Nice multiple for Orion; very nice

Now that the deal is finally on the wire (see prior post “Orion / Macquarie deal“, August 28-07), the green-eyed types across Bay Street and Howe Street will start to try to figure out who got what part of the $147 million purchase price.

You won’t find out those secrets from me. The only thing that is public knowledge and worthy of discussing is the book multiple that Macquarie is paying to grab the platform and the 25 or so key producers at Orion Securities. Book equity jumps around at all independent brokerage firms, and is a function of where they are in the fiscal year, their dividend policies, etc. Assuming the firm had $40 million book equity, that’s a 3.68 multiple. If capital had been kept as low as $30 million, it’s almost a 5x multiple. Wow.

To think that Burns Fry achieved a valuation of about 2.4x book when they were acquired in the mid 90s. Was Newcrest acquired by TD Securities for much more than 3x book?

Today’s transaction is the culmination of years of hard work by dozens of people. Special recognition has to go to Calgary’s Dan Cristal and the Toronto-based mining team for three or four years of tremendous success. Vice-Chairman Mitch Greenspoon gets a hat tip for his stewardship, along with Dan and ECM boss Marilia Costa during some tough, tough times in 2002 and 2003.

And VentureLink’s John Varghese gets the smart investor of the year badge for having the sense to invest in Orion when other, far larger institutional investors, pension funds and life insurance companies couldn’t see what a great opportunity the firm was.

I showed up at Orion in January 2000 to do tech deals, only to have the NASDAQ fall from 5000 to 1200. But we made it work, with lead table results that still hold their own today. Lots of great tombstones and deal mementos are sitting in a box somewhere: RIM, Geac, Certicom, Open Text, Duke Energy, Wi-LAN, MKS, etc. Many lifelong client and colleague friendships were forged during those five exciting years. Sometimes too exciting.

Congrats to our friends for a fabulous deal. It is a very exciting opportunity. Being able to punch on the same level as GMP and the Canadian banks will be a treat, and is a testament to all the effort that folks have put into the place since the mayhem ended in 2001.

Hats off.

MRM

(I left in December 2004 to do the Wellington Financial thing full time {once Ken and I had raised $83 million in LP money for Fund II; Fund III was capitalized with a new $125MM fund in 2006}, and will always be grateful to the people there – present and alumni – that supported my efforts. As they write in highschool yearbooks: You know who you are.)