Tuesday 12 December 2017

Prodigal son of Cognotec

Profile: When Brian Maccaba isn't at the front line of his multimillion-pound software empire, he's observing conflict at the front line in Jerusalem, writes Nick Webb

JERUSALEM was deathly quiet on Wednesday night, as the chatter of AK 47 machine guns fell silent. Cognotec founder Brian Maccaba was there. The multimillionaire software entrepreneur drove out to the front line to see the Arab-Israeli conflict for himself. There had been shooting four or five times that day. The front line was close to where he had attended a dinner party, in a suburb of Jerusalem. "It's like being in Dun Laoghaire and hearing people firing guns on Killiney Hill," he said.

Maccaba's foreign exchange banking software company Cognotec has serious street cred among the technology community.

Maccaba was recently named as one of the top 30 people harnessing the power of the Internet for financial services in Europe and Asia. Last week Cognotec signed a major alliance with FXall, which will open doors to do business with top blue-chip names .

However, Cognotec is not an overnight success. An earlier incarnation went into receivership at the end of the 1980s before being baled out by Davys and Irish Life. Recent investments value the company at $285m. Maccaba is extremely coy about his shareholding, but concedes that it is close to 35 per cent. His paper is worth at least $90m. He is thought to have cashed in some of his chips, raking in at least $30m last year.

The company is set to raise further funds for expansion in the next year, according to Maccaba. Cognotec has already spent between $60m and $70m expanding its business in the last three years. US venture capitalist Warburg Pincus coughed up $30m for a 22 per cent in the firm. Warburg seems to like Irish entrepreneurs, having poured $45m into Eddie Jordan's Formula One Racing team in 1998. Softbank has spent $40m for a 17 per cent stake.

Last January, Cognotec was a nailed-on flotation candidate. Then Abby Cohen opened her big mouth. The hugely influential Wall Street analyst said that perhaps technology stocks weren't as good as sliced bread. The market ultimately collapsed and a swathe of IPOs was shelved.

Maccaba is very cautious about flotation plans. A trade sale is always possible; Reuters made an offer for the company some time ago but the offer was rebuffed. The most likely outcome is that Maccaba will still take the company public but only when market conditions improve. He believes technology stocks will ultimately be good value in three to five years.

Cognotec is in a growing market. A recent report suggested that 5-10 per cent of the Forex market was conducted electronically, with the remainder done over the phone. It has been estimated that 50 per cent of all business will be done by computer in three years. They'll have to stick turbo stripes on the company logo if that happens. The company has changed how it does business, which has hit the bottom line as it spends to embrace e-commerce. But "trading is on target and we'd expect to be in profit by the second half of 2002", says Maccaba. The company needed serious dough to change its spots and build the new business. "We've about $100m of red ink," he said.

Maccaba comes across as an ordinary guy and he laughs a lot during the interview. His PA even comes on the line to joke at his lack of practical technology. "He doesn't know where the on/off switch is."

Maccaba grew up in the suburbs of south Co Dublin. He attended CBC Monkstown before heading to UCD, where he was a classmate and friend of Philip Berber, who sold his company CyberCorp to bankers Charles Schwab last year for over $487m. Maccaba started his career by doing a deal with IBEC. The employers' organisation paid for his studies at London School of Economics and he promised to work with them for a year. "I'd no ambition to be an economist in a stable environment," he said.

At the time, IBEC, or CII as it was then, was working on a videotext project to deliver economist reports to corporate bodies. It didn't take long to figure out that companies were more interested in other services rather than boring economist reports. Maccaba figured that this would be the way to make his millions.

HE got a company off the ground supplying videotext and other services. Dermot Desmond was an early backer. It ran into choppy waters but was bailed out by institutional investors. Then he managed to sell the company in a complex share deal, which saw him take control of Cognotec UK.

"We put a lot into the UK between 1989 and 1990. It was during Lawson's boom. But the economy was overheated and it fell out of bed in about 1990." They were sticky times. But Maccaba managed to pull off quite a stroke. He bought out some of the other shareholders at rock-bottom prices.

The Irish operation was renamed Credo and was ultimately sold off to US giant Misys. Cognotec concentrated on the massive Forex banking software market. It was a good move. Cognotec systems are now moving trillions of dollars. "In one day the Forex market does more business than a month on Nasdaq or NYSE," says Maccaba.

Maccaba was born a Catholic but later converted to Judaism. He has a house in Jerusalem and his directorship is registered there. He watches the Arab-Israeli conflict closely. "It's a difficult situation. There's both right and wrong." Maccaba says that he is more involved in Israel on a cultural level. Two years ago he wrote to the Financial Times expressing "amazement" at the treatment of the somewhat outspoken Rabbi Ovadia Yosef and of controversial politician Aryeh Deri, leader of the ultra-orthodox Shas party. Deri was later sent to prison for three years over a $60,000 undeclared payment.

Maccaba genuinely feels that it was politically motivated. He points out that 430 investigators worked on the case for seven years, while a former president who received $600,000 in gifts was allowed to simply resign. Maccaba represents the Society for the UK Sephardi. It is a political force to be reckoned with, he says. However, he likens his involvement with Israel to his days as a Gaelgeoir. It's driven by cultural rather than political motives.

Exit mechanisms are vital for investors and Maccaba is already thinking of his.

"I'm 42 and I don't think that I'd like to be doing it at 50," he reveals. The hours are a killer, he says. The future could lie with him as a business angel or a non-executive director. He has some investments in technology companies both in Ireland and abroad but it's "not at the same kind of level as Denis O'Brien".

If he floats off Cognotec, Maccaba could easily find himself as rich as Croesus, if not O'Brien.

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