Crain's Cleveland Business by Crain's Cleveland Business

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CORPORATE GROWTH & M&A

S-2 JANUARY 23 - 29, 2012

LETTER FROM THE PRESIDENT

ACG: Where deal makers network

CG Cleveland, investors, advisers and the local chapter lenders from around the of the Association country plan their winter for Corporate travel to make sure they Growth, is best known are in Cleveland the last for two things: our annual week of January for the Deal Maker Awards exDeal Maker Awards. travaganza and the great So ACG Cleveland’s networking crowds that reputation extends well RANDY attend our monthly beyond Ohio’s borders. MARKEY breakfast speaker And with about 500 ACG C L E V E L A N D series and our spring and PRESIDENT members, Cleveland is fall workshops. Cleveland one of the largest chapBusiness Connects magaters in the ACG universe. zine has called the Deal Maker But we haven’t been resting on Awards the best financial industry our laurels. Three years ago we event in town. decided to leverage our position Cleveland long has been a by launching the Great Lakes ACG regional center of deal making. Capital Connection (GLCC) in There are other second-tier centers partnership with the ACG chapters outside of New York, Chicago, Los in Cincinnati, Columbus, PittsAngeles and Boston, but according burgh, Indianapolis and Detroit. to a 2010 story in The Deal, The inaugural two-day 2009 “Perhaps none … boast Cleveland’s event attracted 600 registrants in outsized numbers.” a tough economy, and it was The magazine noted that the topped in 2012 with 650 attendees. local deal community encompasses The partnership took the show to almost 60 companies, including Indianapolis in 2011, and our marquee legal firms, leading Hoosier partners notched anothnational audit advisories, top er unqualified success. The event mezzanine lenders and experienced rotates to Detroit this fall. middle-market investment On the local front, ACG Clevebankers. And that does not even land members also play an integral consider the likes of Eaton Corp., role in maintaining the economic Parker Hannifin, Lubrizol, Transvibrancy in Northeast Ohio. We Digm and other companies based are providing expertise and assishere that have established corpotance to Team NEO’s Deal Advisory rate development teams that Committee, the Cuyahoga County collectively account for dozens of Economic Development Fund, acquisitions each year. and the manufacturing advisory Cleveland’s 21 private equity and growth group MAGNET for its firms (ranked fifth among U.S. Prism Project, which helps manucities) make the city a must-call facturers focus on innovation as destination for prospective the key to their long-term growth buyers and sellers. Scores of and success.

Last year we brought an independent local networking group named Women in Transactions into the ACG Cleveland tent to provide administrative support and to help grow its membership. A chapter task force is looking into adding programming in Akron to better serve the deal community. Other new initiatives include Young ACG Cleveland and the ACG Cup, which you can read more about in this section. Members tell us they join ACG Cleveland for two primary reasons: to attend educational events that help them build value in their companies and for their clients, and for the opportunity to network with a diverse and influential community of business people. With more than 14,000 members worldwide, ACG is the pre-eminent organization for merger-andacquisition professionals in public and private companies, private equity, corporate and investment banking, finance, accounting, law and related service fields. ACG Cleveland Chapter members have access to the full suite of ACG Global benefits and services. If this sounds like an organization for you, we encourage you to attend one of our events or to apply for membership. For information contact me at (216) 241-6689, ACG Cleveland at (216) 696-8484 or visit www.acgcleveland.org. ■

Randy Markey is a partner at Cleveland-based global X, a strategic tax consulting firm.

ACG CLEVELAND 2011-12 OFFICERS, BOARD OF DIRECTORS PRESIDENT Randolph D. Markey global X

PRESIDENT ELECT Sean McCauley PNC Business Credit

IMMEDIATE PAST PRESIDENT Theodore A. Wagner Libman, Goldstine, Kopperman & Wolf

EXECUTIVE VICE PRESIDENTS Brand Patrick Gallagher Fahlgren Mortine Programming Karen Tuleta Morgenthaler

TREASURER Joseph F. Maslowski Roetzel & Andress

SECRETARY M. Joan McCarthy MJM Services

Governance Jeffrey W. Leonard The Leonard Legal Group Great Lakes Capital Connection Al Melchiorre MelCap Partners James M. Hill Benesch, Friedlander, Coplan & Aronoff Timothy G. Healy Linsalata Capital Partners

Media and Publicity Brad Kostka Roop & Co. David M. Hadley Segmint, Inc.

Membership Martin S. Gates Jones Day James P. Marra Blue Point Capital Partners Henry E. Siebert Porter, Wright, Morris & Arthur

Special Programs Trent Meteer TriState Capital Bank

VICE PRESIDENTS

Scott Seelbach Primus Capital Funds

ACG Cup Eric M. Kuhen Kuhen Insurance Professionals

Women in Transactions Denise Carkhuff Jones Day

Douglas K. Winget FirstMerit Bank Business Credit

Young ACG Kevin Bader MelCap Partners

Breakfast Programs John M. Saada, Jr. Jones Day

DIRECTORS AT LARGE

Deal Maker Awards Murad A. Beg Linsalata Capital Partners

Expertise Pays Off

Golf Rudolf Bentlage Chase Business Credit

Economic Development Thomas Zucker EdgePoint Capital

Guy A. Fabe PricewaterhouseCoopers Tom Freeman Grant Thornton Wendy S. Neal Brown Gibbons Lang & Company

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CORPORATE GROWTH & M&A

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Building a new generation of deal makers Mentoring, networking propel Young ACG members toward bright future in Cleveland By CHERYL HIGLEY

leveland has long been a vibrant deal-making hotbed, and with the addition of a young professionalsâ&#x20AC;&#x2122; (YP) contingent and a tie-in to MBA programs around the region, ACG Cleveland is forging a foundation that it hopes will support the next generation of greatness. Seeking what he believed to be a missing opportunity for younger professionals, Kevin Bader, an analyst with MelCap Partners, LLC, surrounded himKEVIN self with a BADER diverse YP MELCAP board, who P A R T N E R S LLC reached out to friends in their respective industries in 2010 to create the M&A Young Professionals of Cleveland. As the group found its footing, it captured the attention of ACG Cleveland. Shortly after came an invitation to bring this YP networking

group into the ACG family. Like any good M&A executive team, Bader and the YP board performed their diligence to ensure synergies existed and it made good sense for the groupâ&#x20AC;&#x2122;s members to become part of ACG. Satisfied that it did, the new Young ACG kicked off in March 2011. The group, which is for professionals age 35 and younger, is growing and now has more than 85 members. Now that the group is established, Bader is hopeful that it can continue to add valuable membership benefits, including philanthropy and more educational opportunities. â&#x20AC;&#x153;I donâ&#x20AC;&#x2122;t think anyone had the idea it would become as successful as it has, in such a short time,â&#x20AC;? said Bader, who is president of Young ACG and represents the group on the ACG Board of Directors. â&#x20AC;&#x153;There are a lot more people out there; itâ&#x20AC;&#x2122;s just a matter of getting them engaged.â&#x20AC;?

Casting a wider net By focusing on networking, education and mentoring, ACG Cleveland sees good things for the local M&A youth movement.

Networking is the root of many deals, and ACG Cleveland has formed a group for young M&A professionals to help them get in on the act. Tod Wagner, of the accounting firm Libman, Goldstine, Kopperman & Wolf, Inc., was ACG Cleveland president when the Young ACG initiative began and is a strong supporter. He currently acts as a sounding board for the Young ACG leadership and helps shape programming and planning so that it aligns with ACG Clevelandâ&#x20AC;&#x2122;s strategic mission. â&#x20AC;&#x153;This program can help young professionals grow their professional network and give them perspective on M&A that may be

Go for it. Weâ&#x20AC;&#x2122;ve got your back. At Roetzel, our attorneys are like our clients - entrepreneurial, innovative and results oriented. Just ask Mark Sarlson and Al Salvatore.

outside their own profesunder way since the sional background,â&#x20AC;? program began. Wagner said. David Akers, founder of One of the key compoCollaborent Group, was nents built into the among those that ACG Young ACG platform â&#x20AC;&#x201D; Cleveland brought in to in addition to networking assist in designing the and education â&#x20AC;&#x201D; is ACG mentorship program. Cleveland Connections, a Akers is renowned for TOD mentoring program that his work in leadership WAGNER matches veterans from development and was LIBMAN, the strongest network of impressed by the level of GOLDSTINE, dealmakers in the state thought and time ACG KOPPERMAN with up-and-comers Cleveland is putting in to & WOLF hungry for broader make sure Young ACG knowledge about M&A. and ACG Connections live up to ACG Cleveland Connections is their expectations. a customized program that takes â&#x20AC;&#x153;Usually when organizations into account the needs and decide to put together a young desires of both parties. Whether professionals group within an orthe Young ACG member is seeking ganization, they put together the career counseling, better networking kidsâ&#x20AC;&#x2122; table, sit them there and or learning how to strike a never work to really integrate balance between work and life, them into the organization. It is ACG Cleveland looks at the the same with mentorship proobjectives and aligns them with a grams, where those seeking senior dealmaker that has the mentors outnumber the people best skill set to match. There are who step up to help,â&#x20AC;? Akers said. nearly 50 mentor partnerships See NEW Page S-18

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S-5

ACG Cleveland honors this year’s top Deal Makers

n 2011, a number of significant corporate growth and dealmaking activities took place in Northeast Ohio. Those organizations deemed the best engines of growth during the past year will be recognized at the 16th Annual ACG Cleveland Deal Maker Awards this Thursday, Jan. 26, at the Marriott at Key Center. The 2012 Deal Maker Award winners are:

also acquired Nalco Performance Products Group, a supplier of value-added specialty polymers and formulation additives to the global personal care and household care industries; and Merquinsa, a Barcelona-based producer of specialty thermoplastic polyurethanes.

OM Group, Inc. OM Group (NYSE: OMG) is

a global provider of specialty chemicals, advanced materials, electrochemical energy storage, magnetic materials and other unique technologies. Its growth strategy is to focus on valueadded solutions for its endmarket customers while reducing its exposure to volatility in commodity prices. Over the past several years, the company has completed three key acquisitions: the electronics businesses of Rockwood Holdings Inc. for $315 million; EaglePicher Technologies, LLC, a battery and energetic device manufacturer, for $172 million; and Vacuumschmelze GmbH & Co. KG, a leader in

advanced energy materials and specialty magnetics for approximately $900 million.

TransDigm Group Inc. TransDigm (NYSE: TDG) is a leading global designer, producer and supplier of highly engineered aircraft components. Implementing an acquisition strategy focused on proprietary component businesses has enabled TransDigm to grow its revenue from $48 million in 1993 to $1.2 billion in 2011. Over the last two years, the company has completed five transactions, including its largest to date, the $1.27 billion acquisi-

tion of McKechnie Aerospace Holdings. Other 2010-2011 acquisitions include Semco Instruments Inc., a manufacturer of highly engineered components for turbo-charged engines, for $74 million; Harco Laboratories, a commercial aircraft components manufacturer, for $84 million; the actuation business of Telair International Inc. for $94 million; and Kent, Ohio-based Schneller Holdings LLC, a laminates manufacturer for commercial aircraft, for $289 million.

Linsalata Capital Partners (LinCap) LinCap is a leading middlemarket buyout firm that has consummated 99 acquisitions with an aggregate transaction value exceeding $3 billion since its inception in 1984. During the past two years, LinCap exited two investments, Transtar Industries and Lund International. Transtar is a manufacturer of automotive refinishing products. At exit, it had sales of $490 million, a 99 percent increase from the $246 million in sales it generated at the time of its acquisition five years earlier. Lund is a designer, manufacturer and marketer of branded automotive aftermarket accessories, which had annual sales of $100 million when sold. Collectively, the two investments generated more than double LinCap’s invested capital. Additionally, LinCap acquired NeuroTherm, Inc.; Whitcraft Group; Eatem Foods Co.; Manhattan Beachwear; and Spartan Foods of America and made several other add-on investments.

The Lubrizol Corp. Lubrizol is a specialty chemical company that produces and supplies technologies to customers in the global transportation, industrial and consumer markets. In 2011, Lubrizol engaged in three transactions, the most significant being its acquisition by Berkshire Hathaway for $9.7 billion. The price paid by Berkshire Hathaway of $135 per share was a 28 percent premium over the closing price of Lubrizol’s shares the day before the merger was announced and 18 percent higher than Lubrizol’s all-time high share closing price. The transaction was approved by 95 percent of Lubrizol’s shareholders. During the year, Lubrizol

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NOMINATE A DEAL MAKER Nominations for the 2013 ACG Cleveland Deal Maker Awards may be submitted at any time of the year. The deadline is Nov. 1, 2012. For a nomination form, contact ACG Cleveland at (216) 696-8484 or admin@acgcleveland.org.

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S-6 JANUARY 23 - 29, 2012

Private equity firms flex their operating muscles

tâ&#x20AC;&#x2122;s no secret that private equity is changing rapidly â&#x20AC;&#x201D; a process both necessitated by and accelerated by the bubble and then the great financial crisis and the resulting recession. We think of this as a natural evolution following the principles set forth by Charles Darwin: â&#x20AC;&#x153;It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change.â&#x20AC;? Competition for capital, talent and great acquisitions forces us to bring our â&#x20AC;&#x153;Aâ&#x20AC;? game or go home. There is about $400 billion in legacy â&#x20AC;&#x153;use it or lose itâ&#x20AC;? dry powder sloshing around the coffers of private equity firms around

the world. A lot of money One-third to one-half is chasing the great comof the 5,000 PE firms in panies for sale, creating the world wonâ&#x20AC;&#x2122;t survive bidding wars for the best this shakeout. The opportunities. Meanwinners will be the firms while, lenders remain that most successfully conservative and build their portfolio investors are more companies by creating demanding and skeptical STEWART EBITDA. Those firmsâ&#x20AC;&#x2122; than ever, with fresh efforts will be validated KOHL capital invested in PE on by their ability to raise THE R I V E R S I D E the decline. future funds from CO. PE firms must consisinvestors. The rest will tently outperform in returns in become reliant on the â&#x20AC;&#x153;kindness order to raise their next fund. of strangersâ&#x20AC;? in an unkind The only sure way to do this is to market. create more EBITDA faster at our Strong operating teams and portfolio companies. There is no deep industry specializations time to waste and there is no allow us to sleep at night even room for error. after agreeing to pay a multiple

that might have seemed far too high just a couple of years ago. The involvement of our operating teams pre-acquisition gives us comfort that we are buying the right company in the right space. Post-close, they can supercharge growth at a portfolio company by helping to develop new products, improving sales and marketing, driving international expansion, integrating add-on acquisitions, and most importantly, making sure that we have the right management team and the right strategy. In the old days, we could buy companies cheaply, leverage them fully and get rich quick. Those days are long gone. As

private equity has matured into a â&#x20AC;&#x153;get rich slowlyâ&#x20AC;? scheme, the PE firms that survive will be both better buyers and better owners. They will deliver growth thanks to well-developed industry specializations and deeply talented operating experts. We embrace this reality as a good thing for our firm, our industry, the companies in which we invest, and, most importantly, our investors. â&#x2013;

Stewart Kohl is co-CEO of The Riverside Co., a global private equity firm focused on acquiring growing enterprises valued at up to $200 million. Contact him at (216) 344-1040 or skohl@riverside company.com.

ABCs of valuation: Which companies are making the grade?

urrent market commitment to the future uncertainty is growth of the business. factoring into valuGrowth. Healthy ations of M&A growth can fetch a transactions. Buyers are purchase multiple in being more disciplined in the high single to low their approach to acquisidouble digits, depending tions, causing a flight to on the industry and quality that is pushing up ANDREW prospects for a business. purchase price multiples Companies that can offer PETRYK for the best companies. BROWN GIBBONS identifiable synergies Buyers are evaluating and clear opportunities to L A N G & CO. companies by tallying a grow through acquisition quality scorecard, with are sought-after assets. the number of positive attributes Earnings quality. Business defining the overall grade â&#x20AC;&#x201D; A, B models with recurring revenues or C. The key factors driving the and stable and predictable cash valuation multiple are: flows are in focus. Management. Buyers are Size. High free cash flow, mealooking for deep and experienced sured by EBITDA, is a measure of management teams with a strong stability. For companies with cash

flow in excess of $10 million, the â&#x20AC;&#x153;large companyâ&#x20AC;? premium is getting larger. The premium on the purchase price multiple can equate to 1x or more of EBITDA. Industry. Sectors less impacted by the downturn, such as business services, technology, food and health care, are generating greater buyer interest. Multiples for cyclical businesses whose performance is more directly tied to the economy are under pressure, though quality companies are garnering significant interest and attractive multiples. Based on these attributes, buyers are assigning a score, or grade, to given opportunities: Grade A businesses possessing all of the above characteristics

are attracting significant interest from both strategic and private equity buyers at robust valuations of 8x EBITDA or more. Grade B businesses possessing most of the characteristics are being sold at valuations that are respectable from a historical perspective, with purchase multiples in the 6x to 8x range, but are highly scrutinized during due diligence. Grade C businesses are more challenging in terms of attracting interest, as buyers and lenders are focusing their attention on higher quality companies. Valuations are modest, causing some owners to hold and wait for a longer trend line of improving performance. A key driver of M&A, and

ultimately deal value, is capital availability. Corporate acquirers are sitting on cash reserves, with acquisitions the primary means to boost their top line in a slow growth economy. Private equity funds are just beginning to tap the oft-cited capital surplus and are looking for investments. Capital needs to be put to work, and lenders are aggressively supporting their efforts. For middle-market companies that can make the grade, there are hungry buyers willing to support healthy valuations. â&#x2013;

Andrew K. Petryk is managing director and principal of Brown Gibbons Lang & Co. LLC, an investment bank serving the middle market. Contact him at (216) 920-6613 or apetryk@bglco.com.

Financial and legal matters can get complicated when youâ&#x20AC;&#x2122;re distributing replacement medical parts in a global supply chain using a sophisticated pricing matrix.

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â&#x20AC;&#x153;They understand the legal side, the corporate side and my side.â&#x20AC;?

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MY BENESCH MY TEAM Cleveland â&#x20AC;˘ Columbus â&#x20AC;˘ Indianapolis â&#x20AC;˘ Philadelphia â&#x20AC;˘ Shanghai â&#x20AC;˘ White Plains â&#x20AC;˘ Wilmington â&#x20AC;˘ www.beneschlaw.com FEATURED ATTORNEYS (left-right): JAMES M. HILL, JOSEPH G. TEGREENE, DAVID W. MELLOTT, DAVID R. MAYO, RICHARD F. TRACANNA AND KARI B. CONIGLIO ÂŠ 2011 Benesch Friedlander Coplan & Aronoff LLP

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CORPORATE GROWTH & M&A

How to manage M&A legal fees

ow that you have decided to either buy or sell a business, you will need to engage your attorney. Legal fees can be large but there are ways to control them. So what are the factors that drive legal fees and how do you manage them? Make certain your counsel understands your concerns and goals from the beginning so that the transaction can be structured properly. Will it be a stock or asset sale? Should there be a contingent purchase price or a significant purchase price adjustment, post closing? Are there environmental, labor or intellectual property considerations? Having to restructure a deal is

Investing via PIPE remains attractive

n 2007 and 2008, the global financial crisis and recession combined to drastically increase the PIPE (private investment in public equity) market. According to DealFlow Media, there were $23 billion in PIPE transactions in 2005, and $121.2 billion of such transactions in 2008. In a PIPE transaction, a public company sells common stock, preferred stock or debt to SEAN private investors. PEPPARD The securities ULMER in a PIPE trans& B E R N E , LLP action are sold in a private placement and, therefore, cannot be immediately resold without registration. Typically, the investors are granted registration rights and the securities are registered soon after the closing of the PIPE transaction. PIPE issuers historically have been used by small- to mid-sized public companies — those that may not have full access to the capital or credit markets. While an expensive source of capital, PIPE transactions offered such issuers speed of execution as well as confidentiality. As a result, they often were used to fund acquisitions. During the financial crisis, large public companies used PIPEs to add cash to their balance sheets, such as Berkshire Hathaway’s investment in General Electric. Typically, PIPE investors have been large institutional investors, like mutual funds and hedge funds. During and since the financial crisis, private equity investors have increasingly used PIPEs to invest in public companies. With the advent of private equity involvement, PIPE transactions are increasingly highly negotiated and offer investors additional protections, including

ALBERT SALVATORE

MARK SARLSON

ROETZEL & ANDRESS

expensive. If you plan on using a Letter of Intent to communicate an offer, involve your legal counsel. Counsel’s involvement at this stage will pay off later. Due diligence can involve significant legal expenses. As the

November 2011

HMR Acquisition Company, Inc.

seller, it is your responsibility to respond to the buyer’s request for information regarding your business. Experienced legal counsel can explain what the buyer is looking for and point you in the right direction. You can help reduce legal expenses by minimizing the involvement of legal counsel in assembling and organizing the requested information. The due diligence information will be used in preparing the various schedules that are part of the definitive agreement. You can control legal fees by limiting counsel’s role to simply reviewing the schedules you prepared. When drafting agreements, client

September 2011

JANUARY 23 - 29, 2012

and counsel should discuss what terms are typical in your type of transaction; for example, being reasonable on the survival period of the representations and warranties; understanding whether a partial holdback of the purchase price should be expected; and what the threshold amounts should be for indemnification. Initially drafting a fair, balanced agreement will reduce redrafts and result in a quicker finalization of the definitive agreement. Every redraft increases legal fees. Negotiating the definitive agreement can take on a life of its own. Some counsel will feel that it is their job to prevent every hypothetical risk that may arise — however unlikely that risk may be. It is essential that your legal counsel has a clear understanding

of what issues are truly important to you and what your risk tolerance is. If both buyer and seller desire to keep legal fees to a minimum, their reasonableness and cooperation certainly will go a long way in achieving that goal. If either side is unreasonable or loses control of its counsel, legal fees can be significantly higher than normal. Open communication between a client and its legal counsel can help minimize any surprises and control legal expenses. ■

Albert N. Salvatore and Mark L. Sarlson are partners in the Cleveland office of Roetzel & Andress. Contact Salvatore at asalvatore@ralaw.com or (216) 615-4845 and Sarlson at (216) 615-4855 or msarlson@ralaw.com.

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To learn more: Contact Randy Paine, Co-Head of KeyBanc Capital Markets 216-689-4119, Doug Preiser, Co-Head of KeyBanc Capital Markets 216-689-5944 or Paul Schneir, Managing Director and Group Head of Mergers & Acquisitions and Private Capital Group 216-689-4005. Visit key.com/m&a 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. ©2011 KeyCorp ADL4293

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Don’t overlook insurance and Auction or proprietary bid? employee benefits in M&A

n today’s M&A environment, advisers, buyers and other parties should place a higher priority on the evolving insurance and employee benefit marketplace. The landscape in the property and casualty and employee benefits markets is changing, and buyers should take notice. Property insurance carriers are focused on rates and recalculating models around wind and storm damage. Last year’s tornadoes in Joplin, Mo., and Tuscaloosa, Ala., created a shift to reclassify inland wind damage exposures. The property JEFFREY risk can change during SCHWAB due diligence. What was OSWALD COS. normally considered inland risk within a coastal state may have been reclassified as “coastal” exposure. As M&A professionals know, lenders are keen about seeing adequate property insurance. Another area of concern for buyers is the workers’ compensation program. Thorough due diligence into a target company’s claims history, frequency and experience modification calculations is essential. Carriers are pulling back on discounts until loss history improves. A focus on pre- and post-lost risk control is paramount. The target business may have some catching up to do on safety management, loss control and claims management. A good broker can add value with a strategic plan. Employee benefit plans, particularly medical, continue to see escalating premiums

and uncertainty around recent health care reform provisions. The situation demands that senior management dedicate more resources toward medical plan strategy, composition and cost sharing. Many employers are switching to a resultsbased approach to their medical plans, where employee contributions are determined by individuals meeting biometric measures (e.g., cholesterol, blood pressure, triglycerides, glucose and waist circumference). Health care is the only form of insurance in which individuals do not pay disproportionate premiums based on the amount of risk they pose. Homeowner’s insurance costs more for an oceanfront house in Florida than it does for a single-family home on a cul-de-sac in Ohio, so why should medical be any different? A full and complete understanding of the target company’s approach to health management is critical to understanding the potential landscape for an acquirer. Reducing claims utilization throughout the hold period results in lower renewal increases, creating equity value at exit. A good broker with a dedicated M&A practice can help buyers navigate the dynamics of a well-constructed risk management and benefits program throughout the life cycle of an M&A investment. ■

Jeffrey Schwab is the practice leader of the Mergers & Acquisitions and Private Equity Practice at Oswald Companies. He is also an account executive for Oswald’s middle-market and financially sponsored clients. Contact him at (216) 658-5208 or jschwab@oswaldcompanies.com.

ost companies are division or product line, the sale acquired in one of two will be less emotional and more processes: an auction likely to go through. But segregating bid or a proprietary sale. the business as to financial perforIn either scenario, the factors mance and ongoing transaction that matter to sellers (and their services can be challenging. investment bankers if an auction) If there is no investment banker are the buyer’s credibility and or corporate development head JAMES professional reputation, industry representing the target and taking HILL knowledge of the target, and ownership of the process, getting BENESCH, having committed capital and a the deal closed on the seller’s side FRIEDLANDER, record of closing deals that have can be challenging. Don’t count COPLAN & financing commitments. Price on the seller, who may have lastARONOFF matters, but it also depends on minute regrets. And the seller’s terms: “Your price, my terms.” advisers may be more motivated to As a buyer in an auction, you keep the client than close the sale. need to show you are willing to spend Family ownership infighting also can be a money in the process before getting dead end. exclusivity. Conduct a complete data room Establish up front the motivation behind analysis. Mark up the purchase agreement the sale and whether it rings true. Proprirather than write a memo discussing it. etary buyers often make the mistake of Show you are serious by using advisers — dealing with sellers who are only testing lawyers, accountants, consultants. Stay on the market. They often realize at some top of the process with the investment point that they will not get their price. Or banking firm. they may realize that without their busiDon’t be “all business.” Warm to ness they will have no life. management; give them a vision for the In a proprietary deal, even more so future. If possible, provide equity incenthan in an auction, how you relate to the tives. Make sure the deal is in your size owners/management is critical: You don’t range in terms of enterprise value. Most wear a $1,000 suit to buy an agricultural sellers don’t want to be part of something distribution business. that is a stretch for the buyer. Once you Just as in an auction, demonstrating agree to terms, don’t “re-trade,” unless there’s industry knowledge and teaming with a material adverse change, as that kind of well-regarded advisers will always make thing gets around in the deal community. you more credible as a buyer. ■ Proprietary bids are clearly preferred by most potential buyers. But they can present James M. Hill is chairman of the Private Equity different risks. Here are some things to Practice and executive chairman of Benesch, remember about proprietary bids: Friedlander, Coplan & Aronoff, LLP. Contact him at If a deal involves a corporate seller of a (216) 363-4444 or jhill@beneschlaw.com.

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Three mistakes to avoid in due diligence process

onducted properly, post-close. Here are due diligence three frequently made should provide mistakes: buyers with valiPoor communicadation of purchase price tion with seller. and identify potential Establishing an open risks. For experienced communication channel acquirers, this process is and building rapport easily repeatable with early in the process with JEFF internal and third-party the seller will improve JOHNSTON experts working seamlessly KEYBANC the diligence process. together. There is a tendency to CAPITAL However, while hiring limit or delay communiMARKETS third-party advisers helps cations with the seller, to professionalize the process, it particularly when it comes to does not eliminate the risk of negative diligence findings. making mistakes. Errors and overPerhaps it’s simply human nature sights made during due diligence or a desire to avoid conflict, but often lead to headaches and cost waiting to disclose negative find-

ings until the end of the diligence process almost always creates undesired results. The seller may perceive an attempt by the buyer to game the system to gain some last-minute leverage. Surprises late in diligence rarely result in a win for either party. Lack of internal coordination. Ultimately, coordination is all about living up to assigned responsibilities. Identifying a project manager with responsibility for all aspects of the transaction supported by functional team leaders can be helpful. Creating a distinct master calendar with all diligence events and holding weekly calls are effective ways to

keep the team organized and aware of deadlines. Sharing the calendar (or a slightly modified version) with the seller is recommended. Poor internal coordination leads to frustration for both buyer and seller, lengthens the process and increases the likelihood of missing critical diligence items. “Be quick, but don’t hurry.” Basketball fans may recognize this as a classic quote from UCLA coaching legend John Wooden. On the basketball court, this meant playing your best and filling your role while limiting mistakes. The concept is appropri-

ate in the context of due diligence — particularly with sellers pushing for shorter diligence periods. In the rush to complete diligence and meet deadlines, there is a tendency to lose focus and attention to detail that can come back to haunt a buyer. So whether it’s driving for a game-winning layup on the court or wrapping up a key diligence item on an acquisition, remember to be quick, but avoid the mistake of hurrying. ■

Jeff Johnston is managing director for KeyBanc Capital Markets Inc. Contact him at (216) 689-4115 or jjohnston@keybanccm.com.

Remember the human capital side of due diligence

ne of the forgotten areas during due diligence is the human capital side of the deal. Most organizations do not know how to evaluate human capital, nor do they have a valid way to do so. Why evaluate human capital? There are many reasons why you should evaluate the human capital of the organization you are considering acquiring. RICK It allows you to SOBOTKA understand how MEADEN & the key individMOORE LTD. uals will behave once they get into your organization. It also provides insight in terms of culture fit, management and communications styles, and how the new team is going to relate to the members of your organization. The evaluation process also can identify trouble areas that will need to be avoided or restructured to resolve. Plus, it can help you avoid losing key players. How do most companies evaluate human capital? Most companies use several basic tactics. They ask questions of key individuals, talk to references and use intuition (gut feeling). In the end, they can believe what they hear, or just hope for the best. How can you objectively evaluate human capital? One objective way to evaluate the human capital is by using an industrial psychologist. While it can be effective, it is costly, time consuming and can be viewed as invasive. Another option is to use a behaviorally based system that you can directly apply. The problem is in knowing what is available. What should you look for in a behaviorally based system? Look for a system that is cost effective, easy to use and validated to measure work-related behavior. The ideal system should provide in-depth, valid and reliable results and have broad applications in See HUMAN Page S-12

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Capturing the value of tax attributes in a deal

mid the depth of want access to them for issues faced in minimal incremental tight acquisition costs. This makes early time frames, identification and valuasome less transparent deal tion of tax attributes considerations that may highly advantageous tip the deal valuation from a deal negotiation needle up or down get standpoint. deferred or somewhat Some tax attributes to SEAN KELLY neglected. One example look out for during the GRANT is the existence of imbeddeal process include tax THORNTON ded tax attributes in deals. deductions for transacTax attributes can lead to effition-related expenses and net cient tax savings when properly operating losses. managed. Tax deductions for transSellers typically want to be action-related expenses: paid for tax attributes, and buyers Expenses triggered when an

acquisition occurs can generate significant cash tax savings. For example, target companies may have compensation plans set to be triggered when a transaction closes, such as stock options that commonly vest automatically when a company is sold. Payouts related to stock options or general transaction-related bonuses can create tax deductions when paid. Other transaction-related tax expenses include success-based fees contingent on a deal closing, such as investment banker fees and deferred financing fees written off with the payoff of a

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target’s existing loans. Depending on the transaction structure, these tax deductions may be available to a buyer in a post-acquisition period or the seller in the pre-acquisition period based on factors such as timing of the payment, wording in the stock purchase agreement, etc. Each party should consider the other side’s tax position to determine where allocating the tax deduction for these expenses provides the greatest tax benefit and how such benefits are shared among the parties. Net operating losses (NOLs): NOLs allow a taxpayer to offset taxable income with accumulated tax losses. Depending on the transaction structure, NOLs accumulated by a target may carry over to a buyer. Determining the value

to place on NOLs can be tricky. Key considerations when valuing NOLs include properly discounting the NOLs for tax exposures identified during tax due diligence. Additionally, a buyer must have an appreciation for statutory limitations, which may restrict the future usage of NOLs. In particular, Section 382’s NOL utilization limitation can significantly decrease the amount of NOL a buyer can use annually. If properly valued and negotiated, tax attributes can provide tax planning opportunities without timing hiccups created by lastminute deal structure changes. ■

Sean Kelly is a tax transaction advisory services manager in Grant Thornton’s Cleveland office. Contact him at (216) 858-3717 or email Sean.Kelly@us.gt.com.

New tax credit available to Ohio equity investors

incurs costs for one or nvestOhio is a new more of the following in tool that Ohio will October 2010 an amount at least equal use to encourage SS&G’s TAS team provided SS&G’s TAS team provided sell SS&G’s TAS team provided financial, operational, and side due diligence and other SS&G’s TAS team provided financial and operational to the amount of the infusions of private tax due diligence and other transaction advisory services to financial and operational due due diligence and modeling Astor & Black and Western Reserve transaction advisory services to diligence assistance to Linsalata qualifying investment: investor cash into Ohio’s assistance to Recovery Partners, LLC – Astor & Black’s Linx Partners. Capital Partners and Stanton. Resources. investment banker. ■ Tangible personal small businesses. The property used in the busistate will award up to ness and located in Ohio. $100 million in tax credits ■ Motor vehicles operated during the current fiscal EDWARD on public roads and used biennium that ends June LOWE has been acquired by has been acquired by primarily for business 30, 2013. Eligible investors HOWARD has been acquired by who invest in an eligible has been acquired by WERSHBALE & CO. purposes. ■ Real property located small business will Halstead Investements, LLC in Ohio. receive a 10 percent Ohio income April 2011 April 2011 July 2011 ■ Intangible property including tax credit. Credits are awarded on December 2010 SS&G’s TAS team provided patents, copyrights, trademarks, a first-come, first-served basis. SS&G’s TAS team provided financial, operational, and SS&G’s TAS team provided SS&G’s TAS team provided financial, operational, and tax due diligence and other financial and operational purchase accounting assistance service marks or licenses. To be eligible, a business must tax due diligence and other transaction advisory services due diligence and modeling to Halstead Investments. transaction advisory services to to Kichler. assistance to Center for ■ Compensation for new meet the following qualifications: Chart Industries. Families and Children. ■ Assets of less than $50 million employees or retained employees. The qualifying investment to or annual sales below $10 million. acquire capital stock or other equity ■ At least 50 employees in Ohio interest in the business must be for whom the business is required To learn how our dedicated team can assist you, made after July 1, 2011. to withhold income tax, or more An eligible investor means an than one-half of the total number contact Scott McRill at SMcRill@SSandG.com individual, estate or trust subject of U.S. employees work in Ohio or call 440-248-8787. to income tax or a pass-through and are subject to that withholding entity in which such an individual, requirement. The business, within six months estate or trust holds a direct or www.SSandG.com indirect ownership interest. after an eligible investor’s qualifying Several steps must be followed investment is made, invests in or in order to be awarded a small business investment certificate. They include: -ERGERS !CQUISITIONS s $EBT %QUITY 0LACEMENTS s &INANCIAL 2ESTRUCTURINGS ■ Both the investor and the small business must register for InvestOhio through the Ohio Serving the global middle market for over 20 years, Brown Gibbons Lang & Company Business Gateway. ■ Either the investor or the offers a broad range of ﬁnancial advisory services including: small business must complete the s M&A Advisory s Restructuring InvestOhio application through s Capital Raising s Fairness Opinions the Ohio Business Gateway. ■ The investor must make the As a leading independent investment bank advising middle market companies investment on or around the date in the U.S. and internationally, BGL provides strong negotiating skills, specialized described in the application and industry experience and a shared entrepreneurial spirit that can help you increase and provide evidence of the investment to Ohio’s Director of Development. preserve your company’s value throughout the transaction process. ■ The small business must make the allowed expenditures and provide evidence to the director. ■ Both the investor and the business must retain ownership interest and the property for two years. #,%6%,!.$ s #()#!'/ More information about the InvestOhio program can be found KEVIN H. SARGENT EFFRAM E. KAPLAN ANDREW K. PETRYK SCOTT T. BERLIN MICHAEL E. GIBBONS at development.ohio.gov/Invest Director & Principal Director & Principal Managing Director Managing Director Senior Managing Ohio/InvestOhio.htm. ■ a premium decorative ﬂoor covering business

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Edward C. Lowe, MAFIS, CPA, is a principal with CPA and business advisory firm Howard, Wershbale & Co. Contact him at (216) 378-7230 or lowe@hwco.com.

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In acquisitions, tax free doesnâ&#x20AC;&#x2122;t Evaluate corruption risk always equate to tax efficient before closing the deal

uyers and sellers usually have conflicting goals. That is one reason it is difficult, if not impossible, to strike the perfect chord between tax efficiency and economic viability. It is important to understand that a taxable transaction is not always tax inefficient. The characteristics of an acquisition are determined by 1) what is acquired (assets or stock) and 2) the consideration paid (e.g., cash, stock, notes, etc.). As discussions DAVE DICILLO occur between a buyer Z I N N E R & CO. and seller and due diligence is performed, the form of the transaction takes shape. Often, the tax issues are overlooked: Structure 1 â&#x20AC;&#x201D; Taxable Acquisition. Corp. B buys 100% of the ownership interests of Target, LLC (a high-growth tech business) for $25 million. The fair market value of Targetâ&#x20AC;&#x2122;s net assets is approximately $5 million. Corp. B would have a $25 million basis in the net assets acquired and becomes the sole owner of Target, which ceases to exist for tax purposes. The acquired assets (goodwill and customer list) would be Section 197 intangibles in the hands of Corp. B. Corp. B may amortize those assets over 15 years, saving federal income taxes each year at the rate of 35% of that amount. Bâ&#x20AC;&#x2122;s resulting tax benefit may exceed the tax costs incurred by Targetâ&#x20AC;&#x2122;s owners on the sale of their units, based on a capital gains rate of 15%.

Structure 2 â&#x20AC;&#x201D; Tax-free Acquisition. Assume that the above acquisition could be structured to qualify for non-recognition of gain (Section 351) by Targetâ&#x20AC;&#x2122;s owners receiving B stock in exchange for their interests. If the owners received solely B stock and held such stock until death, they would incur no federal income tax on the disposition of their interests. However, Corp. B would achieve no step-up in basis of Targetâ&#x20AC;&#x2122;s assets but would likely pay less for those assets than it would have in a transaction with a basis step-up. The tax benefits resulting from a step-up in basis achieved through a taxable acquisition sometimes exceed the tax cost to a seller disposing of assets. Furthermore, the tax benefits at issue will be recognized by the acquirer over a period of years. When the sellers are individuals whose gain would be subject to tax at long-term capital gains rates, trading a current tax cost for a future tax benefit may be beneficial. Because the costs and benefits of the transaction are imposed on different parties, itâ&#x20AC;&#x2122;s important to determine whether the acquirer is willing to compensate the seller for the tax â&#x20AC;&#x201D; that is, how much of the additional benefits the acquirer is willing to share with the seller. It is important to get the appropriate tax and legal counsel involved early in any transaction. Doing so can be the greatest money saver of all. â&#x2013;

Dave DiCillo is a partner in the CPA firm, Zinner & Co., LLP, headquartered in Pepper Pike. Contact him at (216) 831-0733 or ddicillo@zinnerco.com.

hen doing deals outside extent to which these statutes the United States, buyers apply to each party will allow the must take great care to buyer to design a comprehensive assess and avoid the and well-documented diligence risks presented from acquiring a process to evaluate legal risk, repucompany that is in violation of tational risk and the business case global anticorruption laws. This is for the deal. particularly true in the current deal Buyers also must bear in mind environment, in which target that certain target businesses may CIPRIANO companies are increasingly likely to BEREDO present a higher risk of corruption be operating in emerging markets SQUIRE SANDERS because they operate in problematic where bribery is often part of the jurisdictions, have a large number ordinary course of business. of government customers, involve a heavily There is no international anticorruption regulated industry or involve extensive law or standard. The laws in each jurisdicdistributor or agent relationships. tion are complex, and the focus, offense In these cases, an organized, comprehenand penalties of each are different. Deal sive and documented diligence process is makers in the United States long have been critical. If the buyer identifies potential familiar with the Foreign Corrupt Practices issues during its review, it can undertake Act. The trend of increased government additional investigations, insert protections enforcement of the act has resulted in, into the purchase agreement or address among other things, the need for effective issues like successor liability and/or postanti-bribery due diligence. acquisition compliance costs. All these Such diligence is necessary even in paths may be available to mitigate risk and transactions involving jurisdictions where still complete a transaction if a buyer there are no anticorruption laws. But an focuses on these issues early in the process. ever-expanding list of anti-bribery statutes Successfully navigating global compliance presents increasing risks of potential crimiobligations and conducting the necessary nal and civil penalties for acquirers. due diligence requires a global strategy Beyond the significant statutory penalties implemented by professional advisers and financial/reputational impact of a familiar with local markets, laws and violation, a buyer that ignores these business practices. â&#x2013; statutes may end up purchasing a business that was not worth buying. Cipriano S. Beredo is a partner with Squire Sanders A first step in the diligence process and the leader of its Cleveland Corporate Practice should be to determine which antiGroup. Contact him at (216) 479-8280 or corruption statutes apply. Knowing the full cipriano.beredo@squiresanders.com.

Congratulations to the ACG Deal Maker Award Winners Uniquely suited to handle highly innovative transactions, we understand the complex issues faced by clients, and our HIIHFWLYH DQG HIÂżFLHQW WUDQVDFWLRQDO FRXQVHO VXSSRUWV QDWLRQDO and international client business objectives. The seamless collaboration of our tax, antitrust, environmental, international, real HVWDWH HPSOR\HH EHQHÂżWV HPSOR\PHQW H[HFXWLYH FRPSHQVDWLRQ intellectual property and technology attorneys provides clients with the necessary breadth and depth of representation to take their businesses to the next level.

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The global impact on transaction and financing documents

s the world conThe aim of IFRS is to tinues to shrink have companies across through the use the world report of technology, accounting transactions doing business internain a consistent manner. tionally is increasingly Those providing becoming the norm services to investors or rather than the exception. corporations in the United Investors are weighing States will be at a disadJEREMY their options of going vantage if they turn a MICHAEL international, whether by BCG&CO. blind eye to the impact investing, conducting of IFRS and how it differs business or entering new markets from U.S. generally accepted through mergers and acquisitions. accounting principles (GAAP). The new global marketplace is In particular, attorneys who driving the need for a universal draft or review contracts containing accounting language implemented accounting provisions need to through the international finanrecognize the possibility that cial reporting standards (IFRS). GAAP may no longer exist in five

to 10 years. It will be increasingly important to understand that clauses based on financial measurements like net income or EBITDA will be significantly different when measured under IFRS. Such measures are frequently found in compensation agreements, earn-out calculations from business mergers or acquisitions, income-sharing arrangements, bonus plans and so on. Currently, approximately 120 countries require or permit the use of IFRS. The SEC is expected to reach a final decision for U.S. public companies during 2012, with an effective date somewhere around 2016.

The impact already is being seen through other convergence projects — breaking the standards down and then merging them together so they are fully compatible, or the same, under both reporting models. The standards for revenue recognition and leases, for example, will change dramatically. Business professionals can adapt to the effects of changing accounting rules by: ■ Implementing a “frozen GAAP” contractual provision, where the accounting principles employed at the inception of the contract are preserved, for measurement purposes, throughout

the term of the agreement; and ■ Reviewing existing agreements to analyze the impact of convergence with IFRS prior to the U.S. formally adopting those standards. Attorneys and other business professionals in the United States need to take notice of IFRS, as it already has made its trek to North America, with Canada starting its adoption in 2011 and Mexico slated for 2012. ■

Jeremy M. Michael, CPA, is with BCG & Co. and is certified in International Financial Reporting Standards. Contact him at (330) 572-8011 or Jeremy.Michael @BCGCompany.com.

PIPE continued from PAGE S-7

ACG Cleveland congratulates the winners of the 16th Annual Deal Maker Awards 2012 Award Recipients CORPORATE The Lubrizol Corporation

BUYOUT FIRM Linsalata Capital Partners

OM Group, Inc. TransDigm Group, Inc.

consent rights, anti-dilution provisions and pre-emptive rights. Frequently, however, investors agree to lock-up and standstill provisions in favor of the public company, such as prohibitions on acquiring additional securities and/or engaging in proxy contests. While PIPE transactions declined to pre-crisis levels in 2009 and 2010, continuing tight credit conditions and volatile public equity and debt markets make the PIPE market an attractive financing alternative for public companies. For investors, PIPE transactions offer the opportunity to invest in public companies at a discount to market prices with the potential to negotiate downside protections. However, there are significant pitfalls, including the need for shareholder approval and/or trading on material non-public information, and such transactions need to be structured appropriately. ■

Sean T. Peppard is focused on M&A, corporate finance and emerging businesses with Ulmer & Berne LLP, a leading Midwest regional law firm with offices in Cleveland, Columbus, Cincinnati and Chicago. Contact him at (216) 5837054 or speppard@ulmer.com.

Human continued from PAGE S-9

216-696-8484 • 216-696-2582 [fax] 1120 Chester Avenue, #470 • Cleveland OH 44114 www.acg.org/cleveland • admin@acgcleveland.org

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individual and team analysis, communication differences, management styles, culture evaluation and conflict resolution. Finally, you want a system that can be self-administered by key individuals so you control the process and directly apply results. The key in utilizing any human capital evaluation system during due diligence is communication. Explain the benefits of the system in helping to identify how to work more effectively with the individuals and the newly created teams. Discuss the value of identifying issues at this stage rather than months later. Communication allows you to create a positive atmosphere during a challenging time. ■

Rick Sobotka is president of Management Development Group, Ltd., a Meaden & Moore Ltd. company that is a regional representative of the Predictive Index System. Contact him at (216) 241-3374 or rsobotka@meadenmoore.com.

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Understand, mitigate burdens of purchase accounting

nsufficient attention in the acquisition is frequently paid to process. purchase accounting Purchase accounting requirements during under Accounting Stanthe financial due dilidards Codification (ASC) gence process. Verifying 805, Business Combinathe quality of earnings, tions requires all identifying pro forma acquired assets (tangible adjustments and idenand intangible) and DARIO tifying working capital assumed liabilities to be SAVRON trends are the primary recorded at fair value on MALONEY + focus (and understandthe opening balance NOVOTNY ably so) when considering sheet. Much of the inforan acquisition. mation and assumptions necesPurchase accounting, on the sary to determine fair value is other hand, is usually left to be available early in the deal process. addressed after the deal closing is Thus, buyers should timely celebrated. Current purchase consult with their accountants to accounting rules make it very address ASC 805 and begin to important for buyers to consider determine what the opening the rules and requirements early balance sheet will look like.

The globalization of M&A: Your best partner may not be U.S.-based

It is important for buyers to understand that an independent valuation expert may need to be engaged to calculate fair values and that these values then may be subject to financial statement audit scrutiny — if an audit is performed. Auditors must review and “stress-test” the valuation assumptions for reasonableness. In addition, auditors must ensure that the derived values and opening balance sheet are presented in accordance with generally accepted accounting principles (GAAP). Even more important than obtaining the auditor’s GAAP “sign-off,” buyers need to understand and consider the impact purchase accounting can have on

financing terms, such as debt covenant calculations. For example, ASC 805 requires that the present value of any anticipated earn-out payments be recorded on the opening balance sheet as a liability. If not properly considered when negotiating with the lender, this GAAP requirement may result in the breach of a leverage ratio covenant shortly after the deal is closed. Similarly, since ASC 805 requires all deal costs to be expensed when incurred, buyers planning future “bolt-on” acquisitions should try to negotiate terms that exclude future deal costs from debt covenant calculations. The above are just two examples of several purchase

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cquisition activity buyers are on the lookout has rebounded for U.S. assets that may from steep debe cheaper to acquire. clines in 2008-09, Not a hassle. On with 2012 forecasted to many levels, selling your be the best year since the company to an internadownturn. One major tional buyer is no different reason for this turnaround than selling to a U.S.is the increasing presence SEAN based one. With advances of international buyers in DORSEY in communications, the U.S. marketplace. technology and the clear LEAGUE PARK How does this global emergence of English as ADVISORS dynamic affect you? the universal language of Buyer universe is business, there is no need larger. It’s simple. The potential to hire advisers with international buyer universe has expanded offices. The transaction can be rapidly in the past 10 years. The handled right here in your rise of private equity buyers has backyard, in your own language, received most of the attention. without incurring high internaBut an increasing source of buyer tional fees. candidates are Asian, European Cash is king. Global corporate and South American companies cash balances are at record highs, seeking to establish a U.S. presence. and private equity firms are Foreign corporations often being pressured to invest capital struggle to start new operations amassed in pre-recession fundfrom scratch in our country. It is raising. In short, buyers across less painful for them to make the globe have cash to spend and strategic acquisitions. More are competing fiercely for U.S. potential buyers mean more acquisitions right now. ■ competition for attractive U.S. companies. This year, our firm Sean Dorsey, former head of saw international interest in just investment banking at National City, about every sell-side transaction is the founder and managing director we managed. of League Park Advisors, a boutique Weak dollar. In 2011, the investment banking firm. Contact U.S. dollar fell to historic lows him at (216) 455-9990 or e-mail against foreign currencies. Motisdorsey@leaguepark.com. Learn vated by the purchasing power of more about League Park at their currencies, international www.leaguepark.com. Growth doesn’t come to those who wait. Now is the moment to take advantage of emerging

YOUR MARKETS MAY BE GLOBAL BUT YOUR LEGAL ISSUES ARE LOCAL

Dario Savron is shareholder in the audit and advisory practice at Maloney + Novotny LLC. Contact him at (216) 344-5256 or dsavron@maloney novotny.com.

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accounting-related issues that buyers need to timely consider. Obtaining the necessary information and working through purchase accounting can be time consuming and complex, and can cause significant issues for buyers and their lenders if not addressed early enough. Being cognizant of ASC 805 and being timely and properly advised by a team of seasoned professionals will help buyers mitigate the burdens of purchase accounting. ■

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M&A isnâ&#x20AC;&#x2122;t all glitz and glamour; itâ&#x20AC;&#x2122;s risky business

he process of mergers and acquisitions can be exciting and even glamorous at times, but it is also fraught with risk. A business ownerâ&#x20AC;&#x2122;s decision to sell his or her business should not be taken lightly. Most business owners are only going to sell their business once. They have spent many years building up the business, carving out a niche in the market, serving their customers and creating jobs that provide the livelihood for their employees. We like to say, â&#x20AC;&#x153;We are creating the most significant liquidity event in the history of our clientsâ&#x20AC;&#x2122; lives â&#x20AC;Ś and we take that responsibility very seriously.â&#x20AC;?

The deal process has many deal-killer land mines that need to be avoided for a transaction to be completed: Confidentiality. The decision to sell doesnâ&#x20AC;&#x2122;t necessarily mean that the business is going to be sold today. As a result, confidentiality is one of the first risks of the process. A common question from a business owner is: â&#x20AC;&#x153;When should I tell my employees, customers or suppliers?â&#x20AC;? Be honest and never lie, but some things need to remain confidential. Selling the business is one of them, until you are further along in the process. Identifying buyers. When

marketing a business for the offering memo, the sale, deciding who would agreement is only as be the most logical buyer good as the integrity of has risk. Private equity the individual signing it. groups are professional You need to distinguish buyers and treat the between serious buyers M&A process professionand the â&#x20AC;&#x153;tire kickers.â&#x20AC;? ally, with a view toward Negotiation terms. honoring the confidenOnce the most logical ALBERT tial nature of the process. MELCHIORRE buyer has been identiStrategic buyers can be MELCAP fied, the challenging a little trickier. Many process of negotiating P A R T N E R S LLC times the most logical the terms and conditions buyer may be a competitor. of the purchase agreement Disclosing highly confidential begins. The purchase agreement information to a competitor can not only sets the purchase price, be terrifying and is a major risk. it also outlines the sharing of Although you will have each risks through the â&#x20AC;&#x153;reps & potential buyer sign a confidenwarranties,â&#x20AC;? â&#x20AC;&#x153;caps & basketsâ&#x20AC;? and tiality agreement prior to receiving survival periods for these indem-

Maximize next-generation benefits of a future sale Act now before potential changes for gift and estate taxes take effect

ith capital year you simply watch gains rates others reap rewards? likely to rise, Donâ&#x20AC;&#x2122;t let that happen; historically 2012 should be the year low borrowing rates and to implement plans to businesses showing signs maximize value for your of health in their finanfamilyâ&#x20AC;&#x2122;s next generation, cial statements, 2012 is your favorite charities or poised for a boom in the other worthy causes, in a JOHN mergers and acquisitions sale still two or three MCGUIRE CALFEE arena. But what if your years away. company is not quite Fail to act now and ready for sale? What if its the utility of several current results are modest, but its powerful planning tools may be future is bright? Will 2012 be the significantly curtailed in the

federal governmentâ&#x20AC;&#x2122;s budgetary process. The simple gift remains the best tool for transferring wealth, but its current power is in jeopardy. Bush-era tax cuts raised the per-individual estate, gift and generation-skipping transfer tax exemption from $1 million to $5 million, an increase scheduled to expire on Dec. 31. Speculation as to the fate of this exemption varies. It may be reduced to $3.5 million or $1 million and the reduction may take effect at yearâ&#x20AC;&#x2122;s end or earlier â&#x20AC;&#x201D; but no one believes it will survive at current levels. Grantor retained annuity trusts (GRATs) are a wonderful way to

NEED ASSISTANCE NAVIGATING THE ACQUISITION TAX MAZE?

transfer value tax-free or at reduced cost. GRATs are designed to transfer wealth using assets anticipated to appreciate within a short time, such as equity of a company soon to be sold, because in order to be effective, the grantor must outlive the term of the GRAT. Budget proposals being considered include a 10-year minimum term for GRATs to discourage their use. In appraising transferred privately held equity for reporting purposes, the value is typically discounted to reflect its lack of control or marketability. However, for some time the Obama administration has been

nifications. To manage the risks of the M&A process, it is very important that the business owner assemble a strong deal team, which would include their law firm and accounting firm, and of course their investment banker, who will manage and lead the entire process. It may be exciting and at times glamorous, but even Tom Cruise would admit that M&A can be risky business, too. â&#x2013;

Albert D. Melchiorre is president and founder of MelCap Partners LLC, a middle market investment banking firm. Contact him at (330) 239-1990, email him at al@melcap.co, or visit www.melcap.co.

seeking to limit the full application of such discounts to intrafamily transfers, thereby increasing the transferred equityâ&#x20AC;&#x2122;s taxable value. This is likely the last year we will see such a beneficial alignment of a $5 million transfer exemption, useful GRATs and robust valuation discounts. If 2012 is not the year to sell, it nevertheless should be the year to restructure your companyâ&#x20AC;&#x2122;s ownership and stay ahead of the federal budget process. â&#x2013;

John J. McGuire is a partner in Calfeeâ&#x20AC;&#x2122;s corporate practice. He advises clients on general corporate law matters, including mergers and acquisitions, securities, finance, succession planning, venture capital and private equity investments. Contact him at jmcguire@calfee.com or at (216) 622-8892.

OUR CENTRAL FOCUS IS ENTIRELY ON YOU We are Glenmede â&#x20AC;&#x201D; we rally around a single line of business: investment and wealth management. Founded as a trust company in 1956 by the Pew Family to manage the assets of their charitable interests, we still follow our initial mission â&#x20AC;&#x201D; to grow and protect our clientsâ&#x20AC;&#x2122; assets. 8QOLNH PRUH FRPSOH[ RU SXEOLFO\ KHOG Ă&#x20AC;UPV RXU LQGHSHQGHQFH IUHHV XV WR VHW RXU RZQ FRXUVH 7KHUH DUH QR FRQĂ LFWV RI LQWHUHVW :H GR QRW underwrite securities, make loans or sell insurance products. Instead, we measure success solely by how well we manage your wealth.

Zinner & Co. can lead you down the most efficient path for transaction planning. In any sort of acquisition, itâ&#x20AC;&#x2122;s important to get expert business advisory tax counsel in order to strike the optimal balance between tax efficiency and economic viability. Zinner & Co.â&#x20AC;&#x2122;s Business Advisory team can bring clarity and prioritization to complex acquisition issues such as:

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When a guest sits down Five tips for successfully at the family dinner table selling your business

here comes a time when every family business owner contemplates a significant strategic or liquidity event — be it a sale, merger, joint venture, strategic partnership or a financial recapitalization. And while the prospect of taking their business “to the next level” or “taking some chips off the table” may be enticing, owners need to remember that these also are opportunities for outside parties with considerable transaction experience to conduct very thorough due diligence into their CHARLES company. AQUINO Where exactly the WESTERN outcome falls on the RESERVE risk-reward spectrum P A R T N E R S LLC varies in every situation, but one thing is certain in all cases: entering this process in an unprepared manner can be costly — either in terms of valuation, proceeds received and/or ownership dilution. Listed below are five tenets that every family business owner should consider regularly as matters of best practice, particularly when interacting with outside parties: Management/Infrastructure. Thoroughly evaluate the management team, facilities, equipment and marketing collateral to ensure that all-important great first impression.

Legal. Review and resolve matters such as threatened or pending litigation; customer, vendor and employee contracts; potential IP infringements; and any environmental issues. Board of Advisers. Establish a board of advisers that brings complementary expertise and an independent perspective in such areas as strategic direction and financial reporting. Growth Story. In dealing with potential buyers, investors or partners, always have ready a compelling, yet credible, three- to five-year growth strategy — and update it every year! Professional Advisers. Engage wellcredentialed advisers with extensive transaction backgrounds in such disciplines as legal, accounting, tax, estate planning and investment banking. Family owners spend years (and sometimes generations) building, growing and protecting their business. While enticing, the prospect of inviting “strangers” into the house can be daunting. Though there is no guarantee of success, ingraining the above precautions into the regimen of running the business will at least give the owner peace of mind that he or she has left no resource untapped in protecting a lifetime’s worth of work. ■

he process of selling a busiincome-producing assets. ness can prove to be just as Have a map of your challenging as building personal goals. What was the one. Whether or not you “dream” all about to begin with? are in the market, following are Thinking of your reasons for some important considerations: starting the business and what it Plan early. Proper tax planning was going to enable you to do is is imperative and needs to begin helpful in determining what might early in the process to maximize be next. What will you do after the LINDA the benefits to an owner. Even if sale? What would you like to OLEJKO you aren’t quite ready to exit your communicate to key staff? How GLENMEDE business, unanticipated circumwould you like to transition your stances may prompt an early sale. employees? Get your house in order. Buyers will Assemble a good advisory team. conduct a due diligence review. Make Look for individuals with proven experience certain your corporate books are current; in working with comparable companies. It patents or trademarks are complete; confiis important you engage advisers who will dentiality agreements are in place; and listen to and focus on your objectives and contracts with key employees, customers priorities. Your team should include a and vendors are up to date. business accountant, business attorney, tax Define success. It is critical to be clear professional, M&A adviser and a personal on financial and non-financial needs. Your financial planner. financial independence, family legacy and Develop a short list of potential philanthropic objectives are all important buyers. Potential buyers may include a components of a solid financial plan. partner, competitor, customer, supplier, Other factors to consider should be life employee, investor, etc. Narrow the pool to expectancy, cash flow needs, capital your three top choices by weighing your markets assumptions, inflation and other definition for success. Keep in mind the buyer’s motivation and define what would create the best situation for both parties. ■

Charles V. Aquino is a director with the investment banking firm Western Reserve Partners LLC. Contact him at (216) 589-9534 or caquino@ wesrespartners.com.

Linda M. Olejko is a certified financial planner and a business development manager in the Greater Cleveland office of Glenmede, an investment and wealth management firm. Contact her at (216) 514-7876 or linda.olejko@glenmede.com.

is proud to join AGC in recognizing our longstanding client

as a 2012 Deal Maker Award Winner We are honored to have been legal counsel to LinCap for decades of deal-making, including these recent, selected acquisitions and divestitures. LINSALATA CAPITAL PARTNERS announces the sale of

a leading designer, manufacturer and marketer of branded automotive aftermarket accessories.

Calfee, Halter & Griswold LLP www.calfee.com

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Cleveland | Columbus | Cincinnati

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Barberton company has the Wright stuff Tool manufacturer plans to build on its legacy through the acquisition of new product lines By CHERYL HIGLEY

right Tool, the Barberton-based manufacturer of heavy-duty tools, is handcrafting a strategic plan to expand its product line and manufacturing capabilities. That move is the next piece of a growth strategy put in place after Terry and Pat Taylor and Tom Futey purchased the company from second-generation owner Dick Wright in 2007. “In the ’90s, the company spent a lot of time developing its product line but eventually had expanded the tool line as much as we could,” says Futey, who was hired as the company’s chief financial officer in 1993. “We knew that if we were going to take Wright Tool into the next 30 years, we needed to offer more product to our distribution base.” Wright Tool sells primarily to the refinery power generation, distribution and transmission, mining and wind turbine industries. With a 150,000-square-foot manufacturing facility, producing complementary products for its current customer base was part of the vision. The other was to leverage its vast global sales and distribution network and expand its reach with products from companies that may not have the same capabilities.

With a vision for growth in place, the new ownership team looked excitedly to the future — only to have “the debacle of 2008” derail its plans, Futey says. The team had just completed the purchase of the company when the economy nosedived — and took 40 percent of Wright Tool’s sales with it. Instead of growing, the new ownership team found itself having to make difficult cuts in order to sustain the business. Austerity programs were put in place that resulted in difficult layoffs, payroll reductions and a shortened work schedule. For five months, the Taylors and Futey took no salary. “We have third generations working at Wright Tool, and we hadn’t had layoffs in years. Those decisions were very hard, especially for Pat Taylor, who saw friends and people she had hired (being let go),” Futey says. The cutbacks, however, allowed the company to remain profitable, and it has experienced doubledigit growth the past two years. “We acted quickly and I think that helped brunt the impact,” Futey says, adding that while the company doesn’t anticipate returning to its pre-recession employment level, it currently employs about 140 people and is looking to add five to 10 more. With the business stabilized,

So, you think you’re ready to sell? Proper planning, control of the process are keys

lthough none of us can know what deal activity will look like in 2012, signals point to a potential increase in activity for the lower end of the middle market. The private equity community is flush with cash, many larger companies have accumulated cash and improved balance sheets, and the lending environment has thawed. In addition, many smaller companies are growing again, with earnings improving nearly every month. While uncertainty in Washington seems to be the only certainty, the looming increase in the capital gains tax rate at the end of 2012 could spur companies to sell. To boot, estimates reveal many of the

Crain’s Cleveland Business Custom Publishing

more than 250,000 privately held companies with revenues up to $250 million are controlled by some of the estimated 75 million baby SCOTT boomers set to MCRILL retire in the SS&G next decade. Just as one wouldn’t show a house to a prospective buyer without getting it in order, a business owner shouldn’t try to sell a company without proper preparation. Consider the following: ■ Get ready for a difficult and time-consuming process. Turn to a trusted business adviser, often an accountant or attorney, to help guide you through. ■ Clean up your books and records. Consider upgrading from a compilation to a review or a review to an audit, and spend

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Planned transition gives new ownership head start

T Wright Tool headquarters the company refocused its growth efforts and in late 2010 began talking with its bank about pursuing acquisition opportunities. As Futey began exploring options, he found that despite having a supply chain of 4,400 brick-andmortar distributors,100 salespeople and a reputation among its clients for manufacturing the highest quality tools, few people in Northeast Ohio even knew the company existed. That all changed, he says, when he attended an ACG Cleveland holiday event. Since then, Futey says he has seen opportunities cross his desk that may not have otherwise. Wright Tool has attracted the interest of entrepreneurs who have good products but can’t get the attention of independent sales or can’t get it through the distribution channel. Wright can — and that has been the difference maker. “We were able to educate people on Wright Tool and the opportunities we were seeking. People I met told me to be patient and that it may take awhile,” he says. “I’ve been presented with about 20 opportunities this year. We’re in conversations with four of them and are excited to see where it takes us.” ■

om Futey, chief financial officer for Wright Tool, along with President Terry Taylor and Vice President Pat Taylor, came together to purchase the company from Dick Wright, whose father started the business in 1927. Wright’s vision plan for the eventual succession made a tremendous difference in the new team’s ability to hit the ground running. His goal was to keep the company in Barberton and to continue to provide good-paying jobs. His sons, who had been gifted ownership in the company by their grandfather, were not

TOM FUTEY

TERRY TAYLOR

interested in taking over the business, so Wright knew it was imperative to have a plan in place. “In a privately held business, the owners have to be engaged in the business for it to be successful,” Futey says. “Dick knew

he needed to build a management team to succeed him.” In the 1980s, the company purchased the PAT sons’ shares TAYLOR and created a legacy ESOP. Wright sold 25 percent of the company to the group in 1998. In January 2007, they bought the remainder of Dick Wright’s shares and in 2008 redeemed the ESOP and purchased those shares, completing the sale.

That the transition ran as smoothly as it did is a testament to Dick Wright, Futey believes. “The fact that he was still in good health and active in the business but could make that decision that he was ready to entrust the business to us made all the difference,” he says, adding that Wright still sits on the Board of Directors. “I’m sure it wasn’t easy for him to let go, but the reason it was so successful was that he maintained control of the process. We respect him tremendously. We listen when he talks, and he appreciates that.” — Cheryl Higley

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and and

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has secured a growth equity commitment from

has been acquired by

time understanding the recurring earnings before interest, tax, depreciation and amortization (EBITDA). This will help in determining the true potential value of the business. ■ Evaluate your emotions. Are you ready to let go? For many owners, selling is a difficult decision. Alternative transition strategies over a period of time rather than an outright sale should be considered. ■ Work with a wealth planning professional to understand what you need to achieve the remaining financial goals in your life (retirement income, education needs, etc.). What you need may be very different than what you want for the business. ■ Once the decision is made, control the process. Preparation is key. Fix what you can before entertaining potential buyers. Set and manage expectations along the way. Appropriate sell-side diligence will prepare you to best respond to buyer diligence inquiries. Don’t take your eye off the ball. Continue to run the business in the normal course. ■

Scott McRill, CPA, is director of the transaction advisory services group with SS&G. Contact him at (440) 248-8787 or SMcRill@SSandG.com.

has completed a balance sheet recapitalization and reﬁnancing transaction

has been acquired by

has been recapitalized by

has been acquired by

view additional transactions at

harriswilliams.com ©2012. Investment banking services are provided by Harris Williams LLC, a registered broker-dealer and member of FINRA and SIPC, and Harris Williams & Co. Ltd, which is authorised and regulated by the Financial Services Authority. Harris Williams & Co. is a trade name under which Harris Williams LLC and Harris Williams & Co. Ltd conduct business in the U.S. and Europe, respectively.

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New: Young generation can continue connections continued from PAGE S-4

“I chose to get involved because I could see ACG Cleveland was willing to put leadership behind the programs. That formal, deliberate approach to integrate younger professionals is really unique.” Current ACG Cleveland President Randy Markey, managing director of global X, a strategic tax consulting firm, is proud of how the program has come together and says the need for the methodical approach is two-fold. First, it is important that the programs bring value to the younger members; but just as important is the value the program brings to the veteran leaders and to the region as a whole. “ACG Cleveland Connections is connecting the generations — we have as much to learn from them as they do from us. But from a macro level, we believe the establishment of Young ACG can continue the development of this really strong deal-making community,” Markey said. “The more we can do to ensure our best and brightest feel they can have long and prosperous careers here,

they’ll stay and continue to build on the deal-making legacy that has been established.” ACG Cleveland is viewed across ACG Global as a strong, innovative chapter, and Markey is hopeful that other chapters will take note of and implement similar programs. Akers said that while becoming a national model would be great, he’s hopeful that those closer to home will take notice and use it as a regional model in other industries: “This is the kind of thing a region needs to stay strong and grow stronger.” Keeping the intellectual capital in Cleveland is essential, he said, given that as baby boomers retire, the work force will shrink by 40% — creating an intense competition for talent. “This is a great tool for young professionals to get access to the local firms, but it’s also incumbent on veteran leaders to participate in these programs to ensure they can retain the talent to ensure their firms survive,” says Akers. “Whoever participates, whether mentor or mentee, my hope is they will pay it forward

and share their experiences with the generation coming up behind.”

Connecting with MBAs Creating that interaction between generations is beginning even earlier than Young ACG with graduate students who participate in the ACG Cup, a national ACG program. This case study competition gives students real-world experience and invaluable insights from the top dealmakers in the country (see sidebar). In the past three years, connections made during the Cup and subsequent invitations to events like the Deal Makers Awards ceremony have proven beneficial for local MBA graduates who have turned those networking opportunities into jobs at local firms. Markey and Bader both are excited for the future — 2012 will bring more networking with senior members, and diverse and innovative educational programming. Buzz surrounding Young ACG is building, which means good things for ACG Cleveland and Northeast Ohio. “Young ACG is bringing a lot

We think the grass is greener

of energy and creativity to ACG Cleveland, which inspires innovative thinking and brings value to our organization,” Markey said. They’re bringing a whole new perspective to our vision and it’s

exciting.” For more information or to get involved with Young ACG, contact Kevin Bader at (330) 2391990 or contact ACG Cleveland at (216) 696-8484.

ACG Cup gets students up close to the real world

ake your pitch and make it good … that’s the goal for teams who compete in the ACG Cup each year. The competition gives the MBA students one week to prepare analyses of a realworld merger case developed by Houlihan Lokey, a boutique investment banking firm based in Chicago and Los Angeles. Each team makes a 20-minute presentation to a panel of judges, who play the role of the owners and board of directors of the company. The panel for the Cleveland competition includes senior professionals from Northeast Ohio’s premier investment banking, consulting and private equity firms. Graduate students from the Case Weatherhead School of Management, University of Akron, Baldwin-Wallace, Cleveland State University, John Carroll University, Kent State University and the Ohio State University participated in the 2011 competition. Weatherhead teams finished in first and second place. First place winners received an invitation to the ACG Cleveland Deal Maker Awards, a cash prize and an all-expenses paid trip to San Diego for InterGrowth, the

national ACG conference in May. The second-place team was invited to the Deal Maker Awards and received a cash prize. Banking and Finance Professor Scott Fine is the faculty adviser for the Weatherhead teams and is impressed with how dedicated ACG Cleveland is to providing a top-notch educational and networking experience for the students. “The teams get a great networking opportunity and have the chance to be evaluated by people who do this for a living. ACG has done an excellent job of getting committed professionals to take part,” Fine says. “Unlike any assignment I can give, the competition exposes the teams to how a pitch works in a real setting. They learn how difficult it is to succinctly convey complex thoughts in a short time.” While Fine is obviously pleased with the Weatherhead teams’ success, he is hopeful that other schools see how valuable the opportunity is and encourage teams to participate: “I would love to see other faculty get behind this. One of the key factors in moving the competition to the next level is to get deeper faculty support.” — Cheryl Higley

right here And that’s why we’ve called Cleveland home for over 20 years. To learn more about Riverside’s strategies to grow companies with $1 million - $30 million in EBITDA, visit riversidecompany.com or contact Scott Gilbertson, Principal, Origination at sgilbertson@riversidecompany.com. riversidecompany.com | phone: +1 216 344 1040

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ACG CLEVELAND CALENDAR OF UPCOMING EVENTS

Attendees network at the Rock and Roll Hall of Fame during the 2009 Great Lakes ACG Capital Connection in Cleveland. In 2011, the event rotated to Indianapolis, where the opening-night reception was held at the NCAA Hall of Champions.

FEBRUARY 9

APRIL 19

Young ACG panel discussion

FEBRUARY 21 Dinner — Union Club Speaker: Mark Clark, executive vice president & CFO, FirstEnergy

FEBRUARY 27 Evening — Ohio Theater, PlayhouseSquare Speaker: Erskine Bowles, former co-chair, National Commission on Fiscal Responsibility & Reform

Breakfast — Union Club Speaker: TBD

SEPTEMBER 26

MAY 3

Breakfast — Union Club Speaker: Richard Weber, president & CEO, PennEnergy

APRIL 5

Firestone Country Club

JANUARY 31, 2013 17th Annual Deal Maker Awards

Young ACG event

DECEMBER 13

OCTOBER 1

networking event

Young ACG Holiday Social/

For more information contact M. Joan McCarthy at admin@acgcleveland.org or (216) 696-8484 or visit www.acg.org/cleveland.

MAY 17 Breakfast — Union Club Speaker: Richard J. Hipple, chairman & CEO, Materion Corp.

JUNE 12

JUNE 25 Young ACG summer social event

SEPTEMBER 19-20

Young ACG Event

Eighth annual ACG Cleveland Golf Outing

OCTOBER 25

Young ACG event

Afternoon — Ritz-Carlton Cleveland Special event

Evening — Shoreby Club Summer social event with TMA

MARCH 15

Great Lakes ACG Capital Connection

Marriott Renaissance Center, Detroit

OHIO

IS OUR HOME

For more than 27 years, 100 acquisitions and now our seventh fund, Linsalata Capital Partners has called Ohio home. Investing at home is a priority and we are proud to have eight examples where we have partnered alongside Ohio-based founders, families and management teams to grow businesses and create value.

WHO YOU MISSED LAST YEAR ■ John Kasich, governor of Ohio ■ Michael Hilton, president & CEO, Nordson Corp. ■ Monte Ahuja, chairman & CEO, MURA Holdings

Kasich

Hilton

Ahuja

Kvamme

Coburn

Hurwitz

■ Mark Kvamme, president and interim chief investment officer, JobsOhio ■ Chris Coburn, executive director, Cleveland Clinic Innovations ■ Robin Davenport, vice president of business planning and development, Parker Hannifin ■ Edward F. Crawford, chairman & CEO, Park-Ohio ■ Richard Smucker, president and co-CEO, J.M. Smucker Co. ■ Daniel B. Hurwitz, president and CEO, DDR Corp.

Continuity Management LLC Management Consultants

• • • • •

To discuss investment opportunities or questions regarding private equity and how Linsalata Capital Partners can assist with succession, transition or liquidity events, please call Tim Healy at 440-684-1400.

Operational Consulting Distress management Turnarounds Domestic and International Extensive record of success

We have extensive experience with M&A consulting and private equity portfolio companies in domestic and international locations. Call us for an introductory consultation. Call Jackie at 440-333-2424 Email: pcorrigan@cmllc.com

Landerbrook Corporate Center One U Suite 280 U 5900 Landerbrook Drive U Mayfield Heights, Ohio 44124 440/684-1400 U fax 440/684-0984 U www.linsalatacapital.com

Crain’s Cleveland Business Custom Publishing