2024 Association for Corporate Growth by Crain's Cleveland Business

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January 29, 2024 S1

CORPORATE GROWTH & M&A Contents

PRESIDENT’S LETTER

ACG Cleveland: A network of robust deal makers and creating exceptional value for our members.

By Jay M. Moroscak

hen you look back at your friendships and business connections, so many of them originated with an ACG event. It is through these relationships that professional connectivity is made and where deals get done. It is no surprise to this readership that Cleveland has a long history as a hotspot for M&A dealmaking. Our ACG members are at the forefront of that dealmaking community, supplying the knowledge, talent and energy at its core. ACG Cleveland is one of the preeminent chapters within the ACG network. Our activity and size far outpace a market of our size. We have an unbelievably strong group of professionals that give back to the chapter. With more than 500 members and scores of events, there is a palpable energy surrounding our group, propelling the chapter

The Cleveland chapter delivers numerous networking opportunities MOROSCAK through annual marquee events such as the 27th Annual Deal Makers Awards, Deal Source, the Summer Social at Shoreby Club, the annual golf outing at Firestone and the ACG Cup. We also offer highly valuable and innovative content year-round on a smaller, more personalized scale. Our large-format, marquee events are the cornerstones, but there is so much more with unique themes and activities that should appeal to everyone. Our “networks within the network” — Women in Transactions

(WiT), Young ACG (YACG) and ACG Akron — regularly feature special topics and engaging events year-round, all tailored to our diverse membership. I’ve been an ACG member for 22 years, and it is my honor and privilege to lead our chapter. The deal climate has its ups and downs, but ACG Cleveland is a welcoming arena to build relationships and find opportunities. I’m grateful to give back to an organization that allows so much involvement and growth. I look forward to sharing our successes with you during the upcoming year.

S2 M&A insurance choices are really investment decisions S3 How state tax elections could steal the show in your 2024 sale S4 Selling a business in the current high-deal volume environment S5 Valuation trends and expectations for 2024 S6 Cultural fit matters in dealmaking S6 3 steps to prepare for an effective M&A exit S7 The Corporate Transparency Act: Are you ready? S8 Prepare early to maximize valuation in a sale process S9 Minimizing tax risks a key part of structuring a successful deal S10 How private equity firms can accelerate growth with marketing AI S11 A proactive approach to deal origination can add value to your process S12 Family business succession requires calculated planning S13 Not just any ChatGPT NDA S14 Practical advice for distressed M&A transactions

Jay M. Moroscak is a senior vice president with Aon Cleveland. Contact him at 216-272-2155 or jay.moroscak@ aon.com

ABOUT ACG ACG is a global organization focused on driving middle-market growth. Its 15,000-plus members include professionals from private equity firms, corporations and lenders that invest in middle-market companies, as well as experts from law, accounting, investment banking and other firms that provide advisory services. Learn more at www.acg.org. ACG Cleveland serves professionals in Northeast Ohio and has about 500 members. For more information, visit www.ACGcleveland.org.

S15 Build resilience by investing in people, risk management S16 Navigating buy-side tax considerations in mergers and acquisitions S16 Protect your time and money from legal diligence through closing S18 Northeast Ohio’s top deal makers to be honored S18 Officers and Board of Directors S18 2024 events calendar

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M&A insurance choices are really investment decisions By Kip Irle

oth middle-market CEOs were experienced and savvy, and both pursued strikingly similar acquisitions. Two years later, one of the deals had checked every box and exceeded the buyer’s most optimistic expectations. The other was stumbling along and a constant source of criticism from the board. Would you believe the difference largely came down to how the two CEOs viewed risk and insurance? The CEO of the faltering deal faced more than their fair share of unpleasant surprises, among them a handful of extraordinary medical claims resulting from worker injuries, a programming error that triggered a costly product recall and a three-week shutdown of a critical overseas vendor to repair damage from a typhoon. The other CEO also encountered unanticipated problems large enough to impact earnings. Why didn’t those issues derail the newly combined enterprise’s goals? Although nobody can accurately predict every situation capable of creating headaches for companies, the CEO’s mandate to the acquisition team emphasized both a frank examination of potential risks and the identification of strategies to best address those risks. The successful CEO sought to

decapitalize what the company might otherwise spend on insurance. Armed with a comprehensive look at risk management, the leadership IRLE team was able to consider a variety of strategies to best address areas of concern. Those strategies included retaining manageable risks by increasing deductibles, exploring ways to link specific risks more affordably with insurance policies and using captives and other vehicles. Taking such a strategic approach to the combined companies’ risk management allowed the management team to redeploy capital they might have otherwise spent on insurance to fund initiatives supporting growth and a stronger competitive position. Instead of thinking of insurance as just another inevitable expense, the CEO approached the risk management spend as an investment in the companies’ future. Of course, none of that would have been possible had the CEO not been open to discussing shifting strategies for funding risk mitigation. If leadership intends to spend a dollar in capitalizing insurance, it

needs to approach it with the same level of rigor it would assign to capitalizing an investment in a plant expansion. The business case for risk management demands a detailed analysis of the finances, the expected utility and its impact on the combined companies’ return on capital. Only with that level of understanding can the leadership team confidently decide to transform the use of insurance into an investment decision that not only drives costs out of traditional insurance spending but also provides an opportunity to increase market leverage and competitive advantages.

deserving the greatest focus and funding. A universal outcome of most M&A transactions is an increase in financial wherewithal. That has the potential to fund a more effective risk management program, but before the company can determine whether it wants to — or should — capitalize insurance or assume risk on its balance sheet, it must understand its financial risk-bearing capacity. Knowing what the leadership team will have available to work with requires the same kind of financial analysis that is a part of other significant investment decisions.

A universal outcome of most M&A transactions is an increase in financial wherewithal. The leadership team drew upon the specialized expertise of their risk management consultants to better understand the company’s business risk from an insurance perspective. Because not all risks are created equal, identifying and prioritizing risks is the first step. The newly combined entity would face hundreds of potential risks and could not mitigate them all, so the consultants identified the top handful of risks

The consultants also created a sensitivity analysis for insurance, which begins by quantifying the expected annual dollar value of losses in each major line of coverage (e.g., general liability, workers’ compensation). By modeling both entities individually and combining the forward-looking exposure base, unit rate averages and volatility, the consultants presented an actuarially sound forecast of future economic impact, giving the leadership team statistical certainty to

support decision-making. If the analysis concludes that expected losses in a particular category are well below what insurance carriers would charge, the leadership team can consider alternatives. Finally, given an actuarial understanding of the combined companies’ prioritized risks, risk-bearing capacity, and likely losses, the consultant identified options for efficiently addressing those risks. Should the team choose to go ahead and purchase traditional insurance, the information gathered through the process will help them determine the appropriate investment amount and negotiate the best rates. Conversely, if leadership recognizes they can instead use the capital to build and grow the business, that’s true risk optimization. Ultimately, choosing whether to use insurance is an investment decision. By partnering with an experienced insurance risk management consultant, the CEO ensured the leadership team understood all their options to make the best use of their capital, achieve a competitive advantage and create more value.

Kip Irle is the leader of global M&A and transactions solutions at Hylant. Contact him at 312-283-1339 or Kip.Irle@Hylant.com.

Insuring Investments. Enhancing Returns. What you don’t know can hurt you in small or large business transactions like mergers and acquisitions—especially when it comes to insuring risks before, during and after a transaction takes place. That’s why Hylant offers clients the expertise of our dedicated M&A and Transaction Solutions team. Let us help you reduce the uncertainty of complex transactions, protect your investments and make the best use of your capital. Learn more at www.hylant.com/mats.

Insurance, employee benefits and risk management consulting for businesses and individuals.

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How state tax elections could steal the show in your 2024 sale By Samantha Smudz

f you are a business owner looking to sell, advance planning can be the key to help minimize your tax burden and maximize your profits. In particular, recently created state elections for pass-through entities have had a surprising reach, in some cases changing the general dichotomy in the structuring goals of S corporation sellers and buyers. In general, S corporation owners selling their business want to sell equity so they can pay tax at more favorable capital gain rates. However, buyers typically want to structure transactions in a way that allows them to recover the purchase price in depreciation and amortization benefits, often resulting in a portion of the sellers’ gain to be taxed at higher rates. This difference in goals can create strains in purchase price negotiations and, in some cases, even delay the timing on closing a transaction. The pass-through entity tax election, often paired with a pre-transaction “F” reorganization, can help bridge the gap between buyer and seller and set up sellers for significant benefits during the sale. Impact of pass-through entity taxes One of the most impactful provisions of the Tax Cuts and Jobs Act of 2017 created a limitation of $10,000 on deductions

of state income taxes an individual can claim on their federal income tax return. Since then, numerous states, including Ohio, have created passthrough entity tax SMUDZ (PTET) elections. A PTET allows these entities to pay income tax at the entity level, resulting in a federal deduction of more than $10,000 in state income taxes paid by their own businesses. Often, the seller’s largest tax bill is in the year they sell their business. For example, the sale of equity in an S corporation for

of “gross-up” payments due to make a seller whole for selling assets. It is also imperative to know that PTETs will vary by state — including timing, single or multiple-year options, credit amount on your individual income tax return and even when you can deduct the taxes paid. For instance, some states require elections to be completed early in a tax year. Sellers should consider the PTET election as early as possible, putting pen to paper to determine whether it could help in the sale of your business. Regardless of the particulars in your state, timing and structuring the transaction specifically as an asset sale versus equity will be critical factors to success.

Sellers should consider the PTET election as early as possible, putting pen to paper to determine whether it could help in the sale of your business. $20 million of gain could create a federal and state tax bill of well over $5 million. Without a PTET election in place for a state that charges an income tax of 4%, the seller may lose almost $800,000 in federal tax deductions. Those deductions could be enough to make an asset sale more beneficial than an equity sale. For buyers, this could mean the eliminations

Pre-transaction “F” reorganization In order for a taxpayer to take advantage of the PTET in the year of a transaction, first the deal must be structured as a sale at the entity level rather than a sale of equity. Completing an “F” reorganization before a transaction can work well with the PTET. An “F” reorganization has almost become

the norm when acquiring or selling an S corporation, and for good reason. In this context, the reorganization creates a new holding corporation above an operating company. As the operating company becomes disregarded for federal income tax purposes, a purchase/sale of all the equity in a disregarded entity is treated as a sale and purchase of assets. This allows sellers who plan ahead to make the potentially beneficial PTET election. Potential tax benefits also allow: • Sellers a tax-deferred rollover of equity into the purchasing entity. • Buyers that are ineligible S corporation shareholders to potentially maintain a pass-through entity structure post-close. While the M&A market continues to ebb and flow, if you plan to sell your company

in the near future, the best advice is to be aware of the tax opportunities available to you before going down the path of a sale. Planning ahead could significantly impact your success.

Samantha Smudz, CPA, JD, is a tax partner in the Transaction Services Group at Cohen & Company. Contact her at 216-649-5546 or ssmudz@cohencpa.com. Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this article is considered accurate as of the date of publishing. Any action taken based on information in this article should be taken only after a detailed review of the specific facts, circumstances and current law.

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Selling a business in the current high-deal volume environment By Dustin J. Vrabel

elling a business in any environment can be challenging when planning is not addressed early in the M&A process. The challenges are heightened in the current environment where buyers are looking at multiple potential deals simultaneously, expecting to close as efficiently as possible before moving on to the next opportunity. With the proper planning conducted by sellers before even identifying a buyer, however, a sale

transaction can be relatively smooth and maximize value to the seller. Buyers have limited time and resources to dedicate to potential M&A VRABEL opportunities, and they need to focus on those target companies and transactions that are most likely to get to a successful closing. There are a number of steps that sellers should

consider implementing before going to market or engaging with potential buyers that will lend them credibility as a “real seller” and make them an attractive candidate for a deal. Most sophisticated buyers will conduct a Quality of Earnings review (QofE) as part of their diligence to help validate add-backs/adjustments to EBITDA and justify valuation and sustainability of earnings, post-closing. Even if buyers will ultimately engage their own QofE, sellers demonstrate a level of seriousness

and commitment when they make the investment upfront and provide an independent QofE report to potential buyers. It also helps sellers identify add-backs to EBITDA that might have been overlooked. This approach can lead to a higher valuation and provide insight into what level of normalized working capital might be requested as a working capital peg in the letter of intent or definitive acquisition agreement. Further, companies that historically had only internally prepared or accountantreviewed financial statements should

evaluate the cost and benefit of obtaining accountant-reviewed or audited financial statements, respectively, to make it easier for buyers to evaluate reliable financials with some degree of outside review. Conducting an internal legal due diligence review is another step that helps lend credibility to sellers and, most importantly, can speed up the closing timeline. Many items such as ordinary course consents to change-in-control of material contracts are generally addressed after the LOI stage. However, certain items such as ownership/cap table records or real estate title defects with a long lead time should be handled in advance of deal talks to avoid delays. Other items such as environmental, benefits, sales tax compliance and other legal issues can be uncovered and addressed as part of a legal due diligence review. Buyers don’t expect to have every legal due diligence item identified, posted to a data room and covered off before the LOI — and they will certainly conduct their

Conducting an internal legal due diligence review is another step that helps lend credibility to sellers and, most importantly, can speed up the closing timeline. own independent review. Nevertheless, it makes it much easier for a buyer and builds trust when sellers are forthright with legal issues and propose solutions to address them via risk-sharing in the purchase agreement, transaction insurance, corrective action or other remedies. If the internal legal due diligence review identifies material legal issues, then sellers should consider discussing potential transaction risk insurance solutions. While Representation and Warranty Insurance traditionally covers unknown issues in the event of breach of a rep or warranty in the definitive acquisition agreement, various tax indemnity and contingent liability insurance products can cover and ringfence liability for known contingent exposure in the areas of tax, employee benefits, environmental and litigation matters. Again, when the due diligence issues are brought to the forefront and addressed (and not discovered by buyer’s counsel or CPA firm late in the transaction process), it makes a deal more likely to close. Sellers should also think about and propose to buyers what the business could look like post-closing, whether that be new opportunities and synergies or leadership and management if the primary owner of the business is going to be retiring or moving on to other things. These business items can enhance value to the deal, as many of the management/key employee issues are often addressed too late in the process. From a legal standpoint, addressing employee non-compete and employment or transaction/stay bonus 2024 Doug Sibila Testimonial final outlines.indd 1

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arrangements at the appropriate time for employees to consider and evaluate — and not waiting until right before closing — is something that can often be overlooked. Finally, sellers and the entire transaction team must establish reasonable and firm deadlines with all members of the transaction team and help hold everyone accountable once an LOI is executed. Despite what can be perceived as an adversarial situation, finalizing and closing a successful M&A transaction is more about collaboration among experienced parties, CPAs, counsel, bankers and other advisers. Set weekly or daily status calls and meetings and establish agreed-upon closing timelines. Determine expectations for turn times on the definitive acquisition agreement and ancillary drafts. Confirm deadlines for review and resolve comments on environmental reports, insurance reviews, title commitments and other diligence items. These strategies are vital to keeping a transaction on track when buyers, sellers and advisers are working in a highvolume M&A environment.

Dustin J. Vrabel, Esq., is lead partner of the M&A Group at Buckingham, Doolittle & Burroughs, LLC. Contact him at 330-491-5238 or dvrabel@bdblaw.com.

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Valuation trends and expectations for 2024 By Andrew K. Petryk

023 could be considered a year during which buyers and sellers took time to “catch their breath” coming off the frenzied pace of 2022. Market shocks of recession fears, persistent high-interest rates and geopolitical instability served to feed investor caution, leading many to hit the pause button on M&A and await better clarity on the macro environment. The same catalysts that stalled dealmaking hold the potential to push deal flow higher and fuel a rebound in the M&A market in 2024. The weight of a threatening recession loomed large throughout much of 2023, yet the U.S. economy remained resilient. Economists predict continued, albeit slow, growth, with real GDP to increase 2.4% in 2023 and 1.7% in 2024. Interest rates are predicted to moderate or decline in 2024, with analysts anticipating a Fed Funds rate of between 4% and 5% by year-end. The credit markets remain open for good companies. The debt markets have improved notably in the last few months. Spreads are tightening, although all-in rates remain elevated given where reference rates sit (three-month CME Term SOFR around 5.4%, and prime at 8.5%). Nuances remain in a market where new private (non-bank) lenders continue to emerge to fill voids left by

PETRYK

the banks and syndicated markets, and alternative lenders are busy with mezzanine — an increasingly attractive financing option in the current environment.

The high-rate environment has decreased buyer leverage, putting pressure on valuations and causing a disconnect between buyers and sellers. As that gap narrows, we expect more movement in the M&A market. But make no mistake. Quality reigns and great companies are achieving great valuations. Business models with strong recurring revenue and free cash flow, consistency of performance through COVID, and

requirements are heightened. Signs of an uptick were visible during the third quarter. According to GF Data, valuations ticked up on middle-market private equity-backed M&A transactions, with the adjusted EBITDA multiple increasing to 7.5x — up nearly a full turn (0.9x) from the second quarter. Further, the year-to-date average of 7.3x falls just shy of the 7.4x observed in 2022. Strategic buyers and financial buyers are sitting on cash, which will fuel the deal engine as acquisitions augment slower organic growth. Capital in the private equity coffers has ballooned to more than $955 billion as of the third quarter of 2023. More than 20% of that amount is tied to funds with a vintage of three years or more, which must be put to work. But while there is capital to be deployed,

Strategic buyers and financial buyers are sitting on cash, which will fuel the deal engine as acquisitions augment slower organic growth. insulation from geopolitical risk are garnering even greater attention. The highest-quality companies see virtually no change in purchase price multiples. While valuations remain strong for the best companies, the market is binary. Transactions involving average companies are difficult to get done today. Diligence

fundraising has been more challenging today, with the total amount raised by closed funds down 12.9% through the third quarter. Sponsors are choosier about which investments to support and are not rushing to deploy capital. The slowdown is not entirely unexpected, coming off a record year in 2022 when

U.S.-based funds raised a notable $381 billion, according to PitchBook. Significant pent-up demand has the deal pipeline near bursting, with 2024 likely to be an “opening of the floodgates” as buyers, sellers and lenders await bringing deals to market.

Andrew K. Petryk is a managing director and leads the Industrials practice at Brown Gibbons Lang & Co. Contact him at 216-920-6613 or apetryk@bglco.com.

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Cultural fit matters in dealmaking By Albert D. Melchiorre

n order to successfully acquire a business, many challenges and obstacles must be overcome to complete the transaction. MELCHIORRE First, one needs to determine its acquisition rationale and criteria. Inorganic growth by way of strategic acquisition can make sense for a business for a variety of different reasons, including: • access to new markets • product line diversification • expansion of production capabilities • geographical expansion • access to talent in both management and production.

Once the acquisition rationale has been determined and the target identified, an experienced deal team is paramount to successfully navigating the complexities of the transaction to close the deal. In today’s environment, it’s getting even more complex. Cultural fit is one of the most critical aspects of a successful transaction, which can sometimes be missed or overlooked. Cultural fit is a crucial aspect in any M&A transaction because it can significantly impact the success or failure of the deal. Cultural misalignment poses a risk to the merger’s success. Issues such as conflicting values, communication breakdowns and resistance to change can disrupt operations and lead to the failure of the M&A deal. There are several reasons why cultural fit matters, but here are a few that MelCap has seen that can determine success or failure: • Employee morale and engagement: A harmonious cultural fit helps maintain employee morale during times of change. Employees who see a seamless integration of cultures are more likely to feel secure, engaged and motivated. • Retention of key talent: Cultural alignment contributes to retaining key talent. Employees who identify with the newly formed culture are more likely to stay with the organization, reducing the “flight risk” of losing valuable skills and experience.

• Communication and collaboration: A shared cultural foundation fosters effective communication and collaboration. When employees understand and embrace a common set of values and norms, working together toward common goals becomes easier. • Reduction of resistance to change: M&A transactions inherently involve change, and employees may resist change if they feel their culture is being disregarded. Cultural fit minimizes resistance by incorporating aspects of both organizations, creating a more inclusive and accepting environment. • Productivity and efficiency: A cohesive culture can contribute to increased productivity and operational efficiency. When teams are aligned culturally, they are more likely to understand each other’s working styles and processes, leading to smoother operations. Cultural fit matters in M&A transactions because it directly impacts the human aspect of the integration process. Organizations that prioritize cultural compatibility are better positioned to create a cohesive and high-performing merged entity, leading to long-term success and sustainable growth.

Al Melchiorre is president and CEO of MelCap Partners, LLC. Contact him al@melcap.com.

3 steps to prepare for an effective M&A exit By T. Ted Motheral and Jacob B. Derenthal

n today’s business landscape, successfully navigating a business sale requires meticulous planning and execution. Here is a summary of three crucial steps to ensure an effective M&A exit strategy: 1. Strategic alignment: To maximize success during a business exit, sellers should conduct a review of its financial, operational and legal position before engaging with potential merger or acquisition partners. Identifying the strategic goals of the selling business and its owners ensures that an exit path aligns with the company’s vision. Stakeholders should take advantage of this stage to consider challenges that will inform future negotiation of terms. With a solid foundation in place, the exiting company can be confident when it engages financial partners interested in acquiring the business. 2. Team preparation: M&A transactions involve complexities that demand a coordinated effort of the

MOTHERAL

DERENTHAL

exiting company’s employees and external transaction specialists. The typical team will include, at a minimum, representatives from finance, legal, human resources and operations departments. Establishing lines of communication among the cross-functional team is essential for streamlining transaction execution.

3. Communication and stakeholder management: Effective communication is paramount. Most decision makers must balance the need for employee subject matter expertise with a desire to keep the sale confidential. Managing the timing of communications with internal and external stakeholders is necessary for maintaining trust and minimizing

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A successful M&A exit requires strategic forethought, collaboration and effective communication. disruptions. Companies should develop a communication plan that addresses the concerns applicable to each stakeholder group. Timely updates among the deal team can mitigate duplication of efforts during the transition. Additionally, companies should manage reputational risks by aligning their messaging with the values of the exiting and acquiring entities. Lean on advisers with transaction experience to guide the exiting management team and allow company employees to continue operating the selling business without becoming overwhelmed. A successful M&A exit requires strategic forethought, collaboration and effective communication.

T. Ted Motheral is a partner and chair of Walter Haverfield’s Business Services Group. Contact him at 216-928-2967 or tmotheral@walterhav.com. Jacob B. Derenthal is a partner with Walter Haverfield’s Business Services Group. Contact him at 216-928-2933 or jderenthal@walterhav.com.

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The Corporate Transparency Act: Are you ready? By Jennifer L. Vergilii

he Corporate Transparency Act (CTA) was passed into law as part of the National Defense Authorization Act for fiscal year 2021 and took effect Jan. 1, 2024. The CTA regulates what types of entities are required to file a report with the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) and requires reporting of beneficial owners of such entities — individuals who own, control or take steps to create an entity. FinCEN estimates the reporting obligations under the CTA to impact more than 32 million pre-2024 entities and about 5 million entities per year formed in 2024 and over the next decade. In all likelihood, if you are an owner or can direct decisions of a limited liability company, corporation or other type of entity, you will have to report to FinCEN. Reporting is ongoing and failure to report will result in fines. Requirements now mandated by the CTA and who could be affected Domestic and foreign companies registered to do business in the United States are generally required to self-report. While there are 23 different exemptions under the CTA, the exemptions are narrowly drafted

to exclude from reporting those types of entities that are already highly regulated, such as banks, insurance companies, public utilities and VERGILII large operating companies (companies with more than 20 full-time employees and federal tax filings that demonstrate more than $5 million in gross receipts or sales). Reporting companies must report the following information: • legal name of the reporting company • any trade name or “dba” • address • jurisdiction of formation and • Employer Identification Number (EIN). Likewise, beneficial owners of reporting companies must report: • legal name • date of birth • a unique identifying number (passport or driver license) and • address. The CTA’s definition of a beneficial owner is broadly drafted to include any

individual who, directly or indirectly, exercises substantial control over a reporting company or controls at least 25% of the ownership interests. “Substantial control” is interpreted to include any person who can direct or control decisions made by a company. On Sept. 28, 2023, FinCEN extended the deadline to 90 days for entities formed in or after the calendar year 2024. Entities formed before 2024 have until Jan. 1, 2025, to file. FinCEN’s filing system is located at www.fincen.gov/boi. The filing requirements under the CTA are not a “one and done” effort, but rather any time there is a change in beneficial ownership, the reporting entity is required to file an updated report within 30 days of the change. Companies are encouraged to establish education and training protocols for

complying with this new law as the potential to misstep is great. Additional information: 1. Beneficial Ownership Information Reporting Requirements, 87 Fed. Reg. 59498 (Sept. 30, 2022). https://www.federalregister. gov/documents/2022/09/30/2022-21020/ beneficial-ownership-information-reportingrequirements. 2. https://www.fincen.gov/sites/default/files/ shared/BOI_FAQs_FINAL_508.pdf at *10.

Jennifer L. Vergilii serves as firm vice chair, and she is a partner with the Corporate and Finance practice group at Calfee, Halter & Griswold LLP. Contact her at 216-622-8568 or jvergilii@calfee.com.

Congratulations to all ACG Cleveland Deal Maker Award nominees and honorees! Calfee celebrates the accomplishments of MPE Partners, the ACG Cleveland PE Fund Deal Maker of the Year Award recipient! Calfee is honored to represent many companies and private equity funds that generate employment and economic success in our region and beyond. CALFEE.COM | 888.CALFEE1 | INFO@CALFEE.COM ©2024 Calfee, Halter & Griswold LLP. All Rights Reserved. 1405 East Sixth Street, Cleveland, OH 44114. ADVERTISING MATERIAL.

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Prepare early to maximize valuation in a sale process By Jeff Johnston and Brian Weiss

ith over 40 years of combined experience as M&A advisers, we’ve advised many owners on selling their privately held businesses. Some businesses are highly soughtafter, attracting the attention of multiple highly-motivated bidders. The owners of these businesses typically begin planning for a sale well in advance and, with the help of an experienced M&A adviser, can position their companies in the best possible light.

Other businesses struggle to draw significant interest or do not achieve the owner’s desired valuation. In some cases, these businesses have JOHNSTON solid underlying fundamentals yet are unable to achieve an optimal result due to a lack of thoughtful preparation.

Completing successful M&A transactions has additional challenges in today’s post-COVID deal environment. Economic uncertainty and WEISS elevated interest rates have cooled the overall market. Many buyers, however, are eager to put money to work. Corporates have record cash levels

on their balance sheets, and private equity firms must invest their committed capital to achieve desired fund returns. Given the market uncertainty, these buyers want to invest in the highest quality businesses. The best-prepared and marketed companies are achieving very strong outcomes. Below are some ways business owners can prepare for a future sale: Diversify customers and suppliers: In the eyes of a buyer, one of

We have fresh ideas to move industrial businesses forward. Through deep industry expertise, flawless execution, and nationwide resources, KeyBanc Capital Markets® has successfully closed nearly 300 M&A deals since 2019. Industrial & Business Services

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Visit key.com/M&A Let’s connect: Jeff Johnston, M&A Group Head and Managing Director jjohnston@key.com 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 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. ©2024 KeyCorp. 231116-2337329

the biggest risks to a business is an overdependence on a single or limited number of customers. A current owner may have a long, deep relationship with an important customer. Still, a buyer will rightly consider whether that customer’s loyalty will be as strong under new ownership. Similarly, a buyer will view dependence on a single supplier as a potential risk to future production. Buyers will consider these risks in their valuation, so business owners should attempt to diversify both customers and suppliers as much as possible before a sale. Vet historical financials: Buyers will want to ensure that the seller’s historical financials are trustworthy and will conduct financial due diligence, typically with their own accounting adviser. Business owners should consider having their annual financials audited by a credible accounting firm before a sale process — this will streamline due diligence and provide credibility to the numbers. At the appropriate time, sellers should also consider retaining an established accounting firm to perform a Quality of Earning (QoE) analysis. This analysis will identify and adjust out any non-recurring items in the numbers, likely increasing profitability and further bolstering credibility. Create budgets and projections: Owners should institute an annual budgeting process to create a detailed budget for each new year. Buyers will draw comfort from comparing past performance relative to budget. Good performance vs. budget will lend credibility to the current owner and management team. In addition, companies should produce medium-term projections (i.e., three to five years) based on a detailed buildup of business drivers, including trackable key performance indicators. Buyers will use these projections to help value the business, so a thoughtful and logical buildup will help drive buyer confidence. Focus on profitability: Businesses in most sectors will be valued based on their “normalized” profitability. EBITDA, or earnings before interest, taxes, depreciation and amortization, is a commonly used profitability metric. Therefore, owners who may have previously run the business to minimize taxes should focus on maximizing profitability before a sale. This could include cutting unnecessary costs and removing personal expenses from the business. Identify long-term growth areas: Understandably, many owners planning a sale are focused solely on near-term growth to maximize the company’s financials at the time of the sale. Buyers, however, will want to know the business will continue to grow after their purchase. A smart seller will set up the company for continued growth (through new product lines, geographic expansion, a pipeline of acquisition targets, etc.) and help the buyer formulate their own growth plan. The more a buyer believes in the future growth of the business, the more it can pay for the business now. Set up a robust and flexible management structure: Buyers of a privately-owned company will want to ensure that a strong management

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team is in place to drive the business post-acquisition. A standalone private equity buyer typically wants a full management team, including a CEO, going forward. A strategic buyer, which may fold the acquired business into its larger operations, may not require a full management team. If the current business owner would like to exit the business upon sale, it is important that the business operations and customer relationships do not appear too dependent on the owner and that a strong group of managers are eager to remain with the company. Selling a privately-owned business can be complicated, and not all sales have a successful outcome. Business owners should begin planning for an eventual exit well in advance, regardless of the market environment. The more prepared a company is for a sale process, the better result it will achieve. Jeff Johnston is managing director and group head of Mergers & Acquisitions at

KeyBanc Capital Markets. Contact him at 216-689-4115 or jjohnston@key.com. Brian Weiss is managing director of Mergers & Acquisitions at KeyBanc Capital Markets. Contact him at 917-887-0385 or brian.weiss@key.com.

This article is for general information purposes only and does not consider the specific investment objectives, financial situation, and particular needs of any individual person or entity. 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 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.

WHERE CRITICAL INSIGHT MEETS TRUSTED RESULTS Avoid surprises. Our national experts provide thorough buy and sell-side due diligence and quality of earnings assessments so you can make informed transaction decisions.

Mark B. Bober, CPA/ABV, CFF, CVA | mbober@bmf.cpa Steve C. Swann, CPA/ABV, CFE | sswann@bmf.cpa Mindy S. Marsden, CFE | mmarsden@bmf.cpa

Minimizing tax risks a key part of structuring a successful deal By Michael D. Makofsky and Ryan M. Palko

n ounce of prevention is worth a pound of cure in M&A deals. A plan to mitigate tax risks and optimize tax advantages is an essential component of every M&A strategy and requires multifaceted legal expertise. Omitting tax considerations in structuring a deal leaves money at the bargaining table and confounds the valuation process. Whether the business transaction is a purchase or sale, involving assets or stock, good advice is needed to understand how the deal will be treated by the IRS. Asset transactions have unique contours when compared against a stock deal. From the buy-side, buyers may depreciate assets based on purchase price. However, the downside is business successor liability. Under state law, buying assets may keep the buyer on the hook for unpaid state taxes. From the sell-side, asset sales likely create capital gain treatment. This is beneficial because of the capital gain rate break. However, sellers of assets may have potential “depreciation recapture.” To reiterate, experienced advisers have potential planning opportunities to mitigate these tax risks. Stock sales, compared to asset deals, are generally more complex. Depending on the business entity form, the Code blesses some transaction structures as tax-free. On the one hand, buyers may choose stock deals for “tax-free reorganization treatment.” A tax-free reorganization is

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MAKOFSKY

a creature of the Code and requires tax counsel. Sellers generally receive capital gain treatment on the sale of corporate stock. All in all, stock deals are complex, but advisers have levers in the Code to manage parties’ interest in a transaction.

Before inking a LOI, engaging a skilled adviser to structure PALKO your deal ensures the most value is captured at the bargaining table. Advisers with both tax and transaction acumen have tools in their toolkit to bring a transaction to life while mitigating downstream tax liabilities.

Michael D. Makofsky is principal at McCarthy, Lebit, Crystal & Liffman Co. Contact him at 216-696-1422 or mdm@mccarthylebit.com. Ryan M. Palko is an associate at McCarthy, Lebit, Crystal & Liffman Co. Contact him at 216-696-1422 or rmp@mccarthylebit.com.

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How private equity firms can accelerate growth with marketing AI By Brad Kostka

here’s much more to marketing artificial intelligence than simply generating text with tools like ChatGPT. Private equity general partners who recognize this and drive adoption through their firms and portfolio companies will outpace their competitors, particularly when it comes to fundraising, deal flow and portfolio company growth. What is marketing artificial intelligence? Put simply, marketing AI is the use of cutting-edge technologies, such as machine learning, natural language processing and computer vision, to automate and improve marketing tasks. Marketing AI can help private equity firms and their portfolio companies better understand and engage with investors and customers, ultimately driving more top-line revenue and bottom-line efficiencies. How can private equity firms leverage AI for marketing? There are numerous aspects of marketing that can benefit from AI. Below are just a few: • Content creation: Beyond written

content from tools such as ChatGPT and Jasper, there are those that can generate audio (WellSaid, Murf), images (DALL-E, Midjourney), and even video (Pictory KOSTKA and Synthesia). By leveraging these tools, marketers can free up time to focus on high-impact tasks such as strategy, editing and storytelling.

• Media monitoring and analysis: AI tools are adept at autonomously monitoring and evaluating a brand’s presence across diverse media platforms, such as social media, news outlets and blogs. BrightEdge offers a notable example with its AI-powered tool called Insights, which functions as a digital data analyst. This tool methodically searches through millions of web pages, supplying marketers with data-driven recommendations for search engine optimization (SEO) and content development strategies.

the winners. Numerous online resources, including tutorials, courses and articles, are available. Notable resources are the Marketing Artificial Intelligence Institute and Private Equity Marketing Association.

• Lead generation: AI tools can assist in pinpointing and ranking potential sales leads, enabling marketers to focus on the most lucrative prospects. Performance Max, a new feature within the Google Ads platform, is an example of this technology. It uses machine learning and audience signals to optimize campaign performance and, ultimately, maximize conversions across Google’s advertising channels.

Using AI in these areas can enable marketers to save time, base decisions on solid data and enhance the effectiveness of their campaigns — ultimately allowing them to better attract investors, increase deal flow and generate more qualified sales leads.

• Research AI marketing tools: Explore the variety of marketing AI tools and vendors available, which vary in capabilities, pricing and technical requirements. It’s important for private equity marketers to select tools that align with their firm’s unique needs and portfolio characteristics.

• Campaign management: Utilizing AI, marketing campaigns can be finely tuned for improved targeting, personalization and timing, leading to superior outcomes. An example of this application is Seventh Sense, which employs AI to optimize the timing of email deliveries, boosting engagement and email marketing performance.

How can private equity marketing teams embrace AI?

• Identify AI application areas: Pinpoint specific business areas where AI can boost efficiency or effectiveness. This could involve content creation, media monitoring of portfolio companies and optimizing campaign management strategies.

Here are key steps that private equity marketers can undertake to integrate AI tools more effectively:

• Pilot AI tools: Begin with modest pilot projects using AI-driven tools, assessing their functionality and setting achievable objectives. Leverage the wins to secure resources to do more.

• Seek AI knowledge: Gain a fundamental understanding of AI, including core concepts like machine learning, natural language processing and computer vision. Then, keep learning. The technology is rapidly evolving, and those who keep up will be

• Consider the ethics: Remain vigilant about the ethical use of AI. Ensure the data used for training AI models is free from bias and does not lead to discriminatory outcomes, especially in the sensitive context of private equity investments.

• Monitor and refine AI tool performance: Continually assess the effectiveness of the AI tools and make necessary adjustments. Bear in mind that AI systems progressively learn, adapt and enhance their capabilities. • Develop a skilled team: Build a team proficient in data science and AI to manage and leverage these tools effectively. This may involve recruiting new talent or upskilling existing staff in the private equity firm and its companies. • Integrate AI with overall business strategy: Ensure the use of AI in marketing aligns with your firm’s broader business objectives. This includes coordinating with various departments for a cohesive approach, particularly if AI applications span multiple areas. By following these steps, marketing and PR professionals in private equity can begin to harness the power of AI, positioning themselves and their firms at the forefront of innovation and efficiency in investor relations and portfolio company growth. Learn more at roopco. com/pe.

Brad Kostka is president of Roopco. Contact him at 216-902-3800 or bkostka@roopco.com.

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January 29, 2024 | S11

A proactive approach to deal origination can add value to your process By Lizabeth Roth

n the world of lower-middle market M&A, proprietary deals may be the most sought-after. But what is proprietary deal origination, and how can it bring value to your process? A proprietary deal is generally considered a transaction resulting from the direct relationship between the seller of a business and the buyer. This contrasts with an intermediary-led formal process where the seller has committed to exiting the business and is potentially entertaining many suitors.

2. Less competition. A proprietary deal can allow a buyer to discuss a possible transaction without competition. In a formal process, a bidding war may ROTH ensue if multiple buyers are interested in a particular company.

Proprietary deal sourcing can add significant deal flow to your origination efforts. This discussion aims to encourage a more proactive instead of reactive approach to deal origination. As with any approach, there are advantages and disadvantages associated with committing to this strategy.

3. Relationship-focused. A deal negotiated outside of a formal process allows for organic relationship development and a more open exchange of information. Buyers may have an extended opportunity to share more about who they are and explain their value proposition. The buyer may also have a chance to gain a deeper understanding of the business, potentially speeding up the transaction timeline and helping ease post-deal integration challenges.

Advantages

Disadvantages

1. Strategic focus. Reaching out to companies that are not actively seeking an exit may open additional opportunities that are a great strategic fit. Proprietary deal sourcing can allow the buyer to focus on targets that best fit their objectives instead of limiting deal flow to only looking at in-market companies.

1. Time consuming. Proprietary origination can be time-consuming, and acquisition opportunities may not be actionable in the near-term. Compiling a target list requires research. It also may take several conversations and months of relationship-building before deal negotiations occur.

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2. Operations hurdles. Additionally, sellers may not be operating the business financially and organizationally with the goal of an imminent transition. Information requested from the seller might not be in the best format, and the seller may become overwhelmed with the amount of detail requested.

make up a perfect target company. Then, develop a set of search criteria. Having fixed criteria that outline what you are looking for in a target company will help you stay focused and establish a guide for building your pipeline with targets that have the highest probability of being a strategic fit.

3. Owner mindset. Lastly, the seller may not be psychologically ready to exit the business. Engaging with a business owner who has not dedicated time to think through life post-transaction may complicate the conversation.

2. Do your research. Databases and resources can help you compile lists of targets that fit your criteria. Your time is valuable. You should focus your outreach and relationship-building efforts on targets you are confident fulfill most of your criteria. Leveraging technology can be a tremendous asset in building quality target lists.

A proprietary deal is generally considered a transaction resulting from the direct relationship between the seller of a business and the buyer. Whether you’re beginning your proprietary deal process or refining your strategy, here are some tips to help you get started.

3. Know your value proposition. It is important to be able to articulate to a target what you, as the buyer, bring to the table. The target company needs to understand why it would be better off selling the business to you than continuing to hold. For most sellers, this comes down to your ability as a buyer to understand the business and sell your vision. The current owner needs to know how you intend to grow the business and provide value to the company posttransaction.

1. Drown out the noise. Take time upfront to thoughtfully think through what quantitative and qualitative factors

4. Focus on building a relationship. Some of the most successful deals are those during which the buyer and seller

become partners. The buyer and the seller should feel like they are working together toward a common goal. The initial discussions with a potential seller should be conversational and not overtly direct. An overly aggressive approach might skew the conversation and alienate the seller. Even though, as a buyer, there is a desire to work through a “checklist,” being too direct initially might cause the seller to walk away. 5. Be patient and reframe rejection. Most proprietary deals take months of preplanning and conversations before there is a successful transaction. A no can be a no, but sometimes a “let’s keep in touch and see where things go.” Although not everything, timing is certainly a huge factor in the world of M&A, and it is important to remember that situations change. It can pay off tremendously to prioritize cultivating relationships with the owners of strategically compelling companies. This shift in thought process will help you find deals that are a part of your strategically curated M&A pipeline. By utilizing these tips, you will become closer to creating a deal instead of just bidding on one. Lizabeth Roth, JD, is a vice president at Copper Run. Contact her at lroth@ copperruncap.com.

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Family business succession requires calculated planning By Todd Baumgartner

ll families have some level of dysfunction. Throw a familyowned business on top of that, and managing the dynamics between personal and professional relationships across generations can get tricky. A Loyola University study found that only 13% of family businesses made it to the third generation, and of those, only 3% prospered. There is no perfect answer to why some family businesses succeed

while others fail. Still, in my experience, there’s a commonality you’ll find in successful transitions from generation to generation: intentional, thoughtful planning. Evaluating the wants, needs and capabilities of the next generation Family business succession planning is complicated, but the first step is determining whether the next generation

wants the business — and if they do, can they run it? It can be helpful to have the opinion and mediation of trusted outside advisers who will speak the BAUMGARTNER truth, even if it is painful for the family to hear. The next generation may not be qualified to run the business if it has grown beyond the

capacity of the family to manage. They also may not be passionate about the business, which requires honest and open communication. However, if there is a new generation willing and able to successfully operate the business, they need to be adequately prepared and trained. It is strongly recommended that a family employee train under and report to a non-family supervisor or a family member who is not a parent. Governing documents should

The team that gets your deal done! McDonald Hopkins’ full-service M&A practice is committed to knowing the goals of its diverse client base servicing numerous industries. With a team of attorneys who understand the importance of balancing risk with a client’s focus on closing a transaction, we are the destination for businesses looking for an integrated approach to M&A. We work seamlessly with professionals in tax, executive compensation, finance, employee benefits, intellectual property, and restructuring to provide business-focused solutions to complex deal issues.

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Christal Contini

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provide for the length of service and operational duties required for a family employee before obtaining ownership in the family business. Some businesses impose stipulations that family members work at an unrelated business for some time before being employed at the family business. Other provisions can require that all family members involved in the business, other than the employee’s parents, approve of the employee becoming an owner before transitioning ownership. Evaluating the wants and needs of the current generation The current generation needs to have a financial analysis performed by an adviser who can equate their financial needs to maintain their standard of living for the duration of their life. When handing down a family business, few family members seek to extrapolate every last bit of the fair market value from the next generation. Most families will pay a certain purchase price for the business. Setting a purchase price when selling to the next generation can be risky if nonemployee family members are members

The current generation needs to have a financial analysis performed by an adviser who can equate their financial needs to maintain their standard of living for the duration of their life. or shareholders in the business. Officers and directors owe shareholders a duty of care and duty of loyalty to the company’s profits. Human nature is to assume if you aren’t receiving adequate compensation, non-employee family members can bring an action for breach of a duty of loyalty if they feel the selling price is unfair. These are especially difficult cases to defend since the business will ostensibly be forced to prove a negative. Allegations like these are fact determinations that ultimately are decided at a trial before a judge or jury. This is an expensive and time-consuming ordeal that will adversely impact the finances of the business and family relationships and pose a distraction to the management team. Tax planning is also paramount to successfully transfer the business to the next generation and minimize any estate or gift taxes payable. Typically, a business will retain an expert to perform a business valuation that can be defensible to the IRS. The valuation will be the basis for gifting without incurring tax liability. Selling the family business to a third-party buyer

Kevin Washburn

Amy Willey

m c d o n a l d h o p k i n s . c o m

John Wirtshafter

When selling a family business to a third-party buyer, the current generation should retain an investment bank to begin preparing years in advance. The investment bank can define the current generation’s goals in exiting the business and advise on financial decisions that can impact the profitability and sale price of the business. The current generation should also retain legal counsel with expertise in family-owned businesses,

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who can help obtain favorable deal terms and risk allocation. Family businesses tend to have strong bonds and a feeling of loyalty to long-standing employees. Certain buyers can increase the chances that those employees will remain in place or flourish in their new role. An ESOP, strategic partner and certain private equity funds can maintain the existing company culture. When to begin planning to transition your family business As with any sales process, it is crucial

to have options— and options are only available when you’ve planned ahead. I have never encountered a sale process where the business began planning too soon. Without a good plan in place, you risk creating unnecessary family tension, selling below market value, compromising the long-term viability of your business and so much more.

January 29, 2024 | S13

TMA Northern Ohio Chapter Announces 2023 Lifetime Achievement Award Winner!

Todd Baumgartner is a member of the Mergers and Acquisitions Practice Group at McDonald Hopkins LLC. Contact him at 216-348-5737 or tbaumgartner@ mcdonaldhopkins.com.

Not just any ChatGPT NDA By Charbel M. Najm and Jenna R. Bird

n an era where proprietary and confidential information holds immense value, business owners commonly find themselves in tricky situations where sharing valuable information is necessary to complete a merger or acquisition. Sharing confidential business information requires adequate protection to prevent such information from leaking into the wrong hands. In some circumstances, bad actors could even seriously injure or destroy a business. Ensuring that a business’s information remains confidential can be accomplished by crafting a welltailored non-disclosure agreement (NDA) —an agreement that clearly regulates and safeguards business and transaction information. To create a well-drafted NDA, business owners should consider the potential implications of their information getting into the wrong hands but balance that with the need to complete a successful transaction. When drafting the NDA, some key considerations include: • Will the fact that the business is for sale be confidential? Employees and customers may fear remaining at a business subject to a potential sale. • Will certain business secrets and intellectual property require particular attention if they must be disclosed? At least one Ohio court recently held that boilerplate NDA provisions encompassing “all information” are sometimes not enough to protect certain trade secrets.

NAJM

BIRD

• Who will bear responsibility if the party receiving the confidential information experiences a data breach? How will a data breach be defined? As data breaches expand in breadth, it is important to spell out specific responsibilities and protection requirements for all or certain confidential information. • For what purpose may the confidential information be used? Clearly articulating who will have access to confidential information and for which specific purposes will limit the overall risk of exposure. A well-drafted NDA requires attention to detail and — importantly—serves as a cornerstone for building trust among all parties, fostering successful transactions and minimizing risk for business owners.

Charbel M. Najm, Esq., is an attorney at Schneider Smeltz Spieth Bell LLP. Contact him at 216-696-4200 or cnajm@sssb-law.com. Jenna R. Bird, Esq., is an attorney at Schneider Smeltz Spieth Bell LLP. Contact her at 216-696-4200 or jbird@ sssb-law.com.

The Northern Ohio Chapter of the Turnaround Management Association congratulates Shawn M. Riley (McDonald Hopkins), winner of the 2023 Lifetime Achievement Award, pictured here with his wife, Chris.

We thank Shawn for his leadership and the contributions he has made in the turnaround industry and in our community.

We Get Deals Done. McCarthy Lebit offers big firm expertise with small firm responsiveness to ensure our clients achieve success on every deal – no matter the size.

Because exceeding expectations and delivering more success has been our approach for over 60 years. www.mccarthylebit.com

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Practical advice for distressed M&A transactions By Jayne E. Juvan and Christopher J. Hewitt

ith Charlie Munger’s passing late last year, we were reminded how he transformed Warren Buffett’s investing philosophy from buying fair companies at wonderful prices to buying wonderful companies at fair prices. One of the best ways to buy wonderful assets at fair, and maybe even wonderful, prices is to buy them from distressed sellers. There are many reasons sellers need to sell assets at distressed prices

even though the assets themselves are wonderful — technical covenant defaults in debt documents, failure in succession planning, cash flow issues and entityHEWITT destroying litigation judgments, to name a few. The following are some ways sellers and buyers in distressed M&A can position themselves for a successful transaction.

Advice to sellers The No. 1 factor for sellers to be successful is to act before it’s too late. Rarely are there no signs of impending distress JUVAN before everything falls apart. Sellers need to be realistic and not emotional, accept the inevitable, and take action before needing to sell assets in a fire sale. Once the seller has lost suppliers, customers, employees

and other stakeholders, the assets are much more likely to fetch a lower valuation than if the seller can sell a fully functioning, stand-alone business. The seller has a much greater ability to control the narrative on the purpose of the sale, even to the point that the buyer may not even know it’s a distressed sale. There is also a greater probability of saving the rest of the enterprise. Similarly, the seller should have an open dialogue with its lenders. Lenders don’t like surprises, and the seller is likely to need the lender’s assistance in any

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sales process — to obtain some form of forbearance or approval to sell the asset, to maintain liquidity during the sales process, to apply the sales proceeds other than to pay down or restructure debt. Lenders are more likely to work with distressed sellers if there is open and honest dialogue about any financial problems. If possible, the seller should try not to sell assets as is-where is. While no-recourse deals have been in vogue recently, the pendulum is swinging back toward at least some limited recourse against sellers. Especially if the transaction is structured as an asset deal where the buyer is cherry-picking the assumed liabilities, there is no reason not to stand behind the representations in the purchase agreement. Just make them true! Lastly, don’t overcomplicate the sales pitch. Focus on why the assets are wonderful and, if known, how they are critical to the buyer’s business. In many cases, the most logical buyers are the seller’s competitors. The seller should leverage its knowledge about the buyer and create a simple narrative to confirm what the buyer may already suspect about the worthiness of the assets. Advice to buyers First and foremost, pay a fair price. The worst-case scenario for a buyer that exerts its leverage to get a sweetheart deal is the seller goes bankrupt. The trustee for the estate may allege the assets were transferred for less than adequate consideration. If successful, the buyer will either be required to return the assets or pay the difference between the purchase price and their fair value.

We navigate deals in all markets. Located in strategic cities nationwide, our trusted M&A advisers keep our clients protected in today’s everchanging and volatile climate. Jayne E. Juvan Co-Chair, M&A and Securities & Capital Markets Jayne.Juvan@TuckerEllis.com

Christopher J. Hewitt Co-Chair, M&A and Securities & Capital Markets Christopher.Hewitt@TuckerEllis.com

As a corollary to sellers not seeking non-recourse deals, buyers shouldn’t expect perfect information about the seller or the assets. If possible, buyers should structure the deal as an asset purchase, limit the assumed liabilities, protect against successor liability issues, ensure the seller is solvent, and complete reasonable due diligence to feel confident the assets are what the buyer thinks they are. Then, risk-adjust the purchase price on real, not perceived risks, while ensuring the purchase price is adequate consideration on that risk-adjusted basis. The buyer could seek a 363 sale in bankruptcy to protect against unknown liabilities and a possible fraudulent conveyance claim. Sellers may not be willing to entertain a 363 sale, given the higher transaction costs associated with the bankruptcy process. Also, the buyer could lose control of the process as the stalking horse bidder, end up burning a lot of time and money, and walk away with nothing. Conclusion Distressed sales are a perfect opportunity to reallocate wonderful assets from distressed companies to those that can more effectively use them. Done properly, sellers can right-size their companies and possibly save them from bankruptcy, and buyers can obtain quality assets at bargain but fair prices.

Jayne E. Juvan is co-chair of M&A and Securities & Capital Markets at Tucker Ellis. Contact her at Jayne.Juvan@ TuckerEllis.com. Christopher J. Hewitt is co-chair of M&A and Securities & Capital Markets Group at Tucker Ellis. Contact him at Christopher.Hewitt@TuckerEllis.com.

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January 29, 2024 | S15

Build resilience by investing in people, risk management By Brian Stovsky

quality talent and discussing what a successful process looks like.

nvestors and portfolio companies, particularly acquisitive middle-market and lower-middle-market firms, have different challenges than in years past. Volatile market conditions, higher debt costs and competitive acquisition markets have made management teams rethink their growth and retention strategies. In many cases, these strategies start and end with quality people. Manage, retain, and attract top talent Workforce issues can derail a deal and hinder the growth of an organization. So why are human resources teams often overlooked during the deal process or when discussing strategic initiatives? Among other things, building a resilient mergers and acquisitions-oriented business starts with hiring or retaining quality people and seasoned management teams. Resilient businesses require a management team that can lead during chaotic and challenging periods, align with company culture and motivate their workforce. There is no better time than now to review your current process around managing, retaining and attracting

STOVSKY

Use a benefits and human resources advisory team

In many instances, bootstrapped and family-owned-middle and lower-middlemarket companies have understaffed and inexperienced human resources teams, specifically regarding mergers and acquisitions. Private equity firms and their portfolio companies should lean on their advisers to perform many of the critical reviews and benchmarking necessary analyses. This will ensure their compensation and benefits package is competitive with their peers based on size, industry and region. Services such as wage analyses, benchmarking of employee benefits and retirement plans, deferred compensation plans, key person life insurance, employee assistance programs and virtual advocacy tools are among the many things that today’s workforce expect. Additionally, when selecting a management team, consider their

experience with acquisitions and how that can improve integration and workforce management processes. Protect your management team and the company Once the management team is in place, it is pertinent to protect the team by mitigating risks and liabilities that fiduciaries of the business can face. A comprehensive executive risk/ management liability program should be in place to protect a company’s leadership teams from personal liability caused by a professional decision or action. These

Workforce issues can derail a deal and hinder the growth of an organization. programs traditionally include directors & officers (D&O) liability, employment practices liability (EPL), fiduciary liability and crime coverages. Further, errors and omissions policies (professional liability) can protect companies from legal fees in the event of a lawsuit claiming that a business was negligent, made a mistake or performed inadequate work. Such

policies help create a resilient business over time. Properly perform due diligence on a target Another key part of building a successful portfolio company is to compile a great core due diligence team surrounding potential add-on acquisitions. Accurately assess the inherited costs of the target, identify any synergies between platform and add-on and calculate future costs caused by the integration. Human capital strategy, employee benefits plans, retirement and defined benefit plans, executive benefits and buy/sell policies, and commercial insurance program reviews should all be considered during due diligence. Protect buyers and sellers through Representations and Warranties insurance Build a resilient business by protecting the organization from material misstatements or breaches of the purchase agreement post-closing through Representations and Warranties Insurance (RWI). Traditionally, RWI protects a buyer from any breaches in seller representations as reflected in the purchase agreement.

The policy will cover indemnity from seller breaches of the contract. Limits are often set at 10%-15% of enterprise value, deductibles (retention) are typically .6%-.9% of enterprise value, and premiums generally range from 2.4%-2.7% of policy limits. Retention is often split 50/50 between buyer and seller; however, we are seeing more deals structured with little to no seller indemnity in the RWI policy. The placement of RWI has become a widely adopted practice in private equity transactions. It is a unique advantage to have a benefits and risk adviser that can also place RWI, as the RWI adviser will have a direct line of sight into the due diligence that drives the RWI underwriting and consideration of exclusions to the policy. For divestitures in the lower-middle market, there is sell-side Representations and Warranties insurance, limiting the liability of the seller post-closing. This provides coverage for defense costs that may arise from the claim of breaches asserted by the buyer or a third party and can provide up to a specified percentage of the enterprise value to pay indemnity to the buyer if there is a breach. Brian Stovsky is the business development leader of M&A / Private Equity at Oswald Companies. Contact him at 216-970-8622 or bstovsky@oswaldcompanies.com.

M&A Risk Management & Human Capital Strategies

Due Diligence and Human Capital Assessment Risk Management & Property & Casualty Insurance Employee Benefits 401(k) and Retirement Plan Services Key Person Life Insurance and Executive Compensation Reps & Warranties Insurance (RWI) Portfolio Program Management

Providing a world of protection around your investments.

OswaldCompanies.com/PrivateEquity 855.4OSWALD

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Navigating buy-side tax considerations in mergers and acquisitions By James B. Skakun and Stephen A. Mazza

n the dynamic landscape of mergers and acquisitions, the intricate dance between buyers and sellers requires a careful examination of tax implications. Whether opting for a pure asset deal or venturing into the complexities of F-Reorganizations and 338(h)(10) elections, buyers must tread cautiously to avoid unforeseen tax pitfalls. Employer Retention Credit (ERC) scrutiny: Buyers are now faced with the critical task of addressing the ERC in purchase agreements, acknowledging the IRS’s heightened scrutiny. Understanding a target’s ERC claim involves a meticulous review of analysis, support and documentation. With potential audits looming, buyers must safeguard themselves to prevent repayment of credits and associated penalties. F-Reorganizations and true-up payments: The popularity of F-Re-

SKAKUN

MAZZA

organizations necessitates buyer preparedness for true-up payment requests by sellers. Particularly in cases involving specific tax planning strategies, such as the cash basis of accounting, buyers may encounter requests for compensation based on the difference in tax, leveraging the advantages of stock sales over asset sales.

Holistic due diligence: As the M&A landscape evolves, the prevalence of complex deal structures underscores the importance of comprehensive tax due diligence. Buyers should be attentive to issues spanning sales tax, use tax,

state and local income and franchise taxes, and the Employee Retention Tax Credit. Engaging tax counsel in tandem with legal experts ensures early detection of potential issues, facilitating strategic negotiations and mitigating risks through protective language in the purchase agreement or even purchase price adjustments. In conclusion, the success of M&A transactions hinges on a meticulous approach to tax considerations. By navigating the intricacies of ERC, F-Reorganizations and comprehensive due diligence, buyers can fortify their position, paving the way for successful and economically sound deals.

James B. Skakun, CPA, is partner of Tax Services at BMF. Contact him at 330-255-2429 or jskakun@bmf.cpa. Stephen A. Mazza, CPA, is partner of Tax Services at BMF. Contact him at 330255-2440 or smazza@bmf.cpa.

YOUR TRUSTED

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To assist with all your corporate legal needs

SPONSORED CONTENT

Protect your time and money from legal diligence through closing By Jake Nicholson and Christopher P. Reuscher

ou’ve decided to sell, found the potential buyer, showed them the basics of your operation, let them review financials, agreed to basic terms and, finally, signed the letter of intent (LOI). That’s an accomplishment on its own, but like most milestones as a business owner, it doesn’t mean the work is done. How you approach the final leg of the selling process has a major impact on the time and expenses needed to finalize the deal and navigate your post-closing obligations. Once an LOI is executed, the parties have a set period (such as 60 days or 90 days) to solidify the sale terms and close the deal. What needs to be done to hit that deadline is different in every transaction but can be broadly categorized into three buckets: 1. Legal due diligence. Collecting responses to questions and documentation requests from the buyer so the buyer (and equally as important, your own legal counsel) get a detailed understanding of the business and its history.

NICHOLSON

REUSCHER

contract of the business during the legal diligence process, legal counsel will not know to include it in the purchase agreement’s representations and warranties relating to material contracts. That failure to disclose the contract could result in an indemnification claim against the seller when the buyer discovers after closing that it has an unexpected delivery to pay for, has to pay a cancellation fee or has other damages. Alternatively, the buyer could have wanted to continue the contract, but because it was not reviewed before closing, the parties did not know that it required the supplier’s consent to assign. Now the supplier is refusing to work with the buyer. Making a good faith effort to

Reach out to your benefits and insurance brokers to see what may be needed for policies to wind down or stay in place after the sale. 2. Transaction documents. Drafting and finalizing the transaction documents, including the purchase agreement, any employment agreements and other ancillary agreements. 3. Transition logistics. Preparing to ensure the actual transition of business ownership goes smoothly, both internally with employees and their benefits and externally with any approvals, license updates or consents needed. These three categories are unavoidably intertwined and neglecting one can create seller liability via another. For example, the purchase agreement will typically include indemnification provisions that create an obligation for the seller to reimburse the buyer for damages caused by incorrect or incomplete disclosures under the seller’s representations and warranties. If the seller does not disclose a key supplier

complete the legal diligence process does not just benefit the buyer; it also informs your legal counsel and other advisers as they help you negotiate the transaction documents, identify deliverables necessary for the business transition and manage risk. Moving early to complete responses in the post-LOI diligence process will also mitigate risk and legal fees. The goal is to avoid surprises down the road that require parts of the purchase agreement to be rewritten, reopen negotiation of already agreed-upon deal points or disrupt the transition timeline. There are a host of ways to prepare to respond quickly. Some are common sense, like maintaining good contract management practices per the example above. Others are less obvious. Reach out to your benefits and insurance brokers to see what may be needed for policies to wind down or stay in place after the sale.

About this project Business Succession Planning | Closely Held Business and Family Office Practice Emerging Companies and Venture Capital | Employee Stock Ownership Plans (ESOPs) Mergers and Acquisitions | Public and Structured Finance CLEVELAND 216.781.1212 | COLUMBUS 614.246.2150 | walterhav.com ED C

This section was produced by Crain’s Content Studio, the marketing storytelling division of Crain’s Cleveland Business, in collaboration with ACG Cleveland. For questions about this project or to participate in the future, please contact Crain’s Cleveland Business Sales Manager Mara Broderick at mara.broderick@crain.com.

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SPONSORED CONTENT

TMA Northern Ohio Chapter Announces 2023 Turnaround/ Transaction of the Year Winners!

In the tax realm, contact the state’s department of taxation to ensure you do not have any older, forgotten amounts to pay. It is customary for buyers to require the seller to obtain a certificate of tax clearance from their state shortly before closing. If an overdue payment is discovered, it could delay receiving the certificate or uncover liabilities that need to be accounted for in the purchase agreement. With regard to debt or leases that may need the action of a third party or include a personal guaranty that needs to be released, strategize with your legal counsel to determine when you should disclose the proposed sale to those third parties to make sure they receive and provide whatever is needed before the closing.

Going through the sale process as a seller requires juggling many tasks at an emotional time. Understanding how each component plays into the bigger picture of the sale, starting the diligence process with a plan and communicating with your transaction team to manage risk make a major difference in your experience and outcomes.

The Northern Ohio Chapter of the Turnaround Management Association congratulates the winners of the 2023 Turnaround/Transaction of the Year Award: Nicholas M. Miller, Maria G. Carr and Shawn M. Riley (McDonald Hopkins).

Jake Nicholson is an associate in the Corporate, Tax & Transactional group at Roetzel & Andress in Cleveland. He can be reached at jnicholson@ralaw.com.

We are proud of the achievements of these TMA members and celebrate their specific accomplishments with this year’s award. To the winners, thank you for your hard work and contributions in the turnaround field.

Christopher Reuscher is a shareholder in the Corporate, Tax & Transactional group at Roetzel & Andress in Akron. He can be reached at creuscher@ralaw.com.

Roetzel & Andress Corporate and Transactional WHAT WE DO

The Roetzel Corporate and Transactional group provides strategic and commercial guidance to a broad range of middle-market participants,

including privately held and emerging growth

companies, debt/equity participants, traditional/ alternative lenders, financial advisors, as well as

private investors, entrepreneurs and executives.

• Asset, Stock, and Equity Purchase and Sales

• Commercial Contract and General Business Negotiations

• Corporate Governance and Shareholder/Board Management • Cybersecurity and Data Privacy Guidance

• Labor/Employment, HR Compliance, Wage/Hour, and Exec. Comp. • Mergers & Acquisitions, Joint Ventures and Exits

• Real Estate Acquisition, Disposition, Development and Leasing • Succession and Estate Planning

• Tax Planning and Entity Formation/Structuring

• Traditional, PE, VC and Asset Financing Transactions

ralaw.com NORTHEAST OHIO OFFICES AND KEY CONTACTS

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AKRON

CLEVELAND

222 S. MAIN STREET I SUITE 400 AKRON, OH 44308

1375 EAST NINTH STREET I ONE CLEVELAND CENTER, 10TH FLOOR CLEVELAND, OH 44114

Chris Reuscher

Jason Dodson

Albert Salvatore

Robert Humphrey

creuscher@ralaw.com

jdodson@ralaw.com

asalvatore@ralaw.com

humphrey@ralaw.com

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CORPORATE GROWTH & M&A

Northeast Ohio’s top deal makers to be honored

CG Cleveland will recognize the winners of its 27th Annual Deal Maker Awards. The event is scheduled for 5 p.m. to 7:30 p.m. on Jan. 31 at Cleveland Marriott Key Tower. The Deal Maker Awards honor Northeast Ohio’s leading corporate deal makers for their accomplishments in using acquisitions, divestitures, financings and other transactions to fuel sustainable growth. Here are this year’s winners: PRIVATE EQUITY FUND: MPE Partners

MPE Partners (also known as MPE or Morgenthaler Private Equity) seeks to be the preferred partner for entrepreneurs and family-owned companies. Based in Cleveland and Boston, MPE invests in profitable, lower-middle-market companies with transaction values up to $250 million. MPE has two primary target investment areas: high-value manufacturing and commercial and industrial services.

traded company, valued at $54 a share, or approximately $380 million net of cash acquired. The CyberOptics acquisition expanded Nordson’s capabilities as a leading global developer and manufacturer of high-precision 3D optical sensing technology solutions. The deal also allowed Nordson to offer new differentiated solutions to its semiconductor and electronics customers. The acquisition of CyberOptics’ innovative and proprietary technology has expanded Nordson’s growth opportunities into new areas of the semi-conductor wafer fabrication and packaging process. Nordson in August closed its latest acquisition, the ARAG Group and its subsidiaries for a purchase price of $1.05 billion. Expanding Nordson’s core dispense capabilities into the attractive precision agriculture end market, ARAG introduced global market and innovation leadership in the development, production and supply of precision control systems and smart fluid components for agricultural spraying. The transaction helped further Nordson’s key growth initiatives. The acquisition expands Nordson’s product portfolio, adds notable customer relationships and enhances Nordson’s manufacturing presence.

CORPORATE: Nordson Corporation

Nordson Corporation (Nasdaq: NDSN) is an innovative precision technology company that leverages a scalable growth framework through an entrepreneurial, division-led organization to deliver toptier growth with leading margins and returns. The Westlake-based company was founded in 1954 and employs more than 7,900 people worldwide. Its operations and support offices are located throughout 35 countries. The company’s direct sales model and applications expertise serve customers through a variety of critical applications. Its diverse end-market exposure includes consumer non-durable, medical, electronics and industrial end markets. Nordson is a vital, self-renewing global organization that generates wealth and stability for its employees, customers, shareholders and communities. The company has a history of investing in local communities through various corporate and employeeled volunteer efforts and nonprofit partnerships. Nordson has been a critical part of the Northeast Ohio community for decades. Its growth and development aim to benefit the area for years to come. In recent years, Nordson has invested over $1 billion to fuel global acquisitions. Through the Ascend Strategy, Nordson has focused on high-quality, industryleading targets that have helped support its existing lines of business, enabling Nordson to remain the leader in precision dispensing and fluid management. The most recent milestones include Nordson’s 2022 acquisition of CyberOptics Corp., a then-publicly

CORPORATE: Olympic Steel

Founded in 1954, Cleveland-based Olympic Steel (NASDAQ: ZEUS) is a leading U.S. metals service center focused on the direct sale and value-added processing of carbon and coated sheet, plate and coil products; stainless steel sheet, plate, bar and coil; aluminum sheet, plate and coil; pipe, tube, bar, valves and fittings; tin plate and metalintensive end-use products, including water treatment systems; commercial, residential and industrial venting and air filtration systems; Wright brand self-dumping hoppers; and EZ-Dumper dump inserts. Olympic Steel operates 47 facilities. IMPACT AWARD: Brian E. Hall, Chairman and CEO, 2Northstar Capital, LLC As a child, Brian Hall began working part time for his family’s company, Industrial Transport Inc. He became its president and CEO four years after graduating college, eventually purchasing the company from his father and uncle. He led iSource Performance Materials, a joint venture with Applied Industrial Technologies Inc. Four years later, he acquired a majority interest in Innogistics, LLC, whose minority owner was a DHL subsidiary. Hall then formed 2NorthStar Capital, LLC. In addition to specialized construction, he has interests in other service, manufacturing and real estate holdings. Hall has served in various leadership roles and boards throughout his career, including co-chair and interim executive

director of the Commission on Economic Inclusion and senior vice president of Greater Cleveland Partnership, University Hospitals Health System Inc., Fifth Third of Northeast Ohio, the ClevelandCuyahoga Port Authority, Northeast Ohio Regional Sewer District, University of Cincinnati Foundation, Cleveland Water Alliance, Cuyahoga County Economic Development Commission, Rhythm & Blues Foundation and Rock and Roll Hall of Fame and Museum Board. He served as secretary of Cleveland Rock and Roll Inc. He is most proud of founding the Tremont School mentoring program in 1990 and serving as one of the founders of the President’s Council. Brian Hall obtained his BBA from the University of Cincinnati and an EMBA from Baldwin-Wallace University. He attended fours year of the executive management program at the Dartmouth College’s Tuck School of Business and earned a certificate in strategic planning from Georgetown University. WOMEN IN TRANSACTIONS: CHERYL STROM, Organization Partner, The Riverside Company Strom leads the firm’s initiatives to generate new investment opportunities from deal source firms and referral sources based throughout the Midwest. She is a highly experienced private equity professional who brings a depth of capital choices to advisers, business owners and management teams. Her experience spans growth capital, non-control capital, majority-stake equity investments and full acquisitions, as well as debt for companies ranging in size from small businesses to the middle-market. Cheryl works with a team of 20 origination professionals globally to establish new stand-alone companies, or platform companies, for Riverside. In addition, she originates add-on acquisitions for Riverside’s many portfolio companies to help these companies expand and grow by adding new products, services or geographies. Prior to arriving at Riverside in 2006, Cheryl worked in Debt Capital Markets at National City (now PNC), structuring and originating senior debt facilities for companies requiring more than $50 million. She began her career at Dix & Eaton, a strategic corporate and marketing communications firm. Cheryl’s community involvement includes the ACG Cleveland board, where she served as its board president from 2021-2022; past board member and managing partner of Promise Partners, an organization that helps entrepreneurial-minded people achieve their dream of business ownership; and as a committee member in finance and capital-raising campaigns for Saint Joseph Academy. Cheryl earned her MBA from Case Western Reserve University’s Weatherhead School of Management and her BA from John Carroll University.

2023-24 Officers and Board of Directors EXECUTIVE OFFICERS

BOARD OF DIRECTORS

President Jay Moroscak, Aon

John Allotta, BakerHostetler

President Elect Beth Haas, Cyprium Investment Partners

Steve Danford, KeyBanc Capital Markets

EVP Annual Events Terry Doyle, Calfee

Michael Fanous, PwC

Rob Cheffins, CIBC

EVP Branding Peter Cavrell, Fortress Security Risk Management EVP Governance Charles Aquino EVP Innovation Ryan McGovern, Star Mountain Capital EVP Membership Bryan Fialkowski, J.P. Morgan Chase EVP Programming Thomas Libeg, Grant Thornton Treasurer Rob Paskert, Plante Moran Immediate Past President Tricia Balser, CIBC

Kevin Emmendorfer, Ernst & Young

Dave Fechter, Acchroma Michael Ferkovic, Sunvera Group Sarita Gavhane, Edgewater Capital Partners Mitch Gecht, Benesch Joe Hatina, Jones Day Mark Heinrich, Plante Moran Nicholas House, Vorys Kathryn Kelly, Deloitte Matt Kolman, Deloitte Mindy Marsden, Bober Markey Fedorovich Corrie Menary, Kirtland Capital Partners Craig Panzica, CIBC Lizabeth Roth, Copper Run Larissa Rozycki, Harris Williams Ann Seger, Calfee Tom Welsh, Calfee

2024 EVENTS CALENDAR Feb. 8 - ACG WIT: White Elephant (Valentine’s Day Edition) Location: Market Garden Brewery Feb. 22 - ACG Cleveland Joint Event with FEI: Matt Kaulig, Kaulig Companies & Kaulig Racing Location: TBD March 6 - ACG Cleveland Members Only: Curling Event Location: Mayfield Curling Club March 14 - ACG: WIT winners roundtable Location: Lakeside Event Space at Nuevo March 21 - CIBC Joint Event with YACG: March Madness Location: Nano Brew TBD - ACG Cleveland: Women’s Final Four Basketball Event Location: TBD May 7 - ACG Cleveland Guardians Baseball Game with Paul Dolan Location: Progressive Field May 23- ACG Akron Growth and M&A in the Food Industry Location: Buckingham, Doolittle & Burroughs, Akron June 25 - ACG Cleveland Summer Social at the Shoreby Club Location: The Shoreby Club Sept. 4-5 - Great Lakes Capital Connection (GLCC) - Cleveland Location: Huntington Convention Center of Cleveland Sept. 30 - Annual Golf Outing at Firestone Location: Firestone Country Club

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2023 ACG IMPACT DEAL OF THE YEAR SIGNET CAPITAL ADVISORS, LLC CONGRATULATES 2NORTHSTAR, LLC AND BRIAN HALL ON WINNING THE ACG CLEVELAND 2023 IMPACT DEAL OF THE YEAR AWARD. CONGRATULATIONS ALSO TO JOHN ALBERTY AND JOHN GALIK OF SPECIALIZED CONSTRUCTION, INC. FOR SELECTING AN IMPACTFUL BUYER AND GOOD STEWARD OF THEIR BUSINESS. SIGNET CAPITAL ADVISORS IS PROUD TO HAVE SERVED AS SELL-SIDE ADVISORS TO THE SHAREHOLDERS OF SPECIALIZED CONSTRUCTION, INC.

ABOUT SIGNET. Signet Capital Advisors, LLC provides sophisticated investment banking services to select owners of middle market companies throughout the U.S. Signet services include SELL-SIDE ADVISORY (selling all or part of your business); BUY-SIDE ADVISORY (helping shareholders grow their company through acquisition); and, CAPITAL RAISING (equity, junior capital and debt).

TO LEARN MORE, PLEASE CONTACT MICHAEL PAPARELLA Managing Director 216-658-2595 mpaparella@signetcapadvisors.com

BRIAN MCMILLEN Director 216-658-2592 bmcmillen@signetcapadvisors.com

SCOTT SMYERS Senior Associate 216-290-2977 ssmyers@signetcapadvisors.com

200 Public Square Suite 2005 Cleveland, OH 44114

signetcapadvisors.com

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