Smart Business Dealmakers

Everstream Reaches Strategic Agreement With Uniti Fiber In Milwaukee

Thu, 07 May 2020 09:32:42 Z

Everstream has announced a long-term, strategic fiber IRU agreement with Uniti Fiber to operate and maintain an 80-mile fiber network in Milwaukee. Much of the network is 144 fiber count or more; Everstream will operate and maintain all but 24 fibers.

This dense metro network in Milwaukee is expected to allow for the deployment of more than 500 small cell sites. Everstream’s infrastructure also would provide enterprise and wireless customers with access to high-capacity fiber connectivity.

In November 2019, Everstream first entered the Milwaukee market and is actively building its network, which will encompass more than 560 route miles of fiber when complete.

“Everstream is committed to building an enterprise-grade fiber network with the speed, scale and reliability necessary to support Milwaukee and its businesses as they scale and grow,” said Everstream President and CEO Brett Lindsey in a statement. “We welcome the opportunity to continue building a trusted partnership with the city and business community for years to come.”

Everstream’s enterprise-grade network strives to deliver robust business fiber services, including dedicated internet access, dark fiber, Ethernet and data center solutions. Everstream’s advanced fiber network offers direct peering with all major carriers and cloud hyperscalers. With high-speed, low-latency connections, it can accommodate converged internet, voice and data services at speeds of up to 100 Gbps.

The Milwaukee expansion is part of Everstream’s ongoing footprint growth throughout select markets in the Midwest. The company says it is on track to grow to more than 15,000 miles of fiber with more than 3,000 on-net locations in 12 markets throughout the Midwest by the end of 2020.

Evergreen Podcasts Secures $500K Investment

Wed, 06 May 2020 08:25:40 Z

Evergreen Podcasts announced that Lake Effect Radio has committed to an additional round of investment in the Cleveland-based podcast company. The $500,000 investment will help fund the working capital position of Evergreen and support the company's podcast industry expansion.

"In these uncertain times, I'm certain that podcasting has a bigger future than ever," Lake Effect Radio Principal Joan Andrews said in a statement. "With this investment, I want not only to help this great company thrive, but to keep millions of people all over the world enriched and entertained with this great programming."

Evergreen Podcasts CEO Michael DeAloia added: "This new investment round comes at a crucial time. In a period of economic uncertainty for most companies, Evergreen continues to see growth in its branded podcast and partner podcast lines of business. As companies are forced to move remote, more businesses are looking for alternate means of communication. Podcasting is positioned for enormous growth in this work-from-home economy."

The new capital from Lake Effect Radio is expected to be invested in working capital, marketing enhancements, improved hosting and distribution platforms, and critical new podcast show production. Evergreen Podcasts was founded in January 2017 with one employee and two interns. During its first year of operation, Evergreen launched four podcasts with nearly 18,000 podcast downloads. By the end of 2019, Evergreen had added 20 new podcast programs and enjoyed over 1 million downloads. As of 2020, the company has 34 podcast programs that have been downloaded in over 180 countries.

Podcasts published by Evergreen include Rebel Force Radio, The Chad & Cheese Podcast, Burn the Boats, Riffs on Riffs, Pit Pass Moto, Professional Book Nerds, Banking Transformed, Your Teen, Up2 and Wake Up Call. The entire Evergreen Podcasts catalog can be found on iTunes, Spotify, Pandora and over a dozen industry leading podcast platforms, worldwide. The company employs 14 full-time staff members in addition to 25 freelancers.

University Corners Retail Center Bought By Konover South In $3M Deal

Tue, 05 May 2020 11:32:22 Z

University Corners retail center, located in Cleveland’s University Heights neighborhood, has been purchased for $3 million by Deerfield Beach, Florida-based Konover South LLC. The transaction for the 43,000-square-foot neighborhood center closed on May 4 and marked the company’s second Ohio retail acquisition, said Konover South CEO David Coppa. In September, the company, in a joint venture, purchased one of Cincinnati’s most fashionable Hyde Park Square retail spaces housing a landmark Lululemon store.

University Corners is anchored by Family Dollar, plus other national tenants such as Anytime Fitness, Sherwin-Williams, Boost Mobile and Nationwide Insurance. A loan in the amount of $2.3 million was provided by KS Lending Corp., a Konover South company, and the center was acquired through Ten-X Commercial. Property management will be provided by Konover South Development Corp. and leasing will be handled by Tori Nook and Ben McMillon of Anchor Cleveland.

“We are pleased to announce the purchase of University Corners in Cleveland which is our second retail asset in Ohio,” Coppa said in a statement. “Though there are uncertainties in the marketplace nationally, strong fundamentals of well-positioned markets and real estate will prevail. University Corners is located in the dense well-established community of University Heights and has five colleges and universities within close proximity. We look forward to being a part of this fine community.”

Brown & Brown Completes Deal To Buy Solon-Based Loan Protector Insurance

Mon, 04 May 2020 12:00:35 Z

Solon-based Loan Protector Insurance Services has completed its deal to be acquired by Brown & Brown Inc.

The Loan Protector operations will join with Daytona Beach, Florida-based Brown & Brown’s subsidiary, Proctor Financial, to operate as Proctor Loan Protector. Brown & Brown is an insurance brokerage firm, providing risk management solutions to individuals and businesses. Loan Protector works in the lender-placed insurance space.

A team of Tucker Ellis attorneys advised Loan Protector and its owners, Dennis and Dawn Swit, in the deal, which was announced on March 10.

Riverside Co. Invests In Basic Fire & Safety

Tue, 28 Apr 2020 10:28:21 Z

The Riverside Co. has invested in fire protection service provider Basic Fire & Safety as an add-on to its fire and life safety platform, Performance Systems Integration. Based in Portland, Oregon, PSI is a provider of fire and life safety services in the Pacific Northwest. The company provides customers with fire and life safety services including system inspection, service and monitoring, equipment sales and cylinder repairs, as well as installations for new construction and retrofits.

BFS provides customers in Washington state with a variety of fire protection services, including fire extinguisher part sales, inspections, and service.

“This is our second add-on to PSI for the year as we continue to follow through with our aggressive add-on strategy for the platform,” Riverside Managing Partner Loren Schlachet said in a statement. “BFS complements PSI nicely and will help further expand PSI’s presence in the Washington market.”

PSI CEO Travis Everton added: “We’re delighted to partner with such a customer-focused team as we continue to grow PSI’s geographic footprint. Together, we will be able to offer more services and support to better serve customers and will continue building upon the strong business BFS has built over the years.”

PSI commits to delivering customers customer service through its “single-point-of-management” compliance services and solutions for fire protection and life safety needs. The company operates in partnership with Fire King, specializing in fire extinguisher sales and service, cylinder requalification and maintenance and general fire protection services in western Washington.

“Both BFS and PSI share a common vision, focused heavily on providing superior services for their customers,” said Riverside Principal John McKernan in a statement. “We look forward to working with the BFS team and will continue our search for customer-oriented fire protection companies with strong technicians and a specialized focus in the fire and life safety space.”

Working with Schlachet and McKernan on the deal were Senior Associate Liz Burke, Analyst Aakeem Andrada, Operating Partner Ervin Cash and Finance Director Bart Thielen.

Cyprium Investment Partners Closes Fifth Fund With $445M Of Committed Capital

Thu, 23 Apr 2020 15:12:10 Z

Cyprium Investment Partners announced the closing of its fifth fund with $445 million of committed capital. Cyprium’s 90 past investments totaling $1.6 billion have supported growth, shareholder dividends and buyouts, ESOPs and minority recapitalizations.

Over the next several months, Cyprium anticipates a growing need from non-sponsored companies looking to refinance, respond to strategic acquisitions and expand as the competitive landscape evolves and the economy begins a path toward recovery. The recent closing of Fund V is expected to arm the Cyprium team with the capital that will be critical to support the balance sheets and capital needs of lower middle-market companies as the market recovers.

Materion Announces Sale Of Large Area Coatings Business

Wed, 22 Apr 2020 10:03:01 Z

Materion Corp. announced the planned sale of its Large Area Coatings business as part of a strategic focus to align its portfolio to drive sustainable profitable growth. The Mayfield Heights-based company has also initiated actions to close two facilities and consolidate the business within an existing facility to further drive down structural cost.

“With these strategic actions, we are continuing to advance our One Materion multi-pillar strategy to deliver long-term profitable growth,” Materion President and CEO Jugal Vijayvargiva said in a statement. “We are continuing to operate all of our manufacturing facilities in support of essential industries and are aggressively managing the cost structure to align with market demand. We have more than adequate liquidity to operate in this difficult environment.”

Materion through its wholly owned subsidiaries, supplies highly engineered advanced enabling materials to global markets.

Resilience Capital Partners Announces JV With MicroShield

Mon, 23 Mar 2020 10:50:00 Z

Resilience Capital announced a joint venture with MicroShield, a leading provider of advanced antimicrobial defense solutions. With the financial backing and resources of Resilience Capital Partners, MShield Holdings Inc. and its affiliate, MShield Healthcare, intend to meet the increased demand for an EPA-registered, FDA-approved antimicrobial shield that kills 99.99 percent of pathogens and ensures that treated surfaces are protected with a self-disinfecting barrier for up to one year.

MShield Healthcare, a subsidiary of MShield Holdings Inc., plans to partner with MicroShield to provide the MicroShield 360 product first and foremost to participants in the healthcare industry including providers, medical products and facilities including hospitals, long-term care centers, nursing homes and acute care and assisted living centers. MShield Healthcare retains the exclusive global rights for the distribution of MicroShield 360 in these sectors.

In addition, MShield Holdings will develop applications of MicroShield 360 for the consumer, residential and transportation sectors. MicroShield 360 continues to be scientifically tested for effectiveness against a growing range of pathogens.

“Innovation comes in all forms, including how you disinfect hospitals, healthcare facilities and other venues,” Resilience Capital Partners Co-CEO Steven H. Rosen said in a statement. “We see that in MicroShield 360, which kills 99.99 percent of all pathogens; perfection is difficult to achieve in any endeavor, but this is about as close as you’ll find, and it is why we are putting considerable financial resources towards making MicroShield 360 readily available. With growing concern over pathogens, we look forward to working with the Kubec family, which pioneered this concept through MicroShield, to make it affordable, build out distribution channels and deliver this product to those in need in the current crisis environment.”

The protocol for MicroShield 360 requires that an area be cleaned thoroughly prior to a three-step treatment that includes the application of an electrostatic disinfectant, a specially formulated disinfectant and a proprietary coating formula that imparts a final biostatic finish to treated surfaces, preventing pathogens from living on them for up to one year.

MicroShield 360 is colorless, odorless, non-toxic and hypoallergenic and reduces microbial contamination of bacteria, viruses, mold, algae, yeast, mildew, fungi and other potentially disease-causing microorganisms. It can offer protection from a broad spectrum of pathogens including MRSA, E. coli, Norovirus, C. diff, flu strains, gram-positive and gram-negative bacteria, enveloped viruses including the common cold and more than 90 additional diseases and conditions.

David Johnson, CEO at MShield Holdings and president of MShield Healthcare added: “Having come from STERIS Corporation, a leader in the sterilization of medical instruments, I know a game-changing active ingredient when I see one. It is a privilege to be part of such a solution, and we will be exploring every opportunity to assist not only the healthcare industry but also other sectors that can be affected by the spread of communicable diseases.”

Concluded Rosen, “MicroShield 360 offers tremendous potential for reducing the transmission of disease-causing microorganisms, and we look forward to helping make MicroShield 360 widely available to protect public health in these uncertain times.”

Sherwin-Williams Reaffirms Financial Guidance, Pays $49.4M For HQ Land

Sat, 21 Mar 2020 10:12:05 Z

The Sherwin-Williams Co. reaffirmed its financial guidance for the first quarter of 2020 and continues to project net sales growth of 2% to 5% compared to the first quarter of 2019, with The Americas Group expected to be above the high end of this range.

Although the company has experienced headwinds related to the coronavirus pandemic (COVID-19), primarily outside the U.S., a news release states, “we are reaffirming our first quarter guidance amidst this continuously evolving situation. The company is working diligently and proactively across all its businesses to ensure it is taking every reasonable preventative measure to protect its employees and customers, and to maintain business continuity.”

Sherwin-Williams has also reached a deal to pay $49.4M for nearly 7 acres of property downtown to be used for the company’s new Cleveland headquarters, according to a story on Cleveland.com.

With regard to the company’s immediate financial future, Sherwin-Williams Chairman and CEO John G. Morikis said in a statement: “As we continue to prioritize the health and well-being of our employees and their families, I want to thank our entire team for their dedication and commitment in continuing to serve our customers. At the current time, our production operations in Asia are returning to pre-crisis levels with sites operating under the guidance of local and state governments.

"While there has been a dramatic surge in cases across Europe and an increase in cases in North America, the company has experienced minimal disruption to its supply chain and facility operations to date. At this time, the vast majority of the company’s North American paint stores continue to operate and provide customers with multiple options for ordering and receiving product, including through our existing and extensive delivery system and store pick-up.

“We will continue to respond to the many small business owners and independent painting contractors that are relying on us for products and service during this critical time to support their families along with larger customers involved in mission critical applications such as food and beverage packaging, health care equipment and facilities, military equipment and energy infrastructure. Although near-term market conditions are likely to remain unpredictable, we believe our underlying long-term demand fundamentals remain intact, and we remain focused on delivering value added solutions to ensure our customers’ continued success.”

Sherwin-Williams is scheduled to release first quarter 2020 results on April 29.

Greenwich Capital Group’s Andrew Dickow Shares How Coronavirus Is Impacting His Approach To Dealmaking

Fri, 20 Mar 2020 10:10:11 Z

The coronavirus pandemic has brought our everyday routines to a grinding halt, including those in the business and dealmaking community. As the markets continue to veer up and down based on the news at that particular moment, Smart Business Dealmakers wanted to get a sense of how those typically on the frontlines of deal activity are reacting to what’s happening. We spoke with Andrew Dickow, managing director at Greenwich Capital Group, to get his perspective on what’s happening.

What is your immediate reaction to the coronavirus pandemic from a dealmaking perspective?

The immediate impact we are seeing is the need to assess each of our deals at various stages to determine how they will be impacted. Companies across the globe are calling strategy meetings to discuss the broad implications of this crisis and how they are going to push through it in the weeks to come.

What is paramount for us is the health of our clients and everyone we work with. Some industries such as traditional retailers are being impacted significantly harder than others. Others, such as certain segments of the construction services industry, are less impacted.

For deals that are near to a closing, it comes down to having an open and honest conversation between the buyer and the seller — and in some cases the lenders. There is still a lot of uncertainty and so many unknowns. It would be disingenuous to make any specific proclamations about when the macroeconomic environment will return to “normal.”

In most cases, if both sides are aligned that this is going to be a short-term event vs. long-term, it warrants a path forward and continued discussions. The most common thing we are seeing is a general pause to discuss the issue in relation to our expected deal timeline. We have yet to see any of our deals get cancelled permanently. Things are changing by the day, and we are hopeful that we will be able to work through this.

Besides the importance of the health of everyone involved in our deals, we will always assess timing and the environment to ensure we are able to achieve the objectives of our clients. If we ever feel that what is happening during this crisis will negatively impact that, we will work with all parties to determine the appropriate path forward on a deal-by-deal basis.

What is the impact of travel restrictions? Is it lessened by technology?

The impact of travel restrictions has been meaningful. It is limiting the ability of traditional management presentations, site visits, networking events and other general meetings. Our company is mostly working from home, which is a luxury we have as a service-oriented business, but it adds complexity to our day-to-day routines.

Technology has played a huge role for us. Between our messaging systems and videoconferencing capabilities, we are able to stay in constant contact with clients, colleagues and others.

On a more personal front, I am a social creature and it is challenging not being able to see my colleagues and others that I work with on a daily basis. It has been a reminder to me to cherish all the relationships in my life and to work to communicate even more as a leader during these challenging times.

How does dealmaking typically respond when the economy takes such a brutal hit?

This is clearly an unprecedented scenario, but throughout the course of history, particularly in the U.S., we have shown our resiliency in rebounding after a crisis. Although this is a health crisis that is pushing us into a financial crisis, there will always be a place for M&A.

In the short term, companies will be focused on stabilizing operations, shoring up their balance sheets and getting back to normalcy. In some cases, that will lead to larger companies divesting noncore assets to free up cash and focus on their core competencies, while companies that went into the crisis with little to no debt and strong balance sheets take advantage of potentially discounted valuations and consolidation opportunities.

Over time, there will continue to be deals in specific industries and niches that were impacted in different ways.

Can dealmaking eventually be a path to economic recovery, at least to some degree?

I don’t think dealmaking will be the path to economic recovery, but it will certainly play a role in it. In the middle market specifically, you will have entrepreneurs that were looking to exit so they could transition into retirement, which doesn’t completely get upended by a crisis if there is no alternative succession plan.

Deals will still get done. You will also see those with a lot of dry powder that have been on the sidelines dive into the market looking for opportunities. These opportunities could be in the form of giving struggling companies working capital to get them back to full strength to enable them to capitalize on new opportunities where their competitors may not have been as resilient. Generally, there is consolidation in certain industries coming out of a recession, which brings stability into certain markets. Over time, this also opens the door to new entrants coming in to try to take market share from the larger players that stabilized the market initially.

Banner Solutions’ Brendan Deely: Kick The Tires A Little Harder To Find The Right Deal

Thu, 19 Mar 2020 12:42:37 Z

Dominating strategy always wins out over dominant personalities as Brendan Deely is assessing potential acquisition targets.

One of his biggest M&A regrets is acquiring a company that had a domineering owner, a reality that quickly led to conflict with the acquired company’s employees.

“People who are willing to stay and work with that kind of personality over time are typically not high performers,” Deely says. “We had to rebuild the team over time, and it was a lot more work than we anticipated because we didn’t stress the culture side of the business hard enough.”

It’s one of the few blemishes in Deely’s deep acquisition history. As CEO at L&W Supply, which was owned by Chicago-based USG Corp. at the time, he led 15 acquisitions and helped grow the company from $800 million to $2.5 billion in revenue.

These days, he serves as CEO at Banner Solutions, which was recently acquired by Tailwind Capital.

We spoke with Deely about his approach to dealmaking as both a buyer and a seller.

Be strategic about acquisitions

Acquisitions are typically only as good as the growth strategy that backs them up.

“You can go out and buy a business, but ultimately, your quality of earnings can decrease if you buy the wrong type of business in the wrong market,” Deely says. “A good strategy is having an M&A pipeline that is robust, along with a strong integration process.”

And as Deely learned the hard way, never underestimate the importance of culture.

“If it’s an organization that really has no process, no leadership and just kind of muscles everything through, it’s a hard lift,” he says. “When you have a bunch of different opportunities on the market, why settle for a workout?”

When you’re a growing business looking for targets to augment and build on that success, don’t waste your time on a team that’s not willing to work hard and put in the effort to excel.

“Find the next target,” he says. “If you see something that you’re trying to get into and the company is available, kick the tires a little harder. If it happens this year or next year, find the right one that’s going to really drive your business for the next 15 to 20 years in that market, not a couple of quarters.”

Being owned by private equity, as is the case with Banner Solutions, should not hinder your acquisition strategy, Deely says.

“If we buy your business, you’re part of the Tailwind Capital portfolio, but you’re working with us,” Deely says. “This is the strategy put together by the Banner Solutions management team. If you’re comfortable with that, who owns us or who is going to own us down the road really shouldn’t matter.”

On the sell side

Even if you’re not currently looking to make a deal, it’s always useful to keep an eye on the M&A market to see what’s happening in terms of deal flow.

“You can always not sell your business, but I think it’s just being smarter about your strategic options,” Deely says. “If this is ultimately the biggest way as an owner to create generational wealth, I might want to learn more.”

Cyprium Partners’ John Sinnenberg: Noncontrol Capital Market Provides A Wide Range Of Dealmaking Options

Thu, 19 Mar 2020 12:32:34 Z

Cyprium Partners provides noncontrol capital for middle-market companies in need of a small boost on the path to meeting their growth objectives.

“Our goal is to work with families, founders and entrepreneurs who need capital — or at least think they need capital — and don’t want to give up control,” says John Sinnenberg, partner, chairman and founding member at the firm. “They’re trying to minimize the equity dilution, so they want to find a transaction where they have to give up as little equity as possible, understanding that they're asking a firm like ours to take on some equity risk.”

This process of identifying what a company needs and structuring an appropriate deal typically has numerous layers, something which has always appealed to Sinnenberg.

“These owners typically have most of their net worth tied up in the company, and they really need to pick somebody they trust,” Sinnenberg says. “So it’s not just a matter of deal structure; it’s also the nature of trust and the bonding and the relationship that gets formed.”

Dealmakers spoke with Sinnenberg about making deals in the noncontrol capital market and the different factors that come into play in getting a deal done.

Work through the layers

Cyprium often works with clients who are exploring a capital raise for the first time. They may have received funding from a commercial bank previously, but this is their first time working with an institutional investor.

“They’ve gone to their lender, typically a commercial bank, which says they get X dollars, and they need more than X,” Sinnenberg says. “The question is, do they have to sell control, or can they look to some other structure to achieve their objectives, which can be strategic or financial.”

Different types of transactions carry with them different levels of urgency.

“There are certain types of transactions that we do where the transaction needs to get done,” he says. “I have a business, I want to make an acquisition, and I need capital to do that. That’s a transaction where the need for capital is first and foremost, and you try to figure out the best structure beyond that. But then there are other kinds of transactions where the deal doesn’t necessarily have to happen unless the structure is right.”

This could be a shareholder buyout, a shareholder dividend, an ESOP transaction or a management buyout, among other types of deals.

“It’s a variety of things, where it doesn’t really have to happen, but if you can get the structure right, it will,” Sinnenberg says. “Either way, we get paid to listen very carefully and try to figure out the appropriate structure and address what we think the issuer’s needs are — whether that’s the family, the management team or the founder. So structure becomes incredibly critical.”

Finding an amicable solution

Sinnenberg recalls a recent transaction in which the company had three owners who were siblings, with one of the three serving as CEO. Each sibling owned 33 and one-third percent of the business.

“The sibling who was CEO saw a lot of growth opportunity in the company,” he says. “The other two siblings, all they wanted to do was monetize their holdings. Their position was, ‘I don’t need you to grow, just keep paying me dividends.’ In a friendly way, they worked out a deal where the CEO would buy out the other two siblings.”

Cyprium helped the CEO go from owning a third of the company to increasing his ownership to close to 70 percent.

“We structured a deal where we put in some subordinated debt, some preferred stock, and we also ended up with the rest of the equity,” Sinnenberg says. “So it was a win-win. In that case, the CEO wants to roll over his existing equity so there’s not a tax consequence for him.”

Stay off the beach

The foundation of a good deal begins with the quality of the individual you’re working with.

“Are they good people?” Sinnenberg says. “Do they pass the character test? Is it a good company? We don’t invest in turnarounds or early stage companies. Is it a company that we think has a business model that is survivable? You get past those two things and then you look at the use of proceeds, and you say, ‘OK, is this something that makes sense?’”

If the deal on the table is a shareholder dividend recap in which the owner is taking 80 percent of their net worth off the table by liquefying it, that’s probably not something Sinnenberg would want to do.

“We want them having as much, if not more, money at risk than we do,” he says.

Everybody has a different number for what they need to be able to “go to the beach,” Sinnenberg says.

“We want to make sure, to the extent we can, that we feel comfortable that they’re not going to go to the beach once we give them the capital to do a dividend or recapitalize the firm,” he says. “It’s every day dealing with people and trying to figure out who they are and what motivates them.”

Chip McClure: Dealmaking Can Open The Door To New, Innovative Business Opportunities

Thu, 19 Mar 2020 12:24:32 Z

Chip McClure gives a lot of credit to auto racing pioneer Roger Penske for shaping his approach to dealmaking.

“I know it’s a fairly well-used phrase, but in his case, he really does want to make sure that both sides come out ahead in whatever kind of deal is being done,” says McClure, managing partner at Michigan Capital Advisors.

“One of his mantras is, ‘Spend less time worrying about making the right decision and spend more time making the decision right.’ That’s just a good way to operate.”

McClure has more than 35 years of experience in the transportation industry. In 2007, he was named “Legend CEO” by Automation Alley, a business technology consortium in Southeastern Michigan. McClure has found success through M&A by never losing sight of the people involved in the deal.

“It’s making sure that you understand the relationship and, quite frankly, the culture of the company you’re looking to invest in, acquire or merge with,” he says. “Spend as much time doing that as worrying about the specifics of the legal structure or the capital structure of the company.”

In this Dealmaker Q&A, we spoke with McClure about his philosophy on dealmaking and how the Southeastern Michigan M&A market has adapted with technology.

How important is discipline in dealmaking?

You have to be disciplined. Have we seen a lot of deals that could be attractive in other areas? Yes. We try to stay very disciplined in two areas. One is to be very specific as to where we can create value. If we can’t create value, then we shouldn’t do it.

The other thing we do is take the time to make sure we’re doing this value creation over the proper time period. Some of that is just spending time with potential companies we may want to invest in so they get to know us and we get to know them before we even do anything.

At the end of the day, it all comes back to discipline, either discipline on where we can stay focused and provide value, or to have the discipline to know when we’re outside our swim lanes and not get involved in that.

Why does dealmaking matter to a region’s economic competitiveness?

When you know what’s going on and you’re paying attention to dealmaking, it will show you where there are lots of different nuggets or core competencies in the market. There’s no question as we talk about the dealmaking here in Southeastern Michigan that mobility is front and center. It’s one of our core competencies. But it’s important to know what else is out there and being developed. When you broaden your scope and you examine how deals are getting done with other technologies, it has the potential to make what you’re investing in better, as well as open the door to other opportunities.

A couple of our companies have moved into quick-service restaurants and are looking at machining that is not only environmentally friendly but economically viable. It’s having that ability to broaden your view and look beyond your realm to see what’s out there. Dealmaking is an important part of that process.

How is the Detroit market changing?

As I look at the market here in Detroit, we’re totally reinventing ourselves through the sharing of experiences and of best practices and having an ecosystem that people can tap into. They can see and learn what others have done, both those who have succeeded and failed, quite frankly.

It’s really that commitment to making this a geographic area with an ecosystem that can generate dealmaking activity that I’m excited about. I spent a lot of time on the public company side, but I’m seeing it now through the eyes of private companies and smaller venture capital and startup companies. It’s really exciting to see how various entities, both big and small, are supporting that ecosystem.

MPE Partners Completes Recap Deal With Teel Plastics

Thu, 19 Mar 2020 10:23:37 Z

Teel Plastics Inc. has completed a recapitalization transaction with MPE Partners.

Headquartered in Baraboo, Wisconsin, Teel is a technology-driven manufacturer of highly engineered and complex plastic components specializing in plastic extrusion and injection molding. A winner of Wisconsin Manufacturer of the Year, Teel serves the agriscience, laboratory sampling bags, medical, consumer cosmetics, water treatment, flex-film cores and industrial piping markets.

The transaction proceeds are expected to be utilized to accelerate the growth of the company.

"The Smith family is proud of the success we've had building Teel into a world class plastics processor over the past two decades, and we have a future of exciting growth planned,” Teel Plastics Owner and Chairman Jay Smith said in a statement. “We are confident that, together with MPE, we will continue to innovate, deliver quality products to our customers, and execute on our growth plan. We are excited to utilize the capabilities, resources, and capital that MPE brings to support this next chapter of growth."

The company was founded in 1951 and has developed a reputation for superior quality, materials expertise, collaborative product development, and exceptional customer service. Teel has been owned by the Smith family for over 20 years and was seeking a partner to help capitalize on the significant growth opportunities that are currently available to the company.

Based in Cleveland and Boston, MPE Partners is a private equity firm focused on investments in lower-middle market companies primarily in the high-value manufacturing and commercial & industrial services industries. The firm works closely with their portfolio companies, partnering with industry-leading management teams and providing them with strategic, operational and financial support to create long-term shareholder value through superior operating and financial performance.

PMCF's Plastics & Packaging Group served as exclusive financial adviser/investment banker to Teel Plastics in the recapitalization. Foley & Lardner served as the legal advisor to Teel, and Baker Tilly provided tax structuring and accounting due diligence support.

Rob Huxtable: Co-Investment Can Be A Powerful Litmus Test For C-Suite Leaders

Wed, 18 Mar 2020 13:24:34 Z

C-suite level co-investment is a powerful tool, with at least three significant benefits: enhanced financial alignment between C-level leaders and their sponsor, additional wealth creation leverage for the executive and a powerful career decision litmus test.

Despite these benefits, utilization of co-investment is spotty across the middle market. Some funds do not require it, and many executives hesitate to write a check. That said, we believe that co-investment should be seriously considered every time a C-suite leader joins a private equity-backed portfolio company.

Equity grants create foundational alignment between sponsor and executive by ensuring that all parties mutually profit from value creation and a successful exit. However, alignment becomes emotionally and financially real when an executive makes a personally meaningful co-investment into a deal. By putting skin in the game, the executive becomes emotionally invested in the company as a co-owner. The concept of “going into business with a sponsor” is a powerful signal to the private equity firm that the executive is fully committed.

Co-investing is also a tax-efficient wealth creation tool. After all, what better way to beat the market than to outperform it through one’s leadership? Because most option grants result in ordinary income tax treatment, co-investing can lower the blended tax rate at the liquidity event. In our experience, savvy private equity operators insist on maximizing their upside while diversifying their own portfolios by placing a personally meaningful financial bet on themselves. For reference, middle-market co-investment ranges for CEOs are typically between $100,000 and $500,000, while CFOs often land in the $25,000 to $100,000-plus range. Many successful candidates are facing cash flow pressures such as college tuition and other expenses that impact liquidity. In these and other cases, we suggest a self-directed IRA. This tool, which reclassifies a traditional IRA, allows an individual to deploy IRA funds into a private deal without sacrificing any tax-deferred benefits.

Finally, co-investment is a powerful career decision litmus test. When C-level leaders hesitate here, all parties should pause to ensure a legitimate fit. Presumably, a C-level leader accepts an equity-backed role based upon the belief that they will increase the value of the asset. An executive who does not insist on co-investing may be signaling doubt in the investment thesis or their own capabilities. In such a situation, we advise that the executive think twice about whether the opportunity is truly the right move for their career; if not, it is better for all parties to walk away rather than risk a failed C-level hire.

One important caveat before co-investing: Executives must conduct thorough due diligence of a portfolio company’s financial performance, customer concentration risk and macro factors, among other areas, before embarking. Further, an executive may be wise to pass on investing in a dire turnaround situation. That said, and for most deals, we advise both sponsors and portfolio company executives to seriously consider, if not require, co-investment as part of onboarding a new C-suite leader.

Rob Huxtable is a partner at FALCON, where his primary focus is leading high-impact portfolio company CEO searches across North America. He also conducts portfolio company CFO assignments, as well as fund-level operating partner searches. In his more than 15 years in retained search work, he has successfully led more than 250 assignments for more than two dozen private equity firms. Reach him at Rob.huxtable@falcon-pe.com

LSI Completes $7.6M Sale Of North Canton Manufacturing Facility

Wed, 18 Mar 2020 11:06:30 Z

LSI Industries Inc., a Blue Ash-based manufacturer of indoor/outdoor lighting and graphics solutions, has completed a $7.6 million deal to sell its North Canton manufacturing facility.

The company, based near Cincinnati, is in the process of relocating its existing operations to a smaller, leased facility in the North Canton area while retaining its existing workforce. As previously disclosed, recent advancements in graphics technology, together with other productivity improvements, allowed for a significant reduction in square footage required to support the ongoing growth of the business. The production transition will be fully completed by June 2020.

LSI has received $7.6 million in net proceeds from the sale of the North Canton facility. The company intends to use these net proceeds to reduce outstanding indebtedness while continuing to invest selectively in the ongoing growth of the business. As of Dec. 31, 2019, LSI had total net debt of $9.2 million, a reduction of $29.4 million from the end of the company fiscal year, June 30, 2019.

“The sale of the North Canton facility represents another important step toward further maximizing the systemic efficiency of our supply chain and asset base,” LSI Industries President and CEO Jim Clark said in a statement. “Relocating to a nearby leased facility allows us to retain our valuable skilled workforce in North Canton, ensuring that we continue to provide the innovation, quality and service our customers expect from LSI. Our reduction in debt during the past year has materially improved our capital position, providing the flexibility to invest in targeted, profitable market verticals consistent with the long-term focus of our leadership team.”

Boston-Based Crow Point Partners Buys Oak Park Wealth Management

Mon, 16 Mar 2020 11:05:33 Z

Boston-based Crow Point Partners LLC has agreed to acquire a minority stake in Oak Park Wealth Management LLC and begin offering private wealth management and family office services to the marketplace under the Oak Park brand name.

“Private wealth services are a natural extension of our business,” said Peter DeCaprio, Crow Point’s president and CEO in a statement. “We manage money for many other RIA’s and family offices; our product lineup and skill sets match up nicely with what RIA’s already ask for from us, which are differentiated strategies that consistently beat benchmarks.”

Oak Park Wealth Management Founder Dan Doyle added: “We are pleased to begin our relationship with Crow Point. Crow Point enhances our investment process and research, helping us offer adaptable strategies to navigate both changes in life and the market. The combination of our sophisticated tax planning and fiduciary client model with Crow Point's world-class risk management and investment process is a value add for clients.”

Crow Point Partners is a $150 million specialty asset management firm. Oak Park Wealth Management is a $20 million wealth management firm headquartered in Cleveland that focuses on providing innovative investment strategies designed to improve the characteristics of traditional portfolio management.

Cleveland-Cliffs, AK Steel Announce Shareholder Approvals Of Merger Agreement

Fri, 13 Mar 2020 13:11:14 Z

Cleveland-Cliffs Inc. has completed the acquisition of AK Steel Holding Corp., integrating North America’s largest producer of iron ore pellets downstream into the production of value-added steel and specialty manufactured parts for the automotive industry.

The combined company will be led by Chairman, President and Chief Executive Officer Lourenco Goncalves.

“This is a new era for Cleveland-Cliffs as a producer of differentiated, high-quality iron ore, metallics and steel in North America," Goncalves said in a statement. "The new Cliffs will begin from a unique position of strength in our industry, with a dynamic combination of assets including two efficient integrated blast furnace steel mills, two electric arc furnace plants, a new state-of-the-art HBI plant and several other highly technologically developed facilities."

Goncalves added: "We will be catering to a desirable customer base and primarily doing business in the United States, the most resilient manufacturing economy in the world. I am honored to be leading a company that is built on such a rich history, and now combines mining, pelletizing, direct-reduction, EAF steelmaking, BF/BOF steelmaking, highly technologically developed finishing mills and automated manufacturing of auto parts. I am also very pleased to welcome the AK Steel employees and the unions representing the workforce throughout the country to the Cleveland-Cliffs family. From now on, we are a single, united and very strong team.”

Jill Arena: Struggling To Find The Right Deal Partner? Take A Deeper Look At Your Process

Thu, 12 Mar 2020 12:47:15 Z

Buy it or build it?

It’s a question business owners often face as they consider the best way to achieve their company’s growth objectives. Jill Arena recently represented a plastics company that was interested in growing and wanted to buy an injection molding and extruding company in Texas.

“The company wanted to do the extruding in Texas to move the product to Mexico,” says Arena, who serves clients as an M&A intermediary through Arena Enterprises. “Why would they ship the finished product from Ohio to Mexico? Let’s buy an extruder in Texas and we’ll just ship it from Texas.”

It looked at 20 companies, with mixed results.

“We couldn’t find what we were looking for, as they didn’t have the equipment we really needed,” Arena says. “If you put in the work and you can’t uncover the type of business you want to acquire, the best option is typically to go ahead and build it.”

Dealmakers spoke with Arena — who has spent more than 20 years providing buy-side advice to small and middle-market companies — about acquisition strategy and the importance that a strong narrative can play in guiding you to the best outcome.

Get a clear picture

A good acquisition, if that’s ultimately what you’re able to do, begins with a solid foundation.

“There’s got to be enough of a business case to make an acquisition before you start looking,” Arena says. “A thoughtful acquisition business plan is critical.”

Get your criteria down on paper and list all the reasons why an acquisition would be good for your business.

“What are we looking for?” Arena says. “Who are we looking at buying? Where are we looking at buying? Why does this make sense for our company now?”

Arena is an advocate for a good, concise story that lays out your case for making a deal. It’s crucial in her role as an intermediary who will then make her clients’ case to potential sellers.

“When my strategic buyers sit down and they tell me their story, it has to make sense to the sellers that I call on their behalf,” Arena says. “I call sellers on behalf of a specific buyer and there has to be a reason for the acquisition. It can’t just be world domination. It could be, ‘I want every staffing company in Cuyahoga County because I want the girth. I want to be huge.’ Whatever the reason, the seller is going to want to know, ‘Why do you have interest in me?’”

Arena spends a lot of time counseling clients in the staffing industry, but she also works with a wider range of strategic buyers and private equity firms. No matter the industry, a buyer needs to have a good idea of what it wants.

“If you don't have a clear picture of what’s important to you, you’ll waste time looking at companies that don’t match your buying criteria and time will be wasted,” Arena says.

Take the path less traveled

If you’re wavering between making an acquisition and building organically, there are some important metrics to consider.

“What would it take to enter that market and what would the cost be?” Arena says. “What would it cost if you built in that market? Would that be easier and less risky because you wouldn’t be taking over a poorly performing business that didn’t have any of the equipment you needed anyway?”

Acquisitive companies struggling to find a match may want to evaluate their process for identifying potential sellers.

“Buyers should make unsolicited offers or hire a firm to do so,” Arena says. “Don’t get caught up in buying companies from investment banks where a lot of people are competing for the same businesses. Look elsewhere. You wouldn’t believe how many lawyers are putting companies up for sale. Two of my deals last year were done by lawyers. There’s a lot of money and a lot of buyers chasing good deals, so consider other deal sources.”

If you decide that your goals can be achieved through organic growth, stepping away from M&A can be a wise move. If you’re committed to making a deal, it’s important to find a seller with whom you have a good rapport, so it may take some time to find the right partner.

“Stay the course and don’t get frustrated,” Arena says. “You might have to kick a lot of tires. Just trust your legal team, your search firm, your accounting firm and your evaluation team. The more clearly you can communicate your vision, the more successful your search will be.”

Ownum-Backed Vital Chain Enters Strategic Agreement with Medici Ventures

Wed, 11 Mar 2020 10:32:47 Z

Medici Ventures, the wholly owned blockchain accelerator of Overstock.com Inc., has entered into a strategic agreement with Vital Chain, a Cleveland-based startup focused on digitizing birth and death certificates. Under the terms of the agreement, Medici Ventures will provide development and design services to Vital Chain in exchange for a minority equity stake in the company.

Vital Chain is majority owned by Ownum LLC.

The current process for creating an initial record of birth or death, ensuring validity, storing records, and issuing regenerated valid certificates is fragmented and inefficient, a news release states. Vital Chain’s birth and death certificate solution utilizes blockchain technology to reduce reliance on legacy paper-based systems and allows for the digital issuance and management of vital records. The Vital Chain solution intends to integrate with partners across the vital record ecosystems, including health systems and government entities, helping them to increase efficiency, save time and reduce associated handling costs.

“Medici Ventures’ keiretsu is committed to accelerating the adoption of blockchain technology, and Vital Chain is a meaningful addition to our identity pillar,” said Jonathan Johnson, CEO of Overstock and president of Medici Ventures. “The digitization of vital records enables efficient and secure birth registry and death certification processes while enabling easier benefits management and other use of those records.”

Vital Chain CEO Shane Bigelow added: “Medici Ventures brings a wealth of knowledge and experience in helping companies like us to build meaningful technology in the identity realm. To have Medici, as the leader in the space, take an ownership stake in our company and involve us in their keiretsu is a great honor. We look forward to building our position in the market and bringing digital vital records to people everywhere.”

Medici Ventures, Overstock.com’s wholly owned blockchain accelerator, was founded in 2014 with a mission to change the world by accelerating the adoption of blockchain technology, in order to fundamentally change the way in which we transact.

Riverside Invests In Kalamazoo-Based National Flavors

Wed, 11 Mar 2020 10:16:36 Z

The Riverside Co. has invested in National Flavors LLC. Kalamazoo-based National Flavors creates and produces flavors for use in beverages, frozen desserts, baked goods, confections and processed fruits.

Established in 1941, the company bills itself as a provider of a "robust library of high-quality flavors and creative flavor development." NF offers a convenient customer portal and flavor sample ordering tool, Flavorush. Flavorush gives customers control over the sample selection and ordering process, provides on-demand pricing and documentation and ships samples in 24 hours.

“The market for flavor manufacturing businesses is highly attractive, and it is a great time for founders to sell,” said Riverside Managing Partner Loren Schlachet. “During our investment period, we will look to strengthen NF’s research, development and application capabilities through organic and inorganic growth initiatives to continue delivering innovative custom flavors and leading customer service. We are actively pursuing add-ons of other leading flavor houses to complement NF.”

Riverside Partner Alan Peyrat added: “We look forward to adding NF to Riverside’s family of successful investments in the flavor and specialty ingredients space such as: Parker Products, E&A Scheer and MEC3 along with strong consumer brands including Tate’s Bake Shop.”

Working with Schlachet and Peyrat on the investment for Riverside were Senior Associate Liz Burke, Associate David Myers, Analyst Erin Reger, Operating Partner Brad Mundt, Finance Director Doug Guess and Managing Director, Sales Excellence Steve Hollingsworth. Director of Research Matthew Delly sourced the investment for Riverside.

Invacare Completes Deal To Sell Dynamic Controls Subsidiary

Mon, 09 Mar 2020 13:20:41 Z

Invacare Corp. has completed the sale of its Dynamic Controls subsidiary to Amherst, New York-based Allied Motion Technologies Inc. As part of Invacare’s strategy to enhance its products, the transaction is expected to open the door to relationships which can provide access to technological innovations to further differentiate the company’s powered mobility products. The transaction was completed on March 7.

“As so much of our business is based on electromotive propulsion, we are pleased to be working more closely with a leading innovator of motion technology to pave the way for better integrated propulsion systems in the future,” Invacare Chairman, President and CEO Matt Monaghan said in a statement. “By entering into a strategic relationship with Allied Motion, we can create exciting new opportunities to accelerate technical advances in power wheelchairs through closer integration of the key control and motor technologies and expect other novel innovations as a result.

“Through this transaction, Dynamic Controls’ technology can be combined with Allied Motion’s unique capabilities as a leading electromotive technology company to drive the next horizon of innovation. This will also help accelerate the adoption of healthcare informatics technology, such as MyLiNX™, and enable our products to continue improving patient care. We are excited about the opportunities this new partnership can bring to both companies.”

As part of this deal, Invacare has entered into a long-term product supply agreement with Dynamic Controls. This agreement includes ongoing supply and support of the LiNX™ system, one of the most advanced control solutions for powered wheelchairs that heightens the driving experience for patients, while also making the chairs easier for professionals to program and configure. The agreement includes continued support of the MyLiNX informatics platform as well as the infrastructure and applications that drive the healthcare informatics solution for Invacare’s respiratory products. The informatics help to build patient confidence by enabling the patient and provider to easily share data while facilitating efficient troubleshooting.

Allied Motion is a global company that designs, manufactures and sells precision and specialty motion-control components and systems used in a broad range of industries. Its products and highly engineered electrical systems help power recreational, emergency and specialty vehicles across the world.

“The acquisition of Dynamic Controls provides us another building block in becoming one of the world’s motion solutions leaders,” Allied Motion Chairman, President and CEO Richard S. Warzala said in a statement. “We are eager to begin working with the Dynamic Controls team to inspire the development of new and innovative motion control products. We are also looking forward to a mutually beneficial relationship with the Invacare team, by providing products, service and support for Invacare’s powered mobility and respiratory portfolios.”

Baird served as exclusive financial adviser.

Atlanta-Based Novelis Moves Step Closer To Buying Aleris

Mon, 09 Mar 2020 09:10:10 Z

Novelis Inc. announced that it can close its acquisition of Beachwood-based Aleris Corp., but the Atlanta-based company must divest Aleris’ Lewisport, Kentucky plant as part of its agreement with the U.S. Department of Justice. Novelis can close the acquisition prior to divesting those assets once it obtains European Commission approval of the buyer for Aleris’ plant in Duffel, Belgium.

The arbitrator assigned to resolve Novelis’ dispute with the DOJ ruled that aluminum and steel are not in the same relevant product market for automotive body sheet under antitrust laws, but still insisted on the divestiture.

"This decision ignores the reality of the automotive body sheet market and the competition we have faced against steel for years,” Novelis President and CEO Steve Fisher said in a statement. “Aluminum remains the material of choice for our customers, and we are going to continue to provide them with the innovative, lightweight and sustainable solutions they demand. We are moving forward with the acquisition of Aleris to realize the many benefits this transaction will bring to our employees, customers and the aluminum industry as a whole."

Novelis intends to proceed with the divestiture of Aleris’ North American automotive business, including the Lewisport, Kentucky plant. Once the company receives EC approval for the buyer of Aleris’ Duffel plant, Novelis intends to close the transaction as quickly as possible.

The $2.6 billion acquisition of Aleris, a global supplier of rolled aluminum products, was first announced in July 2018.

Ancora, NY-Based Macellum Takes 11 Percent Stake In Big Lots, Calls For New Board

Fri, 06 Mar 2020 10:19:59 Z

Citing a number of strategic mistakes, an investor group has issued an open letter to shareholders of Columbus-based retailer Big Lots Inc. calling for a new board that it believes can maximize and return shareholder value.

The letter is signed by New York-based Macellum Advisors Managing Member Jonathan Duskin and Ancora Executive Chairman and CEO Fred DiSanto.

In the letter, Duskin and DiSanto reference an offer Big Lots received from a nationally recognized private equity firm to enter into a sales leaseback transaction for certain of the company’s real estate valued at over $1 billion.

“At that value, Macellum and Ancora believe that monetizing the company’s owned real estate could generate pro forma earnings per share of over $6 per share,” the letter states. “The net proceeds of this type of transaction would be worth significantly more than the current market cap of the company of $648 million, as of March 5, making the rejection of such offer very troubling to the investor group.

“With earnings per share at nearly 2x the level management just guided to for fiscal 2021, combined with a refreshed board focused on improved governance and the addition of more relevant retail and turnaround experience, the investor group believes that the board can oversee a renewed strategy for growth that can improve the company’s valuation and drive shareholder returns 3‐4x higher than the current share price.”

The letter announced an 11 percent stake that the investor group holds in Big Lots and recommended the following individuals to be named to the board: Theresa R. Backes, Suzanne Biszantz, Andrew C. Clarke, Lynne Coté, Jonathan Duskin, Steven S. Fishman, Aaron Goldstein, Jeremy I. Liebowitz and Cynthia S. Murray.

Fishman previously served as Big Lots CEO, retiring in 2013.

Lake Health Exploring Strategic Opportunities For Growth

Thu, 05 Mar 2020 16:49:45 Z

Lake Health trustees announced plans to launch a partnership exploration process and has engaged Chicago-based Kaufman Hall to work with trustees, medical staff and hospital leadership to evaluate opportunities.

Lake Health is reviewing its strategic options to allow it to remain true to its mission of providing comprehensive health care services to the residents of Lake County and neighboring communities while honoring its commitment to local access, healing with compassion and superior quality, a news release states.

"Lake Health is an anchor organization in the community and this process is about looking at how we can strengthen that organization now and in the future," Michael Mayher, chair of the board of trustees, said in the release. "Health care is changing so fast that we need to look at how we can shape tomorrow's health system through clinical and technological innovation in order to make Lake Health stronger for the community."

The strategic partnership process is about creating the best long-term vision for the hospital, Mayher said. Lake Health maintains an ‘A-’ rating from Fitch and a ‘Baa1’ rating from Moody’s. The strong financial position means Lake Health sees no immediate financial need for a partner.

“We begin this process from a position of strength," Dr. Philip Brzozowski, president of the Lake Health Medical Staff, said in the release. "By any metric, we have evolved into one of the outstanding health care providers in the region. Yet, there is another level to which we aspire. This process is about seeing if we can enhance our abilities and opportunities to provide care right here in Lake County.”

This isn't the first time Lake Health has evaluated its business model. From 1924 to 1985, Lake County Memorial Hospitals operated as a county owned entity. In 1985, the hospitals converted to a private independent not for profit called Lake Hospital System. The private system took over all obligations from the county, including $19.7 million in debt. In 2009, Lake Hospital System changed its name to Lake Health, emphasizing its focus on health and wellness.

Lake Health President and CEO Cynthia Moore-Hardy added: “As we undergo this process to position us for the future, nothing changes in terms of the superior health care we provide. Our mission won’t change either: To provide local access, healing with compassion and superior quality, which has been our hallmark for more than a century.”