE Act in the Senate plus openly supports its descheduling, a friendly or at least non-hostile Department of Justice and Attorney General, and if the Senate were to flip (depends on Georgia Senate seats run-off results) to Democratic majority you would have all branches of the government become pro-cannabis possibly resulting in federal descheduling, banking reform, decriminalization, etc. As you could imagine this would be great news for all investors looking at cannabis opportunities as the barriers to entry would be knocked down as it would become federally legal to invest in the space, the US public exchanges like the NYSE and NASDAQ would eventually allow cannabis companies to list thus giving investors a path to liquidity they never had, and strategic investors like big Pharma, Big Tobacco, Big Beer, etc would have the ability to make acquisitions / investments in US cannabis companies. A recent Forbes headline said it best, “It’s Time To Admit: Drugs Won The War On Drugs.” 

What changes do you expect within the banking system and how the industry is regulated?

Cannabis specific banking reform is a must and would pave the way for cannabis businesses to gain access to traditional Financial Services, which would be a game-changer for the industry as most marijuana businesses deal primarily with cash. The latest COVID-19 relief bill contains the SAFE Banking Act which would decrease the national deficit, increase tax revenues at both the federal and state levels, help public policy, and does not cost the government anything… It’s a no-brainer. Tax revenue from cannabis will be key to helping states recover from COVID stimulus spending. Like everything in cannabis, it’s going to take time and patience.

Cannabis is a very large industry. What are some of the sub-sectors in the space that offer the most opportunity?

A few areas of opportunity within the cannabis industry to keep an eye on:

1. Personalized cannabis consumption—cannabis has so many health benefits however, like any drug, it affects people differently, so personalization is key to gaining new users and holding on to current ones
2. Expansion of legalization —  additional states coming online means new opportunities throughout the value chain
3. Delivery Tech—people want their product quickly and securely
4. Brands — no dominant players, highly fragmented state to state, brand authenticity is important to users

Tell us three things that most people don’t know about Garrett Hale.

1. I’ve been microdosing cannabis for years
2.  I’m a big proponent of collaboration
3.  I’m a family man as I believe that’s the most important thing in life.