John Kutler Started a Career in the Navy, but Now He Captains an Investment Firm
March 28, 1999
Jon Kutler grew up in wealthy Scarsdale, N.Y., where most of his friends had their sights set on becoming lawyers, doctors and investment bankers.
“It seemed boring to do what everyone else was doing,” said Kutler, now 42. “I rebelled by joining the military.”
Kutler enrolled in the Naval Academy and spent six years with the Navy, including a stint as an anti-submarine warfare officer at Pearl Harbor.
But the world of investment banking was calling him after all.
“A telltale sign that I didn’t belong in the Navy came during the senior design project — we were supposed to design a ship from scratch,” he said. “Most kids did destroyers. My project was a 100-foot yacht.”
After getting an MBA from Harvard University and working at such Wall Street mainstays as Goldman, Sachs & Co. and Credit Suisse First Boston, Kutler started his own company, Quarterdeck Investment Partners, in 1993.
The firm, the name of which is a nod to Kutler’s nautical background, has offices in Washington and Los Angeles. It specializes in providing financial advisory services, such as advice on mergers and acquisitions, for defense-aerospace and information technology companies. An investment subsidiary, Quarterdeck Equity Partners, was founded in 1996; it owns interests in six companies.
“I chose investment banking because I liked the military model: hostile takeovers, high-pressure stress,” Kutler said.
He said Quarterdeck’s strategy is to seek deals that fall below the radar of the larger Wall Street firms.
“Dozens of investment banks are battling to do big deals,” he said. “I knew they would turn up their noses at small, mid-sized deals. There are far more of them, and there’s less competition.”
Washington is a good place to tackle those kinds of deals, Kutler said.
“We think the Washington area is one of the best and least understood markets” for mergers and acquisitions,” he said. “The large Wall Street investment banks may not think so — it’s not a billion-dollar market, it’s a couple-hundred-million-dollar market. The deal size plays right to our strength. And most are privately held companies. You have to find them, educate them, and nurture their confidence.”
Bob McKeon, who was Kutler’s boss at First Boston and later at the New York banking firm of Wasserstein Perella & Co., recalled Kutler as a meticulously organized and hard-working young employee.
The hard work has made him a power in the industry. “When people think of deals in the defense industry, he’s one of the first they call,” McKeon said.
Quarterdeck does about two dozen deals a year. Its revenue comes from retainer fees and commissions, a percentage of the total value of the deal if it is completed. The company is not an underwriter and does not do initial public offerings.
For Quarterdeck, a Washington presence is important both because defense company executives are frequently doing business in the nation’s capital and because of the growing information technology industry. The Los Angeles office handles more of the aerospace business.
Fifteen of the company’s 21 employees work out of the D.C. office at the Ronald Reagan Building and International Trade Center. About 75 percent of the company’s work in information technology is based in the Washington area.
Kutler predicts that the information technology industry will follow the same path as the defense industry — consolidation.
“The marketplace will be substantially different five to 10 years from now,” he said. “There are now thousands of small companies; the vast majority will have been merged together. There will be a lot more publicly traded companies.”
The reason: Customers, including the federal government, want to deal with fewer contractors, Kutler said.
“There are bigger contracts — and you have to be bigger to compete,” he said. “You can’t get there through internal growth.”
Quarterdeck recently helped sell Analysis & Technology, a North Stonington, Conn., information technology firm, to Fairfax-based Anteon Corp. for $118 million, in a deal that was announced earlier this month.
Quarterdeck “came highly recommended,” said Gary P. Bennett, chairman and CEO of Analysis & Technology. “They really understood our industry. They structured and scheduled the process very well.”
Industry connections came in handy. Kutler knew Anteon’s president and CEO, Joseph M. Kampf; in fact, Kutler had recruited him to run Anteon when negotiating a deal to sell the company to Caxton-Iseman Capital Inc. a few years ago.
“He’s very professional, very knowledgeable and has good contacts,” Kampf said.
“Jon is right that the middle-market companies — $50 million to $200 million — typically get ignored by Wall Street. That’s a niche that Quarterdeck has filled in the last few years.”
Kutler is always preaching the value of growing through mergers or acquisitions. He refers to it as his “missionary work,” which includes television appearances on CNN and CNBC, Op-Ed articles in the New York Times and one-on-one discussions.
But Kutler isn’t looking to expand his own company through a private sale or public offering.
“We don’t have a need for capital,” he said. “We’ve got a wonderful niche.”
A Look at …
Quarterdeck Investment Partners
Offices: Washington and Los Angeles
1998 revenue: $24 million
Employees: 21
President: Jon Kutler
Web address: None
Business strategy: Financial advisory services for defense/aerospace and information technology companies.
CAPTION: Jon Kutler in the conference room at Quarterdeck Investment Partners’ Washington office in the Ronald Reagan Building and International Trade Center.