Fintech companies being powered by global money sources says dealmaker

Vermilion was a recent success for the Quest team, above, from left: Duncan Thorburn, Graeme Henry, Marcus Noble, Scott Carnegie, Stuart Mitchell and Andrew Hope. Picture: Stewart Attwood

The $67 million sale of London-headquartered Vermilion Software, a long-standing client of Quest and market leader in client reporting software to the global asset management industry, to Nasdaq-listed FactSet Research Systems Inc brought increased visibility to a firm which has traditionally flown somewhat under the radar in terms of publicity.

This is despite Quest building a reputation for advising on a wide range of fund-raising, restructuring and merger and acquisition (M&A )activity in Scotland and in other key global markets.

While you get a definite “old school” feeling at the Marcus Noble-founded firm on Walker Street in Edinburgh’s west end, the characteristics of this classic corporate financier are balanced with a dynamic, almost ruthless streak that has seen Quest take an impressive number of complex deals over the line in recent times.

The sale of Vermilion Software was a major boost for Quest

In 2016, the firm advised on 11 deals with a cumulative value of more than £100m – the highlights being Vermilion and the Series B financing round of PureLiFi, led by Singapore sovereign wealth fund Temasek.

PureLiFi is a former Edinburgh University spin-out which is cornering the global LiFi (light fidelity) market with pioneering technology developed in Scotland.

Although, as Quest director Stuart Mitchell points out, corporate finance is not always about the cut and thrust of deal-making and can often be more about the slow burn: “If you look at Vermilion, there was quite an extended timeline to our engagement that in many ways encapsulates what we think are the unique elements of our offering.

“In addition to leading early fundraising rounds, we helped to shape the strategic direction of the company, supported geographic expansion and the rapid scaling of infrastructure and revenues,” he says.

With a further three fintech deals in the pipeline – two in the UK and one in the US, one of which Noble describes as being “twice as big as Vermilion” – Quest is particularly well-placed to give a considered view of the Scottish fintech scene and how it fits into the wider, international context.

Noble highlights a long tradition and continuing prowess in financial services as cards in Scotland’s favour as we look to build critical mass in what is still, admittedly, something of a fledgling fintech scene in Scotland: “Scotland is a great place for fintech in lots of ways,” he says.

“It’s Europe’s fourth largest financial centre, with some of the finest financial institutions and all the expertise that comes with that.

“While there has been a definite change in dynamics and power bases have moved to London, there are a ton of people still based in Scotland with world-class expertise and global understanding of financial markets.”

Traditional finance

Noble lists a number of people who have turned poacher from gamekeeper and made the move from a more traditional finance background into fintech start-up world.

“It’s funny when you’ve got guys solving the problems of their former employers,” says Noble.

Turning to trends in financing and corporate transactions, including in the fintech sector, Noble suggests more Scottish companies need to look outside the UK for investors.

“The scale and international make-up of the deals we advised on in 2016 illustrates that Scotland and UK-based companies must go global to find the investors who can help support their growth ambitions,” he says.

Quest has one very notable differentiator in the marketplace which is its ability, if required, to get involved on the operating side of its clients’ businesses.

Mitchell becomes animated talking about Veropath, the Edinburgh-headquartered specialist in telecoms expense management that helps multinational corporates save tens of millions of pounds across the world.

It’s a company where Mitchell is also the chief financial officer. “Veropath is a business we’re really excited about,” he says.

“It counts some of Europe’s largest retailers and financial institutions among its client base and it has an agile team that is penetrating the world’s largest markets with a product that is nothing short of second to none.”

Quest itself has a lean and agile team, another differentiator, according to Mitchell: “Our clients and intermediaries tell us that our size is an advantage because they get a high-quality, nimbler team than is on offer from the larger firms who do corporate finance. Our clients know we’re living and breathing it every day, we do not have the luxury of winning work by virtue of being a regional office of a global accountancy brand.”

The lean and agile approach, so much favoured by the world’s most successful technology start-ups, hasn’t stopped Quest from bringing talent into the team when it has found people and skill sets that can help drive strategy and performance.

Earlier this year, Graeme Henry, a former head of restructuring at DLA Piper and head of banking at HBJ Gateley who is perhaps best-known for his role in the rescue and takeover of Heart of Midlothian FC joined the fold and is now working alongside Noble, Mitchell, doyen of the Scottish investment scene Scott Carnegie and former Johnston Carmichael director Stephen Paterson, who joined the firm in 2015.

So what can Scotland do to become a more important player in the global fintech order?

Noble thinks that we remain too insular in Scotland and that because the world is not going to come to us, we have to visit the fintech centres where things are moving much faster and are at much greater scale than in Scotland.

“I’m just back from a US trip,” he says. “If you’re not on a plane regularly to meet the top guys in places like Silicon Valley, New York, Singapore, Hong Kong and London, then you’re not in the picture.

“Scottish businessmen and advisers are making real waves on the international scene but you can’t make a difference if you’re sitting in your brass-plated office in the New Town waiting for the phone to ring.”

Noble adds: “Our companies are evolving and embracing technology like never before.

“They are modifying how they behave, how they interact with their stakeholders and their expectations of service providers are ever-changing.

“We believe we are very much at the leading edge of that change and are excited for the years ahead.”

Noble and Mitchell admit Scotland’s leading industry players face not insignificant change to their operating environment, whether that be by way of transformative regulation or constitutional overhaul, but agree that for companies who have global ambitions they will always face these kind of challenges on the corporate timeline.

“One of the brilliant things about ambitious technology companies,” says Noble, “is that they usually have a built-in chip to face up to serious challenges and threats to their business on an almost daily basis and, as they say, only the brave succeed.

“Of course, we also think it helps to have great advisers on your team.”

For more information visit Quest.