Mark Horvick & Northborne Partners

Introduction

The Business Planning class is a law school course designed to help law students become trusted legal advisors and business advisors. The class is organized into a number of case studies that follow the unique paths of successful entrepreneurs and businesses in their quests to make their marks in their respective industries. These case studies tell important stories that teach students about the underlying concepts behind forming, structuring, financing, and even selling a successful business.

This case study focuses on Northborne Partners, a sell-side investment bank. The class for Northborne was held on Thursday, September 7, 2023. Our guest speaker was Mark Horvick (JD-MBA ’07), co-founder of Northbourne.

What is this case study about?

This case study is about a lawyer-turned-investment banker who started a successful sell-side investment bank. Mark Horvick co-founded Northborne Partners in Minneapolis to specifically address the advisory needs of companies in the middle market that wish to be purchased through mergers and acquisitions (“M&A”). Although Mark had ten years of investment banking experience when he co-founded Northborne Partners, he started out as an M&A associate in Kirkland & Ellis‘s private equity group.

This is the story of how Mark’s journey from lawyer to investment banking, including the specific niche that Mark and his partners currently serve. In addition to telling Mark’s story, we also survey the intricacies of mergers and acquisitions and the role occupied by a sell-side investment bank such as Northborne. Finally, we’ll dive into Mark’s transition from a lawyer to a sell-side investment banker and examine how his legal background may have helped him along the way.

This case study is organized into the following five sections:

1. The Road North: The Story of Mark Horvick is an introduction to Mark Horvick and a biography of Mark’s life and career.

2. The Competitive M&A Industry covers mergers and acquisitions as an industry and the roles played by investment banking and private equity firms.

3. The Process of Selling a Business in a M&A Transaction takes the reader through the process of selling a business in an M&A transaction, highlighting the role that Northborne plays through it all.

4. The Northborne Business Model explains how Northborne has succeeded as a sell-side investment bank, including distinctive strategies to better serve clients and outcompete its peers.

5. How a Legal Background Complements a Career in Sell-Side Investment Banking connects Mark’s success as a sell-side investment banker to his background as a lawyer and discusses what law students can take away from Mark’s career trajectory.

1. The road North: The story of Mark Horvick

A. Overview

Before co-founding Northborne in 2021, Mark Horvick made his mark on the M&A field both as a lawyer and a banker. He spent the first five years of his career as an attorney at Kirkland & Ellis, the largest law firm in the world by revenue, where he focused on representing private equity clients on M&A transactions and other corporate matters.

Mark left law practice approximately a decade ago to become an investment banking executive in Minneapolis, working at Greene Holcomb Fisher, Quarton International, and then Cowen & Company. Together, these experiences endowed Mark with a uniquely well-rounded business acumen. His business acumen and strong Minnesota roots made him exceptionally qualified to start his own sell-side investment bank in Minneapolis, which has grown into the successful venture known as Northborne Partners.

B. Early life and education

Mark was born and raised in a small resort town in northern Minnesota. His parents were both schoolteachers. His father taught math, and his mother taught social studies.

Mark would go on to attend the University of Minnesota for his undergraduate studies, where he struggled academically. Thankfully, he “saw the light” after his sophomore year when he transferred to Augsburg University, a small liberal arts school in Minneapolis. In 2002, Mark graduated from Augsburg with his bachelor’s degree in finance.

Immediately after graduating from Augsburg, Mark moved down to Bloomington, Indiana, to start law school at the Indiana University Maurer School of Law. Mark excelled academically at Maurer (including earning the A* in Professor Henderson’s Business Planning class), which allowed him to obtain a summer associate position at Kirkland & Ellis. He graduated from Indiana University in 2006 with both a JD and an MBA.

C. Kirkland & Ellis

Immediately after graduating from Indiana University, Mark moved up to Chicago to start his career as an associate attorney at Kirkland & Ellis. Mark joined Kirkland’s private equity group, which was a unique opportunity at the time. Although many firms have robust private equity groups nowadays, when Mark started his career, Kirkland & Ellis was one of the only law firms that advised on private equity transactions.

As a private equity associate, Mark worked with partners representing high-profile private equity clients. These clients had Mark assist in numerous M&A transactions, which kept him busy. In fact, he recalls billing about 2,300 hours every year.

After spending his first three years in Kirkland’s Chicago office, Mark spent his last two years at Kirkland in the firm’s Shanghai office. Kirkland moved Mark to its Shanghai office because one of the high-profile private equity clients that Mark had been working for had just opened up new offices in China. The partner who represented this client wanted an associate to be closer to these offices. Mark got the opportunity because the partner liked and trusted him.

D. Greene Holcomb Fisher

After two years in Kirkland’s Shanghai office, Mark wanted to come home. His wife, who also worked in Kirkland’s Shanghai office, started looking for new jobs back home, and several different employers started reaching out to Mark to see if he would return from China.

Among these employers were a number of investment banks. While Mark never put much thought into stepping away from the practice of law, he received an enticing offer from Greene Holcomb Fisher, a boutique M&A advisory firm based in Minneapolis. He accepted the offer, and in 2011, he moved back to Minnesota to start his career as an investment banking executive.

Mark remained at Greene Holcomb Fisher for more than five years. He thoroughly enjoyed his time there, as he recalls it being a “perfect fit” regarding the work, the culture, and the people. In fact, many of the bankers were former attorneys, just like Mark. He specifically recalls there being a strong sense of camaraderie among the 35 or so bankers at Greene Holcomb Fisher, which made it so that “everything [we did] move[d] the needle.”

E. Quarton International

Unfortunately, BMO Capital Markets, a much larger bank, acquired Greene Holcomb in 2016. When this happened, several bankers at Greene Holcomb Fisher quit. Mark thoroughly enjoyed Greene Holcomb Fisher’s smaller, tight-knit workplace culture. He did not want to be just another cog in the machine as he was at Kirkland & Ellis. As such, Mark also quit and started looking for the next opportunity.

It did not take Mark very long to find his next opportunity. A few months after BMO Capital Markets acquired Greene Holcomb Fisher, he joined Quarton International as a Managing Director. Like Greene Holcomb Fisher, Quarton International was another smaller firm providing merger & acquisition and capital raising advisory services to the middle market.

At Quarton International, Mark continued what he had started at Greene Holcomb Fishers. He thoroughly enjoyed his work as an investment banking executive and did not think twice about ever returning to the practice of law.

F. Cowen & Company

In late 2018, about two years after Mark joined Quarton, Cowen & Company, a much larger bank, acquired Quarton. This time, however, Mark decided to stay put. As a result, Mark spent about two and a half years as a Managing Director in Cowen & Company’s Minneapolis office.

After a couple of years with Cowen, Mark grew tired of working in a big bank. Mark notes that it is difficult to be entrepreneurial in a big bank, and much of the reason he enjoyed Greene Holcomb Fisher was that it was small enough that he could have some of that entrepreneurial ownership, something he greatly values in his career.

While the pandemic was still in full swing, Mark left Cowen to move on to something more entrepreneurial. That something would become Northborne Partners.

G. Northborne Partners

Mark co-founded Northborne Partners immediately after leaving Cowen in March 2021. He co-founded the firm with three others with whom he worked at Greene Holcomb Fisher. In addition to his three co-founders, two of Mark’s colleagues from Cowen joined him: Chris Klotsche, who is now a Vice President at Northborne, and Mike Hirschberg, who is now a Director at Northborne.

Two and a half years later, Northborne has grown into a firm of 24 bankers. According to the firm’s website, there are six Managing Directors, three directors, four vice presidents, five associates, and six analysts. The team is set up to complete more than 20 deals a year. As a Managing Director and co-founder, Mark prides himself on creating opportunities for those who work for him, even if that means they leave Northborne to do something else.

2. The Competitive M&A Industry

A. Overview

Mergers and acquisitions (M&A) involve transactions where either one company is merging with another or one company is buying another company. Buying and selling businesses has been an age-old practice. However, M&A in the modern era requires a lot of planning.

Although deal structures and transaction costs vary depending on whether it is a public or a private M&A deal, the overall process is similar. Companies merge or acquire other companies to create value for either strategic purposes or to create value by capitalizing on inefficiencies in the market.

Usual M&A deals involve investment bankers, M&A consultants, lawyers, and many other participants.

B. Investment banking

In general, starting a new investment bank is very cumbersome. The barriers to entry in the traditional investment banking industry, such as extensive regulations, competition, and capital requirements, make it hard to penetrate traditional investment banking. Because of these reasons, the traditional investment banking industry is dominated by a few big investment banks.

Unlike traditional investment banks, however, Northborne operates within a niche in the investment banking industry—sell-side investment banking. Because sell-side investment banking does not require a lot of capital or compliance with extensive regulations, it comprises a number of small sell-side investment banks, such as Northborne partners specializing in sell-side M&A.

At the most basic level, sell-side investment banks create value for sellers by finding optimal buyers for the target company. Northborne’s strategy is to focus on specific industry verticals where knowledge from one deal makes it easier to market to companies with overlapping issues.

3. The process of selling a business in an M&A transaction

Selling a business is a complex process requiring time and money. Unlike public companies, private M&A does not have an accessible market that matches buyers and sellers of closely held businesses. Entrepreneurs and business owners who are thinking of selling their business need professional advisors to find a buyer who is not only willing to pay a premium for the business but also likely to close the deal without backing out.

This is where a sell-side investment bank plays a role. According to Mark, the “private M&A market is the most inefficient market out there,” and it is Northborne’s job to find a buyer willing to pay the highest possible premium. For this exact reason, entrepreneurs and private equity firms hire Northborne Partners.

Once Northborne is hired on the deal, Northborne works with clients to enhance the marketability of their business. As seen in Exhibit A, selling a business is a long process. For example, the first stage involves Mark and his team working with the seller’s management team to discuss key value drivers and coaching the seller’s management to increase its marketability. During this stage, Northborne also creates detailed forecast models and attractive pitch decks to inform potential buyers about the business.

Once Mark and his team have finished the initial preparations, Phase I of marketing begins. (See Exhibit A). During this stage, Northborne will approach a hundred or so buyers. Buyers must sign a ceremonial Non-Disclosure Agreement (NDA), also known as a confidentiality agreement, before they can hear the pitch. Please see the appendix for an example of a confidentiality agreement and a checklist for such agreements from Westlaw.

After the initial pitch, Northborne will facilitate follow-up calls and gather a pool of interested buyers. According to Mark, it is his team’s job at this stage to get buyers invested in the deal and spend money on initial due diligence. The first set of bids is due at the end of this phase.

As seen in Exhibit B, for a given deal, the first set of bids usually have a broad range. For example, the deal in Exhibit B had initial bids from buyers ranging from $75 million to $250 million. For the deal shown in Exhibit B, there were 38 bidders, and each bidder valued the seller’s business differently.

Mark and his team will sort the bids from the highest to the lowest and evaluate the seller’s options. In Exhibit B, there were a number of buyers that were strategic purchasers versus financial buyers such as a private equity fund. According to Mark, the highest bidder is not always the best purchaser, as it is equally important to evaluate other aspects of the purchaser’s bids, such as how it plans to finance the transaction.

Once the first set of bids arrives, Northborne will engage in the second marketing phase. See Exhibit A. It will strategically focus on a small number of bidders who are best positioned to close the deal. For example, in the deal shown in Exhibit B, Mark believes that Northborne focused on a group of buyers between four and ten. In this phase, the competitive bidders will have access to more detailed due diligence, and the seller’s management and third-party vendors will have access to the data room.

By the end of the second marketing phase, Northborne usually receives a Letter of Intent (LOI) from the buyers. Please see the appendix for a form letter of intent from Westlaw. According to Mark, “You want to keep maximum leverage the entire time, … and so you want to avoid being exclusive.” At the end of this phase, Northborne will receive a marked-up purchase agreement and negotiate with two to three competitive bidders simultaneously.

Once everything is finalized, the seller and buyer will move on to the last phase—exclusive negotiations. Once the exclusivity agreement is signed, the buyer has much more leverage than the seller. Finally, closing is the last and most important step in this process. It is very important for Northborne to ensure that the deal closes because Northborne will earn its 3% commission only if it closes.

A complete transaction usually takes six to eight months from the initial preparations to the closing. See Exhibit A. After every successful closing, the cycle begins all over again, with Northborne taking on the next deal. Once a deal has closed, Northborne will market the successful closing and send marketing material boasting the deal to private equity firms. It is a continuous cycle of marketing and selling.

Northborne partners spend 60-70% of their time marketing and developing new clients. Mark says he is “never really not working,” but most of his work is business development, including playing a lot of golf, and “that’s work.” For Northborne, every transaction will have new and different clients, but the process will remain the same. Northborne will undertake similar steps in every deal and help business owners with their once-in-a-lifetime transactions.

4. The Northborne Business Model

A. Overview

Selling a business, for most business owners, is a momentous event. It requires a lot of time and effort from the management, and more importantly, it requires hiring experts to help advice on the sale of the business—from lawyers and tax advisors to investment bankers. In the main text for Business Planning, author and law professor Dwight Drake explains, a “successful business advisor is not a ‘generalist’ who lacks specific knowledge. It is a person with a broad base of specific knowledge that positively impact[s] the decision making.” Dwight Drake, Business Planning: Closely Held Enterprises pg. vi (5th ed. 2018).

Like Dwight Drake’s observation, Mark and Northborne have capitalized on providing highly sophisticated M&A advice to entrepreneurs, families, and other private business owners. Through advising clients on their once-in-a-lifetime transactions using decades of specialized experience, Mark has led Northborne to become a client-focused firm that is much more than a regular investment bank.

B. How Northborne makes a mark in investment banking

Northborne Partners has strategically positioned itself in the investment banking industry to specialize in sell-side M&A transactions. Northborne operates in a very niche segment of the investment banking industry. It offers sell-side advisory services to companies that are generally valued between $50 million and $500 million. Since its inception, Northborne has advised on deals ranging from $18 million to over $800 million.

Unlike regular investment banks focusing on both buy-side and sell-side transactions, Northborne’s narrow focus on sell-side transactions requires low capital injection. According to Mark, transactions on the buy side require a larger team with various areas of expertise to conduct due diligence.

Compared to that, most sell-side private equity transactions do not require a large team. On the sell side, as long as an investment bank has a good process, a small team can facilitate a large transaction. In Northborne’s case, with a twenty-five-person team, it closes more than twenty deals yearly. Mark says that the firm accomplishes this Northborne successfully closes more than 20 deals every year without sacrificing senior-level attention. According to Mark, this is made possible by having a “good process.” As such, a small investment bank like Northborne can exist without requiring intensive capital injections.

Moreover, unlike Northborne Partners, all bigger investment banks have minimum fee requirements. Because of Northborne’s focus on deals ranging under $500 million, it can undercut bigger investment banks and provide higher quality service in that segment. Unlike big-name brands such as Goldman Sachs, Northborne’s single-minded approach—sell-side M&A transactions—does not create any conflict of interest; this allows Northborne to focus on the best possible service and outcome for every transaction and provide top-notch quality service.

Additionally, Mark believes that business has become less driven by relationships and more driven by experience, especially in the private equity space. In other words, instead of relying on name recognition or the size of the investment bank, clients choose investment banks with previous experience in conducting deals within a specific industry or certain verticals.

Mark and the team at Northborne have internalized this belief of business being driven by experience in specific industries. For example, according to Mark, one of the partners at Northborne focuses on railroads and “has practically sold every railroad in the United States.” Each member maintains an active dialogue with key strategic buyers and industry-centric private equity firms.

Overall, Northborne focuses on three sectors:

• Food and consumer
• Healthcare
• Industrials.

Within these verticals, Northborne’s clients range from private equity firms selling their portfolio companies to entrepreneurs and families selling their closely held businesses.

Although business in today’s age is driven by experience, relationships are still very important for Mark and his team. Mark and his partners have been friends for over ten years and have a close-knit relationship with all the employees at Northborne. Additionally, when asked what attributes someone needs to become a partner at Northborne, Mark’s answer was simple, “If my wife doesn’t like him [or her, partnership] probably ain’t happening.”

5. How a legal background complements a career in sell-side investment banking

A. Overview

When Mark decided to leave Kirkland and pursue something new, he did not necessarily have in mind a career in investment banking. However, considering all the qualities of the legal profession that would aid a lawyer seeking to enter the investment banking industry, the fact that sell-side investment bankers recruited Mark makes a lot of sense.

For one, Mark’s time at Kirkland forced him to develop exceptional attention to detail to parse through dense legal documents to find virtually all substantive and stylistic errors. Mark believes his attention to detail has been instrumental to his successes as an investment banker, and he believes he would not have achieved such sharp attention to detail if he had started off in a different industry.

Moreover, Mark’s time at Kirkland gave him a strong foundation in M&A and private equity, allowing him to make an immediate impact at Greene Holcomb Fisher. His time at Kirkland taught him about the legal side of M&A and private equity, which helped him stand out since most of his colleagues had gone into investment banking through a more traditional route. Having that legal expertise is something that Mark believes some of the biggest sell-side banks will give lawyers a lot of credit for if they are seeking sell-side investment banking positions.

However, lawyers interested in shifting to investment banking should know there are some challenges to it. Namely, it is important to recognize that only the sell-side investment banks, for the most part, will appreciate a legal background. According to Mark, an investment bank like Goldman Sachs will not pay much attention to an applicant’s legal background.

Law students who are interested in investment banking should work toward transactional careers that will provide them with exposure to finance, M&A, and private equity. They should also continue to expand their networks, connecting with attorneys and bankers, especially bankers with legal backgrounds.

B. Our Takeaways as Third-Year Law Students

As third-year law students who have been fortunate enough to secure a position at a law firm following our graduation in May and our bar exam in July, our focus has been on becoming the best lawyers we can possibly be. In other words, we have not been overly concerned with how we would fare in a different industry.

After hearing Mark’s story, however, we can’t help but wonder what it would be like to lateral into a different industry. If we develop entrepreneurial business aspirations during our time as lawyers, we think it could be incredibly useful to gain expertise in a different industry. After all, the best entrepreneurs are well-rounded individuals with a host of knowledge in more than one industry, which is exactly what has made Mark such a successful entrepreneur himself.

As somebody working toward becoming a transactional attorney who will constantly work alongside bankers in multi-million dollar lending transactions or M&A deals, Mark’s story has been a helpful reminder for us. We may be focused on becoming the best transactional lawyers we can possibly be right now, but we should always keep in mind the business side of the transactions we will be a part of. In an industry as client-driven as the law, it will be crucial for us to put ourselves in the client’s shoes from the get-go. This is what Mark was able to do, and he did it so well that he was able to become the client himself.

Conclusion & connection with other case studies

The stories of Bob Meltzer’s VisaNow, Chamberlin, and PactSafe have a lot of commonalities with Mark’s Northborne Partners. All three companies were successful businesses that were built on technological innovation. All three stories resulted in successful acquisitions.

In the case of VisaNow, Bob Meltzer started his business with an initial $10,000 capital injection and built a successful business that was valued at $300 million by the time of his exit. From Northborne’s perspective, VisaNow would have been a perfect client.

Through its smart tech products, Chamberlain created value through successful patents and revolutionized residential and commercial garage doors. Chamberlin was acquired in a strategic acquisition by Blackstone for $5.1 billion. Although Chamberlin’s deal amount would have been on the upper end of Northborne’s usual deals, Northborne could have assisted in Chamberlin’s acquisition.

Finally, Pactsafe, another legal tech startup that quickly revolutionized contracts, was successfully acquired in a strategic acquisition by Ironclad—another contract management software company.

All three businesses fit the overall profile of Northborne clients. Northborne could have used its expertise to create value and help with the acquisitions for all three companies.

Appendix

A. Form Confidentiality Agreement – Also known as non-disclosure agreements (NDAs), confidentiality forms are commonly used by sell-side investment banks where engaging with potential buyers.

B. Checklist for Drafting Confidentiality Agreements – Checklist to assist lawyers and investment bankers to draft effective confidentiality agreements or Non-disclosure agreements.

C. Form Letter of Intent – LOI is a document outlining the understanding between the buyer and seller showing their intent to formalize a legally binding agreement.

D. Memorandum of Understanding for a merger – Similar to a letter of intent, a memorandum of understanding is a nonbinding agreement that states each party’s intentions to take action, conduct a business transaction, or form a new partnership.