Crain's Cleveland Business

20160118-NEWS--1-NAT-CCI-CL_--

1/15/2016

2:09 PM

Page 1

VOL. 37, NO. 3

JANUARY 18-24, 2016

Business of Life

REAL ESTATE: Building buy Michigan firm acquires Lakeside Place

Personal training

P. 4

There’s a stronger way to keep your resolutions

ENVIRONMENT: Battling algae NASA Glenn is taking on toxic foe

P. 46-47

P. 5

The List

CLEVELAND BUSINESS

HEALTH CARE: Digital first Startup eases clinical-trial paper trail P. 6

NEO’s largest architectural firms P. 51

Weathering weak times in steel biz Industry is being beset by layoffs, low demand and gloomy forecasts

BY RACHEL ABBEY MCCAFFERTY rmccafferty@crain.com @ramccafferty

Times have remained tough for domestic steelmakers as companies face an influx of low-cost imports and low demand in the energy market.

And it doesn’t look like it’s going to get better any time soon.

That trend has been apparent locally. In early January, Cantonbased Republic Steel announced plans to temporarily idle its Lorain plant, laying off more than 200 in the coming months.

Reports that Pittsburgh-based United States Steel Corp. also planned to lay off workers in Lorain soon followed, though the company and the union would not confirm numbers.

A statement from a company spokesperson did say U.S. Steel continues to “adjust” production at the plant. And Patrick Gallagher, sub district director in District 1 for United Steelworkers Local 1104, said the union had been presented with a variety of scenarios that would lead to layoffs and operation curtailment, if orders didn’t pick up.

As of last Wednesday, Jan. 13,

SEE STEEL, PAGE 7

Startups can finally apply for R&D credit Law would benefit young tech companies

BY CHUCK SODER csoder@crain.com @ChuckSoder

If you run a high-tech startup company, you probably should call your accountant ASAP. There’s a good chance you’ll finally qualify for the so-called R&D Tax Credit — which could easily save you tens of thousands of dollars, according to three accountants who spoke

with Crain’s Cleveland Business.

Recent changes to the credit are going to create “a windfall” for tech startups as well as some established small businesses that develop and test new products, according to Josh Messina, tax director at Cohen & Co., an accounting firm in Cleveland.

Before, a company had to actually generate a profit to claim the R&D Tax Credit.

If you didn’t pay income taxes, it SEE STARTUPS, PAGE 45

THE DISH

Lee Chilcote explores the growing ranks of Cleveland’s food stylists.

PAGE 8

Entire contents © 2016 by Crain Communications Inc.

PAGE 48

20160118-NEWS--2-NAT-CCI-CL_--

1/15/2016

1:21 PM

Page 1

20160118-NEWS--3-NAT-CCI-CL_--

1/15/2016

1:35 PM

Page 1

Dieting is way overrated.

This deal will do so much more for your self-esteem.

GS350 $409 CLASSIC LEXUS 2015 PER MO LEASE AWD

36 Month lease requiring $2,999 Cash or Trade due at signing. 10,000 miles per year and 25¢ charge per mile over. Plus tax, title, license and doc. fee.

ALL WHEEL DRIVE (In stock only)

And these deals will make you feel good, too!

LEXUS

LEXUS

LEXUS

2016 ES350

NEW 2015 LX570 AWD

2015 RC350 AWD

SAVE OVER

MONTHLY LEASE

MONTHLY LEASE

$349

36 Month lease requiring $2,499 Cash or Trade due at signing. 10,000 miles per year and 25¢ charge per mile over. Plus tax, title, license and doc. fee. No security deposit required.

$469

36 Month lease requiring $2,499 Cash or Trade due at signing. 10,000 miles per year and 25¢ charge per mile over. Plus tax, title, license and doc. fee. No security deposit required.

$10,000 OFF MSRP! 3 TO CHOOSE FROM! Plus tax, title, license and doc. fee.

Lease specials above include complimentary 1st payment

all-new

All new with a striking, chiseled body, an advanced 3.5-liter V6 and a stunning interior, the 2016 RX 350 brings style into sharp focus.

2016

IN-STOCK & READY FOR IMMEDIATE DELIVERY! LEXUS.com

CLASSIC LEXUS I-90 & SOM CENTER WILLOUGHBY HILLS 440 585 9003 With approved credit. Offer ends 1/26/16 (Prices subject to change due to early publication deadline.

RX

20160118-NEWS--4-NAT-CCI-CL_--

PAGE 4

1/15/2016

2:05 PM

Page 1

z JANUARY 18 - 24, 2016 z CRAIN’S CLEVELAND BUSINESS

Michigan group makes another downtown buy

)25 /($6( 35263(&7 $9(18( &/(9(/$1' 2+

BY STAN BULLARD sbullard@crain.com @CrainRltywriter

7RS WZR Ă RRUV IRU OHDVH 8S WR VTXDUH IHHW DYDLODEOH GLYLVLEOH WR VTXDUH IHHW

$YDLODEOH IRU 51& RU ORQJ WHUP /RFDWHG GLUHFWO\ DFURVV IURP 4XLFNHQ /RDQV $UHQD 6LJQDJH FRXOG EH PDGH DYDLODEOH

Visit

TerryCoyne.com Or call Terry at

216.453.3001

1350 Euclid Ave., Suite 300 Cleveland, Ohio 44115

WEATHERHEAD EXECUTIVE EDUCATION Professional Development Programs

Professional Development Programs More than 70 programs for immediate impact on a career and organization.

Affiliate Partners receive substantial discounts with plans for every size company and nonprofit. Can’t find the program you’re looking for? Demand it!

Certificates Certificates

Develop in-depth knowledge in specific functional areas or breadth across a number of different areas. Many can be completed in just four days.

Coaching Coaching

Highly professional, certified coaches help individuals discover, develop and shape their potential.

Signature Programs

Signature Programs Immersive multi-day programs from Weatherhead’s breakthrough organizational behavior research. Includes in-depth sessions and private coaching.

Custom Solutions

Custom Solutions Collaborate with us to design and implement an educational experience tailored to your needs. Or we’ll deliver an Open Enrollment course exclusively for your team.

Visit weatherhead.case.edu/executive-education or call 216.368.6413 to learn more.

Business Lending in Partnership with Area Credit Unions SM FOR MORE INFORMATION CONTACT JONATHAN MOKRI jmokri@cbscuso.com | 440.526.8700

An East Lansing, Mich.-based real estate investment group that specializes in older buildings has acquired the four-story Lakeside Place building, 323 Lakeside Ave., in downtown Cleveland from an affiliate of Streetsboro-based Geis Cos. The purchase by Sixty North LLC is the firm’s second in the Warehouse District. Lakeside Place is a little more than 500 feet from the Bradley Building, 1220 W. Sixth St., which Sixty North bought in 2014. Bradley is one of the district’s most famous landmarks, because apartment dwellers there in the 1970s pioneered residential living in the neighborhood of garment factories and warehouses dating to the Civil War. Lakeside Place is a former garment factory dating from 1919 that had been empty for decades when it was converted in 1994 to modern offices. Geis Cos. purchased the building in 2012 from a receiver as it was going through a foreclosure proceeding. It was Geis’ first venture in the downtown market, though more would follow.

Matt Steigenga, a Sixty North principal, said he and partner Mike Peplowski bought the building because they think it will gain value as office tenants throughout downtown Cleveland are displaced as office buildings are converted to apartments and hotels. “Our niche is historic buildings,�

Steigenga said. “We were blown away by how pretty the building is.�

He said Geis “made wonderful improvements to the roof, elevator systems and common areas. Very little needs to be done.� Steigenga said his firm has been “extremely pleased with (Bradley) “We got down there the day it was listed (in 2014) because we know how strong the residential market is there.�

Sixty North also is adding housing

Lakeside Place debuted as a garment factory in 1919. (Stan Bullard) to downtown. In an estimated $2 million project, Sixty North is converting the empty sixth floor of Bradley from office use to apartments, and it’s reorganizing the building so floors five through eight are residential and the lower floors are for office and retail use. By midyear, the Bradley will gain 10 apartments, bringing its residential suite total to 26, Steigenga said.

The investments are naturals for the pair, he said, “because we love old buildings. But it’s not all in the bricks and mortar. Things have to make economic sense.�

Steigenga and Peplowski started acquiring old buildings in downtown Grand Rapids, Mich., in 2006.

Sixty North now has a portfolio of about 500,000 square feet of such properties in Grand Rapids and East Lansing. Owning and operating landmark buildings is technically a third career for both.

Prior to buying antique properties, both were in real estate — Steigenga in corporate services with CBRE and Peplowski with a Michigan real estate developer. Prior to that, both played pro basketball.

Steigenga played with the Chicago Bulls, and Peplowski played with several teams, including the Sacramento Kings. They became friends while playing basketball at Michigan

State University.

Fred Geis, who operates Geis Cos. with brother Greg Geis, downplayed the significance of the sale of the building. “We had a number and they met it,� he said.

However, there was more to the 323 Lakeside deal than that. The Sixty North principals were touring Warehouse District properties with Richard Sheehan, an NGKF managing director, and asked if anything else might be available. That prompted Terry Coyne, NGKF vice chairman, to see if the Geis brothers would entertain an offer for Lakeside Place, which was not on the market for sale. The 87,000-squarefoot office building has space for lease. It is 20% vacant.

Sheehan said the sale is another sign of the Warehouse District’s evolution. The Michigan buyers are only the second group of out-of-town owners to take positions in the district, he said.

None of the parties would disclose how much Sixty North paid for Lakeside Place. Land records do not show a sale price because the Michigan group technically acquired the 323 Lakeside LLC that Geis used to hold the property. Cuyahoga County assigns a market value of $3.6 million to the building for property tax purposes.

Correction The list of Crain’s 52 published on Dec. 28, 2015, in The Book of Lists reported incorrect 2014 revenue for thunder::tech. The correct 2014 revenue is $5.4 million.

s Cleveland Bus sines ss (ISSN Volume 37, Number 3 Crain’s 0197-2375) is published weekly at 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113-1230.

Copyright Š 2015 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio, and at additional mailing offices. Price per copy: $2.00. s POSTMASTER: Send address changes to Crain’s Cleveland Bus sines ss, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912.

1-877-824-9373.

REPRINT INFORMATION: 212-2 210-0 0750

8748 Brecksville Rd., Suite 238 | Brecksville, OH | 44141 www.cbscuso.com • Commercial Real Estate Financing • SBA Loans - 7(a), 504 • Machinery & Equipment Loans

• Construction Loans • Business Lines of Credit • Local Lender • Competitive Rates

Subscriptions: In Ohio: 1 year - $64, 2 year - $110. Outside Ohio: 1 year - $110, 2 year - $195. Single copy, $2.00. Allow 4 weeks for change of address. For subscription information and delivery concerns send correspondence to Audience Development Department, Crain’s Cleveland Business, 1155 Gratiot Avenue, Detroit, Michigan, 48207-9911, or email to customerservice@crainscleveland.com, or call 877-824-9373 (in the U.S. and Canada) or (313) 446-0450 (all other locations), or fax 313-446-6777.

CLEVELAND BUSINESS 700 W. St. Clair Ave., Suite 310, Cleveland, OH 44113 Phone: (216) 522-1 1383; www.crainscleveland.com

Reprints: 212-210-0750 Krista Bora kbora@crain.com, Customer service and subscriptions 877-824-9373

20160118-NEWS--5-NAT-CCI-CL_--

1/15/2016

2:39 PM

Page 1

CRAIN’S CLEVELAND BUSINESS z JANUARY 18 - 24, 2016 z PAGE 5

NASA Glenn aims to fight toxic algae

BY CHUCK SODER csoder@crain.com @ChuckSoder

Edgewater apartment investment increases

BY STAN BULLARD

Superman will not save Lake Erie from toxic algae — a foe that threatens Ohio’s drinking water and its economy.

OK, then: Is there anyone around these parts who knows anything about flying through the air? Shooting things with energy beams? Protecting the Earth, in general?

Actually, yes. There is.

NASA Glenn Research Center is beginning to play a bigger role in the effort to fight harmful algal blooms like the one that forced Toledo to issue a ban on drinking tap water for two days back in 2014.

In some ways, Glenn is just getting started. Over time, however, the NASA center could become a major player in the effort to address the problem — and other waterrelated issues around the world, according to Bryan Stubbs, president of the Cleveland Water Alliance.

The alliance aims to help the center achieve that potential. It just signed an agreement saying that it will help Glenn form partnerships with companies and organizations that could help it turn waterrelated technologies into actual products.

“We want to make sure NASA Glenn is — out of the 10 NASA research centers — the one known for water,” Stubbs said.

Alliance members exchanged information with Glenn researchers at the 2015 Ohio Water Innovation Summit in November. Three of Glenn’s five presentations that day focused on projects that in some way relate to the algal blooms that have been causing much of the lake to turn green during the summer.

One project is already up and running.

Or, shall we say, flying.

By coincidence, Glenn had just equipped a jet plane with a device for monitoring water quality when the Toledo water crisis hit in August 2014.

So Glenn pilots took to the sky. Flying under the clouds — something satellites can’t do — they aimed their hyperspectral imager at the massive algal bloom that covered much of Lake Erie’s western basin.

They weren’t just taking pictures. The imager collects data on the sunlight that reflects off the algae. By analyzing the frequency of that light, Glenn researchers can tell if a given algal bloom is toxic.

Before the water crisis, Glenn had just secured funding for three research flights that would be used to fine tune the technology.

Plans changed once the crisis began: Glenn ended up conducting more than a dozen flights over the next two months, with additional funding from its own budget and NASA headquarters.

It kept up that pace last year. This time, however, the team also conducted flights over a handful of reservoirs in northern Ohio and the Ohio River.

Building stuff The project got its start in 2006, after optical systems engineer John Lekki noticed that NASA could be doing more to address the health of the Great Lakes. So he contacted the Ann Arbor branch of the National Oceanic and Atmospheric Administration. They told him they could use a hyperspectral imager that could be mounted on a plane.

“We just love to build stuff. So we built one,” Lekki said.

Now Glenn is working on a smaller

sbullard@crain.com @CrainRltywriter

Above, a Lake Erie satellite image showing an algae bloom. Below, prairie grass at NASA’s Plum Brook station near Sandusky. Research suggests the grass could help minimize the blooms. (Above: NASA; Below: John Blakeman)

imager that could eventually be mounted on a drone.

Indeed, Glenn does like to build stuff.

Much of what it builds is designed for use in space. However, Glenn has created a list of water-related technologies that may have a use here on Earth.

Among them is a water purification system that could be used to sterilize water contaminated by all kinds of toxins, including those produced by some forms of algae.

Led by Isaiah Blankson, Glenn researchers have developed a portable device that can kill micro-organisms by injecting plasma into water and hitting it with highfrequency bursts of electricity. It doesn’t need filters or chemicals, and it doesn’t heat up the water.

Glenn has been working with graduate students at Case Western Reserve University to find ways to commercialize the technology. It’s also hunting for other water-related technologies, according to Laurie Stauber, who helps lead Glenn’s local economic development efforts, which involves working with local businesses and organizations, such as the Cleveland Water Alliance.

That hunt could extend to the other nine NASA centers, Lekki added.

“Sometimes what we do is act as a conduit to the rest of the agency,” he said.

An organic solution Some solutions to the Lake Erie algae problem may not take the form of hightech gadgets. Consider John Blakeman’s

presentation at the Ohio Water Innovation Summit. He suggested that Ohio could prevent algae from forming if it could convince farmers to plant strips of prairie grass along the edges of their fields.

The idea is to starve the algal blooms of their primary source of nutrients: the phosphorus that runs off farm fields and into Lake Erie during heavy rains.

Prairie grass likes to eat phosphorus: Experiments by Iowa State University suggest that it can cut phosphorus runoff by 90%.

“It’s not conceptual. … It actually will work,” said Blakeman, an independent contractor who was hired to restore the prairie at Glenn’s Plum Brook Station near Sandusky.

Now Blakeman is spreading the word.

Earlier this month, he sent details about the idea to agricultural researchers at Ohio State University.

He wants them to run experiments to determine how wide the prairie strips need to be and which types of grass would work best.

One barrier: Farmers will lose revenue if they plant prairie grass on land that could be growing food. However, they also could make money by turning those tall stalks of prairie grass into biofuel, according to Blakeman, who also is president of the Ohio Prairie Association. He added that government incentives still might be necessary to ensure farmers don’t lose money.

“I’m just trying to open people’s minds and eyes to this very viable alternative,” he said.

As it prepares to start building an apartment community near Edgewater Park in Cleveland’s Detroit Shoreway neighborhood, Garfield Heights-based NRP Group has hiked the development’s size by 23%, to 306 units from 248 originally planned.

Aaron Pechota, NRP senior vice president of development, said the prior suite count was seen as the bottom of a potential range for the 10-acre site.

“If the market is there, which in this case we think it is, we add a little more,” Pechota said.

A larger complex allows for more amenities to differentiate the project from others, which in this case includes a clubhouse, fitness center, pool and a halfacre of green space.

Pechota also does not see 306 suites as a stretch for a city of Cleveland’s size and stature.

“There is a lack of true, high-quality multifamily that we see going up and are building in cities other than Cleveland,” Pechota said. “I think people don’t appreciate the size of the market here, and people are always coming and going in Cleveland for jobs and education. They are used to seeing this type of product in other cities.”

Cleveland does not have the population growth of other regions, and apartment construction historically has lagged other markets. But it also does not have the super-charged level of apartment development other major cities are experiencing.

NRP, which operates nationally, is constructing apartment developments in Charlotte, N.C., where developers are putting in about 5,000 units a year.

Meantime, the Marcus & Millichap real estate brokerage estimates about 1,100 units went in during 2015 in the Cleveland-Elyria-Mentor Metropolitan Statistical Area, which is up from 925 in 2014.

“On the basis of statistics, we are very confident we’ll be able to fill this thing,” Pechota said. He added the project will attract people who might want to live in downtown Cleveland but do not want to live in an office building or warehouse converted to apartments. The new interchange that recently opened at West 73rd Street and the West Shoreway also will improve access to downtown and from the western suburbs. A pedestrian tunnel has long connected West 65th Street’s north end to the waterfront.

Look for the apartments to be ready in mid-2017.

Rents will be competitive with other conversion and rental apartment developments in the region, he said.

The eight buildings comprising the project will have a sleek, contemporary feel and a few elements to pay respect to the neighborhood’s industrial heritage. Previously called Breakwater Bluffs, NRP changed the name to The Edison at Gordon Square, associating it with innovation and its location near Gordon Square at West 65th and Detroit Avenue.

The 10-acre site, which stretches from West 65th to West 58th streets on the north side of Breakwater Avenue, has an industrial past of its own. NRP demolished more than 300,000 square feet of industrial space in three main buildings previously on the site.

The new buildings will have three and four stories as well as two-story townhouses. Pechota said that will produce the varied roof line of a community rather than a single building.

The trigger for construction of the project, which has been in the works since 2012, was the closing of financing on Dec. 16. Cuyahoga County records show the project received $12 million from the Cleveland International Fund and a mortgage of indeterminate size from Huntington Bank. Pechota declined to expand on the financing or NRP’s equity investment in the project.

Pechota would not put a development cost on the project. However, industry estimates put the investment at about $38 million.

20160118-NEWS--6-NAT-CCI-CL_--

PAGE 6

1/15/2016

1:19 PM

Page 1

z JANUARY 18 - 24, 2016 z CRAIN’S CLEVELAND BUSINESS

For Sale - 25,642 SF Office Building Immediate Access to I-90 Euclid Ave

Ave Prospect

Hospitals in a bind turn to Complion Startup converts clinical trial papers to digital files

Ave Carnegie

BY CHUCK SODER

• 25,642 SF Office Building

• 95 Parking Spaces

• 1.3 Acres

• Innerbelt Visibility

• 306’ Frontage on Prospect Ave

• Exterior Signage Possible

Michael J. Occhionero

216.861.5291 MichaelOcchionero@HannaCRE.com

HannaCRE.com

In one room, Rick Arlow used high-powered computers to simulate deep brain stimulation techniques.

The room across the hall wasn’t quite so high tech.

It was full of binders, floor to ceiling. If they started falling, someone might get hurt.

Arlow aims to prevent such a catastrophe — and many other paper problems plaguing hospitals that run clinical trials. His startup company, Complion, is helping University Hospitals and other health care providers get rid of all those binders.

After spending more than five years studying for both a M.D. and a Ph.D at Case Western Reserve University, Arlow dropped out of graduate school to start Complion in 2013.

Since then, more than 25 health care providers have signed up to use the Cleveland company’s software, which allows them to replace the vast amount of paper documents generated during clinical trials with electronic files.

Those files meet the U.S. Food and Drug Administration’s strict documentation standards. So if the FDA conducts an audit, they won’t need that room full of binders, Arlow said.

If there’s another company that can provide the same service, Arlow said he doesn’t know about it.

“We’ve never lost a deal to a competitor,” he said.

So far, Complion is the most successful of the 30-or-so companies to graduate from the Flashstarts business accelerator in downtown Cleveland, according to comments made last month by Flashstarts CEO Charles Stack.

He recognized that potential after Complion graduated from the program in 2013: That year, Flashstarts and other investors pumped $435,000 into the company. The company went on to raise another $1.7 million.

That cash has helped Complion hire a staff of 10 people — a group that includes a few of the clinical trial administrators that Arlow worked with back when he was testing early versions of the software at University Hospitals.

This year, Arlow expects the company to double the size of its customer base.

Why? For one, customers are starting to come to him. That wasn’t the case in 2014. Back then, he spent a lot of time just trying to explain what it was Complion was selling.

Since then, however, he’s given several presentations at conferences and workshops across the country, talking to people about how to manage clinical trials without paper.

He doesn’t say much about Complion during those talks. Even so, they’ve helped him get the attention of customers.

MCKINLEY WILEY

2450 Prospect Avenue, Cleveland, OH

csoder@crain.com @ChuckSoder

“It just happens that we’re the only company providing this solution.”

— Rick Arlow, CEO Complion

“It just happens that we’re the only company providing this solution,” he said with a laugh.

After earning a bachelor’s in biomedical engineering from Lehigh University in Bethlehem, Pa., Arlow moved to Cleveland to attend graduate school at Case Western Reserve.

By then, he and fellow Lehigh graduate Zach Bloom had already started their own medical device company, LifeServe Innovations.

They were trying to commercialize a tool that would make it easier to give someone an emergency tracheostomy, a technique used to open people’s windpipes when they can’t breathe.

In recent years, however, investors have been more reluctant to fund medical technologies that face high regulatory hurdles.

So he put that device on the backburner — and decided to focus on an idea that could help lower those hurdles.

Arlow learned more about the problems clinical trial administrators face while in graduate school at Case Western.

While he was using advanced computer modeling technology to help scientists learn more about deep brain stimulation, he noticed people testing technologies on actual patients spent a lot of time just managing paper documents and chasing down doctors to get signatures.

So Arlow said he started asking a ton of questions and “nagging a lot of people” to understand their problems.

One of those people was Phil Cola, vice president of research and technology at University Hospitals.

Cola had recently put together a team tasked with helping manage clinical trials being conducted at UH, the Cleveland Clinic, MetroHealth and the Louis Stokes Cleveland VA Medical Center.

The team faced a heavy workload.

So when Arlow said he might be able to create software that would lighten the load, Cola told him to give it a try.

Cola didn’t expect to ever hear back from him. But roughly a year later, Arlow showed up with a demo.

It was crude, but promising. So Cola and his colleagues started giving him advice on how to improve it.

Today, Cola’s team uses Complion’s software to manage all of their clinical trials.

His staff is happy with it, and so are the FDA regulators that they work with, Cola said.

Complion “nailed it,” Cola said.

As a result, his team is able to help more local researchers test medical technologies that could one day become actual products.

“We’ve been able to help a lot more investigators with their own ideas than we ever were before,” he said.

20160118-NEWS--7-NAT-CCI-CL_--

1/15/2016

2:06 PM

Page 1

CRAIN’S CLEVELAND BUSINESS z JANUARY 18 - 24, 2016 z PAGE 7

STEEL CONTINUED FROM PAGE 1

Gallagher had no updates on the plans for the Lorain mills of U.S. Steel or Republic, whose workers also are represented by Local 1104.

But overall, he said the effect in Lorain will be “devastating,” as those cuts trickle down through the economy.

“Our communities are hurting,” he said.

In statements, both Republic and U.S. Steel attributed their plans to unfairly traded or dumped imports.

Republic also cited a negative forecast for 2016, while U.S. Steel in an emailed statement pointed to “fluctuating oil prices, reduced rig counts, depressed steel prices.”

Republic did not respond to requests for further information, and U.S. Steel declined comment.

Representatives for both Cantonbased TimkenSteel Corp. and Luxembourg-based ArcelorMittal said they were in a quiet period before making their next earnings announcement.

Both mentioned the challenging market in their most recent results this fall.

2016’s a ‘wash’ — or worse Gallagher attributes the market

difficulties to the “continuing flood of imports,” which have made it hard for domestic steelmakers to compete.

Companies in other countries have been dumping products — selling them for less than it costs to make — and profiting off the strong dollar. The union hopes for relief from trade cases in the form of tariffs and countervailing duties, but Gallagher said some foreign producers already have been able to absorb those kinds of costs because of the exchange rate.

There’s a global “oversupply” of steel, said John Lee, an equity research analyst for Fifth Third Bank in Cincinnati.

That’s mainly due to a slowdown in Chinese demand for steel, without a slowdown in production. And it could lead to a longer recovery.

“Supply issues take a longer time to correct,” he said.

When there’s a recession due to demand, the market can have a strong comeback, Lee said.

But when the problem is oversupply, it takes time to work through the inventory.

Lee’s outlook going forward is muted, and he said he thinks 2016 will be a “wash” for the industry.

Andrew Lane, senior equity ana-

lyst for Chicago-based investment research firm Morningstar Inc., has an even gloomier outlook — he expects steel prices to remain low, which he defines as below $500 per ton, through the end of the decade.

Steel prices moved far lower than anticipated last year, with prices for hot rolled coil dropping below $400 per ton.

He also pointed to a Chinese oversupply as the reason for this issue, as prices were elevated from the country’s real estate and construction boom.

Although demand has decreased, China still is making steel that “nobody needs,” Lane said.

Lee and Lane also both pointed to a weakened energy market as a source of decreased demand for steel.

There has been a significant slowdown in drilling activity and rig count, which means there’s less demand for piping and ancillary products, Lee said.

And while the auto industry has been a bright spot, Lane said he thinks auto demand may have peaked in 2015.

He expects automakers to gradually replace steel with lighter-weight aluminum to meet fuel-efficiency standards.

A bright spot

CoverMyMeds is moving and hiring

One Northeast Ohio mill that’s managing to buck the trend, at least according to the local union, is ArcelorMittal Cleveland.

United Steelworkers Local 979 represents about 1,500 hourly workers at the plant, and none are on layoff or reduced time, said president Dan Boone.

They’ve even taken applications to hire more.

Orders are up as of Jan.1, he said, and the plant is operating near full capacity.

It’s not all smooth sailing — the union and company are in the midst of contract negotiations right now and unfairly dumped steel still poses a challenge — but the mill’s efficiency and the markets it serves have helped bolster it.

ArcelorMittal Cleveland serves the automotive, appliance and spot markets, the latter meaning it sells to secondary steel companies that then turn the metal into products. It’s also notable that it makes advanced high-strength steel, a strong, light metal that works well in the automotive industry’s quest to make more fuel-efficient vehicles.

“The Cleveland plant is poised to function well into the next 20 years,” Boone said.

CoverMyMeds is leaving Twinsburg for an office in Highland Hills that’s three times larger than its existing space.

The larger space at 22901 Millcreek Blvd. will allow the fast-growing health care software company to hire another 25 people in Northeast Ohio over the next three to five months, most of whom will be software engineers. CoverMyMeds then will employ about 50 people in this region.

Doctors and other prescribers use the company’s software to electronically ask insurance companies whether a patient’s medication is covered — which traditionally was a laborious process involving phones and fax machines. That software has been popular: The 8-year-old company’s sales reached $100 million last year.

In the past, the company for the most part focused on hiring people in Columbus, which is home to its largest office. However, the company said last year that it planned to lease a new office in Cleveland’s eastern suburbs since it planned to start hiring more people from this region.

The new office contains 15,000 square feet of space. The office at 8866 Commons Blvd. in Twinsburg has only 5,000 square feet of space.

— Chuck Soder

TAKING THE BUSINESS OUT OF BUSINESS BANKING

With our Business Mobile App, you can: • Manage accounts and transfer funds • Deposit checks by taking a picture of each check • Review and approve ACH, Wire, and Positive Pay transactions (Treasury Management Customers only)

The Talmer Bank Business Mobile App lets you securely access your business banking accounts from a mobile device.

Get back to where you want to be! Download the app today and sign in with your Business Online Banking user ID. For more information, or to set up business online banking, visit talmerbank.com/businessapp or call 855-336-9460.

At Beaumont School, our International Baccalaureate Diploma Programme educates the whole student.

IB teachers are prepared to connect with multiple learning styles, allowing students to thrive and succeed.

Where can IB take your daughter?

Beaumont School (216) 321-2954 | beaumontschool.org 3301 North Park Blvd., Cleveland Heights

20160118-NEWS--8-NAT-CCI-CL_--

PAGE 8

1/15/2016

1:20 PM

Page 1

z JANUARY 18 - 24, 2016 z CRAIN’S CLEVELAND BUSINESS

Making food look good is Robb’s specialty Tremont resident is part of growing group in NEO who are drawing attention in field Food stylist Heidi Robb had worked nearly every restaurant job, managed her own catering company and baked the cake for Michael and Liz Symon’s wedding when she discovered her true passion.

Lee Chilcote Chilcote is a freelance writer and editor who has written for Vanity Fair, Next City, Belt and other publications. He is the founder of Lit Cleveland.

Michael Symon asked her to work on a Food Network show that was being shot at his apartment. She assisted the New York City-based food stylist and fell in love with the job right away. “It incorporated cooking with artistry,” Robb said. “I liked working in motion and putting food on camera. It meant looking at it in a new way, making it beautiful for the camera and not just for the customer or client.”

Today, the Tremont resident works full-time as a food stylist, hopping between Cleveland photo studios while traveling to other cities to work for clients like Nestle, WalMart and Vitamix. The role of the food stylist is to prepare the food so

that it can be photographed or captured on video. Most food stylists are professional chefs, and many have artistic backgrounds as well.

Recently, Robb’s work has gone international. Last year, she was hired to lead a workshop at the International Food Photo Festival in Vejle, Denmark, and this May, she’s teaching a weeklong food and styling workshop in Italy.

Her services are in demand in part because of her natural food aesthetic, which is increasingly in vogue these days.

“There really is an art to both styling real food and making food look as natural as it can be without any adulteration to it, as opposed to crafting the perfect burger that is manipulated,” she said. “I can do it, but my favorite thing is to style things that I want to eat, and I like to eat real food.”

Robb is part of a small but growing cadre of food stylists in Cleveland who are able to make a living turning food into art. The presence of professional photo studios like Kalman & Pabst and BurkleHagen, and the affordable cost of doing business in Cleveland, is drawing national clients and generating work for food stylists.

The city’s nationally recognized food scene certainly helps.

Robb cut her teeth working on a Martha Stewart production in New York City several years ago. As the

show shopper, she crisscrossed Manhattan in search of the best food.

“If they wanted a plum in midwinter with a red interior, I had to come back with that,” she said. “You can find anything in New York. That wouldn’t work in Cleveland.”

Melissa McClelland spent five years as a recipe developer and tester for Eating Well magazine and a chef in a bookstore café before she embarked on a food styling career.

For the past 25 years, she’s made a living at it, combining her love of food with her undergraduate degree in sculpture.

“It’s incredibly rewarding,” she said. “I like being able to physically make things. I’m building little sculptures, just like I was trained to, but it’s out of food instead of steel.”

McClelland, who also does set styling for clients like Arhaus Furniture, said the industry has grown tremendously since she returned to her hometown of Cleveland in 1999.

“There had always been two food stylists in Cleveland and that was it,” she said. “Now there are more stylists here and the demand for work is greater. There are a couple of stylists who regularly come in from Grand Rapids, Chicago and Pittsburgh to freelance.”

McClelland is currently training an assistant and believes there’s room for more stylists in Cleveland.

“It’s not a compromise to come to Cleveland,” she said. “The only compromise is that the day rates are lower than Chicago. That creates a bargain for a lot of big clients.”

The work of a food stylist can be very taxing. Typically McClelland is on her feet for nine hours a day, not

including all of the shopping she has to do beforehand. If she’s doing an ice cream shoot, then she has to use real ice cream and it may take all day to get just the right shot.

“Not a week goes by that I don’t get contacted by someone who thinks food styling is cool.”

— Heidi Robb, food stylist

“Despite what everyone continues to think, that the food is all fake, you actually have to know how to cook really well,” McClelland said.

“Ninety percent of what I do is cook real food.” The work of food stylists is collaborative by nature as they work to bring clients’ ideas to life.

“You’re a little bit on stage when you’re working,” she said. “A lot of times there’s someone looking over your shoulder.”

The Cleveland Foundation: Chief Financial Officer and Senior Vice President Established in 1914, the Cleveland Foundation is the world’s first community foundation and, with assets of approximately $2.1 billion, one of the largest. The Chronicle of Philanthropy cited the inception of the Cleveland Foundation as one of the 10 seminal events that shaped the nonprofit world in the 20th century.

Betty Karslake is another Cleveland-based food stylist with an artistic background. (She studied ceramics at Alfred University in New York.)

She said the biggest change that she’s seen in the past 30 years is the emphasis on real food.

“In the past, a lot of artifice and fakery was used, and that gave people the idea that what we do is not real,” she said. “But these days, clients want everything to be more real. You can take a bite out and leave the crumbs.

You can make it look like you made it or your mom made it.”

Robb said social media is a threat to the industry. “Because of the Internet, I worry about my niche becoming diluted by bloggers and Instagrammers who think they’re food stylists,” she said. “Not a week goes by that I don’t get contacted by someone who thinks food styling is cool.”

McClelland agreed that social media has had a mixed influence on the industry. “We’re so flooded now with images that tend to be of a very particular style, window-lit and not studio-lit, using overhead camera angles because people are standing up putting their iPhone over the food and taking a picture,” she said.

“It’s driven the industry in a particular way.”

Despite the challenges, Karslake said that being a food stylist remains a great gig. “I don’t go to work a day in my life because I love what I do,” she said. “I just think food is beautiful, the textures and the colors. You eat with your eyes.”

To contact Chilcote, send an email to clbfreelancer@crain.com. You also can follow him on Twitter @leechilcote.

Voice of Reason

FIG. 6-C

Hero

The Chief Financial Officer (CFO) / Senior Vice President reports to the President & CEO of the Cleveland Foundation and will serve as a key advisor regarding all finance, accounting and investment matters. The CFO will also act as a resource to and routinely partner with the VP of HR, VP of Advancement and the Executive Vice President on any finance-related needs.

As a member of the leadership team and executive committee, the CFO is responsible for developing and implementing The Foundation’s financial and investment strategies and ensuring the success of the financial and accounting operations. Managing a team of nine, the CFO serves as primary staff support for the investment, audit and finance/administration committees of the Board.

The CFO will play a key role in the strategic planning and annual goal setting processes for The Foundation in addition to contributing to the design and implementation of policy regarding daily operations.

The ideal candidate will possess a Bachelor’s degree in accounting, finance or a related field and have ten or more years of progressive senior level financial management roles. S/he will have experience in investment portfolio management, asset allocation, and capital markets, including alternative investments, and demonstrate a thorough understanding of all aspects of accounting and finance and a sound understanding of non-profit management and fiscal policies. The ideal candidate will also have experience in enterprise risk management, business continuity, compensation and benefit plan design, insurance and strategic planning.

The successful candidate will possess a strong service orientation with experience collaborating as part of a multidisciplinary team and working effectively with persons from diverse backgrounds. S/he will have experience in working with boards of directors and leading committee meetings along with strategic abilities with superior technical aptitude, analytical ability, sound judgment and strong operational focus.

Interested candidates may send a resume and express interest by contacting J.J. Cutler at Korn Ferry, jj.cutler@kornferry.com.

The Cleveland Foundation is an equal-opportunity employer.

Problem Solver

Golf Partner

Tax Law Expert

Consultant

Who says you can’t be all things to all clients?

You’re good: on the financial front and on the back nine. But sometimes a client’s charitable giving issue is both urgent and complex. We can help.

We’re Akron Community Foundation, and we have all the charitable resources you need — cost free — before your 3:45 appointment.

From CRUTs to IRAs, we’ll keep you looking good in front of even the most demanding client. So be a hero and call us.

Your client — and the community — will thank you.

PHILANTHROPY FOR THE

BUSINESS SAVVY.

Download our free guide at akroncf.org/hero.

Or, call 330-436-5610.

20160118-NEWS--9-NAT-CCI-CL_--

1/14/2016

3:37 PM

Page 1

KALMAN & PABST PHOTO GROUP

CRAIN’S CLEVELAND BUSINESS z JANUARY 18 - 24, 2016 z PAGE 9

CLARISSA WESTMEYER

Let Nesco work for you.

NEW CLIENTS.

NOW

Get a jump start on 2016 with a list of possible new clients. Download the Book of Lists now and let your best year of business begin.

CRAINSCLEVELAND.COM/LISTS

FOR COMMERCIAL LEASING INFORMATION, CONTACT: DYANN DAVISON | 216.781.4828 ddavison@KandD.com www.KandDRealEstateServices.com

COMPLIMENTARY

DESSERT*

R ESERV E SQUA R E 1701 EAST 12TH STREET | CLEVELAND, OHIO 44114 Commercial space available, Brand new indoor salt water pool with saunas, locker rooms and roof top sundeck.

3,000 sq. ft. to 30,000 sq. ft.

1HZO\ XSGDWHG VWDWH RI WKH DUW ¿WQHVV FHQWHU Complete renovation.

Convenience market.

Brand new build out.

On-site management and maintenance.

Access to the building on E. 12th St. and E. 13th St. with 2 manned security stations, 24/7. Key fob access for tenants.

Wireless, cable and IT services.

Attached garage parking.

Central conferencing center and lounge.

Dry cleaning service.

On-site restaurants.

On-site car rental agency.

Florist.

Concierge services.

ATM machine.

Bike storage.

Savor the aroma of our wood-fired grill uniquely preparing your choice steaks, chops and fresh seafood.

Reservations are highly recommended, especially on weekends.

HOURS OF OPER ATION Monday-Thursday 5pm-9pm Friday 5pm-11pm Saturday 4pm-11pm Sunday 4pm-9pm Bar opens daily at 4pm

10777 Northfield Road | Northfield, Ohio 44067 | 330.908.7625 | hrrnp.com

Offer expires 2/29/16. Not redeemable for cash. Cannot be combined with any other offer. Must be 21 years of age or older. Non-transferable and non-negotiable. Management reserves the right to cancel or modify this offer without notice. Other restrictions may apply.

For free, confidential help 24/7, call the Ohio Problem Gambling Helpline at 1.800.589.9966.

20160118-NEWS--10-NAT-CCI-CL_--

PAGE 10

1/14/2016

4:36 PM

Page 1

z JANUARY 18 - 24, 2016 z CRAIN’S CLEVELAND BUSINESS

Opinion From the Editor

It is a New York state of grind for traveler

Editorial

Invest outward

Downtown Cleveland is no doubt on an upward trajectory.

Public Square is in the midst of a dramatic redo. A handful of new hotels, including the skyline-altering Hilton near the downtown convention center, are poised to come online in the coming months just in time for the Republican National Convention. The revived Flats East Bank has re-energized what had been a desolate part of Cleveland’s waterfront.

However, the narrative in other communities in Cuyahoga County, particularly the inner-ring suburbs, isn’t quite as dazzling. That’s why we applaud Cuyahoga County council for looking at ways to invest casino revenue beyond the downtown area.

Council is considering amending county code to include community development as an accepted use for casino tax revenue. According to a Jan. 4 story from Cleveland.com, these grants could amount to tens of thousands of dollars for cash-strapped communities for projects such as master plans, demolition, roads, streetscapes, parks and senior centers. Sure, they aren’t the sexiest investments, but these sorts of investments can greatly add to the quality of life in a community.

Of course, if this proposal passes — and it appears likely — council members could soon have a few more pet projects to tout come election time. That’s not necessarily a negative, but safeguards should be put in place to ensure council members aren’t funneling funds for window dressing in their district.

Meanwhile, late in 2012, council passed an ordinance that superseded an earlier ordinance limiting casino dollars to downtown until July 2016. Council has since eyed the suburbs for further investments in multimillion dollar economic development projects. Admirably, in November, council agreed to use $4 million of its share of casino gambling proceeds for a loan to help the city of Euclid complete the sec-

ond phase of its $30 million plan to transform the eastern suburb’s waterfront.

It was the first time the county steered casino funds for a suburban project, and as reported by Crain’s Jay Miller, county councilwoman Sunny Simon said the project “proves the importance of taking a regional approach to promoting development in our county.”

Council is now considering putting in place a competitive review process to be used for deciding where to award loans from the casino fund. We’re hopeful that such a process, if appropriately constructed, could put suburban projects on level footing with those under consideration for downtown Cleveland.

After all, Downtown Cleveland shouldn’t be the only community to get the red carpet treatment. The rest of Cuyahoga County deserves some fresh digs as well.

Good work, Jimmy Once again, Cleveland Browns owner Jimmy Haslam wasted no time blowing up his organization in the wake of another losing season. We, like most of Cleveland, dreaded another months-long coaching search that would bring us another inexperienced coordinator. Last week, however, Haslam and Co. found their man: Hue Jackson, the Cincinnati Bengals’ offensive coordinator.

As one of the most sought-after coaching prospects in the league, we’re surprised, quite frankly, and grateful that Jackson decided to sign with Cleveland. So far, Haslam’s unconventional leadership in the Browns’ front office — with an assist from Jed Hughes, a search consultant with Korn Ferry — appears to be on the right course.

Now, the real work begins.

ACTING PUBLISHER AND EDITOR: Elizabeth McIntyre (emcintyre@crain.com)

CLEVELAND BUSINESS

MANAGING EDITOR: Scott Suttell (ssuttell@crain.com)

Ah, New York. If I can make it there, I’ll make it anywhere.

That’s certainly how I felt a couple months ago trying to book a business trip to New York City. It should be pretty easy to get from here — Cleveland — to there — New York, the business center of the United States. But if you want to make it there, you first have to get there.

Travel for business people these days, whether to New York City or just about anywhere else that isn’t a vacation destination, has gotten increasingly difficult since United pulled its hub from Cleveland Hopkins International Airport almost two years ago.

I don’t travel often for business, but when the occasion has arisen these past few years, I’ve certainly had my frustrations. Never more so than when I tried to book a two-day business trip to New York City for early December.

I closely monitored flights from Cleveland Hopkins and Akron-Canton Airport a good Elizabeth six weeks out.

McIntyre I was open to flying into JFK, LaGuardia and Newark airports. Weeks went by. The price stayed about the same.

Direct flights hovered around $800. Connecting flights?

About $300. Finally, I pulled the trigger so that I’d only have one overnight stay.

Now don’t get me wrong. I love the Big Apple. I love the idea of waking up in the city that never sleeps. But this is real life, and real life means I have work to do, and the best way to do that is to wake up where my job is. And that’s Cleveland. So one overnight stay was about all I could allow.

A decent price for that direct flight was elusive, never budging from $800. The best I could do — to fly out Tuesday morning for a noon meeting and depart Wednesday after 5 p.m. — was into Newark via Philadelphia for $305.

To make a long story short: On Tuesday, departure day, there was a weather delay. I sat in the terminal, then on the plane on the tarmac. I barely made the connection in Philly, then that flight was delayed. After a $130 taxi ride to Manhattan from Newark, I arrived an hour late for my meeting.

Now the return: Wednesday brought another weather delay at JFK and word that we’d miss the connecting flight in Philly.

Working with the agent, I snagged a flight from LaGuardia and made it there only to sit for another seven hours before finally boarding.

That’s when the crew realized a passenger who was having a worse travel day than me was on the wrong flight to Cleveland.

He abandoned his luggage on the wrong plane to catch the right flight, forcing the rest of the passengers to deplane to identify their luggage.

After the wrong-way traveler’s rogue bag was identified and tossed, it was wheels up at 10:40 p.m. I arrived home, exhausted, by 1 a.m., five hours later than my planned arrival.

There has to be a better way.

And a short time later, on another trip to New York, I think I found it.

Next week, I’ll tell you about my experience traveling on a charter plane that has the chance to save business travelers money and time when regular service potentially starts later this year. We’ll take off from Burke Lakefront Airport next week.

McIntyre also is acting publisher of Crain’s Cleveland Business.

WRITE US: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited. Send letters to Crain’s Cleveland Business, 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113, or by emailing letters@crain.com. Please include your complete name and city from which you are writing, and a telephone number for fact-checking purposes.

SOUND OFF: Send a Personal View for the opinion page to emcintyre@crain.com. Please include a telephone number for verification purposes.

20160118-NEWS--11-NAT-CCI-CL_--

1/14/2016

11:11 AM

Page 1

CRAIN’S CLEVELAND BUSINESS z JANUARY 18 - 24, 2016 z PAGE 11

Letter to the editor

Web Talk Re: Browns’ TV ratings The decline in ratings for Browns games is a culmination of the team’s record over a number of years. The 2015 season was over less than halfway through the 16-game schedule. Based on that, the fans/viewers drift away and spend their time and money elsewhere. Restarting interest in the Browns for the 2016 season is a very tough task. The fans’ negative view is a snowball that’s rolling downhill, getting bigger and faster, and it will be almost unstoppable.

— Jim Daniloff

to drive profitable growth? It looks like Terry Jenkins, president of Key Private Bank, has a good plan to leveraging tools for the front line to find cross-sell and up-sell opportunities.

— Jim Galon In my experience, wealth management is more of a cross-marketing system for the bank than anything else. Key is better than most due to excellent staff. Still, it’s a bank and banks don’t share risk like they used to, which makes these relationships mostly theoretical.

— Alan Glazen

Re: Team’s front office structure

Re: Athersys strikes licensing deal

Anything that leads to not paying another Dwayne Bowe $9 million is a good start.

— Donald Templeman

This partnership with Japanese company Healios K.K. is terrific news. I believe the treatment that Athersys has developed will replace the present treatment for ischemic stroke. It has been proven to be safe, more effective and, most important, can be administered many hours later after a person has had the stroke.

Time is so important when treating a stroke.

— James Shellenburger

People, “chemistry” plus talent is what leads to successful teams and organizations. The Browns have squadered some good talent in many years of bad chemistry since they returned. Good organizational chemistry is not achieved through the shuffling of boxes on the organization chart, but from developing positive working relationships within and between the team/staff/front office. If you are not well intra-connected, you are not going to win!

— Orgnet LLC

Re: Growth of Key Private Bank It’s interesting to see, with all the fintech startups, how Key Private Bank will continue to differentiate itself. How can it leverage its retail locations and business accounts

Re: Demise of HealthSpot As digital health devices keep getting smaller, cheaper, more accurate and easier to use, they naturally moved down-market to consumers wherever they are, bypassing the need for retail clinics altogether, except for things like getting shots. The video call with a general practitioner or specialist can just as easily happen from a phone or tablet as a kiosk.

— Wayne Caswell

Countries from around the world recently reached a historic agreement in Paris to address climate change.

Not only does this agreement put the world on the right path when it comes to protecting our environment, it also sets the stage for the development of new renewable energy technologies that will create new jobs and kick the American clean energy economy into overdrive.

The Paris agreement sends a strong signal that dirty energy is on its way out worldwide.

But here in the U.S., the clean energy future is already right in front of us.

The Environmental Protection Agency’s Clean Power Plan is spurring the transition to clean energy here in Ohio by encouraging investment in renewable energy sources.

Unfortunately, climate deniers in Congress are pushing a polluter-friendly agenda that has the Clean Power Plan directly in its crosshairs.

Attacking a policy that will clean up the air and create jobs is a lose-lose for all of us.

I urge our elected officials to stand up for the Ohio economy by supporting the Clean Power Plan.

— Clint Schleeper, Cleveland

at North Point Tower, 1001 Lakeside Avenue Cleveland, OH

www.cbre.com/cleveland

950 Main Avenue, Suite 200, Cleveland, OH 44113 T +1 216 6871800 | www.cbre.com/cleveland @WeLeaseCLE

GET INVOLVED

Every shot blocked by the Cavs earns a $100 donation to Cleveland Clinic Children’s Hospital 1.800.ELK.OHIO | elkandelk.com/weakstuff

20160118-NEWS--12-NAT-CCI-CL_--

1/14/2016

11:12 AM

Page 1

Select Recent Transactions

has acquired

D SRUWIROLR FRPSDQ\ RI

has sold its Guiding Systems Business to

D SRUWIROLR FRPSDQ\ RI American Recreation Products IURP

has been acquired by has been acquired by

D SRUWIROLR FRPSDQ\ RI D VXEVLGLDU\ RI

D SRUWIROLR FRPSDQ\ RI

Members of Management

Customized Solutions.

Superior Execution.

Unparalleled Results.

Western Reserve Partners SURYLGHV 0 $ FDSLWDO UDLVLQJ DQG RWKHU ÀQDQFLDO DGYLVRU\ VHUYLFHV WR PLGGOH PDUNHW FRPSDQLHV DFURVV D IRFXVHG VHW RI LQGXVWU\ YHUWLFDOV )RU PRUH LQIRUPDWLRQ SOHDVH YLVLW RXU ZHEVLWH DW ZHVUHVSDUWQHUV FRP

growth equity provided by

&

Ralph M. Della Ratta 0DQDJLQJ 3DUWQHU (216) 589-9557 UGHOODUDWWD#ZHVUHVSDUWQHUV FRP

has acquired

David D. Dunstan 3UHVLGHQW (216) 589-9530 GGXQVWDQ#ZHVUHVSDUWQHUV FRP

D SRUWIROLR FRPSDQ\ RI D SRUWIROLR FRPSDQ\ RI &

D SRUWIROLR FRPSDQ\ RI

'HÀDQFH 3DUWQHUV

has been acquired by

and

has been acquired by

D SRUWIROLR FRPSDQ\ RI

has been recapitalized by

Strategic Advisory Services

Highly Experienced.

Exceptional Client Attention.

Premier Valuation Solutions.

American Roll Form Products

Evapco Inc.

AFC Holdings, Inc.

Ferrara Candy Company

Explorys

Clinical Outcomes Management Systems, LLC

Flavorseal

Olympia Food Industries, Inc.

irth Solutions LLC

Hamilton Beach Brands

Universal Companies, Inc.

dlhBOWLES

Western

Reserve

Valuation

Services

provides

YDOXDWLRQ VHUYLFHV DQG ÀQDQFLDO RSLQLRQV UHODWLQJ WR

)LQDQFLDO UHSRUWLQJ DQG SRUWIROLR IXQG YDOXDWLRQV

&RUSRUDWH ÀQDQFH WUDQVDFWLRQV

&RUSRUDWH WD[ SODQQLQJ DQG FRPSOLDQFH

6XFFHVVLRQ SODQQLQJ DQG ZHDOWK SUHVHUYDWLRQ

(PSOR\HH VWRFN RZQHUVKLS SODQV

Robert M. Stutz 0DQDJLQJ 'LUHFWRU (614) 448-3701 UVWXW]#ZHVUHVYDOXDWLRQ FRP

Daniel P. Callanan 0DQDJLQJ 'LUHFWRU (614) 448-3703 GFDOODQDQ#ZHVUHVYDOXDWLRQ FRP

8

Be methodical about your succession plan

11

Tax due diligence a key part of strategy

18

Marketplace trends present opportunities

AND

Corporate Growth M&A SPECIAL ADVERTISING SECTION

ALSO INSIDE: Consider post-closing obligations 19 Assess technology infrastructure 21 Various forms of capital readily available 24

CRAIN CONTENT STUDIO C l eve l a n d

CORPORATE GROWTH AND M&A

S2 January 18, 2016

ADVERTISEMENT

TABLE OF CONTENTS 10

3 President’s Letter

7 Involve Accountant

4 Market Diligence & Shrewd Acquirers

8 Succession Planning & Equipment Appraisals

6

Transactional Liability Insurance & Mitigating M&A Risk

11 Thorough Tax Due Diligence

16 Cross-Border Transactions

12 Careful Preparation & Earn-Outs

17 Diversify Growth & Non-Control Investments

13 Charitable Legacy & Bypassing Auctions

Outsourcing Negotiations

14 Delivering Deal Value & Next Acquisition Tips

18 Spin-Offs & Private Equity Trends

19 Post-Closing Obligations & Financial Due Diligence 20 Purchase Price Adjustments & Sell-Side Tax Due Diligence Reviews 21 Navigating Technology

22 ACQUIRING COMPANIES

Your deal gets done here

Sale of stock to Hynes Holding Company

Cottonwood Acquisitions, LLC Acquisition of assets of Roadie Products, Inc.

Industrial Maintenance Services, Inc. Sale to Technology Service Professionals, Inc.

MCM Capital Partners III, L.P. Offering of Limited Partnership Units

23 Working Capital & Purchase Price Adjustments

Apple Sauce, Inc.

Apple Sauce, Inc.

Sale of 10 Applebee’s restaurants to Doherty Apple South Florida, LLC

Sale of 33 Applebee’s restaurants to RMH Franchise Corporation

Sale to CeramTec

Lee Steel Corporation and its affiliates Sale of Wyoming, Michigan facilities and business to Union Partners I, LLC pursuant to Bankruptcy Code § 363

$70 million Senior Guaranteed Notes

Acquisition of certain assets of Hospitality Technical Services that made DCI an Enhanced GPNS Provider to Marriott International

Sale to Aurora Diagnostics, LLC

24 Acquisition of dESCO, LLC

Making Big Investments

25 M&A Insurance & Entity Classification 26 Buying/Selling & Bolstering Buyer’s Advantage

Lee Steel Corporation and its affiliates Sale of Romulus industrial real estate and facilities to Hilco Industrial and Hilco Real Estate

LTS Metrology LLC Acquisition of substantially all the assets of LTS Scale Company, LLC

S. G. Morris Represented independent trustee in the sale to Applied Industrial Technologies

Tioga Air Heaters, LLC Acquisition of Reliable Construction Heaters, Inc.

27 ACG Officers and Board of Directors, Events Calendar, About ACG 28 20th Annual Deal Maker Awards

Advertising director Nicole Mastrangelo, nmastrangelo@crain.com Managing editor, custom and special projects Amy Ann Stoessel astoessel@crain.com

Tioga Air Heaters, LLC Acquisition of Mobile Air

Recapitalization with two private equity firms

1BUSJDL + #FSSZ

.JDIBFM + .FBOFZ

$P $IBJS .FSHFST BOE "DRVJTJUJPOT

$P $IBJS .FSHFST BOE "DRVJTJUJPOT

Copy editor Kathy Carr Graphic designer Staci Buck

.D%POBME )PQLJOT --$ t 4VQFSJPS "WFOVF &BTU 4VJUF $MFWFMBOE 0) t mcdonaldhopkins.com

$BSM + (SBTTJ 1SFTJEFOU

Shawn M. Riley, Cleveland Managing Member $IBSMFT # ;FMMNFS $IBJS #VTJOFTT %FQBSUNFOU

$IJDBHP t $MFWFMBOE t $PMVNCVT t %FUSPJU t .JBNJ t 8FTU 1BMN #FBDI t 8BTIJOHUPO % $ * McDonald Hopkins Government Strategies LLC is owned by the law firm McDonald Hopkins LLC. McDonald Hopkins Government Strategies is not a law firm and does not provide legal services.

For more information about custom publishing opportunities, please contact Nicole Mastrangelo.

CORPORATE GROWTH AND M&A

ADVERTISEMENT

January 18, 2016 S3

PRESIDENT’S LETTER

ACCELERATING CLEVELAND’S GROWTH: education, celebration and community

W

ith the upcoming Republican National Convention, a redeveloped and vibrant downtown, and a championship contending Cavaliers team, it is an exciting time to be a Clevelander. It is also an excellent time to be a member of ACG Cleveland and gain access to the chapter’s outstanding professional development and networking events.

For the 2015-16 programming year, our events are hinged on the theme of Accelerating Cleveland’s Growth.

This theme is more than a clever use of the ACG (Association for Corporate Growth) acronym; it is embodied in all the experiences ACG offers.

During the year, we are celebrating our region by showcasing its thought leaders, compelling civic initiatives and diverse business community, with entities ranging from emerging startups to longstanding bastions of industry. I am proud to represent ACG Cleveland as its president and encourage members and non-members alike to embrace our programming, networking and educational opportunities in 2016.

In 2015, ACG Cleveland celebrated Northeast Ohio’s great success stories with dynamic programming that included: a tour of Dunstan the Global Center for Health Innovation; a first-time gathering of the innovation leaders from Eaton, Goodyear, SherwinWilliams and Owens Corning, which was moderated by Nottingham Spirk; a review of the many infrastructure projects in Cleveland, including the Horseshoe Casino Cleveland, Public Square, the Flats and the lakefront; and an introduction to 3D printing and the leading pioneers who are harnessing this exciting industrial technology.

We are confident that the best is yet to come as we head into 2016 with an in-depth look at the Republican National Convention and its impact on our region.

I would also encourage Cleveland’s young professionals and women in business to take a fresh look at ACG Cleveland. We have developed unique opportunities through two

special interest groups, Young ACG and Women in Transactions, to provide networking, education and entertainment offerings specific to your interests. These groups represent more than 160 of our 500 members and are a growing and valued segment of our membership.

Our signature event, the annual Deal Maker Awards, will be held Jan. 21 at the Cleveland Convention Center. We will honor Northeast Ohio’s top corporate deal makers for demonstrated success in using acquisitions, divestitures and financings to fuel growth.

Honorees will include The J. M. Smucker Co., Ferro Corp., Area Wide Protective Inc. and Resilience Capital

‘‘

IT IS A POWERFUL CHANNEL FOR BUSINESS

Plante Moran is one of the nation’s largest accounting, tax, and management consulting firms with alliances throughout the world. We work with more than 200 private equity groups and 300 portfolio companies and our industry expertise spans many sectors including manufacturing, food & beverage, service, technology and health care.

plantemoran.com

PROFESSIONALS AT ALL LEVELS TO

BUILD RELATIONSHIPS AND THEIR CAREERS,

WHETHER THEY ARE YOUNG PROFESSIONALS

{On the right course.}

A higher return on experience.

Partners. We will welcome nearly 1,000 people from Cleveland and around the country to congratulate the winners, celebrate the event’s 20th anniversary and join in a night of networking and new opportunities.

ACG Cleveland is dedicated to bringing relevant content, education and networking to its members, highlighting the exciting developments in our region and providing access to the individuals, institutions and corporations that are making it happen.

It is a powerful channel for business professionals at all levels to build relationships and their careers, whether they are young professionals just entering the workforce or experienced

JUST ENTERING THE WORKFORCE

‘‘

By DAVID D. DUNSTAN

OR EXPERIENCED SENIOR EXECUTIVES.

senior executives.

To our members, I encourage you to make the most of your membership in 2016 by getting actively involved in the chapter and joining a committee.

For those considering membership, please attend an event to see the benefits of ACG membership firsthand.

I guarantee that you’ll be inspired by the experience.

In closing, I would like to thank our current members for their continued support and active participation in all that we do at ACG Cleveland. It is the commitment of our board of directors and nearly 500 members that make the organization great. Please enjoy the rest of this section, which highlights our members’ expertise and provides valuable content with respect to mergers, acquisitions and capital raising.

David D. Dunstan is president of ACG Cleveland and managing director and president of Western Reserve Partners LLC. For more information about ACG Cleveland, visit www.ACGcleveland.org.

S4 January 18, 2016

CORPORATE GROWTH AND M&A

ADVERTISEMENT

BE DILIGENT ABOUT MARKET DILIGENCE Third-party researchers provide valuable, unbiased assessments

By BERT SMYERS

G

athering solid market intelligence (“market research” or “market diligence”) is a vital component of any deal’s diligence process, but it is too often given inadequate focus or neglected altogether.

Market diligence offers significant benefits to buyers, helping them to: ■ Hone valuations during the bidding process; ■ Validate the target’s assertions about market position and growth prospects; ■ Accelerate organic growth post-close by better understanding expansion opportunities; and ■ Identify potential add-on candidates.

Perhaps most importantly, market diligence can identify bad deals by raising red flags that don’t normally surface in other diligence activities.

These red flags can include: customer dissatisfaction that could lead to

attrition, competitive dynamics that suggest future market share loss and changes in the regulatory landscape.

Such actionable Smyers knowledge is especially important in today’s deal climate, as prevailing company valuations climb to historically high levels and the pressure to justify these rich multiples likewise increases.

According to GF Data, middle market EBITDA multiples averaged 7.1x in the third quarter of 2015, which is the highest in the database’s history.

Good market diligence doesn’t have to include expensive and time-consuming assessments. Rather, the exercise is tailored to focus on the key marketrelated value drivers in a given deal.

For platform acquisitions, a comprehensive study may be needed to lay the foundation for post-close strategic planning. However, for addons or smaller transactions, focusing on

only a few issues is usually sufficient.

Common issues include: ■ Evaluating relationships with customers: How durable or “sticky” are they?

■ Assessing the target’s competitive position: Does it have sustainable advantages? How is it differentiated from competitors? Is it gaining or losing share?

■ Understanding overall market dynamics: How is the market segmented? How big is each segment? How fast is each growing?

As mentioned, market diligence should be customized to the discreet needs of a given deal. That said, it often combines secondary research (a targeted review of existing research about the target and its markets) and primary research (information obtained directly from market participants — usually some combination of customers, suppliers, competitors and/ or market experts). Primary research

is collected through phone interviews and/or in-person discussions, but may also include web and phone surveys.

Critical success factors for good market diligence include impartiality and a specific skill set in collecting market insights. These requirements can make it difficult for acquirers to tackle alone.

Third-party research partners exist to fill the gap. Combining research expertise, industry experience and a bullpen of professionals with top consulting skills, research partners ensure a thorough and unbiased assessment of critical market assumptions. They consequently enhance prospects for the deal’s ultimate success.

At the end of the day, investment returns are what matter. Actionable market intelligence can mean the difference between a good deal and a great deal. Avoiding even one bad deal can mean a significant bump in a private equity fund’s ROI. Planning and executing proper market diligence with a reputable third-party research partner is a prudent step to ensure success in today’s M&A environment.

Bert Smyers is managing partner of New Heights Research. He can be reached at 216-523-4295 or bert.smyers@nh-r.com.

Shrewd acquirers set clear strategy, foster relationships

By MICHAEL C. SHAW

C

orporate acquirers are constantly competing with increasing numbers of financial sponsors for auctions and proprietary deals. To become a stronger acquirer, corporations need to focus on setting a clear strategy, designing a long-term pipeline management process and building a strong marketing approach.

Developing the strategy The pace of change in more industries gets faster and the world gets smaller. Which is why Grant Thornton LLP, is part of a global network of member firms, which has more than 40,000 people in more than 130 countries. Combining global scope with local savvy, we’re ready to help you capitalize on opportunities wherever they arise, now and into the future.

Audit | Tax | Advisory | grantthornton.com

“Grant Thornton” refers to Grant Thornton LLP, the U.S. member firm of Grant Thornton International Ltd (GTIL), and/or refers to the brand under which the independent network of GTIL member firms provide services to their clients, as the context requires. GTIL and each of its member firms are not a worldwide partnership and are not liable for one another’s acts or omissions. In the United States, visit grantthornton.com for details. © 2015 Grant Thornton LLP | All rights reserved | U.S. member firm of Grant Thornton International Ltd

Great acquirers that execute multiple successful deals over time always have a clear strategy prior to acquiring. Corporations typically look to their core capabilities first and determine whether they can leverage these Shaw capabilities to make an acquisition successful, or if a core capability needs to be improved upon with an acquisition.

For example, a large distributor may have a great value-added service capability that smaller distributors aren’t providing to customers.

Conversely, the same distributor may have significant gaps in its sales capabilities because it lacks certain products or territories that could be obtained through acquisition.

Finding targets and managing a pipeline If you’re waiting for deals to come across your table, you’re missing out on the right opportunities. Building a pipeline should be treated the same as a company’s normal sales process — identify leads, convert them to opportunities and manage routine contact to convert the opportunity.

Trade journals, industry associations and trade shows are the best place to begin building your list.

If your company has identified targets, there should be a record of the last time someone communicated with that target’s business owner — and it should be a fresh contact.

Presenting yourself to sellers Strong acquirers find ways to alleviate the pain points of potential sellers, which increases your opportunity conversions. The stronger buyers are able to demonstrate they can close quickly, require little to no financing contingencies, and treat target employees favorably after the deal.

Buyers should develop proper marketing collateral to help communicate their capabilities as a buyer.

Michael C. Shaw is partner at Copper Run. He can be reached at 614-888-1786 or mshaw@copperruncap.com.

Solutions Realized Whether your business has plans to grow from within, make acquisitions, or recapitalize, one thing is clear: it’s critical to have a knowledgeable banking partner in your corner. That’s why businesses depend on FirstMerit Bank’s expertise in Business Credit and Sponsor Finance to help turn their plans into success.

As a preferred capital provider for private equity groups, we’re here to listen, to learn, and to understand your business and your goals. Let us show you why these great companies chose FirstMerit Bank.

A portfolio company of:

A portfolio company of:

A portfolio company of:

A portfolio company of:

Undisclosed Amount Senior Secured Credit Facilities

Undisclosed Amount Senior Secured Credit Facilities

$17,000,000 Senior Secured Credit Facilities

$22,500,000 Senior Secured Credit Facilities

Sole Lead Arranger & Administrative Agent

Sole Lead Arranger & Administrative Agent

Sole Lead Arranger & Administrative Agent

Sole Lead Arranger & Administrative Agent

November 2014

January 2015

March 2015

March 2015

A portfolio company of:

A portfolio company of:

Leading Ohio-Based Fluid Power Distributor A portfolio company of: A portfolio company of:

TRP CAPITAL

American Industrial Acquisition Corporation (AIAC)

Undisclosed Amount Senior Secured Credit Facilities

$21,500,000 Senior Secured Credit Facilities

$31,000,000 Senior Secured Credit Facilities

$8,500,000 Senior Secured Credit Facilities

Sole Lead Arranger & Administrative Agent

Sole Lead Arranger & Administrative Agent

Co-Lead Arranger & Co-Syndication Agent

Sole Lead Arranger & Administrative Agent

March 2015

June 2015

June 2015

August 2015

A portfolio company of:

A portfolio company of:

$24,500,000 Senior Secured Credit Facilities

$15,000,000 Senior Secured Credit Facilities

Sole Lead Arranger & Administrative Agent

Sole Lead Arranger & Administrative Agent

September 2015

October 2015

Undisclosed Amount Senior Secured Credit Facilities

$25,000,000 Senior Secured Credit Facilities

Syndication Agent

Sole Lead Arranger & Administrative Agent

November 2015

November 2015

TO LEARN MORE, CONTACT:

Doug Winget, President, FirstMerit Bank Business Credit, at 330-384-7448 or doug.winget@firstmerit.com.

Jacqueline Hopkins, Managing Director, Sponsor Finance Group, at 312-429-3618 or jacqueline.hopkins@firstmerit.com.

Member FDIC 5058_FM15

firstmerit.com

CORPORATE GROWTH AND M&A

S6 January 18, 2016

Empire Business Associates brings 20 years of experience to the sale of distribution, service and manufacturing companies. :H SURYLGH D IUHH FRQÂżGHQWLDO PDUNHW analysis of your business with no fees upfront.

ADVERTISEMENT

Outsource intricate M&A negotiations to third-party expert THESE KEY REASONS UNDERSCORE NEED

empire

Specializing in the sale of small and mid-size businesses

business associates

www.empirebusinesses.com

440-461-2202

A

s due diligence wraps, you’ve likely identified a number of red flags with the business you’ve planned to acquire. These obstacles can present both short- and long-term challenges, ranging from immediate cost burdens to the potential

“I know exactly who you should call.�

People who know Private Equity, know BDO.

The Private Equity Practice at BDO Strategically focused. Remarkably responsive. A century of experience. BDO’s Private Equity Practice provides integrated, value-added assurance, tax, advisory, and consulting services across the fund cycle, and across the world – all through a single point of contact.

Ohio locations: Akron | Cincinnati | Cleveland | Columbus Accountants and Consultants www.bdo.com/privateequity Š 2015 BDO USA, LLP. All rights reserved.

for expensive litigation down the road.

Outsourcing complex negotiations to an experienced third-party allows you to focus on your positive assets and lay the groundwork for a smooth, productive transition.

1

CONTRACT NEGOTIATION: As an organization shifts, key leadership positions may be moved or eliminated. Hire an expert to negotiate with executives on your behalf.

A third-party removes emotions from the process and, upon reaching a successful agreement, circumvents any chance for litigation.

There are typically two roads to closure in these circumstances: Dottore The executive can choose to sue the company, which is a lengthy and costprohibitive process, or take a severance package and walk away. Executives almost always choose the path of least resistance. Your negotiator can assist with customizing the details of an exit package and help the executives quickly come to the conclusion that accepting the offer is in their best interest.

2

CREDITOR AND SUPPLIER DEBT: Let’s say the owners of your acquiring company have dozens of unopened American Express bills in their desks. In these cases, cutting off communication to creditors only postpones the inevitable

‘‘

collections headaches and lawsuits to follow.

Creditors and suppliers are often left with very little at the end of an M&A deal, so they’re pleased to speak to a third-party representative who is willing to work out a percentage pay out. Your negotiator can evaluate each circumstance and recommend a buy-out budget to you in advance.

The approved budget empowers the negotiator to close these accounts on your behalf, while minimizing the amount of new capital going to solve old problems. This process often requires dozens of phone calls, so unless you have a persistent employee with time to burn, outsource this task to a partner who can focus on it.

3

GOVERNMENTAL COMPLIANCE ISSUES: When conflicts arise with local, state or federal authorities, it’s essential to find an attorney who specializes in compliance issues. These problems can range from environmental to tax and everything in between. The public sector moves at a slow pace, so never underestimate the value of relationships in these situations. A well-connected attorney or consultant can help expedite resolution behind the scenes and above the board.

Mark Dottore is president and CEO of Dottore Cos. He can be reached at 216-771-0727 or mark@dottoreco.com.

A THIRD-PARTY REMOVES EMOTIONS

FROM THE PROCESS AND, UPON REACHING

‘‘

By MARK DOTTORE

A SUCCESSFUL AGREEMENT, CIRCUMVENTS ANY CHANCE FOR LITIGATION.

ADVERTISEMENT

CORPORATE GROWTH AND M&A

Involve your accountant early on before proceeding with acquisition

By JOSEPH V. PEASE JR.

W

hen considering an acquisition, it’s always a good idea to start by speaking with your accountant. A CPA’s experience in tax, financial and business matters allows him or her to provide significant value for dollars spent, whether

on a sell-side or buy-side transaction.

CPAs are in a great position to help their clients with acquisition services.

These services include directing clients to buy-side resources if they haven’t already located a target.

If they have identified a target, the services would include financial and tax due diligence; business valuations;

deal structure to minimize income taxes; assistance with the sourcing and structure of financing the deal; negotiations; working with the attorneys on letter of intent terms; and asset purchase agreement specifics.

Accountants can also assist with cash flow modeling to determine equity needs.

The sale process can be a very stressful experience for a business owner, especially if advisers are not well-versed in what to anticipate.

Being properly prepared to plan and execute the transaction can be the difference between a smooth, low-risk, high-reward experience and one that may crash and burn after the sale.

January 18, 2016 S7 A CPA firm can help in several ways, from preparing or reviewing pro-forma statements about the company’s future performance, to providing shareholders with projections of the deal’s net proceeds after taxes and expenses.

Sellers often rely on their CPA to negotiate working capital adjustments and to negotiate post-transaction adjustments. In extreme cases, the CPA firm plays a vital role when there are contentious issues between the buyer and seller after the closing.

Business owners who are anticipating a sale Pease Jr. or acquisition would do well to discuss the potential transaction with their CPA and gain an understanding of the CPA’s level of experience with prior deals.

The firm should be ready to explain the types of deals it has worked on, issues they faced and how they were addressed.

Buyers should inquire about what to anticipate during the transaction and how the accounting firm would handle various situations. Ask the accountant to prepare a summary of after-tax dollars resulting from the sale and opportunities to minimize taxes to ensure the best possible outcome for you and your business.

Joseph V. Pease Jr. is president and CEO of Pease & Associates.

He can be reached at 216-3489600 or jpease@peasecpa.com.

The right people to get the extraordinary done.

Some opportunities feel like impossible challenges. They’re so big and complicated that they require insights from lots of different fields. But when you have the right team working with you, truly extraordinary things can happen.

See our stories at pwc.com /extraordinary To learn more, visit www.pwc.com/us/deals or contact Brian Kelly at (216) 875 3121 or Thorne Matteson at (216) 875 3441.

© 2016 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity.

Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors

CORPORATE GROWTH AND M&A

S8 January 18, 2016

ADVERTISEMENT

It’s never too early for succession planning Craft a well-developed strategy for a smoother transition

By STEWART KOHL

F

amilies are complex. And family businesses can really highlight the intricacies of all those relationships. Succession planning is therefore complex for the owner of a family business.

A capable heir may be waiting in the wings, but family members often aren’t present or ready.

Entrepreneurs who have built their busi- Kohl nesses don’t often get around to the next step, but succession planning is critical to the long-term health of any enterprise.

I don’t think it is coincidental that the words “succession� and “succeed� have a common root.

START NOW Consider bringing in a financial partner well before you want to

hand over the reins. Partnering with a private equity firm can allow you to keep the lead role and either retain a majority or assume minority ownership. In addition to providing personal liquidity, you can allow all stakeholders to make their own decision about staying in or cashing out. And best of all, you will have access to your partner’s resources to drive growth through add-on acquisitions, research and development investments, global expansion and many other strategies.

LOOK AHEAD Good financial partners will nurture the company and help ensure that your ultimate transition will be smooth. The help won’t be like that of a consulting firm or other adviser.

Because of their skin in the game and close alignment of interests, equity firms also provide two opportunities to generate gains for you and the other shareholders: at the time of the private

equity firm’s initial investment, and down the road if you choose to sell your remaining stake.

PLAN CAREFULLY Talk to other business owners who

have worked with partners to find out about their experiences. Work with experienced advisers and attorneys. Consider your goals for the company, yourself and your family, and then ask potential partners for details on how they can help you achieve them. Be clear about your objectives, and ask your investor to do the same. Make sure the partnership is a good cultural fit. You don’t have to like the same adult beverages or sports teams, but you should agree on the big issues facing the company.

DON’T BE INTIMIDATED Rather than being intimidating, succession planning with the right partner will be an exciting opportunity to take your company to the next level and resolve any questions you might have about its future. Get started on your company’s future today.

Stewart Kohl is co-CEO of The Riverside Co. He can be reached at 216-344-1040 or info@riversidecompany.com.

C A L F E E CO N G R AT U L AT E S

The J. M. Smucker Company and Ferro Corporation on their well-deserved 2016 ACG Cleveland Deal Maker Awards.

The attorneys at Calfee are proud to represent companies that engage JO NJEEMF NBSLFU NFSHFST BOE BDRVJTJUJPOT BOE DPSQPSBUF kOBODF We congratulate our longstanding clients and all other award winners.

$BMGFF $MJFOUT kSTU -FHBM FYQFSUJTF BMXBZT

Cleveland | Columbus | Cincinnati calfee.com

Equipment appraisals are key part of M&A

By KIPP A. KRUKOWSKI

A

machinery and equipment appraisal may not be the first thought that comes to mind when negotiating your business transaction. However, the oft-overlooked equipment appraisal plays several important roles during a business sale or acquisition.

First, the appraisal could be used to help justify the asking price or the offer on the business.

Second, if a buyer is looking to get a business acquisition loan, lenders will want an appraisal of Krukowski the machines for collateral purposes.

In addition, once a price is negotiated between the buyer and seller, part of the negotiation is the allocation of purchase price. Since the purchase price normally consists of the buyer acquiring the tangible (machinery and equipment) and intangible (goodwill) assets of the company, both the buyer and seller will have to report the same allocations when they submit their tax documents to the IRS. A fourth benefit of an equipment appraisal is that the buyer will be able to use the details of the report to set up her asset list and depreciation schedule of the newly formed entity.

Although a machine might have a book value of $0 on the selling company’s balance sheet since it has been written off, the buyer of the company will be able to depreciate the asset again starting with its current fair market value. The appraisal provides documentation on what “new� value should be placed on each piece of equipment.

Finally, an appraisal provides potential equipment replacement costs should an insurance claim occur.

Not all equipment appraisals are the same. Estimated online values or appraisals from used machinery and equipment dealers aren’t enough.

Business owners should secure through an accredited appraiser an equipment appraisal that is Uniform Standards of Professional Appraisal Practice (USPAP) compliant.

All three methods of valuation will be considered, and accurate research and analysis will be completed to arrive at values.

A buyer needs proper documentation to support the equipment values and a signed certification showing those appraisals are unbiased if the IRS were to audit the financial statements.

Kipp A. Krukowski is managing director of Equipment Appraisal Services. He can be reached at 216-912-0832 or kipp@ equipmentappraisal.com.

I’m a dealmaker.

I’m also a

lawyer, which helps a

great deal.

Merge or acquire. Divest or recapitalize.

Buy or sell, equity or debt.

Or just organic growth.

Name your aim, and let’s go get it.

Whether you lead a public company, a PE fund or a family office.

I bring people together—the right people, at the right time.

Because that’s how deals get done.

How enterprises grow.

How portfolios get power-sized and businesses achieve their potential.

When the stakes are this high, the know-how has to be higher.

I’m Chair of the Private Equity Practice Group.

But the seat I like best is the one next to you, at the table where we do the deal or plan the strategy that builds your future.

I’m JIM HILL. I’m on your team.

MY BENESCH MY TEAM > Chair, Private Equity Practice Group; Corporate & Securities Practice Group > Representing publicly and privately held growth companies, private equity funds and portfolio companies, family offices, mezzanine finance providers, equity participants. > Legal Services Include: Mergers and Acquisitions, Public/ Private Equity Offerings, Public/Private Debt Offerings, Strategic Planning. > 216.363.4444 | jhill@beneschlaw.com

www.beneschlaw.com

CORPORATE GROWTH AND M&A

S10 January 18, 2016

ADVERTISEMENT

Mitigate M&A risk through due diligence, deal structure and favorable terms

By JAKE DERENTHAL

P

articipants in mergers and acquisitions all want to limit the risk arising out of their transactions. Decisions made at each step ultimately determine the level of exposure for buyers and sellers.

With planning and help from experienced advisers, parties can manage M&A risk by conducting effective due diligence, determining optimal transaction structure and negotiating favorable agreement terms.

Conduct effective diligence The diligence process is designed to flush out essential information about

the target, which allows the buyer to understand the facts before committing to the purchase. The quantity and detail of diligence required varies by transaction but generally includes analysis of historical financials, material contracts, customers and suppliers, employees, technology, real property and applicable regulatory issues. Parties should create deal-specific diligence lists focusing on critical areas for the applicable business. Discovering unforeseen risks upfront provides options — whether it’s walking away, adjusting the price or creating new escrows — and is the best way to avoid buyer’s remorse.

Optimize transaction structure Deal structure will determine who assumes or retains the target company’s li- Derenthal abilities. Buyers generally prefer to acquire assets, which automatically excludes obligations not expressly assumed. Alternatively, sellers like to sell stock to create a clean break in which all assets and liabilities transfer to new shareholders by operation of law.

In some situations, a merger or joint venture may best accomplish the parties’ goals. Parties may want to

Negotiate favorable language

and covenants ensures purchasers acquire what they intend. Focusing on indemnification is critical to determine who is responsible for post-closing risk. The difference between expansive or capped indemnity will have longterm consequences. Finally, ancillary documents should be properly drafted to effectively transfer title.

Risk allocation reflected in M&A documents and purchase price are closely related. One side will often assume more risk to complete a transaction when the price is right.

Savvy dealmakers don’t shy away from these calls but make sure decisions are made in light of all facts and available options.

Regardless of what is said during negotiations, the language in definitive transaction agreements will govern the deal. Incorporating the right representations, warranties

Jake Derenthal is a partner in the Corporate Transactions Group of Cleveland-based Walter | Haverfield LLP.

consider forming new companies as acquisition vehicles or to hold spin-off assets to isolate risk. And in all cases, analysis of tax implications is required to avoid surprises from the IRS. Using a combination of working capital adjustments, earn-out payments, escrows, holdback and seller notes as part of the deal structure can further align seller and buyer interests in future performance.

Transactional liability insurance bridges gap between buyer, seller

By JEFFREY SCHWAB

I

t’s no secret that whether you are the buyer or seller, protecting yourself from the chaos of unforeseen liabilities should be of utmost priority. Fortunately, a number of carriers offer transactional liability insurance products.

Transactional insurance is a collection of products including representations

and warranties, tax liability, pollution and contingent liability.

These products can be used to distinguish a bid and bridge the gaps that arise between buyers and sellers.

Sellers seek to minimize indemnities and survival periods, while the buyers want to maximize the escrows and extend the representation period.

■ A representations and warranties

• Key insights delivered: market sizing, growth and risk assessments; “voice of the customer” analyses • Expert, custom, and cost-effective market research to support all phases of the deal cycle ✓ Pre-LOI “quick hit” exercises ✓ Post-LOI market diligence reports ✓ Post-close portfolio company support ✓ Sell-side research to support owners and investment banks • Serving small & middle market PE firms, corporations and advisors for more than a decade

policy is designed to protect an individual from a financial loss that occurs because of a contractual breach of representation and warranties.

These Schwab policies are designed to mirror the asset purchase agreement or sales and purchase agreement.

■ Tax liability policies address known tax positions taken by the seller and can also cover transaction-related tax positions.

The IRS may place a lien on assets at the time of sale for unpaid federal taxes.

Federal tax liability for unpaid taxes may result in the IRS placing a lien on assets at the time of sale. State and local tax issues

may arise depending on the jurisdiction. A tax policy minimizes or diminishes these concerns.

■ Contingent liability stems from an issue identified during due diligence that could lead to financial loss postclosing. This often arises because of litigation or potential litigation, and both the buyer and seller have to properly valuate the risk. A contingent liability policy removes this exposure from the transaction.

Keep in mind, unplanned liabilities can affect both sides of the transaction.

In general, underwriters will require both buyers and sellers to have “skin in the game” when structuring the policy. While there is a minimum policy premium plus

EXPERT. INSIGHTS. DELIVERED. ‘Take it to New Heights’ for your market research needs! www.nh-r.com

due diligence fees, in the end both will benefit from streamlined negotiations and more confident transactions.

Look for a solid broker with a dedicated M&A practice and the right carrier markets.

Seasoned professionals can help both buyers and sellers navigate to the most appropriate transactional product, which helps you to increase your close success rate by removing a deal’s intrinsic uncertainties.

Jeffrey Schwab is senior vice president and practice leader of the Mergers & Acquisitions/Private Equity Practice at Oswald Cos. He can be reached at 216-658-5208.

Expertise Pays Off For more than 80 years, we have helped middle THYRL[ JVTWHUPLZ HJOPL]L ÄUHUJPHS Z\JJLZZ -PUHUJPHS [H_ 0; HUK VYNHUPaH[PVUHS K\L KPSPNLUJL 7\YJOHZL HJJV\U[PUN JVUZ\S[H[PVU ;H_ Z[Y\J[\YPUN + Risk assessment/risk mitigation (\KP[ [H_ HUK HK]PZVY` ZLY]PJLZ 3L[ V\Y RUV^SLKNL L_WLYPLUJL HUK L_WLY[PZL IL HU HZZL[ [V `V\Y JVTWHU`»Z VWLYH[PVUZ THUHNLTLU[ HUK ZOHYLOVSKLYZ

Aim for your targets We understand the unique challenges you face in your business. Across all industries, our experience, depth of knowledge, and global reach can help you overcome challenges and achieve your goals. Deloitte serves corporate acquirers and private equity investors throughout the entire M&A lifecycle. From strategy through execution, integration and divestiture, Deloitte’s M&A Services can help you achieve deal success.

Cleveland | 216.363.0100 Canton | 330.966.9400 Delaware | 740.362.9031 Elyria | 440.323.3200

Giovanni DiCenso +1 216 589 5150 / gdicenso@deloitte.com Kevin Murphy +1 216 589 1471 / kevinmurphy@deloitte.com

Business Advisors and Certified Public Accountants Copyright © 2015 Deloitte Development LLC. All rights reserved.

36 USC 220506 Member of Deloitte Touche Tohmatsu Limited.

maloneynovotny.com

CORPORATE GROWTH AND M&A

ADVERTISEMENT

January 18, 2016 S11

AVOID PITFALLS, MAXIMIZE PROFIT WITH THOROUGH TAX DUE DILIGENCE T

here was a time during the 1980s when environmental due diligence was not viewed as important to the transaction. Today, it is integral to most transactions because of the potential for hidden deal killers. Similarly, the need for tax due diligence was sometimes overlooked in past transactions, but the need has never been greater than it is today.

It is easy to understand why tax due diligence has become increasingly significant. Tax laws are becoming more complex. Businesses that operate beyond state borders or in international jurisdictions face myriad taxes and vigorous enforcement by tax authorities.

Tax due diligence traditionally focused on examining the various types of taxes businesses faced, Godenswager II including those they may have been obligated to pay depending on the jurisdiction in which they operated.

Going forward, effectively involving the tax team early and throughout the deal process presents an opportunity to leverage the diligence process beyond conventional results and render the deal more profitable.

While laying the groundwork for diligence, here are some suggestions:

Do not overlook potential opportunities and credits Not all tax diligence needs to be focused on averting risk. Appreciable opportunities for unrealized growth may arise throughout the course of conducting diligence.

‘‘

Examining the business’s tax position provides the opportunity to review certain tax credits and other incentives, such as the R&D credit, employment tax credits and local incentives. These credits are often overlooked or not pursued, but they can easily add value.

Proper tax due diligence has become a vital part of any successful deal.

An understanding of the potential tax exposures and planning opportunities equips the parties to effectively deal with it during negotiations and move the deal forward.

David H. Godenswager II is a senior manager in BDO’s Transaction Advisory Services practice. He can be reached at 216-325-1700 or dgodenswager@bdo.com.

TOO OFTEN, OUTSIDE ADVISERS ARE NOT ENGAGED UNTIL AFTER A LETTER OF INTENT IS SIGNED, WHICH RESULTS IN LOST DOLLARS TO THE SELLER OR ADDITIONAL COST TO THE BUYERS.

Solicit advice early Although structured as nonbinding, the terms of the letter of intent can place one of the two parties in a superior bargaining position early on in the deal process. Too often, outside advisers are not engaged until after a letter of intent is signed, which results in lost dollars to the seller or additional cost to the buyers. For example, if structured properly, and in many cases involving a flow-through entity target, the buyer can secure the benefits of a tax basis step up without materially increasing the seller’s taxes.

Ensure a proper scope and consider nonincome-based taxes Many parties focus only on incomerelated taxes, which leave the results incomplete. They potentially overlook fatal exposure risks.

Properly identifying tax exposures is important, but non-incomebased taxes, such as sales taxes and employment taxes, have the potential to derail the otherwise stable acquisition.

Today, many jurisdictions are increasingly scrutinizing the characterization between employees and independent contractors. Misclassified employees could inherit significant employment tax liabilities.

Likewise, a business with relatively small international operations might be easy to overlook during diligence but could result in a significant tax exposure and penalties.

‘‘

By DAVID H. GODENSWAGER II

CONNECT with

500 local and 14,000 global

DEAL MAKERS

Association for Corporate Growth Driving Middle-Market Growth

www.ACGcleveland.com

CORPORATE GROWTH AND M&A

S12 January 18, 2016

ADVERTISEMENT

CAREFUL PREPARATION WILL PAVE WAY FOR A SUCCESSFUL BUSINESS SALE

By MICHAEL BENSON

W

hether you’re hoping to sell your business next month or next year, smart preparation can lay the groundwork for a transaction that maximizes the company’s value. Here’s how to get started: ■ Make yourself redundant (or even expendable). You are not ir-

replaceable. You are not Winston Churchill. If you’ve run a solid operation, your company should be just fine after you leave.

But consider the buyer's point of view. His greatest fear is that you just might be indispensable and that when you walk out the door, the business will collapse.

Avoid that impression and the uncertainty it generates with clear,

When an owner’s values mean more than just dollars and sense, AEF can create the significance to match their success.

Download our FREE Ebook at www.aefonline.org/crains2016

easily understood business operations, competent staff that will stay with the company after the sale, and thorough documentation of activities relating to every facet of the business.

■ Document, document and document some more. Documentation is so important to a business sale that it merits further explanation.

Document supplier and customer relationships. Suppliers and customers are often more important to a company’s success than any individual employee.

Buyers will want to know that these arrangements are established and secure.

Document all profit performance (taxes). Some decisions are driven by the potential tax implications in a privately owned business. Some of those decisions can be damaging when it’s time to illustrate the true profitability of a company. Work with your accountant or bookkeeper to construct an accurate picture.

Document all profit performance (nonoperating expenses).

Most privately held companies run a variety of non-operational expenses Benson through the business.

Make sure supporting paperwork for these expenses is retained.

■ Do your housekeeping. It’s the little things. First impressions count.

Ask any car dealer — a dented fender can leave a prospect wondering, “What else could be wrong?” The primary goal is to let the buyer see the real value of the business, so eliminate as many

distractions as possible. The cleaner and more uncomplicated the environment is, the better the first impression. That goes for the office, work areas, and financial information and records.

Selling a business is not always easy, but preparing with these steps improves your chances of converting a prospect into a buyer who clearly understands how he can buy — and grow — your company.

Michael Benson is the president at Empire Business Associates.

He can be reached at 440-461-2202 or mike@empirebusinesses.com.

Earn-outs may help bridge valuation gap

By MICHAEL TUCCI and JENNIFER HORN

O This City Inspires Us

And that’s why we call Cleveland our home To learn more about Riverside’s strategies to grow companies with $1 million - $30 million in EBITDA, contact Cheryl Strom, Origination, at +1 216 535 2238 or cstrom@riversidecompany.com.

The Riverside Company | 50 Public Square, 29th floor Terminal Tower, Cleveland, OH 44113

ne way for buyers and sellers in M&A transactions to agree on a purchase price when their valuations of the target company’s future income differ significantly is through contingent consideration, commonly known as an “earn-out.” Earnouts provide that a certain portion of the purchase price be contingent on certain future events occurring over a specified Tucci period of time.

These future events may be based on financial metrics, such as EBITDA, revenue or gross profit, or on non-financial metHorn rics, such as product development milestones, regulatory approvals, or employee or customer retention goals.

For example, a buyer and seller may agree that 20% of the purchase price will be contingent on the purchased business achieving EBIDTA targets over the next eight quarters. After each quarter, the buyer will pay to the seller an agreed-upon amount, which is either a fixed amount or a percentage of EBIDTA for that quarter. If the target is not met, no payment will be made.

A common variation is to have a target EBIDTA range with a sliding scale earn-out payment based on where in the range the target was met.

Earn-outs can bring a buyer and

seller together on price to help close the deal, but if they are not crafted and executed carefully, they may delay the valuation gap dispute. At that point, it is usually much more difficult and expensive to resolve.

If earn-outs are based on financial metrics, sellers should be aware of several issues.

One is how to isolate the performance of the target’s business while the buyer is integrating the target entity into its existing business.

Another is what happens if the buyer determines that it will put fewer capital resources into the purchased business than originally expected, because new opportunities or challenges require greater expenditures in other segments of the buyer’s business.

Finally, expectations may differ on accounting methodologies.

This is particularly problematic if the earn-out is based on gross profit. While these issues cannot be eliminated, a properly crafted purchase agreement can help mitigate these risks.

Overall, earn-outs work best if the seller remains involved with the business during the earn-out period and when the metrics are as objective and verifiable as possible, with all calculation methodologies agreed to in advance.

Michael Tucci and Jennifer Horn are attorneys. Horn is in the Business and Corporate Services Group at Mansour Gavin LPA. She can be reached at 216-523-1500 or jhorn@mggmlpa.com.

CORPORATE GROWTH AND M&A

ADVERTISEMENT

January 18, 2016 S13

Building a charitable legacy from a business sale

By LAURA MALONE

W

hen owners of closely held businesses meet with their trusted advisers, two important and interrelated questions guide the discussions: 1) “What is the best strategy for exiting my business?” 2) “How can I maximize the financial and tax benefits from that exit?”

In enlightened discussions, owners may choose to address more than tax savings and net proceed increases. They may want to talk about reallocating some of their tax savings toward giving back to the community or figuring out how to manage wealth in a way that

won’t alter their children’s values.

A donor advised fund (commonly known as a DAF) is that point of intersection where the owner’s personal and social interests intersect in simple, tax-smart and meaningful ways. Many owners find the donor advised fund affords them the opportunity to ensure the same sense of enduring significance as a private foundation but without the labor and oversight that private foundations require.

Furthermore, they can offer a level of privacy that is not available in the public tax filings of a private foundation.

How does the business owner benefit?

Because donor advised funds are

sponsored by public charities, gifts of closely held stock, real estate, or other assets qualify for the highest benefits available, including:

■ Tax-free philanthropic growth.

Could this ‘kill the sale/deal’?

down the transaction process. Most buyers hardly notice the DAF charity’s involvement in the transaction.

Professional legal/tax advice is necessary to avoid an IRS challenge of these favorable tax benefits.

However, thanks to the simplicity and cost-effectiveness of DAFs, business owners now have a meaningful way to ensure that they will be remembered over successive generations.

Because the gift must be made before any formal, legally binding agreement to sell or merge the company, gifting the shares to the donor advised fund and the subsequent transition of those shares to the buyer can take place without slowing

Laura Malone is vice president of development at American Endowment Foundation. She can be reached at 888-440-4233 or lauramalone@aefonline.org.

Won’t the owner lose control?

Malone

■ Immediate and maximum income deduction at the highest percentages of adjusted gross income; ■ Avoidance of capital gains on gifts of long-term appreciated stock or other property; ■ No estate taxes on the asset; ■ Potential reduction of alternative minimum tax or possible avoidance of net investment income tax; and

Savvy business owners understand the difference between ownership of a business and control of a business.

Often, the owner is only gifting nonvoting shares or a portion of the asset that is not large enough to impact the owner’s business control.

Bypass the chaotic auctions when sourcing deals Consider these best practices

By JAMES M. HILL

ny? These practices are key:

M

■ Either a strategic or a financial buyer has a former CEO or former operator that has a vast network in the chosen industry and you pay this individual to find "not for sale" companies. A CEO often has a thesis for an industry platform that will draw him into being the CEO or the chairman if a financial buyer.

any strategic buyers and financial buyers are trying to avoid frenzied auctions where the leverage is liberally permitted and the valuations are intimidating. So how does one go about avoiding the frenzied auctions — often without any exclusivity and having to greatly leverage up the compa-

■ There are a large number of buy-side firms that often do add-ons, as larger EBITDA companies often go to auction but find a boutique Hill firm that specializes in the industry. Sell-side firms are usually not attracted to buy-side opportunities because they want inventory to sell. You will have to pay a retainer for this and make sure the buy-side firm understands your industry.

■ Strategic and financial buyers often seek a confidential information memorandum from the large regional or international firms. However, smaller investment banks are an ideal avenue, too. Closely held businesses don’t want to send out 200 teasers. They want to know the best targets on which to focus. Buyers often overlook this consideration.

■ Attend the industry conferences that interest you most as a buyer. You will fraternize with certain CEOs that own their own company (not sponsored

companies) and learn to build a relationship. You cannot focus on general industries but most financial buyers have limited their focus to two or three industries.

■ This requires hard work, and you need a full time corporate development officer to handle this.

James M. Hill is chairman of the Private Equity Practice at Benesch, Friedlander, Coplan & Aronoff LLP. He can be reached at 216-3634444 or jhill@beneschlaw.com.

S14 January 18, 2016

CORPORATE GROWTH AND M&A

ADVERTISEMENT

Retain, motivate talent to deliver deal value These strategies help guide transition

By PwC DEALS PRACTICE

T

he talent aspects of M&A have long presented challenges for deal makers, but they can also be a critical part of an M&A strategy.

Achieving success in M&A calls for an incisive capacity to evaluate leaders and teams; an understanding of what motivates them; and an ability to design incentives, environments and roles to retain the most valuable talent.

Getting M&A right from a talent strategy perspective can help propel companies ahead in today’s market.

Bringing in new talent has increasingly become a key goal for M&A transactions.

According to PwC’s 2014 M&A Integration Survey, access to management or technical talent has increased in importance by 27% since 2010.

Yet only about a third (36%) of

executives say they were completely able to achieve those objectives following the transaction’s close.

There is little doubt that talent integration is difficult. In fact, 37% of executives claim that organizational structure, people management and work practices are a top post-close difficulty. These factors are the thirdmost frequently cited challenge after integrating information technology and systems, and aligning operating procedures and business processes.

Yet an acquirer may also face challenges when it comes to existing employees.

M&A transactions can carry huge opportunity costs that can drag down the economic value of the transaction.

Three key aspects are usually the problem: Employee disengagement and productivity declines, voluntary attrition and market share shrinkage.

During the deal’s planning phase, it is important to establish strong leadership and a contemplative approach to employee retention.

Kelly On day one of the merged entity, continuity is paramount: there are customers to be served, employees to be onboarded, payrolls to be met, emMatteson ployee benefits coverage to be extended and workplace infrastructure to be maintained.

As the new organization enters into its initial 100 days, success will Thompson depend on the acquirer's ability to provide the right support for a smooth

workforce transition — one that assists employees from both companies to be engaged in their careers and add value to the organization.

Potential steps include: 1. Assess talent at target company 2. Identify and engage the future leaders 3. Identify the future mid-level managers 4. Determine non-monetary incentives 5. Motivate millennials 6. Communicate throughout the M&A process 7. Design the future organization The M&A transaction can serve as the impetus for building a talent strategy that embodies such policies as work-life balance and flexibility.

Although M&A can be disruptive to employees at both the acquirer and the target organization, it can also be an

What secrets are hiding behind the IT door?

By JIM ABBOTT

I

nformation technology can be a pretty scary thing, since many of us neither speak the language nor have any training on the topic. As such, IT is often overlooked during the acquisition process.

Whether you’re on the buy side or sell side, IT due diligence needs to be a part of every merger or acquisition.

When spending millions to acquire, the last thing you need is to find out (after closing the deal) that a huge

capital outlay is necessary to bring the IT systems up to speed.

Looking to sell your business or carve out a business unit? You present a much more valuable opportunity if your systems have been brought into the 21st century and your IT team is on top of its game.

If you’re looking to acquire, you should be very concerned about the target’s network infrastructure, its security and its compliance with regulatory guidelines, as well as those who manage it. IT can be a tremendous asset or

a huge liability, and only by getting under the hood and knowing what questions to ask can you really gauge the value of what you’re buying.

Abbott A proper review and analysis should consider the acquisition from two perspectives: how the business affects IT and how IT affects the business. It should also consider not only the hardware and software, but also the people because

Brian Kelly and Thorne Matteson are deals partners at PwC. Bradley C. Thompson is an M&A tax partner at PwC. Brian Kelly can be reached at 216-875-3121 or brian.kelly@pwc.com. Thorne Matteson can be reached at 216875-3441 or thorne.matteson@ pwc.com. Bradley C. Thompson can be reached at 216-875-3062 or bradley.c.thompson@pwc.com. you turn to an IT company for advice on accounting? In any network, there are many variables to consider, and no two are alike.

By working with a team that handles IT on a daily basis, you’ll better understand the short- and longterm implications of a system and its operating team. The right source will be one that regularly solves a variety of IT challenges, while also bringing a strategic perspective to the table.

Jim Abbott is the sales and marketing manager with Ashton Technology Solutions. He can be reached at jabbott@ashtonsolutions.com, or 216-539-3685.

SM

Reduce investment risks.

Maximize your potential. bmblb bm] !bvhķ "o +o -m ";b ; rrou| mbা;v

Risk Management Consulting

Contact Jeff Schwab

McCarthy Lebit protects client interests in the purchase, sale, merger, 1omvoѴb7-াom -m7 u;v|u 1| ubm] o= 0 vbm;vv;v

Corporate Aggregation

Sr. Vice President & Private Equity Practice Leader

Post-Acquisition Synergies

216.658.5208 jschwab@oswaldcompanies.com

u vor_bvা1-|;7 1o mv;Ѵ -ѴѴo v 1Ѵb;m|v |o |-h; -7 -m|-]; o= orrou| mbা;v _bѴ; lbmblb bm] Ѵb-0bѴb|

Employee Benefits Human Capital Solutions Retirement Plan Services Life Insurance Executive Compensation Plans Learn more www.OswaldCompanies.com/Private-Equity

Š 2015. Oswald Companies. All rights reserved. DS1056

Trusted Advisors. Respected Advocates.

they determine how much value the network adds.

A well-architected system, managed by people who really know what they’re doing, can lead to a much more efficient and productive workplace. A haphazardly constructed network, getting little to no regular maintenance, is a ticking timebomb. But one could easily be mistaken for the other by an untrained eye.

Some business consultants and CPA firms offer “technology consulting� and “IT due diligence� as an additional service, but look at it this way: would

opportunity to re-energize all employees around a new purpose and growth agenda. Where senior executives are successful in communicating an inspiring vision and story around a new corporate future with a merged entity, they can win the “hearts and minds� of employees and re-recruit them with a new zest and energy.

A bigger corporation with a new growth trajectory and mission can be a powerful lure for talent.

has been acquired by

a portfolio company of

a portfolio company of Goldman Sachs and Centerbridge Partners has been acquired by

has been acquired by

Sell-Side Advisor

Sell-Side Advisor

has been acquired by a portfolio company of

Argosy Private Equity and Anvil Capital has been acquired by

Sell-Side Advisor has acquired

Sell-Side Advisor

Sell-Side Advisor

$1 Billion

has acquired

has been acquired by

Buy-Side Advisor has been acquired by

Sell-Side Advisor

$1.2 Billion

Transaction Value Buy-Side Advisor

$692 Million

Transaction Value Buy-Side Advisor Equity Private Placement

a portfolio company of

HGGC and Charlesbank has been acquired by

has been acquired by

Financial Advisor

$1.4 Billion

has divested certain assets related to

Sell-Side Advisor

Brass and Tubular Products to

Sell-Side Advisor

Ideas are the new currency.

To learn more, contact: Mergers & Acquisitions Paul Schneir 216-689-4005 pschneir@key.com

Visit key.com/mergers Investment Banking | Capital Markets Syndicated Finance | Risk Management

KeyBanc Capital Markets is a trade name under which corporate and investment banking products and services of KeyCorp and its subsidiaries, KeyBanc Capital Markets Inc., Member NYSE/FINRA/SIPC, and KeyBank National Association (“KeyBank N.A.”), are marketed. Securities products and services are offered by KeyBanc Capital Markets Inc. and its licensed securities representatives, who may also be employees of KeyBank N.A. Banking products and services are offered by KeyBank N.A. Key.com is a federally registered service mark of KeyCorp. ©2015 KeyCorp. ADL8377

$800 Million

Transaction Value Sell-Side Advisor

CORPORATE GROWTH AND M&A

S16 January 18, 2016

ADVERTISEMENT

Will your next cross-border transaction receive government approval?

Agency carefully monitors swath of transactions

By MARY I. EDQUIST

I

f you are contemplating a merger, acquisition, joint venture or other form of investment by foreign companies or individuals, you should be aware of the Committee on Foreign Investment in the United States.

An inter-agency committee of the U.S. government, CFIUS is composed of representatives from nine federal agencies, including the Department of Defense, the Department of State and the Department of Treasury.

CFIUS has the authority to review, investigate and block almost any foreign investment in a U.S. company or asset that either raises national security concerns or involves critical infrastructure. Given that the president has the authority to unwind such transactions at any time, even postclosing, parties regularly file voluntary

notifications with CFIUS in order to gain a safe harbor.

Among other matters, a CFIUS notice provides the government with informa- Edquist tion concerning the nature of the transaction and the seller’s domestic operations, as well as the foreign buyer’s background and future intentions with respect to the business or assets being acquired.

Depending on the circumstances, it can take between 45 to 90 days after a formal filing is made to obtain approval from the committee.

While some may think their transaction is far removed from “national security” or “critical infrastructure,” CFIUS interprets these terms very broadly.

Recent CFIUS reviews of transac-

tions, ranging from the sale of a U.S. pork producer to the acquisition of gene sequencing technology, illustrate the extent of the committee’s reach.

CFIUS regularly investigates transactions involving finance, aerospace, telecommunications, mining, oil and gas, pipelines and refineries, government contracting, computer devices and software, among a range of other industries.

In addition, the size of a deal has little bearing on whether CFIUS will take interest in a transaction. Unlike in an antitrust setting, the actual dollar value invested or the purchase price are not major factors.

For example, CFIUS in 2011 informed China-based Huawei Technologies that it would be required to divest its acquisition of $2 million worth of assets from 3Leaf Systems, a server technology company.

Aon Risk Solutions

A successful transaction.

Easy to say, hard to do.

Aon M&A Solutions can help you achieve success from due diligence through integration planning, implementation, and transformation.

Be sure you have the right people at the right time, linking compensation to corporate objectives while protecting your business assets and optimizing financial position.

To discover more, contact Jeff Nicholson (jeffrey.nicholson@aon.com) at 216.623.4152, or Jay Moroscak (jay.moroscak@aon.com) at 216.623.4143.

Risk. Reinsurance. Human Resources.

Parties understandably may hesitate to undertake the burden of yet another regulatory filing in connection with their transaction. However, they should take into consideration certain matters before deciding whether to forego a filing: ■ Foreign buyers commonly insist on such filings; ■ CFIUS regularly reviews company websites, press releases, Securities and Exchange Commission filings, and other public notifications and government filings to understand what transactions have occurred or are in process; ■ CFIUS may learn of the

transaction from competitors or other federal agencies; and ■ Without a filing, there is no safe harbor to prevent the president from unwinding a transaction, an action the executive has not hesitated to take previously.

Given the scope of CFIUS jurisdiction, it is wise to ensure that any cross-border transaction is carefully analyzed to determine the risks and rewards of filing a notice with CFIUS. Mary Edquist is an associate in the Business Department at McDonald Hopkins. She can be reached at 216-348-5415 or medquist@mcdonaldhopkins.com.

ADVERTISEMENT

CORPORATE GROWTH AND M&A

January 18, 2016 S17

Build a culture of innovation to diversify growth

By DAVID MUSTIN

I

t has been often reported that the U.S. Commissioner of Patents in 1898 said, “Everything that can be invented, has been invented.” While that quote has been debunked, it often feels that way to those who are seeking the next great invention. So, if lacking the innovation DNA, how does one start?

The late economist Theodore Levitt said, “Creativity is thinking up new things, while Mustin innovation is doing new things.” To truly be successful at innovating, you may start with creativity, but then it must be translated into actual results.

Innovation starts with leadership and vision. Leaders should shift from homerun thinking to smaller, yet clear achievable objectives. Start with simple goals for new services or extensions to existing services. Some organizations just

start with simplifying internal processes.

Develop a balanced team with a bias for innovating. Ideas come from one

STAY IN CONTROL OF NON-CONTROL INVESTMENTS Protections available for minority investors

By BRENT PIETRAFESE

M

ost traditional private equity firms tend to avoid minority, or non-control, investments.

However, the number of minority investment transactions has been increasing amid the rise of new single and multi-family offices that want to deploy capital but lack the desire or ability to source, diligence and manage control deals.

The increase in minority investments has placed a renewed focus on which protections are available to minority investors. Pietrafese When evaluating a minority investment, it is important to not think of control/non-control as a zero-sum game.

Not having a controlling share in a company doesn’t mean the investor has to accept a position of merely being “along for the ride.” There are a number of protections available to minority investors that will allow them to exert influence and have an active role in the investment.

The three most basic of these protections are information rights, preemptive rights and “tag along” rights.

Information rights require a company to provide investors with certain financial statements (typically annual and monthly) and other material company information. Most information rights also include the opportunity to visit the company’s facilities, inspect its books and discuss matters with management.

Board observation rights also fall into the information rights category. Such rights allow a minority investor (or their designee) to attend board meetings in a non-voting role and, depending on company/board culture, participate in board discussions.

Many minority investors prefer board observation rights over having an actual board seat because they have a “seat at the table” when material issues are discussed, but do not have the fiduciary responsibility and potential liability that comes with an actual board seat.

A preemptive right is simply a privilege extended to certain investors that allows them to maintain a proportionate share of the ownership of a company by purchasing a proportionate share of any new equity issuances before they are sold to third parties.

Minority investors are generally restricted from selling their equity interests, but they commonly are given the right to participate, or “tag along,” in sales of equity interests by the controlling investor, who is not similarly restricted.

This right provides minority investors an opportunity to share in the control premium that would otherwise only be paid to the controlling investor.

Minority investors in private companies must carefully consider a host of issues when evaluating such investments, but fear of being merely “along for the ride” need not be one of them.

Brent Pietrafese is a partner in Calfee, Halter & Griswold LLP’s Business Transactions practice.

He can be reached at 216-622-8623 or bpietrafese@calfee.com.

set of resources. Another set should design and develop the details. A third group should develop the business

case, while a fourth group should manage to completion.

Leading organizations use tools such as DISC or Herrmann Brain Dominance Instruments to identify resource availability.

They also test during hiring to verify skill, behavior and thought diversity.

Organizations with a shortage of any of these resource types will be limited in their ability to innovate.

Innovation is impossible without a solid process to move from ideation through implementation. Tools and techniques such as program/portfolio management coupled with Stage Gate methods are critical.

Sizing the portfolio correctly is also important. Smaller organizations or those with limited resources and budgets should take on no more than three to five significant initiatives annually.

Finally, it’s important to put culturebending techniques in place. To increase innovation, celebrate rather

Because no two deals are alike.

than punish failure. Thomas Edison failed 10,000 times before inventing the light bulb.

Start small and prepare for incremental advances. Take the long view and invest over time to grow the team and the portfolio.

Lastly, give your teams a vested interest by rewarding those that succeed. Start with public recognition.

Over the long term, consider financial rewards to align the team to organizational objectives.

According to Harvard University professor Michael Porter, “Innovation is the central issue in economic prosperity.” Balancing organization objectives between acquisitions and innovation is a healthy approach to diversifying growth.

David Mustin is founder and managing director of Stafford Snyder. He can be reached at 216-570-4283 or david.mustin@ staffordsnyder.com.

Delivering Results to the Global Middle Market Recent Select Transactions Environmental Services

Business Services

© D SRUWIROLR FRPSDQ\ RI © © DFTXLUHG © © DFTXLUHG E\©

Real Estate

Healthcare

© REWDLQHG ´ QDQFLQJ © provided by

© DFTXLUHG E\ ©

Consumer Products

Hospitals & Health Systems

© D SRUWIROLR FRPSDQ\ RI ©

© DFTXLUHG E\ ©

© DFTXLUHG E\ ©

Cross River, LLC © D VXEVLGLDU\ RI ©

Shanghai Shenda Co. Ltd. Industrials

Industrials

© DFTXLUHG E\ ©

For over 25 years, Brown Gibbons Lang & Company has provided our global middle market clients with a broad range of customized, strategic M&A and corporate finance advisory solutions.

© DFTXLUHG E\©

To view additional transactions and to sign up for one of our Insider industry updates, please visit bglco.com Cleveland • Chicago

M&A Advisory I Debt & Equity Placements I Financial Restructuring I Business Valuations

Transactions involving securities are completed through Brown, Gibbons, Lang & Company Securities, Inc., an affiliate of Brown Gibbons Lang & Company LLC and member FINRA.

CORPORATE GROWTH AND M&A

S18 January 18, 2016

SPIN CYCLE: THE RISE OF SPIN-OFFS

By GIOVANNI DI CENSO and MATTHEW KOLMAN

W

hile conglomerates regularly make headlines for their billion-dollar-plus acquisitions, the marketplace is seeing an increasing number of spin-offs and asset sales. In most cases, companies are spinning-off units to allow them to better focus management attention, capture value not appreciated by the market and increase strategic and financial flexibility.

Spin-offs often are treated as tax-free transactions to investors, which make them even more attractive. However, companies can’t assume that all spinoffs will be treated as such. They still must meet certain conditions.

And even when they go through, the spun-off entities must avoid certain transactions for a period of time.

Many boards and executives recognize that identifying the next breakthrough, internally developed idea is time and energy-intensive. It can be an uncertain process, especially in large organizations where business division managers may want to focus on other priorities. In large organizations, the competition for capital can mean that

promising ideas may not get needed support.

By spinning off a portion of the business to form two independent organiDi Censo zations, and following that with strategic acquisitions, a corporation may be able to quickly “build” what it needs to increase revenue and market share.

Of course, a spin-off is not the same as a sale. An outright sale can produce significant liquidity, but sellers may incur meaningful tax costs. A spin-off often is tax-free but doesn’t provide a meaningful boost to short-term liquidity.

In fact, some companies begin the spin-off process and an outright sale on parallel tracks, as market conditions could favor one strategy over another.

If asset valuations decline, an outright sale may be the preferable outcome.

If a company goes forward with a spin-off, it needs to be prepared. A host of issues can prove disruptive, if not catastrophic: Each business will require its own dedicated blueprint for, among other things, future operating and organizational needs, legal structure, ownership of

intellectual property, branding strategy and governance structure.

Certain projects that are “in-flight” may need to be suspended until the spin-off is Kolman complete.

Employee relations are critical, especially in projecting key steps and milestones, and setting expectations around roles, compensation and strategy. Cost structures need to be analyzed thoroughly to mitigate the risk of post-transaction bloat.

In short, while many factors argue for a spin-off rather than a sale — and tax costs are among the greatest — successfully executing a spin-off requires significant energy and attention.

Giovanni Di Censo is a tax partner in M&A Transaction Services at Deloitte and the office tax managing partner in Cleveland. He can be reached at 216-589-5150 or gdicenso@deloitte.com. Matthew Kolman is an advisory director in M&A Transaction Services. He can be reached at 216-589-3981 or mkolman@deloitte.com.

Founded in strength, focused on success We are proud to join ACG in recognizing our clients Ferro Corporation The J. M. Smucker Company

ADVERTISEMENT

Private equity trends foretell continued optimism

By CHRISTOPHER P. REUSCHER and CONNIE A. PORTER

D

espite a recent slowdown in deal activity, current overall trends in private equity provide reason for optimism. Private equity buyers offer unique advantages to sellers that increase the likelihood of deal success.

Current deal trends Private equity firms have a tremendous amount of dry powder with which to invest. With their continued success at fundraising and the median time for holding a target declining for the first time in six years, the outlook for private equity’s ability to invest is positive.

The middle mar- Reuscher ket continues to account for the majority of private equity buyouts.

Many private equity firms see value in the buyPorter and-build model, meaning these investors are acquiring lower middle market and core middle market companies to grow themselves.

An increasing number of baby boomers in the U.S. are looking to sell their companies and focus on retirement, so more businesses are expected to be for sale. With valuation-to-EBITDA multiples decreasing from 2014’s highs, opportunities for private equity firms should be strong in 2016.

Trends that are expected to continue are: 1) the rise of family office investing; 2) independent sponsors sourcing deals; and 3) limited partners wanting to actively participate in deals as co-investors.

Challenges To successfully navigate the deal

landscape, private equity firms need to be prepared to meet current challenges, including regulatory scrutiny, cybersecurity issues and cost of financing.

Among some of the biggest challenges private equity firms face are regulatory hurdles. During the past year, the SEC focused on transparency issues, particularly spotlighting transaction fees and expenses.

Pitching the advantages of a private equity buyer October was a blockbuster month for megamergers and acquisitions in the public sector.

Corporate acquirers have money to deploy, and their funds are accessible. In this competitive environment, private equity firms need to be prepared to market their advantages to potential targets.

Advantages of selling to a private equity buyer include the lower probability of antitrust roadblocks and the lower risk during due diligence when the buyer is a financial buyer and not making a strategic acquisition (meaning no disclosure of sensitive information to a competitor).

A private equity buyer can be more creative with deal structure and has the ability to retain current management, which may be important to a seller who has nurtured the current team and intends to retain some upside in the company’s continued success.

Despite the recent slowdown, the target market is likely to become more robust. Private equity firms can take advantage of this market with creative deal structures and by pitching their strengths to potential sellers.

Christopher P. Reuscher is a partner at Roetzel & Andress, LPA. He can be reached at 330-762-7994 or creuscher@ ralaw.com. Connie A. Porter is an associate at Roetzel & Andress LPA. She can be reached at 330-849-6679 or caporter@ralaw.com.

Counseling companies and financial sponsors in M&A and other corporate transactions has been a cornerstone of strength for BakerHostetler since the firm’s founding a century ago.

Mark Weisman Managing Director Tel: (216) 415-7509 Email: mweisman@navidar.com

Navidar is an investment banking firm, providing companies and investors in dynamic industries with strategic M&A advice, capital raising solutions, vital insights and breakthrough opportunities.

EXPERIENCE FOR TOMORROW

Clients can expect to receive completely independent advice and creative solutions - experiencing the difference between uncertainty and success.

bakerlaw.com Austin Cleveland

Denver

Indianapolis

Minneapolis

San Antonio

CORPORATE GROWTH AND M&A

ADVERTISEMENT

January 18, 2016 S19

Before you sign on dotted line, address post-closing obligations in a business sale

By MICHAEL D. MAKOFSKY and STEVEN P. LARSON

capital or EBITDA adjustments and indemnification.

T

Working capital or EBITDA adjustments

he sale of a business is one of the most significant events in a business owner’s life. The owner is excited to move on to the next chapter and is often eager to close and monetize the deal. However, there are often terms and obligations in the purchase agreement that survive the closing of the transaction, which can impact the owner’s return or create liability.

Consequently, business owners need to understand the significance of these post-closing obligations and address them before closing.

Two important examples are working

A purchase price is often derived from a multiple of a company’s working capital or EBITDA (earnings before interest, taxes, depreciation and amortization). After the closing, parties calculate working capital or EBITDA adjustments to true up the actual value of the company. It is important to understand when and how the adjustment will be calculated so the owner is prepared for the possibility of refunding a portion of the purchase price to the buyer. If the actual working capi-

tal or EBIDTA varies from the estimate then the owner could potentially be obligated to refund the difference.

Indemnification

Makofsky

In a purchase agreement, an owner makes representations and warranties regarding various facets of the business. Representations often include veracity of financial statements, payment of taxes, condition of assets and status of contracts. An owner will also agree to perform or refrain from performing certain actions.

For instance, a buyer may require an

owner to keep certain information confidential, not solicit current employees nor compete with the business.

If the buyer incurs damages because a Larson representation or warranty is untrue, or an owner breaches a covenant, then the buyer may be entitled to indemnification. Indemnification is a process in which an owner repays a buyer for the losses incurred as the result of such inaccuracy or breach.

Almost all buyers require the right to indemnification. However, an owner can try to mitigate or box-in potential liability before closing by limiting

the survival period of representations and warranties, providing minimum (basket) and maximum (cap) dollar limits and narrowly defining the scope of damages.

By understanding the potential postclosing liabilities, business owners and their legal teams can work to negotiate the sale in the owner’s best interest.

Michael D. Makofsky and Steven P. Larson are attorneys in the Mergers and Acquisitions Practice at McCarthy, Lebit, Crystal & Liffman Co., LPA. They can be reached at 216-696-1422 or mdm@mccarthylebit.com and spl@mccarthylebit.com.

For strategic acquirers, financial due diligence goes beyond the numbers

T

here is always a lot of excitement when a company announces an acquisition. Press releases are issued and investors are eager to hear about growth and synergy opportunities.

Management teams communicate the deal rationale to current employees while welcoming the target’s employees into their organization.

But getting to that point, and charting the course for the most effective integration possible, starts with a thorough and efficient due diligence process.

For successful strategic acquirers, due diligence goes beyond an evaluation of the target, and includes a thorough review of the strategic fit, cultural alignment, value chain Libeg and the potential benefits from collaboration between the two companies.

In today’s competitive mergers and acquisitions environment, it is essential for strategic acquirers to be able to identify how the combination of the target and the existing business can create incremental value (including geographic expansion, size/scale, complementary technology, etc.). At the same time, they also have processes in place to identify risk factors that allow them to walk away from the wrong deals.

For strategic acquirers, effective financial due diligence goes beyond simply confirming the target’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). If executed properly, it can provide valuable insights into the growth drivers and risks present at the target, which can help with negotiating leverage, terms and conditions in the purchase agreement, the purchase price allocation and integration strategy.

Here are a few examples of areas where financial due diligence can add value to strategic acquirers:

Validate synergy assumptions For public companies, one of the first questions investors and analysts typically have are related to synergy

estimates (and what a post-synergy EBITDA multiple might look like).

This is not something that executives take lightly — these are targets that they will be measured by in the coming quarters and years. Being able to set appropriate synergy targets requires a strong understanding of the recurring earnings base after eliminating any accounting tricks or non-recurring revenues and expenses.

It is also important to identify potential dis-synergies, such as channel conflicts that could exist between the target and the buyer’s current customer base, and any under-investment in the target business. Potential red flags include lack of investment in sales personnel or capital expenditures in recent years.

‘‘

BEING ABLE TO SET APPROPRIATE SYNERGY

TARGETS REQUIRES A STRONG UNDERSTANDING OF THE RECURRING EARNINGS BASE AFTER ELIMINATING ANY ACCOUNTING TRICKS OR

‘‘

By TOM LIBEG

NON-RECURRING REVENUES AND EXPENSES. identified is critical. These issues have the potential to impact contract negotiation — which is often occurring concurrently with the diligence review — and due diligence requirements in other functional areas, such as human

resources, operations and information technology.

Even with excellent collaboration among the functional teams, no due diligence process can provide a guarantee of deal success. But by

engaging the right internal resources and external advisers who understand the strategic rationale, key risk factors and what it takes to get a deal done, strategic acquirers can certainly tilt the odds of success in their favor.

Tom Libeg recently joined Grant Thornton LLP's Transaction Services practice as a managing director after spending the last four years at PolyOne Corp., where he was the director of M&A. He can be reached at 216-858-3588 or tom.libeg@us.gt.com.

Understand commercial trends It is vital for strategic acquirers to develop a strong understanding of the target’s commercial position and end market dynamics. Diving into the underlying trends of the business can help answer critical questions about the target’s relationships with key customers, ability to generate revenue from new products, exposure to swings in raw material prices and drivers of margin improvement or deterioration. These are factors that can significantly impact valuation and, potentially, whether or not to move forward with the deal.

Investigate. Learn. Share. Prosper.

Purchase agreement terms and conditions Financial due diligence teams can add value to many aspects of the purchase agreement. A thorough examination of the balance sheet is required to negotiate the most appropriate working capital target, evaluate and account for the impact of debt-like items and ensure the closing accounts are compiled in a consistent manner. Additional risk factors and potential unrecorded liabilities (e.g. threatened litigation, environmental and product liability) may also be identified, which can impact materiality thresholds or indemnification provisions in the contract.

For corporate development teams at strategic acquirers, receiving timely feedback on any financial issues

Meaden & Moore’s Transaction Advisory Service professionals deliver quality, accuracy and speed in a complex mergers & acquisition market.

Our Transaction Advisory Services include: Acquisitions & Divestitures | Due Diligence | Business Valuations Ownership Transition | Tax Consulting & Structuring

To reach our Cleveland office, call 216.241.3272

meadenmoore.com

CORPORATE GROWTH AND M&A

S20 January 18, 2016

ADVERTISEMENT

Purchase price adjustments warrant scrutiny Experienced counsel can help structure working capital adjustments

By JEFFREY A. FICKES

W

ith the growth and influence of private equity during the last 20-plus years, post-closing purchase price adjustments in mergers and acquisitions have become the norm.

Today, more than three-fourths of middle market transactions include price adjustment mechanisms based on the actual amount of working capital delivered by the seller at closing relative to an agreed-upon target amount.

This adjustment mechanism is used for a very simple reason: Businesses require a certain amount of working

capital to meet ongoing cash flow needs.

If a seller delivers less-thanadequate working capital, the buyer will be required to make an additional investment in the business. On the other hand, if the seller delivers more-thanadequate working capital, the seller will be leaving money on the table.

If this is so simple, then why do approximately two-thirds of transactions with working capital adjustment mechanisms result in downward price adjustments? And why is the average downward adjustment approximately 1% of purchase price ($1 million on a $100 million deal)?

It is generally not because buyers game the system or sellers intentionally pull working capital out of the business before closing.

Fickes For the most part, parties conduct themselves in good faith, especially when they will continue working together after closing (including equity rollovers or executive employment relationships).

Maybe the lawyers are to blame.

This is a provocative suggestion coming from a lawyer for sure, but it

just may be true.

Although simple in theory, structuring working capital adjustment mechanisms is not simple in practice. There are many complex variables that involve the disciplines of law, accounting and finance. Investment bankers and CPAs cannot do this all on their own.

Deal counsel must first possess adequate knowledge of accounting and finance in general. They need to understand the business, the numbers and the accounting methods so the working capital calculation and target are properly established.

Finally, deal counsel can help

reduce the likelihood of material price adjustments and related disputes by being proactively involved in structuring adjustment mechanisms that meet the parties’ objectives and ensure adequate working capital for the business.

Jeffrey A. Fickes is a partner at Tucker Ellis LLP. He can be reached at jeffrey.fickes@ tuckerellis.com. Associates Christina Suh, Paul J. Malie Jr. and Thomas R. Peppard also contributed to the story. They can be reached at christina.suh@ tuckerellis.com, paul.malie@ tuckerellis.com and thomas. peppard@tuckerellis.com.

Thinking of selling? Maximize your return with sell-side due diligence

By ROBERT SHEFFERLY III and DON STANOVCAK

M

ore and more sellers of businesses in the U.S. are performing what is referred to

as sell-side tax due diligence. This is the practice of reviewing the company’s tax positions and compliance before starting an active sale process.

Some sellers are initiating these due diligence reviews, which were

popularized in Europe, early in the transaction life cycle because they’ve proven so helpful. From maximizing transaction value to expediting the sale process to remediating tax exposure, here’s why it’s important not to

overlook this crucial process:

Maximize transaction value Sell-side tax due diligence can be used to negotiate a higher sales price in cases where the seller has substantial tax attributes, such as net operating losses, general business credits or capital loss carryforwards. Sellside tax due diligence could provide insight on the tax situation of the seller and the extent to which these tax attributes can be used after the transac- Shefferly III tion. Given this information, some buyers might increase their purchase price. Some buyers might be more confident in submitting offers if they betStanovcak ter understand the tax situation of the target companies and believe that it’s less likely their own due diligence would derail or add complexity to the deal process.

Expedite the sale process

ƚ DĞů ĂƉ WĂƌƚŶĞƌƐ ŽƵƌ ŐŽĂů ŝƐ ƚŽ ƐŚŽǁ LJŽƵ ŽƵƌ ǀĂůƵĞĚ ĐůŝĞŶƚ ƚŚĂƚ LJŽƵ ĂƌĞ ŶŽƚ ũƵƐƚ Ă ŶƵŵďĞƌ ƚŽ ƵƐ tĞ ƐƚƌŝǀĞ ƚŽ ƉƌŽǀŝĚĞ ŚŝŐŚ ƋƵĂůŝƚLJ ĂŶĚ ŝŶŶŽ ǀĂƟǀĞ ŝŶǀĞƐƚŵĞŶƚ-ďĂŶŬŝŶŐ ƐĞƌǀŝĐĞƐ ƚŽ ŵŝĚĚůĞ ŵĂƌŬĞƚ ĐŽŵƉĂŶŝĞƐ tĞ ĂƌĞ ŚĞƌĞ ƚŽ ŚĞůƉ LJŽƵ ƌĞĂĐŚ LJŽƵƌ ŐŽĂůƐ ĂŶĚ ŽďũĞĐƟǀĞƐ

A buyer will likely examine the seller’s records to determine whether the business has complied with all relevant tax requirements and that taxes filed were calculated accurately. A seller’s pre-sale review documentation can help expedite the buyer’s review.

The buyer will still undoubtedly conduct its own due diligence, but the process may go faster since this would be verifying the seller’s work as opposed to a full-on examination from scratch. Sell-side due diligence also makes it less likely that a buyer would turn up tax issues previously unknown to the seller that could potentially change the deal structure or price, or possibly kill the deal altogether.

Opportunity to remediate tax exposures

MelCap Partners, LLC Middle Market Investment Bankers

1684 Medina Road, Suite 102 Medina, OH 44256 Phone: (330) 239-1990 Fax: (330) 239-1991 www.melcap.co

Securities offered through M&A Securities Group, Inc. Member FINRA/SIPC. MelCap and MAS are not affiliated entities.

The testimonial presented above does not guarantee future performance or success.

If conducted early, sell-side due diligence allows time for sellers to remedy any previously undiscovered tax problems. While the types of problems and the remediation process may vary based on the taxing authority and underlying issue, the seller benefits from early awareness regardless of the venue. This early awareness may

allow sellers to take such steps as: ■ Perfecting certain elections that are important to their tax classification or tax situation ■ Formally changing to permissible accounting methods ■ Seeking private letter rulings from the IRS to perfect certain tax positions ■ Filing previously unfiled returns under certain programs that limit their exposures These steps can relieve buyers from their concerns and fix, eliminate or reduce the amount of their exposures. Even in cases where exposure is theoretical, most buyers will take steps to protect themselves from liability for tax errors made under the previous ownership.

As a result, the elimination or minimization of these exposures can reduce or simplify the need for purchase price adjustments, indemnification provisions and escrows later in the transaction cycle.

Sellers who perform an effective sellside tax due diligence review before going to market can often increase a business’s selling price, reduce buy-side due diligence times and concerns, and increase credibility with potential buyers.

On the other hand, sellers who don’t take the necessary steps to review federal, state, and international obligations in the early stages of preparation could wind up paying for it down the road in delays, deal-time stress or negotiation over the financial terms of the deal.

As buyers conduct closer examination of taxes in their due diligence regimens, the value to sellers of reviewing and remediating tax issues prior to the sale continues to grow.

Most sellers find that it is better to uncover any potential tax exposures and deal with them now rather than waiting until the buyer brings them up later during the sale process. As in any other negotiation, surprises are rarely good.

Robert Shefferly III is a partner in the National Tax Office at Plante Moran. He can be reached at robert.shefferly@plantemoran.com.

Don Stanovcak is an attorney in the National Tax Office at Plante Moran. He can be reached at don.stanovcak@plantemoran.com.

CORPORATE GROWTH AND M&A

ADVERTISEMENT

January 18, 2016 S21

NAVIGATING THE WORLD OF TECHNOLOGY M&A Invest time, resources into maximizing company’s position

By MARK WEISMAN and STEPHEN DAY

Y

ou have decided to sell your technology company. What can you do to best position your company to realize the maximum value?

First, the technology M&A market, especially for private companies, is extremely imperfect. There are large discrepancies in what different buyers are willing to pay for similar assets.

Many of our sale processes have

involved dramatic differences in what different buyers are willing to pay for the same company. Recognizing this key fact about the technology M&A world is the critical starting point for any sale process.

Without a strong team of professionals (investment bankers, lawyers, accountants), these imperfections will work to your disadvantage.

Second, most strategic buyers of technology companies are focused on the growth prospects of the business they are buying because of the multiples

ACQUISITIONS & DIVESTITURES

|

FINANCINGS

|

paid for technology companies.

Finally, given the sophisticated and esoteric nature of many technologies, it is important to Weisman understand that your technology will be a critical focus area for the buyer. Showing the buyer that you have something truly different is key to realizing strategic value for your company. While this may seem obvious,

technology companies often underappreciate this notion.

So how does this all translate into how the sale process should be managed?

Day It is critical that you invest a lot of time thinking about your positioning — how you convey your value proposition and growth prospects to potential buyers — because this can greatly enhance your valuation.

Mark Weisman is the managing director of Navidar’s Cleveland office. He can be reached at 216415-7509 or mweisman@navidar. com. Stephen Day is the cofounder and managing director of Navidar.

He can be reached at 512-7656973 or sday@navidar.com.

GROWTH CAPITAL

Focused on Relationships, Not Just Transactions Cascade Partners LLC is an investment banking and private investment firm serving entrepreneurs, businesses, and investors active in the middle market.

We work with our client partners and provide: - Buy Side Advisory Services - Growth Financing

As we say, “equity is a story sale.”

In a sale process you may need to tell that story in a slightly different way to different buyer groups.

It is best to never assume that an interested buyer understands your technology and what it may mean to them. It helps if you and your banker can clearly communicate the value of your technology in terms that the buyer will most understand and appreciate.

We frequently see that companies have not reconciled their qualitative highgrowth story with convincing quantitative support in the form of highly defensible financials (including projections). One common example involves a company telling a very interesting market growth story but then showing in their financial plan a growth rate below that of the market in which they are participating.

We wish we had a nickel for every time a client told us that they knew who would buy his or her company or that he or she was sure a few “logical acquirers” would be there at the end. The reality is that things often work out very differently.

The key takeaway is that it makes sense to approach a broad buyer universe, and make sure that international buyers are well-represented among those you approach.

- Sell Side Advisory Services - Recapitalizations

Cascade Partners manages Cascade Growth Partners, an operationally focused private investment fund which provides growth capital to healthcare, valueadded manufacturing and technology-enabled service businesses generating less than $4 million in EBITDA.

For additional information about Cascade Partners please contact: RAJESH U. KOTHARI, CFA rajk@cascade-partners.com GARY N. LEWIS garyl@cascade-partners.com KEN MARBLESTONE kenm@cascade-partners.com THOMAS K. COX tomc@cascade-partners.com

Securities offered by Cascade Partners BD, LLC – FINRA/SIPC Member

DETROIT | 248.430.6266

CHICAGO | 847.282.7041 CLEVELAND | 216.404.7221

WWW.CASCADE-PARTNERS.COM

CORPORATE GROWTH AND M&A

S22 January 18, 2016

ADVERTISEMENT

4

THE DEAL. Negotiations don’t start with price. Before getting your lawyer to send out a term sheet outlining the deal, you need to establish a relationship with the potential seller and lay out the reasons why the opportunity makes sense for both parties. Be sure to listen and understand their objectives, goals and needs. This provides a fallback position that will help keep the opportunity moving forward when the negotiations become difficult, which almost always happens.

By KEN MARBLESTONE

A

cquiring a company is one of the biggest decisions a business owner makes. These are largedollar, high-risk decisions that may positively or negatively impact a business for years. So, why do business acquisitions often involve happenstance, and what obstacles prevent business owners from undertaking a proactive, well-thought-out acquisition strategy?

Too often, business acquisitions happen because of chance introductions to people who are ready to sell their company. This is a reactive (as Marblestone compared to proactive) approach. This strategy can work, but before moving forward the following questions must be asked: 1) Does the acquisition fit my strategy? 2) Do I know the universe of companies that do fit my strategy, and have I contacted them?

These questions often are not asked prior to an acquisition because of the time and resource constraints inherent in all businesses. If you are intrigued by the idea of making acquisitions based on proactive strategy and process, then read on.

Below are four important steps to determining your acquisition strategy and process:

1

DEFINE YOUR BUSINESS STRATEGY. Taking a proactive approach to the acquisition process starts with your strategy. To determine your strategy, a few questions that need to be answered include: ■ What are our existing core strengths, and how do we build on them?

■ Are there key customers that are better to add through

ACQUIRING COMPANIES THAT FIT YOUR STRATEGY Proactive approach offers several advantages acquisition rather than organically?

■ What do our clients want that we are not providing?

■ Do we need to expand vertically or horizontally to grow, or just our geographical footprint?

■ What is the best way for us to leverage our current platform to reduce costs?

■ Are there new technologies or capabilities that we could add to drive growth?

2

IDENTIFY POTENTIAL TARGETS THROUGH RESEARCH. There are far more companies out there than you might realize, and you should not just depend on those companies that are brought to you for

sale. This is a key step in letting your strategy drive the acquisitions, and not the acquisitions that happen to be available drive the strategy. You also need to investigate the market and understand what companies fit your strategy. Then, determine if they can be acquired. Make sure they have the customers, product, technology or geographic fit that your company needs strategically.

3

REACH OUT TO THE TARGETS. Once your list of potential companies is developed, you need to contact them and engage in a dialogue.

Our experience has been that many of these companies may not have even thought about selling their business. It will take time to build a discussion and

for the target company to determine that it might be time to consider a transaction. You need to connect with them, talk to them about your business and how they could benefit by affiliating with your company.

Making contact with the right person at the target firm and establishing a dialogue is not easy. It is a timeconsuming process and requires many attempts to connect with the right person. Networking, trade connections and advisers are effective ways to initiate communication. Of course, just having a conversation does not get the process very far. It may take several calls and discussions to actually focus in on the concept of an affiliation. Remember, you have to date before you get married.

Leading a business is never easy.

You and your team are already time-constrained competing, hiring, developing products and building client relationships. Adding an acquisition mandate to a full workload can be done, but must be well thought through. A full-time corporate development team is an ideal solution, but very few firms consistently need or can retain that expertise.

An in-between alternative is to engage an outsourced corporate development team. Some investment banks focus on executing the acquisition process and have experienced considerable success.

Working with investment bankers specializing in buy-side advisory services offer several advantages, including reduced costs; skill and research capabilities at finding targets; success at contacting and engaging the targets; and ability to quarterback the negotiation, due diligence and closing phases. This allows your team to focus on integrating the new purchase.

Ken Marblestone is a managing director at Cascade Partners LLC. He can be reached at 216-404-7221 or kenm@cascade-partners.com.

TRANSACTION SERVICES Our fully dedicated, partner-led team delivers sophisticated deal experience to the middle market.

Machinery & Equipment Appraisals www.EquipmentAppraisal.com

Financial, Tax and Operational Due Diligence Tax Structuring Portfolio Company Audit and Tax Services Equipment Auctions & Liquidations www.EquipmentAuction.com Justin Thomas, CPA - Transaction Services Partner jthomas@cohencpa.com

ADVERTISEMENT

CORPORATE GROWTH AND M&A

January 18, 2016 S23

Never underestimate the importance of working capital

By LLOYD BELL

W

orking capital is an oftoverlooked component to most acquisition transactions. Business owners who have not engaged in a transaction may find that the conversation has suddenly shifted from EBITDA and purchase price multiples to net working capital.

What is net working capital? The individual components depend on the business, but it should be limited to the assets and liabilities that will transfer in the sale. For simplicity, think of it as the current assets excluding cash minus the current liabilities excluding

interest-bearing debt.

The concept in a transaction context is relatively simple: the buyer assumes that a certain amount of net working capital will be delivered at closing. The purchase price may change depending on whether the actual amount is higher or lower. The reality is that the working capital adjustment is anything but simple.

Different issues can arise when determining the working capital’s impact on the transaction, but the two most common problems are establishing the proper target amount and the true value of the components.

For businesses with seasonal peaks,

the amount of net working capital may vary during the year.

If the targeted amount of net working capital is based on the balance sheet when Bell net working capital is at its highest, it’s likely that the amount reported at close will be lower.

Therefore, the purchase price will be adjusted downward. It is essential that an appropriate target amount be agreed to during negotiations to avoid a downward adjustment.

Understanding the true value of the components of net working capital is a

more serious problem.

Some adjustments are easy to identify, such as the need to writeoff uncollectible accounts receivable.

Others not only are more difficult to quantify, they may reflect poorly on the quality of the information coming from the seller.

Inventory balances may be inflated by large amounts of slow-moving or obsolete inventory, which indicates that historical profits may be overstated.

Similarly, expenses that should be accrued for may be left off the balance sheet. Concern arises when report totals (such as accounts receivable aging or inventory detail) don’t match the

balances on the financial statements.

Owners contemplating the sale of their business should make it a point to understand how much working capital their business needs to ensure that no surprises pop up during the due diligence process.

Sell-side due diligence, or even some solid conversations with the company accountant, will go a long way toward a successful sale.

Lloyd Bell is director of the Corporate Finance Group at Meaden & Moore. He can be reached at 216-928-5360 or lbell@meadenmoore.com.

Purchase price adjustments can alter a deal’s final price tag

By JUSTIN THOMAS

A

fter lengthy negotiations, a buyer and seller agree upon the enterprise value of the business for sale. This is a step in the right direction; however, the purchase price is not yet final.

Round two includes analyzing and negotiating purchase price adjustment mechanisms, which can materially affect the final cash payment in a deal.

These mechanisms are increasingly being built into the letter of intent, pre-due diligence, and are almost always part of the final purchase agreement.

While purchase price mechanisms are intended to preserve value and allocate economic risks to the buyer and seller in an equitable and “fair” manner, too often one or both parties use these mechanisms to manipulate the final deal valuation.

The most common purchase price mechanisms — net debt and working capital adjustments — work hand in hand. They are particularly necessary when a deal is being valued on a “cashfree/debt-free” basis, in which the buyer establishes the enterprise value, or headline price, for a business.

The buyer effectively agrees to pay the seller an additional amount for any cash

left in the business and reduce proceeds paid for any debt transferred in the sale.

The difference between these cash and debt amounts is the Thomas net debt adjustment.

To ensure sellers do not reduce working capital to artificially increase cash at closing — and alternatively compensate sellers for working capital invested in a business — a working capital adjustment mechanism complements the net debt adjustment.

Typically, price is adjusted on a dollar-for-dollar basis to the extent

closing working capital is higher (price increase) or lower (price decrease) than a negotiated working capital target.

The specific language used in the purchase agreement to define cash, indebtedness, working capital, target working capital, accounting principles and even Generally Accepted Accounting Principles is negotiable and critical to determining the final cash price.

Buyers and sellers should know that there are no standard definitions for these key terms. For example, debt is often more than bank debt or outstanding notes. There is

no standard way to establish the appropriate net working capital target.

The best way, and possibly your last chance, to preserve value in a deal is to use the most advantageous definitions for your scenario.

Work with your advisers early on in the process to assess the right language for your specific deal and current market norms. Then, make sure both sides of the table — seller and buyer — are on the same page.

Justin Thomas is a partner in Transaction Services at Cohen & Co. He can be reached at jthomas@cohencpa.com.

TMA Ohio Chapter announces 2015 award winners!

We congratulate Bob Greenwald, RMG Consulting, winner of the 2015 Lifetime Achievement Award pictured with Sally Barton, TMA Chapter President.

We congratulate the winner of the 2015 Turnaround of the Year Award Charles Deutchman, Shared Management Resources, Ltd. and Alan Grochal, Tydings & Rosenberg, LLP (not shown).

We thank Bob for his leadership and the contributions that he has made both in the turnaround industry and in our community.

We are proud of the achievements of these members and celebrate their specific accomplishments with this year’s award. Thank you for your contributions to the Turnaround Management Association.

CORPORATE GROWTH AND M&A

S24 January 18, 2016

ADVERTISEMENT

CLEVELAND IS MAKING BIG INVESTMENTS: SHOULD YOU FOLLOW SUIT? Select right form of capital to optimize your growth

By REBECCA LYNN WHITE

I

n this fast-paced world, it isn’t easy to shift the momentum in a city. But it is essential to make this shift in order for the city to stay vibrant and thriving. Walk around Cleveland, and you will see various sites and buildings under construction or planned for near-term development, most notably the redesign of Public Square.

Companies go through a similar shift at times to ensure White their products and services are relevant and innovative. This can involve a facility expansion/renovation, product line expansion/redesign, revamped marketing/business strategy and/or additions to the management team/

employee base.

Each of these initiatives requires a great deal of time and capital to implement. While you may be able to justify the time, can you justify the cost of capital? And even if you can, where does one find this capital?

Fortunately, capital is readily available in the market today from a variety of providers and in a variety of forms: ■ TRADITIONAL BANKS: Typically the most common and least-expensive form of capital, banks generally make loans based on a company’s cash flows or collateral base. Debtors are required to meet several financial covenants (including debt service, cash flow and/or operating covenants), which assure the lender that their capital is secure. These covenants, however, can sometimes have the unintended

consequence of restricting growth, depending on the company’s financial situation.

this capital is typically less restricted by covenants and offers more flexible repayment terms.

■ ALTERNATIVE LENDERS: In a highly liquid market such as this, alternative financing sources have emerged, including Business Development Companies and Small Business Investment Companies. They provide capital to small and growing businesses, as well as those that are light on traditional collateral. Although capital from alternative lenders is generally more expensive than from traditional banks, it can be structured in a more accommodating manner, such as senior term, unitranche, second lien, junior secured and equity co-investments. As such,

■ MEZZANINE PROVIDERS: Although more expensive, mezzanine capital can be structured in a variety of ways, but typically consists of subordinated notes or preferred stock provided by an institutional fund. The structure of these capital investments is varied and driven primarily by certain rate of return thresholds upon exit. To achieve these returns, elements such as cash interest, paymentin-kind interest (or accrued interest) and equity warrants are often utilized. While this can be expensive, principal payments are often minimal or delayed entirely until the loan’s expiration, which allows some financial flexibility for the company along the way.

FOCUSED ON WHAT MATTERS TO YOU In a sea of complicated legal issues, it’s easy to lose perspective.

What are your business goals? How do you plan to accomplish them? Your strategy for business growth matters, and the experienced corporate lawyers at Roetzel will collaborate with you to develop and execute a customized plan designed to unlock value at your enterprise.

At Roetzel, we advise our clients through the entirety of the lifecycle, from early stage, entrepreneurial companies to highgrowth private companies and publicly traded entities. Whether the growth you seek is domestic or international, organic or driven by acquisitions, our attorneys are here to propose innovative solutions and assist you every step of the way.

For more information, visit us at ralaw.com/mergers_acquisitions

1375 East Ninth Street One Cleveland Center, 10th Floor Cleveland, OH 44114 216.623.0150

222 South Main Street Akron, OH 44308 330.376.2700

■ MINORITY EQUITY: Typically the most expensive option in terms of dilution to the current shareholders, this form of capital avoids the expense burden of principal and interest payments, freeing up cash entirely for continued growth investments.

The new equity partner(s) will require some measure of operational and financial control, typically in the form

of a board seat or other “negative” covenants. So even if one can justify the dilution, because they believe the additional capital will enhance the value of the business beyond the status quo, it is imperative to identify a partner who shares a similar growth vision for the business.

Like every city, each company has a different strategy for growth.

Determining the appropriate amount of capital and analyzing the various costs and benefits is key to choosing the best form of capital to enable your business to achieve its growth objectives.

The good news is this is a healthy market with much liquidity and many options. The challenge comes from the fact there are many options and no obvious, one-size-fits-all shortcut to get there.

Whichever form of capital you choose, by investing in your business you will be contributing to the further growth and development of our great city.

Rebecca Lynn White is a director and head of the Capital Raising Practice at Western Reserve Partners LLC in Cleveland. She can be reached at 216-574-2109 or rwhite@wesrespartners.com.

Eliminate Surprises

Serving private equity groups nationwide, BMF Transaction Advisory Services provides thorough due diligence and quality of earnings assessments that help you better evaluate the value of a target company so there are no surprises down the road.

CHICAGO · WASHINGTON, D.C. · CLEVELAND · TOLEDO · AKRON · COLUMBUS · CINCINNATI ORLANDO · FORT MYERS · NAPLES · FORT LAUDERDALE · TALLAHASSEE · NEW YORK

RALAW.COM ROETZEL & ANDRESS, A LEGAL PROFESSIONAL ASSOCIATION

Mark B. Bober, CPA/ABV, CFF, CVA, Partner and Practice Leader Steve, C. Swann, CPA/ABV, CFE, Partner Transaction Advisory Services • bmfcpa.com • 330.762.9785

ADVERTISEMENT

CORPORATE GROWTH AND M&A

January 18, 2016 S25

M&A insurance products facilitate deal execution

By JAY MOROSCAK and MATTHEW HEINZ

T

ransaction liability products have emerged as a staple of the M&A landscape. These products, which cover representations and warranties, tax, litigation and other contingent risks, are viable alternatives to an escrow or indemnity in any deal structure.

Transaction liability is a reliable tool that enables M&A practitioners to allocate certain deal risks to the insurance markets for a fixed cost. This ability to manage and allocate risk on the front end of a deal has Moroscak allowed buyers to bid more aggressively and sellers to extract more funds at closing.

Representations and warranties insurance covers liabilities arisHeinz ing out of a breach of one or more of the representations and warranties in an M&A transaction. Policies can be tailored to address a client’s specific indemnity needs on a deal, from amount of coverage to duration of coverage to scope of loss.

Buyers can use R&W insurance to achieve a lower purchase price by offering a very aggressive seller indemnity package in exchange for a slightly reduced enterprise value, and potentially even shut down an auction

Jay Moroscak is senior vice president at Aon Cleveland. He can be reached at jay.moroscak@ aon.com. Matthew Heinz is senior managing director at Aon Transaction Solutions. He can be reached at matthew.heinz@aon.com.

Tax changes may warrant review of entity classification

By PAUL H. SPEYER

A

ll businesses, especially small and mid-size businesses and their owners, are subject to a plethora of taxes.

Income taxes, payroll taxes, sales and use taxes, property taxes, gross receipts taxes, excess Medicare tax, and net investment income tax, just to name a few.

Depending on how the business entity is classified, the owner may be subject to a higher or lower amount of these Speyer taxes. With the addition of the excess Medicare tax and the net investment income tax in 2014, it may be time to reevaluate what entity type your business operates as, if you haven’t already.

For example, if your business operates in one of the entities taxed as a partnership, general partnership, limited partnership, limited liability partnership or limited liability company, your allocable share of income may be subject to self-employment tax.

If certain thresholds are met, your income may be subject to the excess Medicare tax.

If your company is not a personal service company — such as those operating in the fields of law, accounting, actuarial sciences, consulting, health, engineering or

EXPERT ACQUISITION ADVISORY SERVICE

process by offering up an “as is” deal construct to a seller.

Sellers can utilize the insurance by convincing buyers to accept an insurance alternative to the traditional indemnity structure, thereby reducing escrows and holdbacks. This strategy increases deal efficiency and produces a cleaner exit.

In addition to the benefits of representations and warranties insurance addressing unknown risks, M&A-based insurance products are also available to address known or heightened exposures. For example, tax liability insurance can address exposures tied to uncertain tax positions. A whole host of other contingent liabilities tied to M&A transactions can potentially be underwritten and boxed through tailored, one-off insurance policies, as well.

The M&A insurance market has grown and matured significantly over the past three to five years.

R&W insurance, in particular, is now a commonplace feature of M&A practice in the U.S. Deal makers would be wise to familiarize themselves with the particulars of the suite of M&A insurance products through discussions or tutorials with their insurance brokers and M&A counsel.

architecture — you may be able to separate your manager interest from your investment interest and not pay the self-employment tax or excess Medicare tax on the investment interest allocable share of income.

Depending on the income and loss sharing of your partnership, it may make sense to examine if converting to an S corporation may save the owners taxes.

Perhaps you operate as a sole proprietorship or a single member limited liability company that is treated as a sole proprietorship. You may want to consider making an election to be treated as a corporation, followed by an election to be treated as an S corporation.

This would allow you to pay yourself compensation subject to payroll taxes while any income in excess of a reasonable salary could be distributed to you free of payroll taxes.

It is imperative the salary be reasonable and not minimal in order to avoid payroll taxes. Presuming you’re active in the activity — that is generally working at least 500 hours annually — the remaining profit would not be subject to the net investment income tax.

It’s important to periodically review the type of tax entity your business operates as, along with all the other items.

Paul H. Speyer is a principal in the Tax Group at Maloney + Novotny. He can be reached at 216-344-5284 or pspeyer@maloneynovotny.com.

JOSEPH V. PEASE, JR., CPA Co-Author of “Mergers & Aqusitions for Distributors: Expert Advice for Buyers & Sellers”

• Acquisitions & Divestures • Due Diligence • Business Valuations • Tax Structuring Visit www.peasecpa.com for info on our upcoming M&A for Distributors Panel Discussion.

Tax, Audit/Assurance and CFO Services

$ $ $ $ $ $

$ $ $ $ $ $

CHOOSE PEASE & ASSOCIATES

Pease & Associates, cpas

Call today for a free consultation with one of our specialty advisors.

216.348.9600 | peasecpa.com

$ $ $ $ $ $

$ $ $ $ $ $

$ $ $ $ $ $

$ $ $ $ $ $

$ $ $ $ $ $

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ CFO OF $ $ $ $ THE $ $YEAR $ $ $ $ $ $ $ $ $ $ $ $ PRESENTED BY $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

$ $ $ $ $ $

$ $ $ $ $ $

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ NOMINATIONS $ $ $ $ $ $ $ $ $ $OPEN $ $ $ •$ DEADLINE: $ $ $ $ $ $ $ JULY $ $ $ CRAINSCLEVELAND.COM/NOMINATE $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

HONORING NE OHIO’S TOP FISCAL OFFICERS

Thinking about your business is a big part of ours.

PUT OUR TAILORED INSIGHTS TO WORK FOR YOU. To make confident decisions about the future, entrepreneurial, growing organizations need a different kind of advisor. One who starts by understanding where you want to go and then brings the ideas and insights of an experienced global team to help get you there.

Experience the power of being understood.

Experience RSM. rsm us.com

RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax and consulting firms. Visit rsmus.com /aboutus for more information regarding RSM US LLP and RSM International. AP-GL-ALL-PEG-1215

$ $ $ $ 8 $ $

$ $ $ $ $ $

$ $ $ $ $ $

CORPORATE GROWTH AND M&A

S26 January 18, 2016

ADVERTISEMENT

Buyer battle is seller payday Market dynamics provide competitive acquisition landscape

By ANDREW K. PETRYK

P

rivate equity firms with a need to deploy both new and aging funds, and strategic buyers under mounting pressure from shareholders to accelerate growth beyond organic means, are locked in epic battles for acquisitions. Sellers have the high ground and are enjoying the spoils in the form of attractive valuations and exceptional deal terms.

Armed with strong balance sheets and clear directives from their boards of directors, strategic buyers are aggressive, forcing private equity groups to look for ways to differentiate

themselves in competitive auctions.

Cash on corporate balance sheets stood at a staggering $1.43 trillion* in December, and credit is readily available at attractive terms.

With a low cost of capital and quantifiable synergies, strategics generally have more pricing flexibility and are having success competing with private equity and contributing to valuation multiple expansion. The need for growth and a highly competitive M&A market have also forced strategics to expand their acquisition criteria, driving deal activity into different geographies and across a wide spectrum of targets.

The weapons of private equity firms remain aggressive debt markets, powder kegs of equity sitting on the sidelines, and a willingness to consider sub20% targeted internal rates of return.

Combined, these have proven formi-

dable in offsetting the synergies taken into account by strategics in developing their valuations for targets.

Sponsors are paying up to win auctions, Petryk and for solid targets, lenders are supporting them.

Leverage has escalated to record highs, mirroring levels observed in the previous 2007 peak. According to Standard & Poors Leveraged Commentary & Data (S&P LCD), total leverage in the broader middle market (EBITDA below $50 million) ticked up to 5.5x in November.

The lower middle market (enterprise values below $500 million) saw total leverage creep up to 4.9x. As of September, private equity’s war chest ballooned to over $130 billion in equity

capital earmarked for the middle market (fund size $100 million to $1 billion) alone, according to PitchBook.

Purchase price multiple inflation of 1x to 2x (multiple of EBITDA) over the last 12 to 24 months has been observed across the market irrespective of size or sector. The inflation is a function of excess capital, cheap borrowing costs and competitive dynamics.

Significantly greater premiums have been observed when companies are able to attract strategic buyers.

Strategic buyer multiples are up significantly from 2007 levels, topping financial buyers across almost all size segments: In November 2015, S&P LCD reported an EBITDA multiple of 9.1x for companies across all industries with enterprise values below $250 million, which compares to 8.2x

for financial buyers.

Similarly, for enterprise values between $250 million and $499 million, reported strategic and financial buyer multiples were 10.7x and 9.1x, respectively.

How long will today’s elevated pricing environment last?

From their perch, sellers are enjoying the battles playing out in front of them between strategic and private equity buyers. If they wait too long, they may be drawn into a battle of a different sort — that of managing through the downside of a long-in-thetooth economic cycle.

Given the stage of the current cycle and looming interest rate hikes, sellers are encouraged to take advantage of these favorable market dynamics.

Andrew K. Petryk is managing director of Brown Gibbons Lang & Co. He can be reached at 216-9206613 or apetryk@bglco.com. * Cash & short-term investments in the S&P 500 (ex-financials), S&P Capital IQ.

Scrupulous due diligence bolsters the buyer’s advantage

By MARK BOBER and STEVE SWANN

T

he current M&A market remains a “seller’s market,” both in terms of economics (purchase price multiples), as well as the structure of key deal terms.

The buyer may be at a disadvantage since there could be multiple potential buyers performing due diligence with no exclusivity nor any guarantee or commitment that they will be able to close the deal.

The confluence of all these factors makes performing thorough due diligence more vital than ever to best position the buyer to maximize her return on investment.

Among those best practices are: ■ Understand key value enhancement drivers. What is the historical growth rate, and is it sustainable? What is driving such growth?

Where are the opportunities to enhance revenue/profitability, and what actionable initiatives can be undertaken to

achieve growth?

■ Analyze quality of earnings to better understand sustainability of historical revenue and cash flows. This includes Bober assessing the impact of non-recurring, owner discretionary, and out-of-period adjustments on cash flows. It also includes assessing customer and vendor trends, as well as trends for the nature of cost of goods sold. Further, what is the history of sales price increases/

DEAL MAKERS

decreases and vendor price increases/decreases?

■ Assess the cash conversion cycle, and analyze the Swann net working capital trends. How much capital is tied up in net working capital, and what additional working capital will be necessary to fund growth? Are there opportunities to reduce working capital and improve the cash conversion cycle?

■ How realistic are pro forma projections in relation to historical performance? Are such projections built on a bottom-up or a top-down basis? It is critical to understand the underlying assumptions and to reconcile them to historical trends as well as the sales pipeline and order book.

■ Assess the strengths and weaknesses of the infrastructure in place, and determine whether it

is adequate to serve as a platform for growth. This includes the key management team, current workforce and the underlying systems that provide the data to monitor performance.

■ Assess qualitative factors, including culture, attitude, mode of communications, teamwork, etc.

The above items represent a few of the factors to consider in terms of due diligence.

It is critical to understand these topics when developing a business plan, including a 90-day plan on which initiatives will be undertaken postacquisition.

Mark Bober and Steve Swann are partners in the Transaction Advisory Services Group at Bober Markey Fedorovich. Mark Bober can be reached at 330-762-9785 or mbober@bmfcpa.com. Steve Swann can be reached at 330-762-9785 or sswann@bmfcpa.com.

The expertise to expedite M&A deals.

NOT DEAL BREAKERS

The Dottore team works to maximize assets and resolve conflicts before and during acquisitions. Our hands-on approach brings simplicity to complex transitions, allowing buyers to quickly move ahead with promising new investments.

• • • •

The Corporate Transactions Attorneys of

Mergers, Acquisitions & Joint Ventures | Closely Held Business Services | Financing Transactions & Loan Workouts |

Due diligence Deal design Lay offs Grievance resolution

• • • •

Creditor negotiation Lawsuit management Partnership dispute resolution Tax compliance & governmental reporting issues

Find out how we can benefit your next deal.

Securities & Corporate Governance | Emerging Company Cleveland | 216.781.1212 | walterhav.com

Representation | Private Equity & Venture Capital

Receivership · Mediation · Acquisitions · Divestitures Cleveland & Washington DC | 216-771-0727 | DottoreCo.com

CORPORATE GROWTH AND M&A

ADVERTISEMENT

ACG Cleveland 2015-16 Officers and Board of Directors OFFICERS

January 18, 2016 S27

2016 ACG EVENTS CALENDAR DATE

EVENT

LOCATION

January 21

20th Annual Deal Maker Awards

Cleveland Convention Center

February 9

Weston Smith, Former CEO, HealthSouth (joint event with FEI)

Union Club

February 10 February 10

Regional Networking, Central WiT Leadership Program (part 1 of 2 for members only)

Lockkeepers Jones Day

February 16

ACG Akron – Akron Accelerator CEO Anthony Margida

Akron Accelerator

February 25 February 25

Regional Networking, West Young ACG Lunch & Learn – Live Once, Plan Often

Lakewood Country Club Bernstein

March 2

Young ACG – Presentation & Tour

Market Garden Brewery

March 3

Regional Networking, East

Shaker Country Club

March 10

Workforce Development

Union Club

March 16

WiT Leadership Program (part 2 of 2 for members only)

Deloitte

IMMEDIATE PAST PRESIDENT Murad A. Beg, Linsalata Capital Partners

April 14

Al Green, CEO, Kent Displays

Union Club

May 12

WiT – Happy Hour & “Marie Antoinette”

Dobama Theatre

BOARD OF DIRECTORS

May 19

Republican National Convention (members only)

Ritz-Carlton

Kevin W. Bader, HTV Industries

June 14

Spring Social (joint event with TMA)

Shoreby Club

September 13-14

Great Lakes Capital Connection

Cleveland Convention Center

September 26

12th Annual Golf Outing

Firestone Country Club

PRESIDENT David Dunstan, Western Reserve Partners PRESIDENT ELECT John Saada Jr., Jones Day EXECUTIVE VICE PRESIDENT, BRAND Brad Kostka, Roop & Co. Strategic Integrated Communication EXECUTIVE VICE PRESIDENT, PROGRAMMING & INNOVATION Dale Vernon, AB Bernstein Global Wealth Management EXECUTIVE VICE PRESIDENT, RESOURCES Joseph Adams, Plante Moran PLLC TREASURER Brian Leonard, Edgewater Capital Partners SECRETARY M. Joan McCarthy, MJM Services, LLC

Rudolf Bentlage, JP Morgan Chase Denise Carkhuff, Jones Day Elizabeth Evans, Republic Steel

For complete event details and registration, visit www.ACGcleveland.org.

John Grabner, Hylant James M. Hill, Benesch (Trustee Emeritus) Christopher Hogan, KeyBanc Capital Markets Jonathan Ives, SCG Partners Brian Kelly, PricewaterhouseCoopers Raymond Lampner, BCG & Co. Randolph D. Markey, Global X Sean P. McCauley, Citizens Bank Trent Meteer, TriState Capital Bank Kevin Murphy, Deloitte Consulting Jeff Schwab, Oswald Companies

ABOUT ACG ACG is a global organization focused on driving middle-market growth. Its 14,500 members include professionals from private equity firms, corporations and lenders that invest in middle-market companies, as well as from law, accounting, investment banking and other firms that provide advisory services. Founded in 1954, ACG is a global organization with 57 chapters.

Learn more at www.acg.org. ACG Cleveland serves professionals in Northeast Ohio and has nearly 500 members. For more information, visit www.ACGcleveland.org

Peter Shelton, Benesch Bertrand Smyers, New Heights Research Jennifer Stapleton, Jones Day Karen Tuleta, Morgenthaler Private Equity Theodore Wagner, Bober Markey Fedorovich William Watkins, Harris Williams & Co.

What Secrets Are Hiding

Behind the IT Door?

Thomas Welsh, Calfee Halter & Griswold Rebecca White, Western Reserve Partners

It may not seem obvious at the start of an acquisition or merger, but overlooking the IT assets of a company could be costly down the road.

WHERE WILL YOUR GROWTH COME FROM?

A weak or compromised digital infrastructure can devalue your business from the beginning.

Ashton can provide a thorough on-site analysis of hardware, software, IT staffing and practices–identifying strengths and exposing vulnerabilities long before the ink dries on your deal.

Copper Run’s merger and acquisition advisory professionals provide senior level attention on every transaction. We help our clients transition ownership, grow through acquisitions, RU VHFXUH ¿QDQFLDO SDUWQHUV for future growth.

Our team provides the comprehensive IT reporting you’ll need as you finalize your transaction and begin building for the future.

Make IT Part of the Conversation

SELL-SIDE ADVISORY | BUY-SIDE ADVISORY | VALUATIONS Copper Run Capital LLC | 614-888-1786 | Copperruncap.com

Call Ashton at 216.397.4080 or ashtonsolutions.com and find out how bits & bytes effect the bottom line.

CORPORATE GROWTH AND M&A

S28 January 18, 2016

20th annual Deal Maker Awards to honor leaders in M&A

ADVERTISEMENT

ACG Cleveland, Northeast Ohio’s leading organization for merger and acquisition and corporate growth professionals, will recognize the winners of its 20th Annual ACG Cleveland Deal Maker Awards at 5:30 p.m. Thursday, Jan. 21, at the Cleveland Convention Center.

The Deal Maker Awards are a tribute to Northeast Ohio’s preeminent corporate deal makers for their accomplishments in using acquisitions, divestitures, financings and other transactions to fuel sustainable growth. The 2016 Deal Maker Awards winners are:

The J. M. Smucker Co.

Ferro Corp.

Area Wide Protective

Resilience Capital Partners

The ambitious acquisition and divestiture program of The J. M. Smucker Co. has been key to its growth. Over the past two years, JMS made two sizable acquisitions.

Big Heart Pet Brands, a producer of premium pet food and pet snacks, was a $6 billion acquisition, providing JMS with a significant presence in the category. As a result of the acquisition, the company plans to create an additional 400 jobs at its Orrville headquarters. Sahale Snacks Inc., a privately held manufacturer of branded nut and fruit snacks, was an $80.5 million acquisition. Additionally, JMS has entered into an agreement to sell its U.S. canned milk brands and operations to Eagle Family Foods Group LLC.

During 2013 and 2014, Ferro aggressively restructured from nine business units to three. It then executed a disciplined acquisition program. Over the past 18 months, Ferro acquired Vetriceramici S.p.A., a European leader in ceramic coatings, for approximately $108 million; TherMark, a leader in laser marking technology; Nubiola Pigmentos, a leading European pigment producer, for approximately $165 million; Al Salomi, a leading manufacturer of frits and glazes in the Middle East and North Africa, for approximately $36 million; and the porcelain enamel assets of Turkish chemical manufacturer Ege Kimya San. These transactions have been vital to improving Ferro’s balance sheet and its stock price performance.

Area Wide Protective Inc. is a leading provider of outsourced traffic management services. The company was acquired by Blue Point Capital Partners in 2006, and under its ownership diversified both its customer base and geography, leading to significant top-line and margin growth. It expanded from a regional business with 10 locations into a business with 43 locations across 17 states. The Riverside Co. acquired AWP in June 2015. AWP subsequently completed the add-on acquisition of Traffic Specialties Inc.

Over the past two years, private equity firm Resilience Capital Partners has been active in managing its portfolio of niche manufacturing, distribution and business service companies. During this timeframe, Resilience made 12 acquisitions, two divestitures and one recapitalization in industries including: manufacturing, technology, energy and construction. Its portfolio companies today employ more than 7,000 people in 15 states and collectively represent more than $2 billion in revenues.

THE 2016 ACG CLEVELAND DEAL MAKER AWARDS PLATINUM SPONSORS ARE: BENESCH, FIRSTMERIT, GRANT THORNTON, KEYBANC CAPITAL MARKETS, MERRILL DATASITE AND OSWALD COS.

DISCLAIMER The articles in this section were prepared by the respective contributors for general information purposes only and are not intended as legal, tax, accounting or financial advice. Under no circumstances should any information contained in any of these articles be used or considered as an offer or a solicitation of an offer to participate in any particular transaction or strategy. Any reliance upon any such information is solely and exclusively at your own risk. Please consult your own counsel, accountant or other advisor regarding your specific situation. Any views expressed in the articles are those of the respective contributor and are subject to change without notice due to market conditions and other factors.

February 3, 2016

11am - 1:30pm • InterContinental Hotel, Cleveland

ECONOMIC OUTLOOK

Tickets: CrainsCleveland.com/Outlook2016

or contact Kim Hill at 216-771-5182 • kehill@crain.com

What you need to know for 2016 1VPU \Z VU -LIY\HY` HUK OLHY [^V SLHKPUN ÄUHUJPHS L_WLY[Z ZOHYL ^OH[ [OL` [OPUR ^PSS TVZ[ impact personal investing and the broader economic picture in the coming year. ࠮ 5H[PVUHS YLNPVUHS LJVUVTPJ V\[SVVR ࠮ 3HIVY THYRL[ \ULTWSV`TLU[ ^HNLZ ࠮ .SVIHS NYV^[O

SPEAKERS

Jack Kleinhenz, principal and chief economist, Kleinhenz & Associates / chief economist, the National Retail Federation

SUPPORTED BY

࠮ 4VUL[HY` WVSPJ` ࠮ 0U]LZ[VY Z[YH[LNPLZ HUK HZZL[ HSSVJH[PVU ࠮ *VUZ\TLY HUK YL[HPS LU]PYVUTLU[

Lisa Emsbo-Mattingly, president, National Association for )\ZPULZZ ,JVUVTPJZ KPYLJ[VY VM YLZLHYJO NSVIHS HZZL[ HSSVJH[PVU -PKLSP[` 0U]LZ[TLU[Z

IN PARTNERSHIP WITH

20160118-NEWS--41-NAT-CCI-CL_--

1/14/2016

11:13 AM

Page 1

CRAIN’S CLEVELAND BUSINESS z JANUARY 18 - 24, 2016 z PAGE 41

Focus HEALTH CARE

Q&A - P. 43

z

HIPAA HELP - P. 43

z

ADVISER - P. 44

For the benefit of the community Medicaid expansion has hospitals reframing their value proposition

BY LYDIA COUTRE lcoutre@crain.com @LydiaCoutre

With the expansion of Medicaid insuring more Ohioans, hospitals and health care providers aren’t having to provide as much charity care — simply because the number of uninsured patients needing providers to pay for the cost of their care is shrinking.

As such, Northeast Ohio’s nonprofit health systems are rethinking their so-called community benefit strategies and finding new ways to serve the region in order to prove their value to residents and ultimately defend their tax-exempt status. Previously, the amount of free care they provided for the poor spoke for itself.

“It was kind of easy to sit back and count your charity care and not think about the other things you were doing in the community,” said Rob Whitehouse, Summa Health System’s senior vice president for marketing and community relations.

Between 2013 and 2014, for example, Akron-based Summa’s community benefit total dropped from $93.1 million to $67.1 million after a significant drop in charity care and Medicaid shortfall dollars. Other buckets of community benefit — education, research, subsidized health services and community health improvement services, programs and support — remained the same.

Because Summa was able to rely on the charity care number, a “great deal” of its community benefit went unreported, Whitehouse said. The system is working to put processes in place to educate employees about what community benefit is and how to report it.

“I’m willing to bet our numbers are going to be good just by reporting what we’re actually doing,” SEE BENEFIT, NEXT PAGE

20160118-NEWS--42-NAT-CCI-CL_--

PAGE 42

1/14/2016

11:13 AM

Page 1

z JANUARY 18 - 24, 2016 z CRAIN’S CLEVELAND BUSINESS

HEALTH CARE

BENEFIT CONTINUED FROM PREVIOUS PAGE

Whitehouse said.

Although the Affordable Care Act dramatically increased access to health insurance coverage, it hardly turned hospitals into cash cows.

While many saw an increased number of insured patients access their systems, rarely does the coverage, especially Medicaid, cover the full cost of care. While health systems typically saw a healthy decline in the amount of completely free care provided, they saw significant increases in the amount of dollars they shifted to covering the cost difference between what Medicaid pays and the cost of treating those patients.

The Cleveland Clinic, for instance, saw charity care dollars shrink by 40.5% from $169.8 million to $101 million between 2013 and 2014. At the same time, the amount of funds the Clinic put toward covering Medicaid shortfall grew by 75%, from $124 million in 2013 to $217.5 million in 2014.

The shortfall funding need grew faster than the charity care declined, representing more than a simple shift. That difference is in part due to the Clinic increasing the number of locations in the system that provide services for Medicaid patients. But also, with Medicaid available, people who are newly qualified are signing up and actively seeking out primary care and other services, according to Steve Glass, chief financial officer for the Clinic.

This significant shift of charity care cost over to shortfall cost is the bulk of the change Glass expects to see from the Medicaid expansion.

“I would hope that we would con-

tinue to see some of this migrate,” he said, “but we’ve seen it start to flatten out over the last year, so I think we’ve seen the biggest impact of it.”

He’d like to continue to see that cost shift from charity care toward shortfall as more people are insured, but since that initial jump, it’s flattened out.

Meanwhile, at University Hospitals, both charity care and Medicaid shortfall funding rose between 2013 and 2014. The Medicaid shortfall spike, however, was much more drastic, increasing by 33.3% to $76 million 2014. Charity care only rose by about 3.4% to $61 million in 2014.

The charity care bump was likely the result of UH bringing medical centers in Elyria and Parma into its fold, but even factoring that in, the charity care cost hasn’t decreased as dramatically as one would think, said Heidi Gartland, UH’s vice president of government relations.

“We still have a lot of folks that, even with the Affordable Care Act, are for whatever reason either not willing to sign up for Medicaid — although I don’t know how often that happens — or not eligible to sign up.

There is still population above 138% of poverty that is not eligible to apply,” Gartland said.

Still spending When a new social program is available, it inspires plenty of new eligible participants to surface — something dubbed the “woodwork effect” — which contributed to there not being a one-for-one transition from charity care to Medicaid shortfall costs, said MetroHealth CEO Dr.

Akram Boutros. In addition, new programs often inspire non-eligibles to come out for services.

Also, being insured doesn’t necessarily equate to knowing how to access care, Gartland said. So, UH has worked to more proactively educate patients who came into the emergency department for non-emer-

mary care physician,” Gartland said.

More than 90% of the patients that came through the medical access clinic did not come back to the emergency room for a non-emergency issue, meaning “we got them into a medical home, which is exactly the big hopeful outcome of the Affordable Care Act,” Gartland said.

“I think because we are evolving, going from charity care into true proactive community benefit, communities will be healthier because of it, particularly the underserved populations.”

— Rob Whitehouse, senior vice president for marketing and community relations, Summa Health System

gency care. A big piece of that has involved steering more patients toward its medical access clinic, where non-emergency patients are treated by a provider and a social worker teaches them how to enroll in Medicaid or other insurance, how to use that insurance, how to find a primary care doctor, why having one is important and more.

“We took care of their medical issue and then we had a social worker come in and actually talk to them about and get them set up with a pri-

As for Summa, it saw its charity cost drop between 2013 and 2014 from $15.6 million to $6 million. Unlike other hospitals, however, Summa saw a decline in its Medicaid shortfall from $23.3 million and $5.4 million, which it chalks up to Medicaid expansion and a rebounding economy. Those freed up dollars present an opportunity to look at how Summa’s community benefit strategy should evolve, Whitehouse said.

He said Summa is developing more programs to ensure those newly in-

sured patients aren’t underserved.

“Just because people have access to insurance now doesn’t mean they’re necessarily getting the screenings right or they’re necessarily using the benefit properly,” Whitehouse said.

Population health strategies are also becoming more entrenched in hospitals’ community benefit strategies.

For example, of MetroHealth’s more than 1.1 million patient encounters each year, only 0.3% are inpatient, but that sliver of encounters represents about 45% of revenues for the health system, Boutros said. That remaining portion and vast majority of encounters, however, is where providers can have more of an impact on the community, he said. Beyond community benefit, various federal programs incentivize focusing on a holistic picture of health, such as the Readmissions Reduction Program and the Hospital-Acquired Condition Reduction Program.

“99.98% of your life is outside of the health care system,” Boutros said. “So we need to figure out how to impact that 99.98% of your life because we’ve been focusing on the .02% of your life that happens to come in the health care system.”

Whitehouse said there will be a period of adjustment from big charity care numbers to reporting existing and building new programs, “but I’m confident we’ll get there.”

“I think because we are evolving, going from charity care into true proactive community benefit, communities will be healthier because of it, particularly the underserved populations,” he said.

THERE’S NO

BUSINESS LIKE YOUR BUSINESS. Vorys, Sater, Seymour and Pease is a full-service corporate law firm that works with all kinds of businesses to help them grow. We recognize that your business is unlike any other. And what a coincidence — because our law firm is unlike any other, too.

For more information, visit vorys.com.

Vorys, Sater, Seymour and Pease LLP 200 Public Square, Suite 1400, Cleveland, Ohio 44114 106 South Main Street, Suite 1100, Akron, Ohio 44308

Columbus

Washington

Cleveland

Cincinnati

Akron

Houston

Pittsburgh

20160118-NEWS--43-NAT-CCI-CL_--

1/14/2016

12:04 PM

Page 1

CRAIN’S CLEVELAND BUSINESS z JANUARY 18 - 24, 2016 z PAGE 43

Q & A: Dr. Debra DeJoseph Medical director, Women’s Health Institute, University Hospitals Somewhat recently, University’s Hospitals launched its Women’s Health Institute, which provides coordinated care for busy women. It’s a virtual center designed to help women, particularly working women, who may not have time to spend on their own health and well being. Oftentimes, they’re busy taking care of the health care needs of their children, spouse, parents, etc.

The center’s director and medical director provide a personalized approach for patients to connect them to and arrange appointments with primary care, obstetrics and gynecology and other specialists. They also provide health coaching to prepare for doctor appointments and health navigators to guide women through the maze of health information.

Crain’s sat down with the center’s medical director, Dr. Debra DeJoseph, to learn a little more about the center.

Former journalists help docs with privacy issues

BY CHRISSY KADLECK

Tell me about your background.

I was a dietitian before attending medical school, and have worked as an internist at University Hospitals since 1994. All my educational training has been at Case Western Reserve University, and I am currently a senior instructor for the School of Medicine.

What makes the Women’s Health Institute a virtual resource?

By virtual resource, we mean we are making the connections between patients and providers throughout the UH system, having recruited providers in the system who are especially interested in seeing women. We provide tools for our providers, and the cornerstone of this is the health risk assessment, which is the tool the nurse navigator uses to obtain a complete history on the patient.

This can be reviewed by the Women’s Health Institute doctor seeing the patient and used to generate orders prior to the patient’s appointment if indicated.

What is the health risk assessment used for?

The health risk assessment also will alert staff if a specialty referral is indicated; for example, to UH’s high-risk breast clinic. The assessment was crafted in collaboration with the thought leaders at UH in gastrointestinal, gynecology, breast care, rheumatology and orthopedics as well as mental health care. To streamline caring for patients, we have worked with the IT department at UH to offer enhancements to our electronic medical record to facilitate caring for women so that we can provide comprehensive care as efficiently as possible. We believe that the computerized medical record should facilitate excellent care, not put a wall between doctor and patient.

Who are the institute’s biggest customers? Is it geared particularly toward working women?

The institute’s biggest customers to date have been patients onboarding with UH. It is not particularly geared toward working women, as we have found that women not in the workplace often have more scheduling conflicts. They are often responsible for others, both children and parents.

What issues do women, particularly working women, face that this center can help with?

The unique issues facing women involve juggling many responsibilities and just not enough energy left to be as proactive in their own health care as they want to be. The Women’s Health Institute nurse navigators can be the support staff that they need, and the physicians working with us endeavor to provide the personal touch that UH care providers are known for.

What is the largest health risk for women?

clbfreelancer@crain.com

The largest health risk for women is the same as for men: cardiovascular disease. We have seen a dramatic rise in obesity related diseases in both men and women.

Both men and women turn to alcohol to self-medicate stress, but women increase their risk for breast cancer and osteoporosis with more than 10 drinks a week.

After creating a six-page informational booklet on the Health Insurance Portability and Accountability Act, Diane Evans watched her company’s trade show giveaway transform into a compliance must have.

A seasoned journalist, Evans along with her business partner, Jason Edwards — both former professionals at the Akron Beacon Journal — created the resource booklet for the Ohio Dental Association trade show in Columbus this past fall as result of all the research they had been doing about HIPAA compliance for their joint venture, M.E.D Media Mart.

“We’re media people at our core,” Evans said, adding that their company, a partnership of their two individual LLCs, has provided content and website development for small medical practitioners and large organizations such as the Cleveland Clinic. “In the process of working in this medical sector space … what we discovered was that there were a lot of people who seemed to be struggling

What is the best piece of health advice you could offer a working professional?

The best piece of health advice I can offer for a working professional is to view their body as the most important piece of equipment they have, and it needs to be cared for and maintained to maximize performance. Time spent for health is time that is well spent and should yield higher productivity.

SEE PRIVACY, NEXT PAGE

How close is your business to our 100% owned and operated KLJK VSHHG ²EHU QHWZRUN"

Your Competitive Edge in Health Care Management As the health care industry continues to evolve, there is an increased demand for strategic leaders. Set yourself apart with a Health Care Administration MBA from Cleveland State University.

Find out by searching for your building on our Network Availability Map at

HYHUVWUHDP QHW RXU QHWZRUN

Through specialized coursework and experiential learning, you will graduate with a holistic view of health care administration and the understanding of how management and medicine work together to achieve the goal of superior patient care.

Take the next step in your career.

Visit csuohio.edu/mba for more information and to apply.

216.923.2280

everstream.net

216-687-3730 · mba@csuohio.edu

20160118-NEWS--44-NAT-CCI-CL_--

PAGE 44

1/14/2016

12:12 PM

Page 1

z JANUARY 18 - 24, 2016 z CRAIN’S CLEVELAND BUSINESS

HEALTH CARE

PRIVACY CONTINUED FROM PREVIOUS PAGE

with these ever-changing HIPAA guidelines.”

Enter MyHIPAAGuide.com, a subscription service created by Evans and Edwards, and published by M.E.D Media Mart, designed to deliver its subscribers well-researched, comprehensive and up-to-date information on what they need to do to make sure they comply with all HIPAA rules and regulations. The annual subscription costs $279.

“After that show we came back and said, ‘There’s a lot of interest in learning more about and demystifying this whole thing of HIPAA compliance,’” said Evans, a 28-year veteran at the Beacon who left in 2006 when the paper was sold and after recognizing that not only was the industry changing, but so was the way people consumed information.

Passionate about creating compelling content, Evans said this kind of niche is just the opportunity she has been waiting for since leaving the newspaper.

Following the September 2015 dental trade show, she tucked herself away for a week and immersed herself in research to create something that would help medical practices and organizations more than a basic handout. The result: a 10-step plan built around 40 catalogued resources that deliver easy-to-find information quickly and that are vigilantly updated as they change.

“New rules and regulations are constantly being written,” Evans said.

“As recently as October of this year, a whole new set of rules came

out for how medical practices and HIPAA covered agencies have to do their reporting for 2016.”

Evans said that she is aiming for a base of 500 subscribers by the end of the reporting period, which is the end of February.

She said that not only have the privacy and security rules changed, the stakes are much higher for those charged with protecting health information. The government announced that in 2016 it will begin to conduct audits and non-compliance comes with hefty penalties.

That’s what motivated Dr. Waleed Nemer, president of the Summit County Medical Society and an internist who practices in the Akron area. Nemer is one of the first subscribers to the guide, which he considers well worth the investment as an education program and consultation service for him and his staff.

“The money is not the only penalty. Taking off work and going to court and going here and there and answering questions,” Nemer said.

“Having agents come to your office and request this and request that.

This is not very favorable for a physician.”

Meanwhile, Jan Leach, a former Beacon editor and vice president, said Evans’ new role is a perfect fit.

“When Diane left the Beacon, she really was thinking of ways to kind of maximize her expertise of telling a story, verifying it, accuracy, attention to detail and getting that information to people who need that information,” said Leach, now an associate professor of journalism at Kent State University.

ADVISER: Kathryn E. Hickner

Medicare home health agencies should redirect focus Medicare home health agencies provide crucial health care services and access to care to a vulnerable and homebound population. These services include nursing, physical, occupational, speech therapy, social work and home health aide services.

Also, home health care is considered the “least costly alternative” among the formal post-acute care setting, according to the Alliance for Home Health Quality and Innovation.

For several years, the home health industry has experienced tremendous change and has been subject to significant governmental regulation and scrutiny. During the last few months of 2015, certain developments unfolded that will impact home health agencies during the coming year.

To achieve better health care for individuals, better health for the country’s population and lower health care costs (goals commonly referred to as the “triple aim”), the federal government is increasingly paying health care providers for value — meaning quality and efficiency — instead of volume alone.

In November of last year, to further these goals, the Centers for Medicare and Medicaid Services issued a final rule providing, among other changes, a value-based purchasing model for certain home health agencies starting during 2016.

Although Ohio’s are not initially required to participate in the valuebased purchasing model, it is advisable for home health agencies in the state to position themselves for suc-

WE KNOW ALL SMALL BUSINESSES

AREN’T THE SAME. THAT’S WHAT MAKES US

DIFFERENT. COX BUSINESS INTERNET℠ 15

69

Hickner is co-chair of the health care practice group at Ulmer & Berne LLP in Cleveland. ing 2013 and over $18 billion in Medicare payments for 2013, including those in Ohio.

While the data can be used to compare home health cost and utilization among various geographic regions, the data does not include any information related to the quality of home health services. However, information regarding home health agencies’ quality of care is available on the CMS Home Health Compare website, which allows the public to compare the quality of care provided by one agency to other agencies and to state and national averages. Also, the Health Policy Institute of Ohio offers several comprehensive and useful resources describing the basics of health care data transparency and related resources on its website.

In summary, recent regulatory developments underscore the need for home health agencies to focus on providing high quality efficient care, to be prepared for increasing public transparency and governmental scrutiny and to continue to implement and strengthen regulatory compliance programs. It’s advisable for them to stay apprised of regulatory developments and proceed with diligence and care so that they may thrive during 2016 and beyond.

SET THE BAR HIGHER.

WEATHERHEAD EXECUTIVE MBA PROGRAM

FEATURED PACKAGE

$

cess under such a model considering industry trends.

Also in November of last year, the U.S. Department of Health and Human Services’ Office of Inspector General issued its 2016 Workplan, which provides for continued governmental scrutiny of home health payments and efforts to combat fraud and waste through investigations and other enforcement activities.

Many legitimate home health agencies and their trade associations are supportive of such efforts, which are viewed as a means to improving their industry’s reputation and ensuring that legitimate agencies are able to compete with others on a fair playing field where the majority of agencies provide high quality, medically necessary services without resorting to kickbacks and other illegal activities.

The Workplan explains that at one point, the Office of Inspector General found that one in four home health agencies engaged in questionable billing and that “nearly $1 billion in improper Medicare payments and fraud has been identified relating to the home health benefit” since 2010. Considering the current regulatory enforcement environment, agencies located in Ohio and elsewhere should develop and implement robust and active compliance programs. Health care attorneys often recommend that such compliance programs include a special emphasis on marketing and compensation arrangements because of associated risks under applicable health care regulations.

The federal government and other industry stakeholders contend that transparency is an important tool to reducing fraudulent activity and increasing the quality and efficiency of home health services. Accordingly, last December, CMS released a data set reflecting the utilization and payments pertaining to 11,062 home health services provided to Medicare beneficiaries dur-

99 mo*

for 12 months with a 2-year agreement

CALL 877-903-7884 OR VISIT COXBUSINESS.COM TO SWITCH TODAY *Offer valid until 5/1/16. Minimum service term, equipment, installation, fees, taxes, and other restrictions may apply. See coxbusiness.com. ©2016 Cox Communications, Inc. All rights reserved.

Designed for working executives, this program is delivered by internationally renowned faculty who have pioneered the advancement of leadership on four levels: self, team, organization and society.

Make our difference your advantage with an Executive MBA from Weatherhead.

APPLY TODAY AT WEATHERHEAD.CASE.EDU/EMBA

20160118-NEWS--45-NAT-CCI-CL_--

1/15/2016

1:42 PM

Page 1

CRAIN’S CLEVELAND BUSINESS z JANUARY 18 - 24, 2016 z PAGE 45

STARTUPS CONTINUED FROM PAGE 1

was useless.

Then, in December, the federal government passed the Protecting Americans from Tax Hikes Act. The so-called PATH Act allows young companies to claim the credit against their payroll taxes, assuming they have employees engaged in research and development.

Those employees don’t have to be scientists working in a lab. Many software development teams will count, too, according to the accountants who spoke with Crain’s.

The credit could help LineStream Technologies save a significant amount of cash, according to CEO David Neundorfer.

He oversees seven employees who are focused on developing and testing the Cleveland company’s software, which is used to control motors and industrial equipment.

Thus, Neundorfer and his accountants think LineStream will probably meet the four-part test for the R&D Tax Credit: The team is working to develop new and improved products; they face technical uncertainty; the work is technological in nature; and it involves a process of experimentation. “Nearly everything we’re doing would qualify,� Neundorfer said.

And since he’s a member of the board that oversees the Cleveland chapter of the Entrepreneurs’ Organization, he plans to spread the word about the tax credit to other entrepreneurs.

And not just those entrepreneurs

who run tech startups.

The credit uses a broad definition of research and development, according to the accountants. It’s broad enough that it could include construction companies testing out new building materials and insurance companies developing software for internal use.

If those companies generate less than $5 million in revenue per year and had no sales five years ago, they can take LineStream’s route and apply for the payroll tax credit.

More established companies can benefit from two other recent changes: For one, the PATH Act — which altered a long list of tax laws — also made the credit permanent.

So companies that already receive it can operate with more certainty, since they no longer have to worry that Congress will fail to reauthorize the 35-year-old credit every few years.

Plus, the new law allows companies that pay the alternative minimum tax to receive the R&D Tax Credit, so long as they generated less than $50 million in revenue, on average, over the previous three years.

All kinds of small businesses, and even some larger companies, pay the alternative minimum tax.

Among them are many Cohen & Co. customers, Messina said. “A lot of our clients could be impacted,� he said.

Michael Krajcer agreed that the alternative minimum tax change could give businesses in all kinds of industries a chance to apply for the

R&D Tax Credit, as long as they do research that qualifies.

But the PATH Act will have a particularly large impact on high-tech startups, given that many of them — maybe most of them — will qualify, according to Justin McLoughlin, president of airCFO, which operates in Cleveland and San Francisco.

How big of an impact will it have on a single company?

Well, say your startup employs three people who are 100% focused on qualifying R&D, and they each make $60,000 a year.

In that case, you’d save a total of $11,160 per year — 6.2% of their combined salaries, Krajcer said. But the credit would only offset half that amount if they only spent half their time on R&D, he added.

So is this free money? No. If you want to get the credit — and avoid IRS scrutiny — you need to properly document your R&D projects as soon as they start, Krajcer said.

The requirements aren’t onerous: He suggests that companies write down their goals for a given project at the outset and then keep a log of the issues they face along the way, describing what worked and what didn’t.

Some companies already generate some of the documentation, but many don’t.

That’s especially true at startups, where some key information might only be written “on a whiteboard or even on the back of a napkin,� he said.

Ç°

Ç° ÇŻ ÇŻ

Chemtron Corporation

- ¢

$

$

Ä™

Ç­ Â ÇŻ

¢   ǭ

ÇŻ

ÂŁ Ç­ ÂŁ Â

$Ä™ Ç° ÇŻ

Ç° ÇŻ

Ç° ÇŻ

Ĵ ¢

Ĵ ¢

Ĵ ¢

Ç°

Ç° ÇŻ ÇŻ

-

$ ǭ ¢

$ Ç­

ÇŻ

Ç° ÇŻ

Ĵ ¢

Čƒ

Č„    ǯ  ǯ Çą ÇťĹ˜Ĺ—ĹœÇź Ĺ?Şŗ-Ĺ™Ĺ˜Ĺ™Ĺ™ Çą $ $ Č“  ǯ řŖŖŖ ; Ç° ŚřŖǰ Ç° ÇŻ ĹšĹšĹ—Ĺ˜Ĺ˜

20160118-NEWS--46-NAT-CCI-CL_--

PAGE 46

1/15/2016

1:22 PM

Page 1

z JANUARY 18 - 24, 2016 z CRAIN’S CLEVELAND BUSINESS

Business of Life HEALTH & WELLNESS: Personal training Crain’s occasional look at different wellness programs and options in Northeast Ohio. Send suggestions: clevedit@crain.com

Toughening up new resolutions

BY LYDIA COUTRE As the New Year begins, gyms see an influx of people striving for their “new year, new me” fitness goals.

For the first few weeks of the year, “if you come to this facility, really any facility during peak hours, you can’t move — it’s one person to one machine,” said Mike Karban, owner of Totally Toned Personal Training, while sitting in the Brunswick Recreation and Fitness Center.

Within four to six weeks, more than half of the well-intentioned New Year’s resolution hopefuls will be gone, Karban estimates.

Stephanie Rutti, Karban’s client for more than two years, calls them “resolutionaries.” She used to be one. Every New Year, she’d tell herself this would be the year she’d make changes, the year she’d lose the weight.

“It never got to that point where I stuck to it,” she said. “I’m a quitter. I’m one of those resolutionaries.”

Karban sees this spike every year both in his personal training business and at the two gyms he owns: Millers Athletic Club and Break Out Fitness Club, both in Euclid, But those who sign up for personal training tend to be the ones who stick around — as was the case for Rutti.

“Personal training is like the insurance policy for what you’re buying at the gym,” Karban said.

A gym’s not going to call you when you don’t show up, but the personal trainer whom you scheduled time with will, he said. That accountability is what drives forward New Year’s resolutions — and fitness goals year-round. And for the in-home training he offers, it eliminates the challenge of finding time to get to the gym or someone to watch the kids.

Karban was that extra push and support Rutti needed. Since September 2013, she has lost between 90 and 100 pounds, depending on whether you count the holiday weight flux.

Now, she’s there all the time working with Karban.

“You need that support, because no matter what, there’s always negative forces,” she said.

Since 2004, Karban’s personal training business has grown from an ad in the paper for in-home training to an evolving team of several personal trainers operating in homes, online and at the gyms that Karban now owns or partners with.

Trainers can help with fitness goals ranging from strength competitors to pre- and post-rehabilitation patients.

The New Year surge tends to be those in between those ends of the spectrum. If it’s not people signing up for memberships themselves, it’s gift certificates that sit unused for months until they’re about to ex-

pire (one year, two separate people called him for training just days before the expiration date on the gift certificates friends and family had bought them the previous holiday season.)

“The fitness business in a lot of ways is a right now kind of situation,” Karban said. “People feel like if they don’t do it right now, they’re not going to do it.”

The start of the year tends to be that “right now” time when peo-

ple come in droves and give too much too quickly, burn themselves out and then fade away.

To anyone looking at fitness goals, Rutti says they have to be ready to make a commitment for reasons beyond a date of the year.

“I think a lot of times what happens, though, is people, they get so excited to do it — and they really mean to do it — that they jump in too much,” he said.

We don’t just see people for who they are; we see

20160118-NEWS--47-NAT-CCI-CL_--

1/15/2016

1:24 PM

Page 1

CRAIN’S CLEVELAND BUSINESS z JANUARY 18 - 24, 2016 z PAGE 47

In the past nine months,

94% MARC GOLUB PHOTOS

of individuals served in United Way-funded healthy food access programs have increased their fruit and vegetable intake.

Left, Larry Corrigan of Hinckley works out as Mike Karban looks on at the Brunswick Recreation and Fitness Center. Below, Karban, who owns Totally Toned Personal Training, works with Stephanie Rutti. He has been her personal trainer for more than two years. Rutti has lost between 90 and 100 pounds since 2013.

them for who they can become.

20160118-NEWS--48-NAT-CCI-CL_--

PAGE 48

1/15/2016

1:25 PM

Page 1

z JANUARY 18 - 24, 2016 z CRAIN’S CLEVELAND BUSINESS

BUSINESS OF LIFE

Source Lunch Loren Chylla is executive vice president of media services for the Adcom Group, one of Cleveland’s leading marketing firms.

His job is to figure out for clients such as Cleveland Clinic and paint and coatings giant Sherwin-Williams Co. how to spend their marketing dollars most effectively. Having followed the media universe for nearly two decades, first at Cleveland.com and now at Adcom, the Lyndhurst native has witnessed an explosion of new marketing and advertising opportunities.

To keep an eye on what people and businesses will be acquiring and using in the next year and beyond, Chylla spent three days in Las Vegas earlier this month, attending the mammoth Consumer Electronics Show. His specific business mission was to see and hear the latest in digital thinking.

“I went to the show to see how (digital) publishers are reacting to the new technologies,” Chylla said. And he — Jay Miller raved about a digital refrigerator.

What’s a digital refrigerator?

It’s a refrigerator with a panel on it like a tablet. You swipe through and it shows you the weather for today, the headlines, what’s in your refrigerator, suggested meals based on what you have and expiration dates.

What else did you see at the Consumer Electronics Show that will offer your marketing clients new ways to reach consumers?

Google Cardboard (a low-cost virtual reality headset that puts users in the middle of digitally generated action). I can see myself putting on that headset and lying back on my couch on a Saturday afternoon watching a football game or a movie, if it’s shot the right way. One other big thing is that the automotive industry is getting big into modernizing. They were talking a lot about the driverless car. They also were big on these sensors built into seatbelts that monitored your activity. So if you start to fall asleep or a health ailment comes on, like a heart attack, it sends an emergency call. 3-D printers were also big.

You can actually buy a basic model for under $500 now.

Personally, I’m trying to figure out what I would do with a 3-D printer in my house.

How is your job, figuring out where to put advertising messages that people will respond to, changing?

It’s in turmoil and it’s exciting. It’s changing so rapidly. We put client’s brands around content that’s relevant. Advertising and brands want to be modern and relevant. To them, that means mobile, social media. It doesn’t mean print and radio.

And that will include virtual advertising, of course.

Publishers at the show were talking to me about, “How can we help you with virtual reality?”

When you talk about publishers there, you’re talking about the media businesses that agencies like yours have long used to disseminate advertising and marketing messages. But the term “publisher” is really taking on a broader meaning, and the role of marketing agencies like yours is changing alongside, isn’t it?

Brands are becoming publishers.

Sherwin-Williams has a (digital and print) magazine, called Stir, for design professionals. They’re in charge of their own content. So my job is to connect their media to consumers to produce a return on investment, which could be more paint gallons sold or more design appointments booked.

So does that might mean you might figure out how to find people interested in a client online when they are doing a Google search?

Yes. We can now track you when you browse digitally. I can find you when you search for a new pair of shoes. I can start to feed you information (in the form of ads that pop up as you surf the web) by using a cookie (a bit of data stored on the surfer’s computer). I can use that cookie when you’re on the Crain’s or ESPN website to send ads about shoes.

How else is technology, the kinds of technology you saw at the consumer show, changing your business?

We produced commercials using drones. We had the drones with cameras on them and we flew them overhead to watch bikers coming down a path.

What was the strangest thing you saw at the show?

A Fitbit (a brand of digital activity tracker people wear on their wrists) for pets. If you don’t want to wear a Fitbit when you walk your dog, you can put it on the dog’s ankle and it measures your steps for you. It was kind of a unique thing. I sent it to my kids because I thought it was so funny.

Loren Chylla MARKETING

FOUR THINGS: FAVORITE STREAMING SERVICE Netflix brings high-quality, well-produced original content to the table, such as ‘House of Cards’ and ‘Orange is the New Black,’ which I really enjoy. To watch a favorite like ‘Seinfeld’ or ‘Saturday Night Live,’ it’s Hulu all the way.

PRINT READS Wall Street Journal, New York Times, Plain Dealer.

I try to start my morning flipping through The Journal and The Times.

AD MAN, NOT MAD MAN It’s a neat business, man.

It’s challenging but exciting. It’s changing so much.

ATLANTA After college at Ohio University, his friends went to fast-growing Atlanta to find work. He returned to Cleveland for a year and then joined them in Atlanta, finding a job doing marketing at the Georgia Lottery.

LUNCH SPOT Blue Point Grille 700 W. St. Clair Ave. 216-875-7827 www.bluepointgrille.com

The meal One had grilled walleye and a diet Coke, the other grilled salmon and iced tea, both served with whole grain jasmine rice and steamed broccoli.

The vibe A high-end seafood house that is the anchor of the Warehouse District restaurant scene — with crisp blue napkins and dark blue water glasses.

It’s a little nautical, of course, and has its extensive oyster selection on a chalkboard.

The bill $44.17, plus tip.

20160118-NEWS--49-NAT-CCI-CL_--

1/15/2016

1:48 PM

Page 1

CRAIN’S CLEVELAND BUSINESS z JANUARY 18 - 24, 2016 z PAGE 49

ADVERTISING

Crain’s People on the Move promotional feature showcases Notheast Ohio job changes, promotions and board appointments.

Guaranteed placement in print, online and in a weekly e-newsletter can be purchased at www.crainscleveland.com/peopleonthemove.

TRANSPORTATION

CONSULTING

ARCHITECTURE

Joe Brady

Nancy Pokorny

Ibrahim Hakki

Executive Vice-President Marketing and Strategic Alliances

Principal

Shareholder - Sr. Project Architect

Findley Davies

KA, Inc.

Simplified Logistics LLC Joe Brady has joined Simplified Logistics as executive vice-president marketing and strategic alliances, leading marketing and alliance partner management. As a 25-year veteran of the logistics and supply chain solutions industry, Joe has played a pivotal role in the accelerated growth of a number of organizations throughout his career.

He comes from Supply Chain Edge, where as senior partner and principal he led the supply chain management advisory firm's business development and marketing.

Nancy's promotion to Principal recognizes her leadership of the firm's growth and business development efforts. With more than 25 years of experience, she assists manufacturers, hospitals and higher education clients with strategies related to merger and acquisition, change management, and health and group benefits.

TECHNOLOGY Ike Herman

NONPROFITS Deborah A. Bridwell Executive Director Stella Maris Inc. Deborah A. Bridwell, PhD has been named executive director of Stella Maris Inc. Stella Maris Inc.’s mission is to provide quality chemical dependency treatment and mental health services to our community. Programs and services include subacute detoxification for men and women, intensive outpatient counseling and case management, and supportive housing for men. Most recently, Dr. Bridwell served as deputy executive director, Commission on Economic Inclusion, Greater Cleveland Partnership.

MANUFACTURING Jeff Crane President and CEO TPC Wire & Cable Corp.

TPC is pleased to announce Jeff Crane has joined the organization as President and CEO. Crane brings with him a track record of leading high-performance teams executing organic and M&A-fueled growth strategies. Previously, Crane served as President and CEO of ERIKS North America and also Lewis-Goetz and Co. TPC is a supplier of high-quality cable, connectors, and assemblies that outlast commodity products, reduce customer downtime, and save overall cost. Learn more at www.tpcwire.com.

David Jankowski

Evan Zanee

OEConnection

Shareholder - Sr. Project Architect

CONSULTING Matt Klein Principal Findley Davies Matt's promotion to Principal builds upon his expertise in pension and retiree health care plans. His technical depth assists clients in making critical decisions to minimize risk and achieve strategic objectives.

Matt is a frequent author and presenter on de-risking strategies, new laws and regulations, and pension accounting.

FINANCIAL SERVICES Bob Dawson Vice President, Commercial Lending The Middlefield Banking Company As VP of Middlefield Bank's new Mentor Loan Production Office, Bob's 28 years of banking experience will offer Lake and Geauga Counties assistance in financial positioning, commercial lending and cash management.

Director of Strategic Integration The Shamrock Companies Shamrock, an integrated marketing and enterprise solutions provider, has hired marketing veteran David Jankowski as Director of Strategic Integration to further develop the capabilities/capacity of the company’s strategic marketing consulting practice. A 27-year marketing agency veteran, Jankowski will lead strategic marketing and branding initiatives for existing and new clients, working closely with Shamrock’s national sales team to cross-sell the entire suite of integrated solutions.

ARCHITECTURE

EVP & Chief Product Officer

Ike is responsible for all aspects of product lifecycle management, business planning and customer research for all OEC products. Ike started with OEC in 2003 as a sales representative and has held leadership roles within the company's sales, product and account services departments.

ADVERTISING & MARKETING

KA is pleased to announce Ibrahim as a new shareholder. With more than 20 years of architectural experience, Ibrahim has amassed wealth of commercial experience for a variety of public and private clients.

As graduate of Kent State University and a firm leader in Revit best practices, his technical expertise puts him on the forefront of building information modeling. To learn more about KA visit our website: http://www.kainc.com

FINANCIAL SERVICES John Solich Vice President, Commercial Lending The Middlefield Banking Company Skilled in Commercial Financing for medium to large businesses, Solich's expertise covers Geauga and Lake Counties. Specializes in Commercial Real Estate. Parker MBA.

KA, Inc. KA is pleased to announce Evan as a new shareholder. Evan is involved in a variety of largescale, complicated, fast paced projects ranging from casinos, to shopping center redevelopments to department stores all over the country. He holds a Masters of Architecture from Kent State University, registered in Ohio and holds an NCARB certificate. To learn more about KA visit our website: http://www.kainc.com

ARCHITECTURE Graham Post Shareholder - Sr. Project Architect KA, Inc. KA is pleased to announce Graham as a new shareholder. Bringing more than 14 years of design experience, Graham has worked on numerous retail redevelopments, nation-wide tenant improvements, specialty retail branding and restaurants as well as commercial office developments, several of which have produced recognition. He is a graduate of Oregon's School of Architecture and Allied Arts. To learn more about KA visit our website: http://www.kainc.com

ARCHITECTURE Kevin Spring Shareholder - Sr. Project Architect KA, Inc. KA is pleased to announce Kevin as a new shareholder. For past 10 years, Kevin has been involved in a variety of project types including office, retail, mixed-use from initial concept design through construction administration. He holds a Masters of Architecture from Kent State University, registered in Ohio, is LEED Accredited and holds an NCARB certificate. To learn more about KA visit our website: http://www.kainc.com

CONTINUED ON PAGE 50

20160118-NEWS--50-NAT-CCI-CL_--

PAGE 50

1/15/2016

1:54 PM

Page 1

z JANUARY 18 - 24, 2016 z CRAIN’S CLEVELAND BUSINESS

ADVERTISING

Crain’s People on the Move promotional feature showcases Notheast Ohio job changes, promotions and board appointments.

Guaranteed placement in print, online and in a weekly e-newsletter can be purchased at www.crainscleveland.com/peopleonthemove.

LAW

LAW

Shipra Kumar

David Landman

Kelly Skeat

Associate Attorney

Partner

Partner

Matasar Jacobs LLC

Benesch

Benesch

Kumar has joined the firm as an associate attorney, serving the firm's financial services and business litigation practices.

She comes to Matasar Jacobs from the Agency of the Inspector General of Cuyahoga County where she was involved in public corruption investigations. Her prior experience in financial fraud investigations is of particular value to the firm's growing financial services litigation practice. Kumar is a graduate of the Case Western University School of Law.

LAW

David has been named a partner in Benesch's Litigation Practice Group. His practice focuses on complex commercial litigation. He has represented clients in federal and state court on a broad range of matters at both the trial and appellate level. David’s experience includes business and securities litigation, accounting malpractice defense, false advertising and counterfeit Lanham Act cases, internal investigations, director and officer liability defense and First Amendment matters.

Kelly has been named a partner in Benesch's Health Care Practice Group.

She has experience representing hospitals, physician practices, life science and durable medical equipment companies and private equity funds in transactional and regulatory matters.

For more information or questions regarding advertising in this section, please call Lynn Calcaterra at 313-446-6086 or email: lcalcaterra@crain.com

REAL ESTATE

CLASSIFIED

Phone: (216) 522-1383 Fax: (216) 694-4264 Contact: Denise Donaldson E-mail: DDonaldson@crain.com INVESTMENT PROPERTY

COMMERCIAL PROPERTY

2 UPCOMING AUCTIONS FRI. JAN. 22ND - 10AM

Downtown

GLASS & METAL SOLUTIONS 2160 HALSTEAD AVE. LAKEWOOD, OH 44107

SOMACA 84" 6 BRUSH GLASS WASHER, BOVONE MINIMAX 371 W/ SPARE PARTS, METRAL SHAPE MACH., BELT SANDERS (4"X132"), SEMI/AUTOMATIC CUTTING TABLE, FELT WHEEL, COMPRESSORS, GLASS EDGER/PENCIL MACH., NIB DOORS, DOOR HRDWE, TOOLS, SCAFFOLDING, RACKING & MORE!

FRI., JAN. 29TH - 10AM CLEVELAND PAINT CO. 855 E. 22ND ST. EUCLID, OH 44123

4800 sq ft office building for sale.

Near Justice Center, Playhouse Square, freeways. Ideal for law firm, owner occupant. Possible residential use. $159,000. 2103 St. Clair Ave.

www.StClairOffice.com 216.235.2597

DON’T FORGET:

For More info and PICS, go to www.BIDROSEN.com

216-990-1831 www.BIDROSEN.com

BUSINESS SERVICES C. W. JENNINGS INDUSTRIAL EXCHANGE Global Expansion Consulting Construction • Acquisitions Exporting • Financing

Crain’s Cleveland Business on-line @ CrainsCleveland.com

(855) 707-1944

For all the latest business news...online

LIST YOUR AUCTION, COMMERCIAL, INDUSTRIAL, LUXURY HOME OR RETAIL SPACE HERE! Crain’s Cleveland Business’ classifieds will help you fill that space.

FLUID MGMT. ACCUTINTER, CAROB COLOR DISPENS, MACHINES, 5000# CATFORK LIFT, 2.5 “LIKE NEW” DBL MAST, PRESS WASHERS, KEY MACH, PAINTER’S EQUIP & TRADE SUPPLIES, APPROX. 500 MISC. CANS OF PAINT/STAIN/CAULKING, OILS, GELS, THINNERS, CLEANERS, PAINTER’S TAPE, ETC., AND SO MUCH MORE.

Copy Deadline: Wednesdays @ 2:00 p.m.

All Ads Pre-Paid: Check or Credit Card

Contact Denise Donaldson at 216.522-1383 DDonaldson@crain.com

BUSINESS SERVICE OWNERS! Submit your business card to promote your service.

To find out more, contact Denise Donaldson at 216.522.1383

FLYNN ENVIRONMENTAL UST REMOVALS • REMEDIATION DUE DILIGENCE INVESTIGATIONS

(800) 690-9409

INVESTMENT OPPORTUNITY BUSINESSES FOR SALE Fulfillment Company.

Sales $711,373 Ask $120,000.

Mailing Company. Very Profitable.

Sales $1,082,720 Ask $750,000 www.empirebusinesses.com

440-461-2202

BUSINESSES FOR SALE 46-year-old small specialty women's store Excellent reputation and loyal following. Owners ready to retire. Energetic new ownership should restore sales volume and profitability.

Contact owners at P.O. Box 241053 Cleveland, OH 44124

Selling a Business?

Ohio Business Brokers Assoc.

WWW.OBBA.ORG Find hundreds of businesses.

Find a good broker to help.

Buying a Business?

Classified Ads WORK!

Position Wanted OEM inside sales Estimating, product assessment.

Sheet metal fabrication background.

440-842-4753 To place your

WANTED: Your subscription to Crain’s Cleveland Business To sign up call toll-free at 1-877-824-9373 or on-line @ CrainsCleveland.com Click on “Subscribe Now.”

Crain’s Cleveland Business Executive Recruiter ad Call Denise Donaldson at 216-522-1383

20160118-NEWS--51-NAT-CCI-CL_--

1/15/2016

1:28 PM

Page 1

CRAIN’S CLEVELAND BUSINESS z JANUARY 18 - 24, 2016 z PAGE 51

The List NAME OF FIRM THIS ADDRESS YEAR PHONE/WEBSITE

LARGEST ARCHITECTURAL FIRMS Ranked by Local Registered Architects LOCAL REGISTERED ARCHITECTS

LOCAL OFFICE REVENUE (MILLIONS)

TOTAL 01-1-2016 01-1-2015 STAFF

2015

2014

TOP LOCAL EXECUTIVE TITLE

MAJOR CURRENT PROJECTS

1

Westlake Reed Leskosky 1422 Euclid Ave., Suite 300, Cleveland 44115 (216) 522-1350/www.wrldesign.com

60

48

140

$40.0

$32.0

Cleveland Clinic CWRU health education campus; Cleveland Clinic Avon Hospital; Rock and Roll Hall of Fame; Ohio State Univ. arts district; Pennsylvania Academy of Fine Arts; Hawken Upper School

Paul E. Westlake Jr. managing principal

2

GPD Group 520 S. Main St., Suite 2531, Akron 44311 (800) 955-4731/www.gpdgroup.com

43

39

558

$90.1

$86.4

Ellet High School; Meijer's; CMHA; Akron Ronald McDonald House

Darrin Kotecki president

URS (an AECOM Company) 1375 Euclid Ave., Cleveland 44115 (216) 523-5600/www.aecom.com

33

31

542

$152.2

$146.4

Volvo grassroots plant; BMW SLP grassroots plant; confidential beverage production plant; Innerbelt Bridge project; new confidential headquarters building

Dana S. Mitchell, vp, office manager, architecture, design consulting services division, Cleveland/Akron; J. Brandon Davis, sr. vp, industrial group

4

Herschman Architects Inc. 25001 Emery Road, Suite 400, Cleveland 44128 (216) 223-3200/www.herschmanarchitects.com

27

25

71

$14.0

$11.5

Retailers: Dick's Sporting Goods; Fabletics; hhgregg; Staples; Z Gallerie. Shopping centers: Strongsville; Oxnard Calif.; BelAir Md.; Taylorsville Utah; Southlake Texas. Goodyear Ariz. development

Mike Crislip, president, partner Carole Sanderson, CFO, partner

5

ThenDesign Architecture (TDA) 4135 Erie St., Willoughby 44094 (440) 269-2266/www.thendesign.com

25

22

49

NA

NA

Cleveland West Side High School; Austin Marriott South; North Olmsted 6-12 school; Kent State University MACC annex; Wellington 4-8 school; Vista Springs Assisted Living, Macedonia

Robert A. Fiala managing partner

6

Perspectus Architecture 13212 Shaker Square, Cleveland 44120 (216) 752-1800/www.perspectusarch.com

23

19

45

NA

NA

Health care, senior living, higher education, government, retail and sports and recreation

Lawrence Fischer William Ayars managing principals

7

Hasenstab Architects Inc. 190 N. Union St., Suite 400, Akron 44304 (330) 434-4464/www.hasenstabinc.com

22

18

44

$9.5

$6.1

Cleveland Clinic Akron General emergency department; Akron Children's Mahoning Valley building A addition; Ohio University Grover Center; KSU Stark arts building

Dennis Check president

7

Vocon 3142 Prospect Ave., Cleveland 44115 (216) 588-0800/www.vocon.com

22

19

100

$25.0

$26.5

Oatey; KeyBank; Cleveland Clinic; Cleveland Browns; W.25th & Detroit development; Jones Day

Deborah V. Donley principal

9

KA Inc. 6000 Lombardo Center, Suite 500, Cleveland 44131 (216) 781-9144/www.kainc.com

21

22

35

NA

NA

Galleria Houston; Woodfield Dining Hall, Schaumburg, Ill.; SaksHouston and Hawaii; Macy's-Hawaii; Thistledown expansion; MetLife HQ Whippany, N.Y.; Quicken Loans Cleveland

John G. Burk president, chief operating officer

10

Domokur Architects 4651 Medina Road, Akron 44321 (330) 666-7878/www.domokur.com

19

20

38

$7.2

$8.3

United Jewish Association, New York; J.M. Smucker Co., Orrville; Camp Greenville S.C., University of Illinois; Kent State University; Westfield Bank; FirstMerit

Michael Domokur owner

11

Bialosky 6555 Carnegie Ave., Cleveland 44103 (216) 752-8750/www.bialosky.com

17

15

47

NA

NA

Crocker Park; Van Aken District; Muskingum University Library; Ursuline College creative and healing arts; Tri-C campus center; Kent State Taylor Hall renovation

Jack Alan Bialosky Jr. senior and managing principal

11

Bostwick Design Partnership 2729 Prospect Ave., Cleveland 44115 (216) 621-7900/www.bostwickdesign.com

17

19

29

NA

NA

Cleveland Clinic Florida; Penn State Univ.; Geisinger Health; University Hospitals; UPMC; BGSU; Fisher Titus Medical Center; LCCC; Allegheny Health Network; Capital University; CWRU

Robert Lewis Bostwick president, director of design

13

C.C. Hodgson Architectural Group 23240 Chagrin Blvd., Suite 350, Cleveland 44122 (216) 593-0057/www.ccharch.com

15

17

51

NA

NA

Clarity Pointe Memory Care, Fla.; Altenheim; Seasons at Alexandria, Ky.; Bethany Village II; Bethesda, Chicago; Miami Jewish Health Systems; Canton Christian Home

Cornelia C. Hodgson president

14

RDL Architects Inc. 16102 Chagrin Blvd., Suite 200, Shaker Heights 44120 (216) 752-4300/www.rdlarchitects.com

14

10

39

$6.0

$4.4

Hillcrest Senior Apartments; Gateway Senior Apartments; Addison Terrace Phase II; Vista Springs Parma; Verandas of Punta Gorda, Fla.; PIRHL headquarters; Estero Oaks, Estero, Fla.

Ron Lloyd president

14

Richard L. Bowen + Associates Inc. 13000 Shaker Blvd., Cleveland 44120 (216) 491-9300/www.rlba.com

14

17

72

NA

NA

KSU College of Architecture; Shoppes at Parma; COTA McKinley bus facility; Wooster safety center; Cleveland city kennel; Lorain County AMTRAK rail platform; CMHA Carver Park

Richard L. Bowen president

16

Dorsky + Yue International 23240 Chagrin Blvd., Suite 325, Cleveland 44122 (216) 468-1850/www.dorskyyue.com

12

15

60

NA

NA

Urban Edge, Bronx, N.Y.; Tanger Outlets; Mixed-use, Ankara, Turkey; Tomoka Town Center, Fla.; NRP Group apartments, Fla.; Lifestyle Center, Okla.; University Town Center, Fla.

William Dorsky managing principal

16

Stantec Architecture 3700 Park East Drive, Suite 200, Beachwood 44122 (216) 454-2150/www.stantec.com

12

13

23

$5.1

$6.6

Yale University biology building; Lake Forest College Johnson Science Center; OSU Marion Science & Engineering Building; University of Texas RGV Science Building; Chagrin Falls Schools

Michael Reagan, vice president, science and technology; Michael R. Carter, managing principal

18

Braun & Steidl Architects Inc. 1041 W. Market St., Akron 44313 (330) 864-7755/www.bsa-net.com

10

10

20

$5.0

$4.3

University of Akron Law School; senior housing, Kent; Courtyard Hotel and Conference Center Fort Mill, S.C.; student housing Toledo

Charles Louis Schreckenberger president

18

CBLH Design Inc. 7850 Freeway Circle, Cleveland 44130 (440) 243-2000/www.cblhdesign.com

10

7

15

NA

NA

MetroHealth; Cleveland State University; Cuyahoga Falls Library; Mercy Regional Medical Center; Huron County Community Library; GSA TSA Hopkins Airport; Heights Libraries

Marc B. Bittinger, Michael D. Liezert, Jeffrey Valus, principals

18

Holzheimer Bolek + Meehan Architects 1382 W. Ninth St., Suite 300, Cleveland 44113 (216) 421-1100/www.hbmarchitects.com

10

9

18

NA

NA

Public library projects in Ohio, Fla., Wisc., Va., W. Va., Ark., Kan., Tenn. Academic library projects for Penn State Univ., Univ. of Texas, Texas A&M Univ., LSU; Southern Illinois Univ.

Peter Joseph Bolek, James Shook, Dan Meehan, David Holzheimer, principals

21

DS Architecture 136 N. Water St., Suite 208, Kent 44240 (330) 678-6144 /www.dsarchitects.net

9

7

23

$1.3

$1.0

City of Kent new safety building; BMW plant cafeteria, addition and alteration, Greer S.C.; Phoenix Building, Ravenna, mixed use historic alterations

Jeffrey G. Meyers partner

22

Sandvick Architects Inc. 1265 W. Sixth St., Cleveland 44113 (216) 621-8055/www.sandvickarchitects.com

8

8

22

$4.0

$3.0

NA

Jonathan Sandvick president

23

Richard Fleischman + Partners Architects Inc. 1020 Huron Road, Suite 101, Cleveland 44115 (216) 771-0090/www.studiorfa.com

7

8

15

$2.1

$2.8

University of Cincinnati, Scioto Hall; NASA research building, Cleveland; Cuyahoga County Public Library, Brooklyn and Parma Heights; OSU Enarson OIA office space; Tri-C Mandel Center

Richard Fleischman president

23

Van Auken Akins Architects LLC The Hanna Building, 1422 Euclid Ave., Suite 1010, Cleveland 44115 (216) 241-2220/www.vaakins.com

7

7

23

NA

NA

Hilton Convention Center Hotel Cleveland; Salvation Army Temple and East Side Corps; Cleveland Metroparks Zoo tiger exhibit; CLE Airport; Shaker Heights School District; Orange School District

Jill V. Akins principal

25

The Austin Co. 6095 Parkland Blvd., Cleveland 44124 (440) 544-2600/www.theaustin.com

6

10

75

$7.0

$5.9

NA

Michael G. Pierce president

25

Herman Gibans Fodor Inc.- Architects 1939 W. 25th St., Suite 300, Cleveland 44113 (216) 696-3460/www.hgfarchitects.com

6

8

15

$2.2

$2.3

Menlo Park Academy, Cleveland; The Westerly I, Lakewood; Slovene Home for the Aged, Cleveland; Fresenius Medical Care, W. 25th St., Cleveland; Anna Maria of Aurora; Olympia Building Cleveland

David P. DiFrancesco president

25

HWH Architects Engineers Planners Inc. 1300 E. Ninth St., Suite 900, Cleveland 44114 (216) 875-4000/www.hwhaep.com

6

6

69

$11.0

$13.5

Institutional, commercial and industrial projects in the United States and abroad

Peter P. Jancar chairman

25

Makovich Pusti Architects Inc. 111 Front St., Berea 44017 (440) 891-8910/www.mparc.com

6

6

11

NA

NA

Ashtabula County Medical Ctr.; City of Lakewood; Cleveland Clinic; Cuyahoga Cty. Community College; MetroHealth System; St. Vincent Medical Ctr.; University Hospitals; Wingspan Care Group JCB

Ronald J. Makovich president

3

RESEARCHED BY DEBORAH W. HILLYER Source: Information is supplied by the companies unless footnoted. Crain's Cleveland Business does not independently verify the information and there is no guarantee these listings are complete or accurate. We welcome all responses to our lists and will include omitted information or clarifications in coming issues. Individual lists and The Book of Lists are available to purchase at www.crainscleveland.com.

20160118-NEWS--52-NAT-CCI-CL_--

1/15/2016

1:28 PM

Page 1

FROM MARKETING 101 TO 1:1 MARKETING PRESENTED BY

360˚ A 360-degree perspective of how to transform your marketing strategy

Hear how three marketing leaders see the industry taking shape

JEFFREY K. ROHRS

JENNIFER DAVIS

CHRIS SERGER

chief marketing officer, Yext - “Introducing Context: Your 2016 Marketing Word of the Year”

director, retention marketing, Progressive Insurance

principal solutions engineer, Salesforce Marketing Crowd

Attend workshops that will help you reconstruct your marketing strategy Workshop presenters will include expert resources from companies such as Speedeon Data, a data solutions provider from Mayfield Heights; Widen, a digital asset management specialist from Madison, Wis.; and Salesforce Marketing Cloud, a digital marketing platform. Attendees can attend 2 of the 4 workshops.

#1 - Know the Building Blocks: Data that helps deliver the right message, at the right time, to the right customer

#2 - Optimize Your Tech Tools: Make the most of Salesforce Marketing Cloud and digital marketing platforms

#3 - Get Personal in Print: Direct mail doesn’t have to mean mass marketing and static content

#4 - Hear the Voice of Your Customer:

Eye tracking and emotional response to understand the customer experience

EVENT INFORMATION March 8, 2016 • 7:30AM - 12:30PM CLEVELAND METROPARKS ZOO | STILLWATER PLACE

For more information and to purchase tickets, visit

CrainsCleveland.com/Crain360

CRAIN360 event programming is a product of the Crain Content Studio