Once upon a time, Michael Carter had a client who was much like his fledgling firm ”“ reliant on a single customer for revenue and needing to branch out fast.
In the 25 years since, the company that would evolve into Carter Morse & Mathias has helped other businesses raise cash or find buyers across a broad swath of industries. The firm”™s impressive track record is recorded on the walls of what remains a small, five-partner boutique investment bank housed in a modest three-decker just off the beaten path along the Old Post Road in Fairfield.
Veritable time capsules of notable mergers and acquisitions are locked in Lucite on tabletops and bookshelves throughout the firm that employs a “bullpen” layout with the offices shared by the partners and the doors open.
The diversified clients have included Pitney Bowes, Saab Aircraft AB, Bear Naked, Butler Hill Group L.L.C., Cranston Print Works, Dinex and Alterman Transport Lines.
Launched in an era when the term mezzanine was more likely to be inferred as a building level than a bank loan, in a quarter century of business Carter Morse & Mathias has kept pace with the bewildering array of sophisticated financing options available to smaller companies today.
Not that every deal has gone as it could have, if hindsight is 20/20 as the saying goes.
“The most bizarre one was that we were about to close a deal on Monday ”“ it was a pet retailer ”“ and Friday night ”˜20/20”™ runs a special on ”¦ puppy mills,” Carter said. “We didn”™t have that situation, but it didn”™t matter. Monday morning I get in and there”™s a message from the big buyer saying did you see ”˜20/20?”™”
After graduating from the University of Rochester, Carter spent a few years working in his father”™s trade ”“ women”™s lingerie ”“ before joining JPMorgan Chase & Co. in middle-market lending, in the leveraged buyout buildup of the 1980s. He soon made up his mind to strike out on his own.
“There was a whole host of companies that we kept saying ”˜no”™ to,” Carter recalled. “”˜We don”™t do that; you”™re too small; you”™re too green; wrong industry;”™ etcetera.
“There was a lot more the banks were doing,” Carter said. “Banks were putting in things like interest rate swaps. That was bold back then. They were just starting to do ”˜airballs,”™ you know, lending beyond the asset value ”¦ Innovation was starting to come into the marketplace. And then you had mezzanine markets just starting to open up, so you had a lot of options. You had customers who didn”™t know at all how to go about doing it, and you had a tremendous need.”
Ironically, starting an investment bank turned out not to be real capital intensive ”“ unless you count the opportunity cost.
“I went 12 months without closing a deal, and basically the life savings that I had ”“ not that it was so much ”“ was down to zero,” Carter said. “It was bad the first year. Don”™t forget, October 19th (1987) was only four months away, so that didn”™t help.”
Carter”™s most interesting deal involved a software company largely selling to one client, a major hurdle to finding any takers. Eventually, an Australian buyer surfaced which saw the business as a way to break into that one huge customer; with Carter, Morse & Mathias”™ client diversifying its customer base and expanding overseas.
“So at the end of the day, this company that was worth practically nothing, the owner could make almost $20 million,” Carter said. “It was something that really couldn”™t have happened without a banker like us. You had to be very, very experienced. The private equity guys said, ”˜Wow, that”™s creative.”™ The lawyers in the room said, ”˜Wow, that”™s creative.”™ It was a ”˜wow”™ type of structure ”¦ in a transaction fraught with risk.”
