Middle-market special report

Mapping the middle market   Davis Graham & Stubbs   Financo   Boston Meridian Merchant Banking   Castle Creek Capital   Meridian Group   Brynwood Partners

The eight-year-old firm is the brainchild of J.C. Raby and John P. Siracuse, both veterans of Boston's technology scene. "We looked out in the world and said a third of the Nasdaq doesn't have research coverage," Raby recalls. "We're pretty sure they're not going to have quality M&A advice because bulge-bracket M&A advisers usually rely on a research arm to source ideas."

Boston Meridian, located about 23 miles south of Boston in Mansfield, Mass., employs seven, including four partners, and focuses on the "sub-$300 million market." Its average transaction size is around $50 million.

Raby, 39, had been a senior executive for San Francisco tech bank Thomas Weisel Partners (now Stifel Financial Corp.), where he ran the firm's Boston investment banking group. Siracuse, 45, had been a managing director at San Francisco's Robertson Stephens, where he led its East Coast software, Internet banking and financial sponsors group. (Robbie Stephens was shuttered by parent FleetBoston Financial in July 2002.) A month after Boston Meridian was founded, in November 2003, Raby tapped a former teammate from his college crew team and longtime colleague, Garrett Palm, 39, who became principal and COO.

"We mostly deal with growth companies," Raby says. "Most of our clients are growing quickly. Most of the businesses have at least $10 million in revenue or more."

The firm averages three to five deals a year, mainly M&A and capital raising, though it also provides valuation and fairness opinion services. 2010 brought four deals, and there's been one in 2011. Boston Meridian recently advised Milpitas, Calif., network security business Pari Networks when it was acquired by Cisco Systems Inc. for undisclosed terms, and it organized a $14 million Series A round of venture funding for cloud-computing software company Adaptive Computing Enterprises Inc. of Provo, Utah, closed Sept. 14. Intel Capital, Intel Corp.'s investment arm, served as the lead on that deal, with Tudor Ventures, the private equity and VC unit of Tudor Investment Corp., and Epic Ventures.

Observers emphasize how important it is for advisers to master the technology ecosystem. John J. Egan III, partner and co-chair of Goodwin Procter LLP's technology companies group, emphasizes that tech companies need to think hard about which original equipment manufacturers they agree to partner with. "OEMs, you know, are going to be the most natural buyers," he says. "If you partner with the right people, you can drive a more valuable acquisition. With the wrong partner, you can actually discourage people from bidding on you."

"If you take your large OEM today, most of them actually exist to buy companies versus develop and launch organic products," notes Raby. "Their value is to have a 5,000-person sales force as a distribution arm."

Boston Meridian does a healthy chunk of work outside New England -- 25% of its deals involve an international party or component from abroad. Much of the Pari deal was driven out of Hyderabad, India. Raby notes, however, that New England is still a vital part of the U.S. economy. "It's where a lot of the technology and innovation still happens. A lot of venture capital and private equity dollars are invested or emanate [from here]," he says. The area's academic institutions are fertile grounds for budding entrepreneurs.

"There's great technology innovation coming out of the schools like the Massachusetts Institute of Technology. There's great management talent obviously coming out of the business schools like Harvard," he says.

Adds Egan, "I think some of the [subsectors], like security and mobile, continue to be very strong."

Raby notes that vibrant tech entrepreneurship extends to New York and Washington, where the focus tends toward e-commerce, digital advertising and communications. "Innovation on the East Coast generally happens in the New York, Boston, Washington corridor," Raby says. "We're down in New York for many e-commerce-type of initiatives and in D.C. for many software and communications equipment opportunities."

Raby notes that many e-commerce shops in New York head to Boston "to get their checks filled. There's a smaller pocket of venture money in New York."

New England trails only Silicon Valley in venture capital resources -- in fact, Raby is looking for partners for a new office in the Valley.

"That's why you see a lot of firms like ours with a Boston and Northern California presence. Boutique tech firms tend to follow the money," he says.

Large investment banks have scant economic interest in banking small and midcap companies, Raby says, adding that his partners typically handle every deal the firm takes on as a unit. "You may have a sub-$200 million sale, so it doesn't fit their economic model because they can't get the fee basis that they want from that type of deal. They have big overheads to sustain. They'd rather keep their best deal teams doing $2 billion deals."

Tech advances should continue to drive middle-market deals. "There was the evolution from mainframes to client servers, there's the evolution of PCs. I think the whole cloud-computing thing is really going to take off," says Egan.

"We're entrepreneurs just like our clients," says Raby. "Every deal we take on has to be one we get done."