Crain's Cleveland Business

20100118-NEWS--15-NAT-CCI-CL_--

1/11/2010

4:36 PM

Page 1

AND

CORPORATE GROWTH M&A SPECIAL ADVERTISING SECTION

INSIDE PRESIDENT’S LETTER ACG Cleveland’s president reports that the organization continues to add members and host exciting events despite the tough economy. ● PAGE S-2

Local middle-market merger & acquisition experts anticipate a slow recovery in 2010. ● PAGE S-4

JANINE BENTIVEGNA

THE M&A LANDSCAPE

More than 600 registrants from around the country gathered at an ACG conference in September that included a reception at the Rock and Roll Hall of Fame.

CASH TRAP Access to capital will be a challenge for some businesses when the economy turns around. ● PAGE S-5

ADVICE FOR SELLERS Advanced preparation not only will make the seller’s business more marketable, but can increase the price paid for the business. ● PAGE S-6

long history BRIGHT FUTURE Cleveland rocks middle-market deal-making

By Ann M. Gynn

SUCCESS STORIES Companies find Northeast Ohio a good place to grow their business. ● PAGE S-8

TURBULENT TIMES Company executives share their insight on navigating through tough times. ● PAGE S-10

T

he middle-market deal-making world knows Cleveland. Home to more than the Rock and Roll Hall of Fame and Museum and worldrenowned Cleveland Orchestra, Northeast Ohio boasts a middle-market deal-making sector that far surpasses most cities of comparable size.

Proof of Cleveland’s prowess came last September when, in the depth of the recession, more than 600 registrants from across the country attended the firstever Great Lakes Capital Connection, a two-day confab of middle-market private equity firms, investment bankers, capital providers and transaction advisers.

“It was a spectacular success,” says Dennis White, chairman of the board of ACG Global and senior counsel at McDermott, Will & Emery LLC in Boston, who was one of the 600 in attendance.

See BRIGHT on Page S-2

For two days in September, Cleveland was the center of the middle-market deal-making universe.

Crain’s Cleveland Business Custom Publishing

20100118-NEWS--16-NAT-CCI-CL_--

1/11/2010

10:19 AM

Page 1

CORPORATE GROWTH and M&A

S-2 January 18-24, 2010

Bright Continued from Page S-1 Private equity firm participation is the driver of attendance at most ACG events, and Cleveland starts with a solid base.

“We just have a phenomenal group of private equity firms here in Cleveland,” says Tom Freeman,

transaction advisory services partner at Grant Thornton. “We’re blessed for the size of the city here.”

Jim Marra, director of business development at the private equity firm Blue Point Capital Partners, agrees that it’s unusual for a city Cleveland’s size to be home to a dozen or more private equity firms.

“In the footprint of the Great Lakes, you don’t see anywhere else with near as much private equity

concentrated as it is here in Cleveland,” he says.

Pioneers of PE Mr. Marra explains that the private equity industry began here before the term “private equity” even existed.

“It started with Frank Linsalata, David Morgenthaler and those early private equity guys in the late ’70s

and early ‘80s who thought it made sense to buy companies on a leveraged basis,” he says.

Cleveland always has had a strong industrial base, which makes it fertile ground for investment opportunities. In addition, Cleveland has had people with significant wealth who wanted to participate in such deals.

“It was a confluence of the unique,” Mr. Marra says. “There were companies to buy, money willing to be devoted to acquisitions, and some pretty smart guys with a vision of what private equity could do.”

One of those visionaries was David Morgenthaler, who founded the eponymous firm more than 40 years ago. Today the private equity and venture capital firm has $3 billion in funds under management and has funded 300 companies.

“Private equity firms have been here a long time,” says Al Stanley, co-managing director of Morgenthaler ’s private equity practice.

“Cleveland’s a strong player in the lower-to-middle segment of the private equity market.”

Mr. Stanley says that the early beginnings of private equity happened here because Cleveland had both a strong industrial and a strong banking base. Other middlemarket transaction services spun off from this core of operators and financiers.

Powerhouse “Cleveland as a deal-making powerhouse is more than private equity,” Mr. Marra notes. “Private equity is the nucleus, but there

A CALFEE ATTORNEY

goes above and beyond. And backwards. And sideways.

At Calfee, we begin with a single objective: to help our clients succeed. Everything else stems from that objective. From our extreme responsiveness to our practical legal counsel that helps clients take advantage of business opportunities, a Calfee BUUPSOFZ SFNBJOT lFYJCMF BOE EFMJWFST sophisticated advice tailored to each client.

Calfee, Halter & Griswold LLP www.calfee.com

Advertisement are many more components — other capital, senior and mezzanine debt, major banks who are experienced lenders in that market, and so on.”

The presence of three big banks [National City Bank, now part of PNC; AmeriTrust and Society (now Key)] also supported private equity, Mr. Freeman says.

In fact, he notes, Blue Point itself spun off from Key Equity Capital.

Add into that mix about a dozen law firms with the necessary experience and capabilities plus Big 4 accounting firms and strong regional accounting firms that can audit portfolio companies and help in acquisitions.

“All the services that buyers of businesses need have really grown up here in Cleveland,” Mr. Marra says. “When you have these components and can pull in others such as environmental and risk management consultants then you can rightly call yourself a deal-making powerhouse.”

Stewart Kohl, co-CEO of The Riverside Company, says the professional community in Cleveland is remarkably developed and sophisticated.

“We can bring all the specialists we need to complete a deal, including attorneys, accountants, insurance, environmental advisers and others,” Mr. Kohl explains.

“Cleveland has broad and deep benches, much more so than in our peer cities. It’s an embarrassment of riches.”

One advantage to operating in Cleveland is that there are a lot middle-market-type companies,

ACG Cleveland offers events, education and networking for dealmakers

I

t will not be news to any ACG Cleveland is one of the reader of Crain’s Cleveland largest and most vibrant chapters Business that 2009 was a in ACG, the Association for Corpotough year for dealmakers. rate Growth. With 12,000 members, The economy crashed, credit ACG is the world’s preeminent markets locked up, defaults organization for corporate developspiked, and erstwhile buyers ment and middle-market M&A focused on strengthening professionals. Chapter their existing businesses. membership includes acYou might have expectcess to the full suite of ACG ed a professional organizaGlobal benefits and services. tion whose members are ACG Cleveland devoted to corporate members work in public & growth and deal-making private companies, private to lose members and see equity, corporate & investattendance decline in such ment banking, finance, PATRICK an environment. But that accounting, law, and other did not happen. Reflecting GALLAGHER professional services. They ACG PRESIDENT the value that ACG Clevejoin ACG Cleveland for land provides, our two primary reasons: membership continued its upward 1) educational events that help trend, increasing slightly to 435 at them build value in their companies last count, and programs were well and for their clients; 2) the opporattended. tunity to network with a diverse Our January 2009 Deal Maker and influential community of Awards event was a sellout, and business people. the inaugural Great Lakes Capital If this sounds like an organizaConnection in September 2009 was tion for you, we encourage you to a smash. The event, a collaboration attend one of our events or apply of ACG chapters in Cincinnati, for membership. Visit us at Columbus, Detroit, Indianapolis www.acgcleveland.org or call me at and Pittsburgh, attracted 600 regis(216) 781-2400 and I’ll be happy to trants—the majority from outside talk with you.

■ the Cleveland area. We are already moving forward on the second Mr. Gallagher is president of ACG annual Great Lakes Capital Cleveland and senior vice president of Connection in September 2010.

Edward Howard.

Crain’s Cleveland Business Custom Publishing

20100118-NEWS--17-NAT-CCI-CL_--

Advertisement Mr. Freeman says. Prior to the most recent economic downturn, the biggest accounting firms didn’t pay much attention to the middle market, but other firms, such as Grant Thornton, were paying attention.

About half of Grant Thornton’s clients in Cleveland fall into the $50 million to $250 million range and are owned by private equity groups, he says.

Grant Thornton finds more companies are switching the audit and tax work that they historically sent to Big 4 firms to regional firms with a national presence. “A company in California owned by a private equity firm in Cleveland can use our services. The private equity firm likes to have one point of contact that is local and this is one of our core strategies,� Mr. Freeman says.

Other Attractions Riverside, Morgenthaler and Cleveland’s other private equity firms have offices and deals outside the area, which means they travel a lot. Thus, having a Continental Airlines hub at Cleveland Hopkins International Airport is a big plus, both Mr. Kohl and Mr. Stanley say.

Having a hub means our staff doesn’t have to change planes as frequently, Mr. Kohl says. Having content employees is critical for the firms’ success.

Riverside finds Cleveland is a great location to attract sophisticated professional talent who appreciate the quality of life they can have in the area. “I love it when kids who grew up in Cleveland, spent time on the coasts and intentionally come back in their 30s because they want to raise a family here,� Mr. Kohl says.

Mr. Stanley concurs. “Cleveland is a great city. There’s something about a Midwest reputation that is reassuring to sellers.�

That regional reputation can help when Morgenthaler is doing deals too. Although the firm doesn’t intentionally promote its roots, sellers perceive the Midwest location as a signal the firm is down to earth and trustworthy.

That’s especially appealing for family businesses deciding to sell, Mr. Stanley says.

But that doesn’t mean Morgenthaler limits its investments to the Midwest. “Our portfolio goes from Maine to California. We look for deals everywhere,� Mr. Stanley says.

Riverside invests globally too.

As for Ohio-related deals, Riverside has a special place in its heart. “There are a lot of great entrepreneurs here,� Mr. Kohl says, adding he sees big growth potential locally in the healthcare sector, including medical services and biotech enterprises.

Technology has allowed firms to grow globally and remain based in Cleveland. As Mr. Marra, who joined Blue Point in 1991, explains: “Twenty years ago, it was harder to buy a company that wasn’t in your footprint geographically. We looked at operations outside Ohio, but we weren’t looking far afield.�

As private equity grew, it became obvious to Blue Point that it needed to expand its horizons if it were to have the best portfolio possible.

Through technological advances such as videoconferencing, the

1/11/2010

10:20 AM

Page 1

CORPORATE GROWTH and M&A “I love it when kids who grew up in Cleveland ... come back ... because they want to raise a family here.� — Stewart Kohl, Riverside

Internet, e-mail, and cell phones, Blue Point has been able to stay in Cleveland and do deals around the globe. “Ohio remains an important part of our portfolio as a deal source,� he says. “I doubt that will change because we’re in constant contact with a number of companies. It’s still easier to keep in touch in town.�

Private Equity Evolution Another deal-making evolution has been the growth of intermediaries such as Brown Gibbons Lang and Western Reserve Partners, who serve as deal connectors between buyers and sellers.

Twenty years ago, a $50 million company without a strategic (corporate) buyer didn’t have many

options, Mr. Marra says. It had to find the private equity firm and coax it into buying business.

In the 1990s, buyers would sign letters of intent without the cash and then approach private equity firms.

As private equity investments produced unusually large returns, new firms organized and the intermediary function grew. “Our world is a lot more competitive,�

Mr. Marra says.

Cleveland’s private equity firms have their own specialties so the community has an excellent breadth to tackle all types of mergers and acquisitions, Mr. Freeman says.

Mr. Kohl says that Cleveland’s private equity community has held on well during the last downturn even when a significant number of firms disappeared. “I’m

January 18-24, 2010

not aware of any in Cleveland closing,� he says.

In fact, Mr. Freeman says, a Cleveland-based private equity firm was created in these challenging times.

Supply Chain Equity Partners is the only private equity firm in the world that focuses exclusively on the distribution industry. “They have a great management team that really understands this space,� he says.

Another Cleveland firm positioned itself well to tackle the downturn opportunities. Resilience Capital always has focused on underperforming companies. So now is a great time for the firm to play in a space that it already understood, Mr. Freeman says. “They’re pretty busy right now,â€? he adds. â–

ecognize the value of a holistic approach accounting for both short and l hen you're ready to talk business? have you been waiting for a banker w way? how much of a difference does knowledge of your industry, mar do you work with a banker who offers you perspective and gives you gui pproach and ongoing consultation? your bank offer you relev es your bank recognize the value of a holistic approach accounting for b

to help show the way? how much of a difference does knowledge ke on your banking? do you work with a banker who offers you pers neďŹ t from a personalized approach and ongoing consultation?

? do you have someone there to listen when you're ready to talk busin ideas and team of experts to help show the way? how much of a di petitive environment make on your banking? do you work with a banke uld your business beneďŹ t from a personalized approach and ongoing con

ker with the passion, ideas and team of experts to help show the way? market and competitive environment make on your banking? do gives you guidance? could your business beneďŹ t from a personalize

h accounting for both short and long-term needs? do you have someo to us for about what’s going onideas with your ve you Talk been waiting a banker with the passion, and team of ex

business. It may be the most productive fers you perspective andyou giveshave you guidance? conversation all day. could your business b ation? your bank offer you relevant solutions that meaningful lue of a holistic approach accounting for both short and long-term need

much of a difference does knowledge of your industry market and compe

How much impact could just one hour have on your business?

To learn more, call Alan Zang, Middle Market Executive at 216-828-7635 or visit key.com/commercial. Š2009 KeyCorp. KeyBank is Member FDIC.

Crain’s Cleveland Business Custom Publishing

S-3

CS94377

20100118-NEWS--18-NAT-CCI-CL_--

S-4 January 18-24, 2010

1/13/2010

3:19 PM

Page 1

CORPORATE GROWTH and M&A

Advertisement

Middle-market M&A looks for a slow recovery in 2010

L

ike the Indians’ and Browns’ seasons, the middle-market merger & acquisition (M&A) world suffered its woes in 2009, says Joseph Carson, managing director at Western Reserve Partners, a Cleveland-based investment banking firm.

Year-to-date through September, he says, total transaction volume for the middle market (deal values between $25- $250 million) was down 55 percent year-over-year, and total transaction value was down 59 percent.

And there was no pickup in the third quarter. Activity fell from second quarter levels as total transaction volume decreased 19 percent and total transaction value decreased 23 percent.

“The new normal is a reduction in valuation multiples from the highs of 2007 and 2008,” says Mr. Andrew Petryk, managing director at Brown Gibbons Lang & Co., a Cleveland-based investment banking firm.

Mr. Carson says, “Limited credit availability is one of the primary drivers of this decline.” Total

leverage for the middle market dropped from a high of 4.4 times EBITDA (earnings before interest taxes, depreciation and amortization) in 2007 to approximately 3 times today, he notes.

Middle market loan issuance in the third quarter was down 46 percent year over year and 13 percent from second quarter levels.

Significantly, he notes, of this amount, 80 percent was used for general corporate purposes rather than transaction financing.

And credit spreads widened through September as lenders aligned return requirements with market conditions and higher costs of capital.

Understandably, Mr. Carson says, the tightening credit market negatively affected EBITDA multiples.

“Not surprisingly, when these depressed multiples are applied to deteriorated earnings, buyer and seller expectations diverge,” he says. “This has caused transactions to be delayed, canceled or completed at reduced purchase

“Not surprisingly, when these depressed multiples are applied to deteriorated earnings, buyer and seller expectations diverge.”

— Joseph Carson, Western Reserve Partners

prices — in some cases, involuntarily.”

To be sure, there are exceptions, adds Mr. Carson. Financially sound companies with compelling stories still attract well-capitalized strategic buyers and financial sponsors. In these cases, acquisitive interest has been robust, and some sellers have received premium valuations. In particular, says Mr. Carson, foreign strategic buyers have become increasingly active in the acquisition of U.S. companies, leveraging favorable exchange rates.

Mr. Petryk says though international opportunities were limited late last year and in early 2009, the volume has appreciably increased thru year end. Brown

Based in Cleveland With a Window to the World Riverside has been investing in and building small businesses since 1988.

To learn more about Riverside’s strategies to grow companies with $1 million $30 million in EBITDA, visit riversidecompany.com or contact Scott Gilbertson, Principal, Origination at sgilbertson@riversidecompany.com.

18 offices 12 countries 3 continents

riversidecompany.com | phone: 216 344 1040

Gibbons Lang currently is working with a Mexico-based client buying a U.S. business and is handling at least three other foreign transactions.

BGL is seeing consistent acquisition interest from credible and well-capitalized western European buyers.

Slow Improvement “A lot, though, is driven by the credit market. It’s still choppy,” cautions Jim Hill, partner and executive chairman of Benesch, the Cleveland-based law firm.

However, he sees deal activity improving in 2010.

Mr. Hill says lender consolidation and several non-regulated lenders pulling out of cash-flow lending have constricted the market for borrowers but that will change slowly, too, in 2010.

However, compared with the recent more robust times, lenders will continue to be wary about to whom and how much they lend.

Mr. Petryk adds that there is increased scrutiny from sellers who are concerned about buyers’ ability to actually finance a deal given the tough credit markets.

Mike McMahon, managing director of M&A Advisory at KeyBanc Capital Markets, believes the quality of assets coming to market is improving.

In addition, large publicly traded or privately owned companies are beginning to think strategically again. During the last 12 to 18 months, companies were making divestitures out of necessity to shore up over-levered balance sheets, he says.

Now they are beginning to return to strategic divestitures to shed non-core assets, freeing up capital to make strategic acquisitions.

“They have been deep in trenches focusing on survival – now they can look at strategy,” says Mr. McMahon. “There’s noth-

ing like a recession to encourage executives to increase their focus on their long-term strategy.”

Creative Solutions Mr. McMahon says he thinks financial buyers will be more active in 2010 even if they need to use creative solutions to get the transactions done, such as putting more equity into deals or investing in non-control situations.

Mr. Carson concurs. “Despite the tight credit availability, financial sponsors who are flush with capital and hungry for good deals have shown their willingness to bridge financing gaps by contributing additional equity, turning to mezzanine financing, or structuring seller notes with a clear path to liquidity.”

Mr. Hill also expects continued, creative financing structures by private equity firms in order to get deals done now.

“The fund managers expect that as lending gets looser in the next couple years, they will refinance and get out some of that equity,” Mr. Hill explains. “When you look at history, the most successful acquisitions in terms of return on investment are bought during recessions.”

Peaks and Valleys Mr. Petryk advises that while the market cycles through peaks and valleys, he expects the valleys and peaks to be wider through the next cycle as the market turns more slowly. Though cautious, he sees a brighter future.

“I’m a lot more optimistic today than I was six months ago,” he says.

Mr. Hill points out that while markets cycle and the relative advantage between strategic buyers and financial sponsors fluctuates, the generational influence on selling is a constant. Time and tide wait for no man.

Mr. Petryk concurs, noting that value multiples are obviously a key driver of deal activity, but other considerations are equally important such as business risk associated with the potential for a prolonged economic downturn or no-growth environment, anticipated increases in capital gains or just being the right time for the private equity firm or family.

“Are you better selling today for

www.chikol.com

5 0 P u b l i c S q u a r e , 2 9 th f l o o r, C l e v e l a n d , O H 4 4 1 1 3

Chikol is a leading middle market consulting firm to companies facing critical organizational, financial and operational challenges . Our teams of professionals provide consulting services in all financial & operational areas and can assist in the changes needed to preserve and enhance enterprise value. In these critical times , there is no substitute for detailed analysis providing a roadmap for immediate action and an experienced team in support that has been there before.

Crain’s Cleveland Business Custom Publishing

20100118-NEWS--19-NAT-CCI-CL_--

1/11/2010

10:21 AM

Page 1

CORPORATE GROWTH and M&A

Advertisement $75 million or waiting and maybe getting $100 million at some point in the future?� says Mr. Petryk.

Some owners looking to cash out now are saying no to the wait, especially given the potential for higher tax rates on capital gains and dividends. “You would really have to significantly increase EBITDA (to still be ahead) if the capital gains tax rate goes to 25 percent or 28 percent,� as compared with 15 percent now, Mr. Hill says. “This will create significantly greater deal flow in the second half of 2010.�

Investors Gain Comfort “Despite the challenges, the overall market has shown signs of improvement and should gain momentum as we enter 2010,� says Western Reserve Partners’ Mr.

Carson. “Credit spreads have tightened as investors have gained comfort with the economy and earnings visibility. In the private market, high-quality credits (BBB public equivalent) are now issuing at less than 6 percent.�

Mr. Carson also notes that the approximately $400 billion overhang of un-invested capital suggests the potential for an M&A rebound. “However, middle-market transaction activity will likely remain soft through the first quarter of 2010, while the credit markets and economy slowly recover,â€? he says. “Though multiples will recover, middle-market M&A participants should expect tempered attitudes. “As with the beginning of every new Indians and Browns season, hope springs eternal,â€? he says. “Let’s just hope the market fares better than our summer and fall sports teams have.â€? â–

WHAT BUYERS AND SELLERS NEED TO KNOW Ron Stepanovic, national SELLERS should adjust their head of the private equity pracexpectations, be more flexible in tice at Cleveland-based Baker general and know: Hostetler, offers this perspective —- Market uncertainty means a for buyers and sellers. buyer cannot take a chance by BUYERS SHOULD KNOW: paying an aggressive multiple on —- Deals will take longer to the seller’s forward-looking earnconsummate than in the recent ings estimate or even historic past. earnings. —- Both lenders and —- Deal multiples have seller will conduct more fallen, and sellers should due diligence, so buynot expect them to iners should have their crease in the near future. own house in order and —- Deal terms have be ready for this addiswung in favor of the tional scrutiny before buyers. approaching sellers and —- Indemnity periods lenders. are longer. Indemnity RON —- Deal costs as a baskets are smaller.

STEPANOVIC Indemnity caps are percentage of the purchase price will in all higher and indemnity likelihood increase as a result of escrows as a percentage of the additional due diligence and purchase price are greater. higher financing costs. —- Buyers will seek to bridge —- Buyers cannot rely on the valuation gap by asking sellers significant level of leverage that to finance a portion of purchase was available before the new price or accept an earn-out. “normal.� Deals will require more —- Buyer and buyer’s lenders equity. will conduct enhanced due dili—- Yields for buyers will congence and scrutiny because tract unless they squeeze addithey want assurance that the tional yield from the seller in the earnings stream is for real and form of a reduced purchase that cost-containment measures price. are in place.

TRANSACTION SERVICES in tune with the middle market

8F XPSL EBZ JO BOE EBZ PVU XJUI PVS DMJFOUT UP VOEFSTUBOE UIFJS PCKFDUJWFT EFBM TUSVDUVSF BOE TFOTJUJWJUJFT 8F DPOĂśSN BOE UFTU ĂśOBODJBM TUBUFNFOUT BTTFTTNFOUT PG RVBMJUZ PG FBSOJOHT BOE OFU BTTFUT UP CF BDRVJSFE SFMBUFE BTTVNQUJPOT DPNQJMF ĂśOEJOHT QSFQBSF DPNNVOJDBUJPOT BOE NPSF 8F CSJOH B WBTU EFQUI BOE CSFBEUI PG USBOTBDUJPO FYQFSJFODF JODMVEJOH t 'JOBODJBM %VF %JMJHFODF t 5BY $POTVMUJOH 4USVDUVSJOH t &NQMPZNFOU $PNQFOTBUJPO #FOFĂśUT $POTVMUJOH t )VNBO 3FTPVSDF 1MBOOJOH

Tom Bechtel - Director of Transaction Services Group 216.774.1142 | www.cohencpa.com

January 18-24, 2010

S-5

The coming cash trap

A

s sales volumes tapered and profits declined or disappeared over the past 18 months, companies responded in two ways, says Lloyd Bell, director, with the Clevelandbased accounting firm Meaden & Moore.

First, they cut back on expenses.

Existing inventory was used to fill new orders. In addition accounts receivable from past sales were being collected, albeit a little more slowly than before, but at a rate that exceeded new sales.

This resulted in positive cash flow, but lower accounts receivable levels. So companies were funding themselves from the cash trapped in the balance sheet in the form of inventory and accounts receivable rather than profits. “You can only squeeze the cash out of the balance sheet for so long,� says Mr. Bell.

As companies find their underlying markets improving in 2010, they will see varied opportunities for growth, he says. “The problem for many of these

“I think the survivors are going to be the companies that ... can adapt to change quickly.� — Lloyd Bell, Meaden & Moore

companies will be liquidity,� Mr. Bell explains. Cash needed to fund a build-up of working capital or to invest in new fixed assets will be unavailable without current access to capital. So financing will be the primary challenge for companies whose markets are improving just as it will be for those companies whose businesses are not rebounding. “I would expect limited assistance from banks in funding growth opportunities, much less

refinancing existing obligations,� he says. “Businesses will need to continue to use as few resources as possible to conserve available cash. Ensure credit facilities are in compliance. If they are not, communicate with the bank immediately. Find out which customers are truly profitable after all costs are considered. And see if price increases or softer credit terms are possible.�

How companies manage the recovery will be as critical as how well they managed the downturn.

Mr. Bell says. “I think the survivors are going to be the companies that are nimble and can adapt to change quickly. Companies need to work on developing shorter cash cycles, which will reduce the amount of capital required. Business owners need to recognize that equity has a cost too, and it’s higher than the cost of debt. Reducing the total amount of capital required and finding the right blend between debt and equity is paramount to maximizing shareholder returns.â€? â–

Find out what the future holds for Private Equity Fundraising and Exit opportunities.

The credit crisis and the U.S. recession altered the PE industry: what does the future hold for Exit opportunities, Fundraising and Deal making?

Grant Thornton offers you a broad perspective for private equity ďŹ rms with an enlightening new whitepaper, Private equity in the post-boom era: What’s next? It explores the current environment of private equity, including liquidity opportunities, the fundraising market and exit opportunities. To get a copy, contact Tom Freeman, Partner, Tax and Transaction Advisory Services, at 216.858.3700 (Tom.Freeman@gt.com) or visit GrantThornton.com/PEWhitepapers.

Find out how it feels to work with people who love what they do!

Grant Thornton refers to Grant Thornton LLP, the U.S. member ďŹ rm of Grant Thornton International Ltd, an organization of independently owned and managed accounting and consulting ďŹ rms.

Crain’s Cleveland Business Custom Publishing

20100118-NEWS--20-NAT-CCI-CL_--

1/11/2010

10:21 AM

Page 1

CORPORATE GROWTH and M&A

S-6 January 18-24, 2010

Better sale prices require planning and preparation

“While all businesses have weaknesses, latitude for seller missteps has become razor thin.”

— Brian O’Neill, Ulmer & Bern e

Partnering For Success as your Trusted Business Advisors

C

Roetzel & Andress’ entrepreneurial business culture compels our attorneys to thoroughly understand our clients’ businesses, embrace their goals and craft innovative solutions to achieve those goals.

With over 130 years of experience, we partner with our clients to serve as their trusted business advisors to provide accurate and valuable legal counsel to a diverse regional and international client base.

220 attorneys • 40 areas of practice • 11 offices One Address: www.ralaw.com

222 South Main Street • Akron, OH 44308 • 330.376.2700 One Cleveland Center, Ninth Floor • 1375 East Ninth Street Cleveland, OH 44114 • 216.623.0150 Akron Cincinnati Cleveland Columbus Fort Lauderdale Fort Myers Naples Orlando Tallahassee Toledo Washington, D.C.

MY BENESCH MY TEAM

When ingenuity meets motivation

redit market reversals over the past 18 months halted one of the most favorable sellers’ markets in M&A history. Methodical conservatism now rules the day, with buyers calling the shots. A seller unable to withstand rigorous scrutiny need not apply.

Once a company makes the decision to explore a sale or recapitalization, one of the first steps in this process: seller-side due diligence, advises Brian M. O’Neill, chair of the business/tax department at Cleveland-based Ulmer & Berne LLP. Seller-side due diligence is the process of a seller reviewing and shoring up its own financial, business and legal records in preparation for a buyer’s discerning eye.

“While all businesses have weaknesses, latitude for seller missteps has become razor thin,” Mr. O’Neill says. “One unexpected obstacle or financial statement discrepancy can ruin a deal. Advanced due diligence allows a company to identify, and if possible eliminate, these types of problems before a buyer becomes involved. This in turn allows the parties to stay focused on the quality of earnings and other value drivers of the business. The key is to leverage the value drivers.”

With M&A activity considerably slowed, most companies are choosing to delay taking themselves to market, says Tom Bechtel, director of the Transaction Services Group at the Clevelandbased CPA and consulting firm, Cohen & Company.

“Now is time to get the house in order to prepare for a sale down the road,” he says. Ultimately these are things you should be doing, but now you may have the time to do them.”

Mr. O’Neill explains that advanced preparation will not only make the seller’s business more marketable, but will help maximize the price paid for the business. Early investigation, including the use of third parties to perform financial and legal due diligence, gives the seller both credibility and the opportunity to clean up issues that could be used against it later in the process.

Wary Buyers Benesch salutes the thinkers and doers for not only believing anything is possible, but for proving it time after time.

Benesch is pleased to congratulate the winners of the Association for Corporate Growth Deal Maker Awards.

We take particular pride in recognizing our client, Dealer Tire.

www.beneschlaw.com

Cleveland

•

Columbus

•

Philadelphia

•

Shanghai

•

Advertisement

Wilmington

“A potential buyer may be wary of even beginning the due diligence process knowing that the seller has never had the benefit of having the financial statements and other key elements of its business independently reviewed,” Mr. O’Neill says. “Any buyer willing to look past an unprepared and disorganized seller is sure to apply a discount to offset any (real or perceived) concerns.”

Mr. Bechtel, who typically advises on the buy side, says buyers look for several key factors that focus on quality of earnings, quality of assets and human

Crain’s Cleveland Business Custom Publishing

capital.

As to quality of earnings, buyers will want to identify the company’s profit sector by sector.

He advises prospective sellers to do everything they can to control costs and manage away from unprofitable sectors.

“As much as possible, get fixed costs to be variable,” Mr. Bechtel says. For example, a company should consider staffing alternatives such as using temporary help instead of rehiring full-time employees or implementing temporary furloughs to reduce costs.

“It’s about controlling costs and managing the timing of expectations,” Mr. Bechtel says.

“Ultimately the buyer will ask, ‘How did this company respond to difficult market conditions?’”

Quality of assets is another area scrutinized by buyer, says Mr. Bechtel. Sellers should examine their inventory and move it rather than hold on in hope of higher prices in the future.

Holding less inventory may also enable the company to cut the cost of storing inventory.

As for human capital, the economic downturn means a lot of quality displaced people are in the job market, says Mr. Bechtel. “That key ‘A player’ you’ve always wanted may now be available,” he says.

House in Order Get all your documents in one place, says Mr. Bechtel. Set up a data site now so the company can just update it quickly when it’s ready to sell. Information to be loaded onto the site includes top customer, vendor and other pertinent data as well as updated key corporate agreements.

“When an opportunity does become available, you’ll be more ready and responsive to buyer’s needs,” Mr. Bechtel says.

Joe Juster, co-chair of the corporate practice group at the Cleveland-based law firm Calfee, Halter & Griswold, agrees. “Don’t scramble to set up a data site at the last minute,” he says. At that point in the process, management should be focused on responding to requests for details from prospects. Anticipating needs, not hurrying around, highlights the management team’s credibility, which can affect the price.

“When you go in and everything is in disarray, it’s a big negative for the buyer,” Mr. Bechtel says. They ask, ‘What else don’t we know?’”

Mr. Juster advises that owners should operate as if their business is for sale, seeking to consistently increase sales and earnings. “If you can show consistent sales and earnings growth, you’ll get a higher valuation,” he says.

A major advantage for private companies over publicly traded companies is that they don’t have to respond to the quarter-to-

20100118-NEWS--21-NAT-CCI-CL_--

1/13/2010

3:20 PM

Page 1

CORPORATE GROWTH and M&A

Advertisement quarter volatility of the public markets. They can take a longerterm view, sometimes sacrificing margin to capture market share or making significant investments in the business. Companies should, however, be careful to document those investments as one-time events so EBITDA can be positively adjusted at sales time.

Mr. Juster offers this example.

A company purchased capital equipment in 2008 to improve its operations or enter a new market. The investment impacted its earnings for the year. However, proper documentation persuaded the buyer that some of the expense can be added back to the 2008 earnings on which the multiple is paid to determine a fair sales price.

ownership issues such as succession planning and buy-sell agreements. Once a sale opportunity arises, those issues can prevent a company’s owners from maximizing their investment, Mr. Bechtel says.

Uncle Sam’s Share

When it comes to maximizing the selling price of a business, “It’s not necessarily what you get, but what you keep,” Mr. Juster says. He, of course, is referring to Uncle Sam and the tax implications of the sale.

After the sale is completed is not the time to determine how to minimize the tax impact.

The type of entity – C corp., S corp. or LLC – and how a deal is structured – asset sales, stock sales, mergers – affects the net proceeds.

Check That Agreement In addition, whether you receive “Business is about relationall-cash at closing, take a seller ships,” says Mr. Juster. “In every note or have an earn-out will relationship there is both opporhave an impact on present value. tunity and risk.” Owners should “There are tremendous oppordo a check-up involving all the tunities before the sale to do company’s key relationships. Do creative planning to avoid estate employees have non-compete taxes,” Mr. Juster says. Significant agreements? Do value can be saved key customers and transferred to and suppliers children, grandhave written a grantor A major advantage children, agreements that trust or a charitaspell out what ble foundation, for private happens in a thus reducing the dispute? Do companies ... is that estate tax impact. majority owners “You can do good they don’t have to and do well with have agreements with minority careful foresight.” respond to the ... shareholders to But advance take them along planning is volatility of the in the sale? critical. It allows As Cohen & company owners public markets.

Company’s Mr. to bring in Bechtel says, appraisers to set a “Address your value for family company’s skeletons before a and charitable gifting purposes prospective buyer does.”

These appraisals need to be done “It’s all about getting the well before a sale occurs. house in order and eliminating “Once you have a letter of obstacles” says Ulmer & Berne’s intent, it’s harder for an appraiser Mr. O’Neill. to come in and say it’s not Remember too, it’s not just worth that,” Mr. Juster says. the property, plant and equipDespite the considerable effort ment numbers that matter. required, the entire seller-side due “Now balance sheets are far diligence process is worth it, more nimble,” Mr. Juster says.

Ulmer’s Mr. O’Neill says. “A well“It’s intellectual property that’s prepared seller can expect that the critically important to the buyer human capital and monetary in maximizing value.” costs incurred in this process will Privately owned companies be offset by the advantages it will also should pay attention to have in today’s market.”

■

January 18-24, 2010

HAVE THE RIGHT TEAM ON YOUR SIDE Brian O’Neill, partner at Ulmer & Berne LLP, says the optimal sellerside due diligence should include: ACCOUNTING TEAM: Accountants should review and verify the company’s financial information and prepare pro-forma interim and trailing 12month financial statements. Establishing the quality of financial information is crucial to maximizing the value of the company. The accounting team should analyze possible adjustments to EBITDA as a means to maximize the value of the company.

LEGAL TEAM: Counsel should review the company’s records and contracts and clean up outstanding issues. The legal team should work with the seller to develop a strategy to deal with typical concerns of buyers such as third-party assignments and consents, regulatory and employee matters and environmental and tax issues.

INVESTMENT BANKER: For larger more sophisticated transactions, an investment banker is an integral part of the deal team and will take the lead to provide estimates of value, develop a marketing strategy, and eventually drive offers from prospective buyers.

DEAL STRUCTURE AND TAX PLANNING: Preliminary deal structure and tax issues should be addressed by the legal, accounting and investment banking teams. As part of this process, the accounting and legal teams should also provide advice on possible estate planning strategies to create the most efficient tax structure for wealth transfer.

DATA ROOM: Organizing due diligence information, including legal documents, financial statements and business reports in a secure online data room can speed up the due diligence process and lower both sides’ transaction costs.

Don’t wonder what’s ahead; be ready for it.

Instilling client confidence and peace of mind since 1784.

Who’s helping you?

Helping to write success stories in the middle market for more than four decades

For more information, please contact: 9`cc :Xjk\i — 216 464 4244

Our passion is partnering with management teams to build top performing businesses. That’s why we’re proud to recognize our investment in one of Northeast Ohio’s most innovative industrial companies,

bnymellonwealthmanagement.com

.

Focused on investments in high value manufacturing and proprietary business services companies with transaction values from $25 - $250 million.

@EM<JKD<EK D8E8><D<EK N<8CK? <JK8K< GC8EE@E> GI@M8K< 98EB@E> =8D@CP F==@:< J<IM@:<J ©2010 The Bank of New York Mellon Corporation. All rights reserved. Products and services may be provided by various subsidiaries of The Bank of New York Mellon Corporation.

$MFWFMBOE t #PTUPO www.morgenthaler.com

Crain’s Cleveland Business Custom Publishing

S-7

20100118-NEWS--22-NAT-CCI-CL_--

1/11/2010

10:22 AM

Page 1

CORPORATE GROWTH and M&A

S-8 January 18-24, 2010

Advertisement

Companies find Northeast Ohio a good place to grow

A

few years ago, Bob Fritz considered selling his family business, Avtron Manufacturing Inc., a 56year old technology company.

Independence-based Avtron designs and manufactures electrical control and test equipment for aerospace, industrial automation and other applications.

As he was exploring his options, he found and came to rely on the Cleveland-based investment banking firm Western Reserve Partners to help him in the sales process. “You don’t just wing it — doing it right takes time,” Mr. Fritz says.

He was amazed at the dealmaking resources to be found in Cleveland. “I’ve lived here all my life and didn’t realize the dealmaking infrastructure available,” he says.

Ultimately, Mr. Fritz sold the company to the Morgenthaler, one of Cleveland’s long-standing private equity firms. He says he liked that the firm understood manufacturing and wasn’t just

Independence and Valley View.

It does so with a global view.

About 30 percent of its customer base is outside the United States.

The company shipped to 78 countries in 2009.

Avtron also has experienced sales records for five or six years through 2008 and expects to post an all-time profit record for 2009 even though sales dipped.

“We’ve grown rapidly. As you grow, your culture and outlook change. Morgenthaler has helped us in that process,” Mr. Fritz says.

“New York financial guys.”

Mr. Fritz’s experience illustrates one reason why Northeast Ohio is a good place for owners of small and mid-sized companies to grow their business and ultimately realize value from their investment.

The region offers access to capital, professional services and a skilled workforce, along with a central location and the technical and scientific resources of leading colleges and universities.

Deal Structure Works Mr. Fritz was pleased to be able to structure the deal so management received stock options and he would stay on as CEO. “Before private equity that wasn’t possible,” he says.

Weekly phone meetings and quarterly board meetings have become part of the routine, and a chief financial officer, Rich Garcia, was brought in to provide more strategic overview of the financial side of operations.

Contact Steve Kimpel at 614-246-2435 www.stonehengepartners.com

Concept Fills a Void

Avtron Manufacturing President Bob Fritz was amazed at the deal-making resources to be found in Cleveland when he decided a couple years ago to look for a buyer for the company.

“Properly handled and managed, private equity is a good thing for a company,” Mr. Fritz says. “We didn’t lose a single employee due to the acquisition.”

Employees are a critical component at Avtron, which differentiates itself with the long-term support it provides to its customers.

That wasn’t always the case.

When Mr. Fritz joined the company in 1974, about 20 years after his family opened a small plant in Cleveland, turnover was higher.

The workforce caliber has improved in part because employees are compensated well and receive excellent benefits,

your M&A advisor. your insurance advocate.

including profit sharing, what Mr. Fritz has been told is a “Cadillac” health plan.

Top Talent Required Avtron employs more than 400 people, many of whom are engineers and other professionals.

Top talent is essential because Avtron produces highly engineered products that cannot be produced by unskilled people.

“We now hire impact players,” Mr. Fritz says, noting one hire brought in $2 million in business and now has customers request him.

“Avtron is able to grow year in, year out with low turnover, and we can find quality people when new hires are needed,” Mr. Fritz says. Even that success, though, doesn’t mean the employees would be willing to pick up and move if Avtron did.

“If I walk in and say we’re going to move to Georgia, they probably would not go,” Mr. Fritz says, noting the company isn’t asking them to make that decision.

Avtron will continue to operate from its five plants in

When Richfield-based Construction Labor Contractors had its first 40 people on the job, they popped the champagne cork. If they did that today, they would be popping corks more than 20 times a day.

“On an average day we have 850 full-time workers on the job,” says Vice President Rob Reese.

Construction Labor Contractors is another Northeast Ohio success story.

The company provides skilled labor to construction contractors and industrial project managers.

By leasing craftsmen, contractors can control their costs while delivering high quality construction work.

Founder and CEO Tim Cherotti says the company was created to fill a void. Although non-union contractors comprise about 85 percent of the labor pool, they did not have a “union” hall where the jobs were distributed.

“The non-union sector needed a better way to provide skilled labor to ‘merit’ construction contractors,” he says.

Operating from 15 offices in nine states, Construction Labor built its own corporate headquarters in Richfield four years ago. In 2008, the company posted its most successful year with $40 million in revenue.

That’s a long way from 1997 when Mr. Cherotti started the company with just $100 and an

Our clients are aware of the varied risks and opportunities that directly impact deals. Yet being prepared requires more than awareness. As an astute M&A advisor, we make all the difference, helping clients understand and identify

Executive search requires Executive knowledge.

property & casualty risk exposures, healthcare issues, and even retirement planning.

We’re committed M&A partners. We create an integrated, customized strategy for any deal’s needs. We’re your insurance advocate. We’re Oswald Companies.

reduce risk. realize rewards.

Yours and ours.

The Sager Company is an internationally recognized search firm recruiting the best candidates for the private equity market and their portfolio companies.

800 466-0468 www.oswaldcompanies.com an Assurex Global Partner

Ohio | Florida | Michigan | Minnesota | Kentucky

800.459.1307

Crain’s Cleveland Business Custom Publishing

sagercompany.com

20100118-NEWS--23-NAT-CCI-CL_--

Advertisement

1/11/2010

10:22 AM

Page 1

CORPORATE GROWTH and M&A

The region offers access to capital, professional services and a skilled workforce, along with a central location and the technical and scientific resources of leading colleges and universities.

ACG CLEVELAND EVENTS All events at The Union Club unless otherwise specified

FEBRUARY 9

APRIL 29

SEPTEMBER 8-9

Dinner Sandy Cutler, CEO, Eaton Corp., (Joint meeting with FEI)

Afternoon Workshop Topic to be announced

ACG Great Lakes Capital Connection Renaissance Hotel

MAY 20

MARCH 17 office in his basement.

He took the leap following four to five years of experience working for staffing and headhunting firms.

“I decided I could do it on my own,” he says. I felt I understood the industry, had the experience, a bit of luck and the good hires to be successful.”

Mr. Reese joined six months after his former fraternity brother at Kent State University started the company.

“It worked out well,” Mr. Cherotti says. “Long tenure is part of our corporate philosophy.

We treat employees as if they’re family.”

Longevity Rewarded The results speak for themselves. Over half the corporate staff has worked at the company at least five years.

Mr. Reese says the Ohio office staff serves as an example for the entire company.

The Akron manager has worked there 11 ½ years.

The Columbus manager has been there nine years, and the Cincinnati manager has been there seven.

Longevity is rewarded by Construction Labor, which pays 100 percent of health care costs after an employee has been with the company five years.

Mr. Reese says Construction Labor is not really a temp agency because full-time employees have benefits, such as paid holidays and vacations, 401(k) participation.

Employees would not find those opportunities working for a traditional temp agency or a small construction firm.

A construction company with 20 employees can’t offer the same benefits package that a larger company like Construction Labor can.

In 2008, Construction Labor sent about 2,000 W-2 forms. In addition, Construction Labor’s 5,000-plus clients mean employees won’t experience the layoffs they could working for a single employer who hits a down cycle and doesn’t have enough work.

Both Mr. Reese and Mr. Cherotti say that the secret behind Construction Labor’s success is how it treats its employees and its clients.

“A labor company is all about relationships,” they say.

Without relationships, the company would be a commodity and pricing would be client’s only consideration.

“The reason we’re so successful is because we create a pleasant work environment,” Mr. Cherotti says. “We put employees and clients first — it really promotes longevity and only adds to stability. It’s rare we lose an employee we didn’t want to lose.”

Although 2009 brought disappointments due to the economy, Construction Labor already is

seeing an uptick for 2010.

In fact, the recession has helped their clients recognize the full value the company offers.

In a construction boom people turned to us when they needed more hands,” Mr. Reese says.

“Now they realize Construction Labor Contractors can help them save money too.”

■

January 18-24, 2010

Breakfast Speaker to be announced

APRIL 22 Breakfast Tom Embrescia Second Generation Ltd. — The Embrescia Companies

Breakfast Chris Connor CEO, Sherwin-Williams

JUNE 15 Social and Networking Reception The Shoreby Club

OCTOBER 4 Annual Golf Outing Firestone Country Club

JANUARY 2011 Deal Maker Awards Dinner Marriott at Key Center

For more information, contact ACG Cleveland at (216) 696-8484 or www.acgcleveland.org

ACG Cleveland congratulates the winners of the 14th Annual Deal Maker Awards 2010 Award Recipients Cliffs Natural Resources Inc. Dealer Tire, LLC TransDigm Group Inc.

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

SPONSORS

Crain’s Cleveland Business Custom Publishing

S-9

20100118-NEWS--24-NAT-CCI-CL_--

1/11/2010

10:22 AM

Page 1

CORPORATE GROWTH and M&A

S-10 January 18-24, 2010

Advertisement

Turbulent times bring management challenges

S

uccessful businesses are founded and funded on the premise of growth and an optimistic view of the future. But a deep and enduring recession like this one turns those accepted notions on their head.

Here are some views from those pitching in on the front lines.

DENNIS KEBRDLE PARTNER, CHIKOL EQUITIES INC., GRANGER, IND. “Our traditional practice of

‘valuate, turn around and help implement long-term changes’ has become one of ‘stabilize if possible and move them out.’

“Our greatest fear today is that there is not enough time being spent preserving enterprise value and that equity is looking at it all through 2008 glasses. Those days are over.

“With that as a backdrop, we continue to believe that buyers can take advantage of the current situation to find bargains and build value. You can find a

What do You Value?

tuck-in company with balance sheet issues but good operations that can be added to an existing platform at a three to four multiple at the bottom of the cycle or for senior-secured debt values. The key to this opportunity is the relationship with secured lenders and the supporting cast of attorneys and consultants.

“By working together to limit or reduce the lender’s loss or exposure, equity players can become welcome guests again in bank offices.”

Audit Business Solutions Corporate Finance Employee Benefits Audits Investigative Accounting Management Development Tax Wealth Center

Creating Value.

To reach our Cleveland Office call 216.241.3272 or visit www.meadenmoore.com

DAN D’AGOSTINO

invested personal sweat and equity into a deal. As deals drag PRINCIPAL/GENERAL out and fears rise that things may MANAGER, DEFINITY PARTNERS, go south, these key players are ever-more willing to leave invested CLEVELAND OFFICE time and money for less risky, lower return deals.

“Despite the tremen“Now, some private dous pressures businesses equity groups are scramare under today, we still bling to retain human see too many leaders capital. The pot squandering precious sweeteners that persuade time and accepting a slugmanagement to stay are gish pace of progress in not always monetary. On their organization. They the flip side, we’ve been are waiting for employees DAN capturing fleeing talent D’AGOSTINO to ‘get it’ and rise to the and placing them occasion, or putting off with groups that are acting in the hopes that compatible.” things will improve on their own.

“The reality is that JEFF SCHWAB moving quickly will M&A PRACTICE uncover the real problems in the organization.

LEADER, OSWALD Problems in decisionCOMPANIES, making, sense of ownerMICHAEL ship, teamwork, accountCLEVELAND GERBASI ability and motivation will surface when the “Even though the organization is asked to economy is bad, the risks move quickly. themselves haven’t “When people invest changed. Exposure to risk, the time to make though, may actually be improvements and the greater because people results are not seen are looking for any deep quickly, people will be pocket. Some people go hesitant to prioritize through an acquisition JEFF improvements in the thinking they don’t need SCHWAB future. However, when a to worry about insurance change is made and the due diligence. Meanwhile, benefits are realized within days, claimants may be thinking about managers and employees will how to make money by filing claims. readjust priorities.”

“Potential buyers should be aware of how targeted companies are operating their insurance MICHAEL GERBASI programs; professional due diliMANAGING PARTNER, SAGER gence would detail the choice and impact those programs. For COMPANY, CLEVELAND example, a cash-flow-basis insurance program may be a liability “For 25 years, my company has for the buyer if not explored served private-equity groups in thoroughly. In a cash-flow plan, recruiting top executives for manthe company pays a certain agement teams. Lucrative returns percentage of premiums and lured risk-inclined entrepreneurs prospective claims at the beginwho remained dedicated throughning of the year. If losses aren’t out a deal—even the tumultuous as great as expenses, the company ones. That was then. gets a refund. However, it’s a “Traditionally, private equity potential liability that the groups literally banked on the company will be paying more as loyalty of their key partners who

12 Deals in the Last12 Months When the M&A and Financing Markets get tough, the tough work harder.

Over 20 years of trusted corporate financial advisory services. s Mergers & Acquisitions s Debt & Equity Placements s Financial Restructurings s Valuations & Fairness Opinions

Crain’s Cleveland Business Custom Publishing staff Ad director: Mike Malley (mmalley@crain.com) Page designers: Kathy Carr (kcarr@crain.com) Joel Hammond (jmhammond@crain.com) Contributing writer: Ann Gynn, Wise Group

www.bglco.com

www.globalma.com

Corporate Finance Experts From Your World™ Contact Michael E. Gibbons (216) 241-2800

Crain’s Cleveland Business Custom Publishing

CONTACT US For more information about Custom Publishing with Crain’s Cleveland Business, please contact advertising sales director Mike Malley at 216-771-5070 or mmalley@crain.com.

20100118-NEWS--25-NAT-CCI-CL_--

1/11/2010

2:48 PM

Page 1

CORPORATE GROWTH and M&A

Advertisement

January 18-24, 2010

S-11

ACG CLEVELAND 2009-2010 BOARD OF DIRECTORS PRESIDENT

PRESIDENT ELECT Theodore Wagner Libman, Goldstine, Kopperman & Wolf

VICE PRESIDENT — DEAL MAKER AWARDS

Timothy G. Healy Linsalata Capital Partners James M. Hill Benesch, Friedlander, Coplan & Aronoff James P. Marra Blue Point Capital Partners

EXECUTIVE VICE PRESIDENTS

Murad A. Beg Linsalata Capital Partners

Al Melchiorre MelCap Partners

VICE PRESIDENT — MEMBERSHIP

VICE PRESIDENT — TECHNOLOGY

Daniel P. Filippi R. R. Donnelley & Sons Martin S. Gates Calfee, Halter & Griswold Henry E. Seibert Porter, Wright, Morris & Arthur Peter J. Shipley Resources Global Professionals

David Hadley David Hadley Corporation

Patrick Gallagher Edward Howard

claims accrue in the year.

“This is especially true today.

We’re seeing employee making greater use of their health plans to maximize its value. The effect is annual insurance rate increases rising above 10 percent and greater use of plans.

“As for property and casualty insurance costs, we see those as flat or even reduced in the coming year. However, financial coverages and directors & officers insurance is now typically more expensive thanks to the recent financial failures and scandals like Bernie Madoff, Stanford Investments, etc.

“Don’t forget the role of surety bonds, which are especially necessary in a distressed environment.

When buyers load up with debt, they must be mindful that they still want to be bondable and that is driven by the company’s financials.”

■

VICE PRESIDENTS — GREAT LAKES CAPITAL CONNECTION

Eric M. Kuhen Marsh Scott Seelbach Primus Capital Funds Karen Tuleta Morgenthaler

Randy Markey Capital Acceleration Partners James P. Marra Blue Point Capital Partners Al Melchiorre MelCap Partners

TREASURER Joseph F. Maslowski Roetzel & Andress

VICE PRESIDENT — PROGRAMS Sean McCauley PNC Business Credit

VICE PRESIDENTS — GOLF EVENT Rudy Bentlage Chase Business Credit Terry R. Lardakis Millisor & Nobil

VICE PRESIDENTS — GOVERNANCE Jeffrey Leonard First Communications Corp.

ACG Cup Douglas K. Winget First Merit

VICE PRESIDENT — OUTREACH Moses R. Jhirad PNC Bank

VICE PRESIDENTS — SPECIAL PROGRAMS

VICE PRESIDENT — ECONOMIC DEVELOPMENT

Daniel G. Berick Squire, Sanders & Dempsey

Donald W. Majcher Ohio Aerospace Institute

VICE PRESIDENT — NOMINATIONS Mathew J. Hanson Emprise Partners

ASSISTANT TREASURER Scott R. Smiley Consultant

SECRETARY M. Joan McCarthy MJM Services

DIRECTORS AT LARGE Guy C. Fabe PricewaterhouseCoopers Tom Freeman Grant Thornton Wendy S. Neal Global M & A

Ulmer & Berne LLP Salutes the Association for Corporate Growth 2010 Deal Maker Award Winners.

Brian M. O’Neill 216.583.7004 boneill@ulmer.com Peter A. Rome 216.583.7124 prome@ulmer.com

We congratulate our client Cliffs Natural Resources Inc. and all of the other ACG Award Winners on their achievement.

www.ulmer.com

Crain’s Cleveland Business Custom Publishing

20100118-NEWS--26-NAT-CCI-CL_--

1/11/2010

10:23 AM

Page 1

CORPORATE GROWTH and M&A

S-12 January 18-24, 2010

Advertisement

ACG Cleveland honors top deal makers

T

he capstone of the ACG Cleveland program season is the annual Deal Maker Awards dinner. Now in its 14th year, the event recognizes Northeast Ohio’s engines of corporate growth and deal-making.

The 2010 awards program will honor three companies on Thursday night, January 21:

TransDigm This Cleveland-based global designer, producer and supplier of aircraft components has grown sales from $48 million at its for-

mation in 1993 to $762 million today. During that time TransDigm has acquired 27 businesses, including six in the last two years. In October 2009, TransDigm (NYSE: TDG) completed a successful $425 million notes offering as part of a capital restructuring that also included a onetime special cash dividend of $7.65 on each outstanding share of common stock. TransDigm was recognized recently by Fortune and Forbes magazines.

Fortune ranked TransDigm No. 51 on its 2009 list of the 100 Fastest Growing Public Companies in

America, while Forbes ranked it No. 25 on its 2009 list of the Best Mid Cap Stocks in America.

Cliffs Natural Resources Cliffs Natural Resources (NYSE: CLF, Paris: CLF) is an international mining and natural resources company whose Cleveland roots go back to 1847. Following a series of strategic transactions beginning in 2002, Cliffs emerged as the largest producer of iron ore pellets in North America, a major

Congratulations to ACG Deal Maker Award winners and our clients

TransDigm Group Inc. Dealer Tire

supplier of iron ore out of Australia, and a significant producer of metallurgical coal. The company has continued to actively execute a strategy designed to achieve scale in the mining industry, focusing on serving the world’s largest and fastest-growing steel markets. Over the last two years this has included more than $1 billion in deals and an attempted $10 million merger with Alpha Natural Resources. Most recently, Cliffs announced a successful $240 million contested bid to acquire Canadian chromite explorer Freewest Resources Canada Inc. and the buyout of its three joint venture partners’ 73.2% interests in a Canadian iron ore mining operation.

Dealer Tire Dealer Tire stands as one of the most impressive corporate growth stories in Northeast Ohio over the past two decades. Formed in the early 1990s to address the tire needs of automotive dealer, Dealer Tire’s foundation rests on more than 80 years of success in tire retailing as Mueller Tire and Brake. In 2000, the Mueller family sold the retail stores to

Our attorneys work with deal makers to design and implement transaction structures, tax efficiencies, risk management measures and negotiating strategies. We bring together tax, antitrust, environmental, international, real estate, employee benefits, employment, executive compensation, intellectual property, technology and litigation lawyers to provide the necessary breadth and depth of representation.

Nominate your favorite Deal Maker Nominations for the 2011 ACG Cleveland Deal Maker Awards may be submitted to ACG at any time during the year. Each November, a selection committee reviews the nominations and selects the award winners. For a nomination form, contact ACG Cleveland at (216)-696-8484 or admin@acgcleveland.org.

focus on Dealer Tire. From 2004 to 2008, Dealer Tire grew 229 percent.

Today it is the number one supplier of tires and wheels to U.S. automotive dealers and has programs in place with Mercedes-Benz, BMW, Lexus, Toyota, Kia, Chrysler and numerous other automakers. In 2009 Dealer Tire entered into a minority recapitalization of the company with the Boston-based private equity firm TA Associates.

The transaction provided liquidity to previous institutional owners and management investors along with an expanded debt facility for future growth and acquisitions.

■

a division of

CHICAGO CINCINNATI CLEVELAND COLUMBUS COSTA MESA DENVER HOUSTON LOS ANGELES NEW YORK ORLANDO WASHINGTON, DC

www.bakerlaw.com © 2010 Baker & Hostetler LLP

has been acquired by

The undersigned acted as exclusive financial advisor to Cranel, Inc. in this transaction

For more information, please call (216) 589-0900 or visit www.wesrespartners.com

Crain’s Cleveland Business Custom Publishing