FORETELLING CHANGE
Over the past decade, the aerospace, defense and government IT/services sector has experienced remarkable change. Companies that once led have faded away while others not on the radar screen have, through acquisitions, reshaped and reinvented themselves to dominate a new marketplace.
Leading the way through these stormy, churning seas, Quarterdeck Investment Partners, LLC has been at the forefront of the trends and strategies that have shaped the sector. In a 1990 article by Chairman and founder Jon B. Kutler in Aviation Week & Space Technology magazine, Quarterdeck countered the industry's diversification trend and called for an "aggressive merger and acquisition environment" to eliminate redundant capacity in the sector. A few years later, as companies scrambled to consolidate in order to survive, Quarterdeck was born of the very trend it had predicted.
Staffed with a team of talented and knowledgeable industry executives, Wall Street dealmakers and former military leaders, Quarterdeck's hallmark quickly became its singular focus and intuitive understanding of this sensitive sector. As a result, Quarterdeck developed a unique culture and structure that permit it to provide the same high quality of service to entrepreneurial and middle-market enterprises that it does large, global industry leaders.
MANAGING IMPLICATIONS
As the initial frenzy of aerospace and defense merger and acquisition activity cooled, Quarterdeck again looked out to the horizon. With profiles in periodicals like Business Week, Washington Technology and Aerospace Daily, Quarterdeck called for both companies and investors to look for mid-sized acquisitions in the fragmented government IT/services sector.
In February, 2000, as the Nasdaq hit its peak, a Quarterdeck-authored article on CBS MarketWatch warned against the enthralling "dot.com" mania and advised prudent investors to balance their portfolios with undervalued defense stocks. Within weeks the bubble burst and the "old economy" defense stocks rose to prominence.
In 2001, Quarterdeck entered into a broad strategic alliance with Jefferies Group, Inc., to establish a cross-shareholding agreement and formed Jefferies/Quarterdeck, LLC. This provided Quarterdeck a comprehensive array of capital markets products to an industry that has typically not accessed public markets for growth. In less than a year, the capital markets opened in an unprecedented manner, with more public offerings of equity and debt in the first two quarters of 2002 than the prior decade combined. And, by mid-2002, valuations peaked and, in many cases, have been off by about a third.
This large-scale trend spotting is a magnification of the "behind the scenes" advice and guidance that Quarterdeck provides all of its clients on a daily basis. And it is that quality of counsel that gave running starts to the federal marketplace and many of the public IT companies that raised capital at remarkable valuations since early 2002. While new entrants "discovered" this sector during the first part of the year, Quarterdeck was already warning clients that this new found interest of the capital markets was part of "Wall Street's cyclical ability to fall in and out of love with this sector 18 months every decade."
A DECADE OF SUCCESS
Quarterdeck's knowledge, experience and realistic approach provide its clients a level of service vastly superior to that of the "me too" players chasing the latest hot trend. It is a product of an inherent understanding of the nature of the companies in the sector, and long standing relationships with its key players-relationships that have lasted through bull markets and down cycles.
This specialization and dedication have attracted nearly all of the sector's Fortune 500 companies to seek investment banking relationships with Quarterdeck. More importantly, this singular focus has provided Quarterdeck with the intangible and invaluable insights that become apparent only when a transaction closes, and the client knows it got the best possible deal.
As Quarterdeck has gained the trust of the sector's leaders it has enjoyed its own growth and success. Last year Quarterdeck also opened its London office, its first permanent overseas presence. This investment has been made in anticipation of the long overdue consolidation of European aerospace and defense companies.
Quarterdeck closes its first decade, having recently been named as The Mergers and Acquisitions Advisor 2002 "Boutique Middle-Market M&A Firm of the Year," and opens a new chapter, as a wholly owned subsidiary of Jefferies Group, Inc., which acquired Quarterdeck at the close of 2002, providing Quarterdeck additional resources to navigate clients over distant horizons.
As proud as Quarterdeck is of its reputation, accomplishments and growth over the last 10 years, its greatest pride is in the accomplishments and successes of its clients.