This year’s ASPIRE Conference started out with an Entrepreneurs’ M&A Roundtable featuring four of Northeast Ohio’s most prominent business leaders — Stewart Kohl, co-CEO, The Riverside Co.; Charles E. Hallberg, CEO, Renew Advantage; Len Pagon Jr., chairman, Robots and Pencils, chairman and CEO, Next Sparc; and Kenn Ricci, principal and chairman, Directional Aviation Capital.
The group, moderated by Jerry L. Kelsheimer, former regional chairman, Fifth Third Bank, shared anecdotes and advice from their experiences buying or selling businesses, and the challenges — and opportunities — they faced.
Stewart was asked by an attendee how the art of the deal has changed over the last 30 years. What follows is a transcript of the above video, edited for readability.
How the art of the deal has changed
The question is, how has the art of the deal changed over the 30 years? And the answer is in so many ways, but just to tick off some of the most important ones. Thirty years ago, really very few people knew how to buy or sell a company. They — it was kind of this small group of lawyers and accountants, and some private equity folks, and corporate development folks. The process was convoluted; it could take months or years. It culminated with scores of folks showing up in hotels and lawyers’ offices, and do you remember those stacks of papers that used to have to be done vertically because there wasn't enough surface area on the tables to sign them all?
I actually can't remember the last time we bought a company with a physical closing. I mean, everything today is done virtually, it's done digitally, it's done seamlessly and electronically. Market terms are well understood. Literally, tens of thousands of people have been schooled in how to buy and sell companies; lawyers, accountants, business brokers, wealth advisers, commercial bankers, investment bankers. Owners are today very sophisticated in private equity, 5,000 firms around the world.
So the understanding of the process is well understood, it’s become much more intermediated without standing — investment bankers standing between buyers and sellers, and transaction — the process of doing a transaction has become somewhat commoditized. But the most important part of a deal, which is figuring out the right company and then structuring the right deal to achieve the ultimate objective, still remains the art of the deal. And it’s still the key to a successful deal, but all the other stuff has become much more routinized.
And then the other thing I’ll point out is just — and I love this — the range of industries in which we can invest in today has broadened so much. Once upon a time, you could invest in any company, so long as it was pretty much a manufacturer or distributor that you could buy for five times EBITDA. Today, we can invest in almost industry in almost any — and it had to be in the U.S. — today it's any country, and including at multiples well into the double digits. That’s good news because it creates a lot more opportunity for folks like Riverside, and other great private equity firms here in Cleveland and beyond. But it’s bad news in the sense it forces us to be expert in so many more areas, and you can’t be an expert in anything so you really need to pick your space. Kenn (Ricci), I love that you’re so focused on one industry, and our folks increasingly have had to focus on the one of the seven verticals where we are deep experts.
