MiBiz October 26, 2020 print edition by MiBiz

Cybersecurity standards to reshape defense manufacturing

Natalia Kovicak takes helm at GR Econ Club

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Managed service providers play key advisory role in shift to work-from-home By JAYSON BUSSA | MiBiz jbussa@mibiz.com

ichard Reiffer and his staff at Grand Rapids-based Fusion IT LLC tend to take a proactive approach when it comes to advising clients on digital strategies. So when COVID-19 transitioned into a full-blown pandemic in early March, the team was already telling the midsize companies it works with to start facilitating effective remote work. Fusion IT, which works with businesses Reiffer on an ongoing basis as a managed service provider (MSP), even developed white papers to serve as a reference for effective work from home strategies. “We started warning our clients early and most of them acted on it to get equipment if they didn’t already have equipment capable of running their remote work,” said Reiffer, the company’s vice president of strategic initiatives. “For a while there, the backlog to get laptops was about six months.” The ongoing pandemic has ushered in a tidal wave of remote working for companies that were either forced to send workers home or did it out of precaution. Many of these companies’ MSPs have become the brain trust for workfrom-home setups and strategies.

Uneven footing With remote work a growing trend before the COVID-19 pandemic, many companies already had a rough infrastructure in place to make the transition smoother, Reiffer said. Still, some businesses had to swiftly make up ground while some of it was dictated by their respective industries. See WORK FROM HOME on page 12

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Panel: Rural broadband development should mirror electric grid build-out By MARK SANCHEZ | MiBiz msanchez@mibiz.com

ichigan and the nation need the same kind of concerted effort to deploy broadband internet access as 90 years ago when America set out to electrify rural areas following the Great Depression, economic developers say. The COVID-19 pandemic has heightened the need to fix a lack of affordable high-speed internet access in some markets of the state that economic

developers say is critical for both businesses and households. Eliminating the so-called “digital divide” must become as important as extending electrical and telephone service into rural markets in the 1930s, Birgit Klohs, CEO of The Right Place Inc. in Grand Rapids, said durKlohs ing a recent virtual panel discussion at the Michigan Economic Developers Association’s annual conference.

The issue has become increasingly important during the pandemic as companies conduct business v irtua lly and students learn remotely, Klohs said. The pandemic brought greater awareness to the issue and how in some areas the digital divide “is more like the Grand Canyon,” Klohs said. “Our children shouldn’t be sitting in cars in the parking lot of a restaurant to get Wi-Fi so they can do their homework. I think that’s just Third World,” Klohs said. See MEDA on page 3

West Michigan cities weigh policy changes to bolster affordable housing By KATE CARLSON | MiBiz kcarlson@mibiz.com

est Michigan cities are examining new policies to expand affordable housing and create a supportive environment for developers as studies show an ongoing need for more units. The renewed discussions this year among city officials in Grand Rapids, Holland, Kalamazoo and Grand Haven come as the COVID-19 pandemic has driven high unemployment and financial strain, raising concern among officials who say it could exacerbate the need for affordable housing. Cities are attacking the problem in a variety of ways, including revamping outdated zoning codes to make it easier for developers to include affordability in housing developments, as well as prioritizing affordable or mixed-use housing for incentive tools such as brownfield credits. Despite the effort being made to add more housing stock at varying price points, housing advocates and local planners are still confronting a stigma associated with — and community opposition

Drew Phillippy is president of Grand Rapids-based Purple East, which recently emerged from bankruptcy under a new law meant to help small businesses.

New chapter for Chapter 11 For small businesses facing bankruptcy, the new federal Small Business Reorganization Act is proving to be a cost-effective and timely lifeline. A Grand Rapids retailer offers an early test case. SEE PAGE 14 STORY BY ANDY BALASKOVITZ // PHOTO BY KATY BATDORFF

to — such housing, including high-density rentals. The Lansing-based Michigan Municipal League has stepped in to help local governments solve their housing puzzle. The MML plans to issue guidance in early 2021 on code reform that can help increase affordable housing units. That includes incentivizing affordable housing developers through tools like brownfield credits, streamlining zoning codes and a refined application process. “What happens is you have developers sinking a lot of money into the process and it makes it harder for them to build housing developments affordably,” said MML Policy Research Director Shanna Draheim. Meanwhile, studies continue to show a need for affordable housing throughout the region. A recent Housing Next study shows at least 5,340 more rental units and 3,548 more owner-occupied units are needed in the next five years in Grand Rapids to meet housing demand. Housing North, a nonprofit that spans 10 counties in the northwestern Lower Peninsula, showed last year the region would need about See HOUSING on page 11

INSIDE: Solar industry on edge

Mergers & Acquisitions PAGE 7

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Continued from page 1 “If you look at why companies locate somewhere, it’s talent, it’s infrastructure and then it’s incentives. And in infrastructure, broadband has to be a utility,” Klohs said. “Somehow this country needs to embrace what we did in the ’30s, which was the electrification of America. You had electricity in the big cities but when you went out to a rural community you still had kerosene. But we made the commitment — it needs to be the same commitment.” The Right Place has been working with Kent County to deploy Wi-Fi hotspots where needed “so that the kids can learn and somebody can work from home,” Klohs said. McCauley

No ifs, ands or buts M a t t Mc C a u l e y, C E O of Traverse City-based Networks Northwest that covers a 10-county region, described broadband access as a “huge issue for Michigan,” particularly in the northern Lower Stamas Peninsula. “We were banging the drums on the issue for many, many years in northern Michigan. Now our gear that we have to hit is one of immediate urgency,” said McCauley, who also likens the issue to the lack of electricity and phone service in rural communities decades ago. “Access to the internet must now be seen as a basic utility — no ifs, ands or buts, in my view,” he said. “We’ve had a number of different programs over the years on loans and things like that. The private sector has done a lot, but it has admitted that it cannot reach

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those hardest to reach because there is not a profit to be had. … The electrification and the phone reach was picked up by the public sector to ensure that Americans across the country remained connected.” In some rural communities, broadband technology is available “but the cost is a challenge just based on the technology that they have,” he said.

Connecting Michigan Communities program to expand broadband access. A project in Berrien and Cass counties received $410,422, while a Calhoun County project received $276,000. A four-county project in Calhoun, Eaton, Ingham and Jackson counties was awarded $782,699. The state said at the time that 1.2 million Michigan households lack a permanent fixed broadband connection at home, resulting in a $1.8 billion to $2.7 billion potential Disproportionality, economic benefit left unrealized among diseconomic potential connected households. The The lack of access contribprojects funded this month utes to the pandemic disprowould extend broadband portionately affecting some access to 10,900 houserural areas economically, holds, businesses and other McCauley said. organizations. The digital divide adds The state plans to award to what economists call a a second round of grants “K-shaped” economic recovtotaling $5.3 million, and a ery, with some communities’ state budget that took effect economies moving upward Oct. 1 includes another $14.3 and some downward, he million in grant funding for said. That will result in some a third round of projects in people having less access to 2021. education, work and even Tony Stamas, president — BIRGIT KLOHS health care through an abiland CEO of the Midland CEO of The Right Place Inc. ity to access telemedicine, Business Alliance, said McCauley said. broadband access has “This next year, you are become “absolutely essengoing to see disproportionality and recovery tial” in economic development and recruiting based on the broadband infrastructure, and and retaining businesses and talent. that needs to be absolutely critical for our comStamas said the Midland Business Alliance munities, the state and the nation as a whole,” worked with a company in western Midland he said. County to get a hard broadband connection Gaps in high-speed internet service are priso it could expand and sell more products marily in the central northern Lower Peninsula online. and Upper Peninsula, plus counties in south“For everybody, that’s going to be at the top ern Michigan, according to the advocacy group of the list. That’s just going to grow as a focus in Connected Nation’s Michigan chapter. helping our business community and attracting In early October, the state awarded $12.7 milbusiness here by saying, ‘We have the network, lion in grants for projects to improve rural broadwe have the resources,’” Stamas said. “We have band internet access. people that can work from their homes around In West Michigan, an initiative in Barry the world who are going to need to have the conCounty received $1.1 million through the nection.”

“Our children shouldn’t be sitting in cars in the parking lot of a restaurant to get Wi-Fi so they can do their homework.”

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MANUFACTURING

New cybersecurity standards poised to reshape defense manufacturing supply chain By JAYSON BUSSA | MiBiz jbussa@mibiz.com

ew mandatory cybersecurity standards are poised to profoundly impact the over 300,000 manufacturers across the United States, including in West Michigan, that make up the country’s defense industrial base (DIB) supply chain. On Jan. 31, the United States Department of Defense (DoD) released version 1.0 of what is called the Cybersecurity Maturity Model Certification (CMMC), which sets in place unified standards for cybersecurity that all members of the DIB must comply with in order to contract with the DoD. “I have seen many regulatory requirements, this is the first time I’ve seen a regulation come down that is literally going to prevent people from doing business,” said Chad Paalman, CEO of NuWave Technology Partners LLC, an I.T. firm with offices in Grand Rapids, Kalamazoo and Lansing that specializes in CMMC compliance. “This is going to get the attention of the C-suite …because if you can’t bid on work, and that means everything comes to a screeching halt because you don’t meet a certain certification” The CMMC framework is comprised of five different tiered levels, which gauge the company’s maturity in regard to cybersecurity. Each level prescribes indicators of organizational maturity.

are still responsible for implementing, monitoring and certifying the security of their I.T. systems, the government will also force the issue through third-party assessments. The CMMC Accreditation Body will be training hundreds of third-party assessors. These assessors, working for or subcontracted by Certified Third Party Assessing Organizations, will travel around the country to provide CMMC assessments. This means manufacturers have to show proof of compliance to assessors and be certified by the CMMC accreditation body to qualify for defense contracts that carry a CMMC requirement. The Defense Department plans to include CMMC requirements in new contract opportunities in the coming months. CMMC will be incorporated into all new contracts over the next five years. Subcontractors will likely hear about CMMC requirements through larger “prime” contractors doing business directly with agencies.

CMMC MODEL LEVEL DESCRIPTIONS LEVEL

• • • • •

Basic cybersecurity Achievable for small companies Subset of universally accepted common practices Limited resistance against data exfiltration Limited resilience against malicious actions

Practices are performed, at least in an ad-hoc manner

• • • •

Inclusive of universally accepted cybersecurity best practices Resilient against unskilled threat actors Minor resistance against data exfiltration Minor resilience against malicious actions

Practices are documented

• • • • • •

Coverage of all NIST SP 800-171 rev 1 controls Additional practices beyond the scope of CUI protection Resilient against moderately skilled threat actors Moderate resistence against data exfiltration Moderate resilience against malicious actions Comprehensive knowledge of cyber assets

Processes are maintained and followed

• • • • •

Advanced and sophisticated cybersecurity practices Resilient against advanced threat actors Defensive responses approach machine speed Increased resistance against and detection of data exfiltration Complete and continous knowledge of cyber assets

Processes are periodically reviewed, properly resourced, and improved across the enterprise

• • • • • • •

Highly advanced cybersecurity practices Reserved for the most critical systems Resilient against the most advanced threat actors Defensive responses performed at machine speed Machine performed analytics and defensive actions Resistant against, and detection of, data exfiltration Autonomous knowledge of cyber assets

Continuous improvement across the enterprise

Urgency required

The effect of the new certification is profound, and an overwhelming number of manufacturers are lagging behind, experts say. “The time to start thinking about preparation for CMMC is yesterday,” Paalman said. “I can tell you firsthand, since I support these companies’ networks, it is going to be an amazing amount of work for these companies and it’s not just the technical side — it’s the documentation of compliance, as well.” Cost is a major sticking point, especially for an industry that notoriously does not invest in cybersecurity. “My experience is that a lot of manufacturing companies do not have enough budget allocation for I.T. and cybersecurity,” Paalman said. “And that’s Paalman Tellier Hill without CMMC.” Another barrier is the absence of in-house Level 1 for instance consists of measures experts who can tackle this daunting process. that might be considered basic cybersecurity Even seasoned in-house I.T. professionals may for small businesses, such as physical security likely find themselves unable to take on the comand installing security updates for computers. plexities of CMMC compliance. Existing contracts require businesses to Sue Tellier, president of Grand Rapids-based implement NIST Special Publication 800-171. supply chain management and logistics company CMMC Level 3 includes these same requireJetCo Federal, described the new CMMC process ments, enabling organizations who have already as “profound” and “very underestimated.” begun cybersecurity efforts to achieve CMMC Tellier estimated that 80 percent of her company’s certification more quickly. work is inside the defense industrial base, working While manufacturers belonging to the DIB

SOURCE: U.S. DEPARTMENT OF DEFENSE

as a prime government contractor and also alongside smaller manufacturers on government sales. Two other Michigan-based manufacturers that supply the defense industry MiBiz contacted for this story declined to talk on the record about the CMMC compliance process. Tellier said some prime contractors expect to lose a staggering 80 to 90 percent of the companies’ supply chain because companies will not be ready for the required CMMC level. Meanwhile, JetCo Federal has taken the necessary steps. The company is NIST 800-171 compliant and Tellier estimated that it will be CMMC level 3 compliant by February. “We’re taking it seriously and it’s a competitive advantage,” Tellier said. “If my competitors don’t take it seriously, it’s good for me but it’s not good for the defense industrial base, speaking as someone who cares about our nation and homeland security and knowing that our domestic supply chain is critical for that. I want people to pay more attention to it and take it seriously.”

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DESCRIPTION OF PROCESSES

DESCRIPTION OF PRACTICES

While Tellier did sympathize with small businesses that might be gun shy about heavily investing to satisfy a set of standards that continue to shift and morph, she said the measures associated with achieving CMMC compliance create a better company. “None of the things we have done has made our company worse,” Tellier said. “These are all steps that are making us more secure and have more honor and sensitivity in regard to our customer information.”

First steps Paalman and Tellier agreed that the initial steps to CMMC compliance begin with business leaders deciding whether they want their companies to be a part of the defense industrial base. If companies already work with existing prime contractors, leadership must find out now what level of CMMC compliance they will need to continue the work. From there, companies can benefit from working with a qualified I.T. consultant for a gap analysis and lay out a plan and budget that leads to CMMC compliance. The urgency is driven in part by the fact that CMMC compliance can take months. The new CMMC regulations come at an opportune time for Angela Hill and her Spring Lake-based Jadex Strategic Group, which supports the defense industrial base by working with clients to build out system configurations that equip defense vendors with a secure space. Hill brings a unique perspective to the job with her global intelligence and counterterrorism experience. Hill served as a U.S. Navy military intelligence analyst and a federal contractor for tier 1 intelligence organizations like the Central Intelligence Agency, Defense Intelligence Agency and the National Geospatial-Intelligence Agency. Hill recently applied this expertise in the commercial space by forming Jadex earlier this year. From her view, the new cybersecurity measures are a welcome addition. “This new CMMC regulation is really ensuring that the government is protecting their information through their vendors,” Hill said. “Nationstate actors and their respective intelligence agencies actively target U.S. organizations and businesses to collect information for ongoing and future operations and work to covertly steal our nation’s national secrets, designs and emerging technologies. The new CMMC framework, at its core, is the government’s way of cracking down and saying you need to protect our relationship and the information we share with you.” Visit www.mibiz.com

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ENERGY Clean energy supporters have long disputed these claims, saying customer-owned generation provides a net benefit to the grid while noting that such programs act as an existential threat to the utility business model. Solar installations also are a long-term energy cost-saving measure for entities that install them. However, at least eliminating or raising the cap on who can participate is a more immediate concern than compensation rates for the solar industry. “There’s a lot of space between the bills that would lift the cap entirely and what we have right now,” Sherman said. “We’ve been trying to negotiate to something that gives us some certainty for a few years.” Despite the uncertainty, Sherman is still holding out hope for legislative action this year. “We would love for this to be a lame duck play,” Sherman said.

Other venues, options

Customers, installers on edge as key solar energy program nears cap By ANDY BALASKOVITZ | MiBiz abalaskovitz@mibiz.com

key program that has incentivized small-scale solar projects in recent years has reached or is nearing its cap in two utility service territories. That’s raising concerns about stifling the state’s solar industry as the clean energy sector tries to recover from significant pandemic-related job losses. For years, the st ate re qu i re d utilities to offer net metering programs, which credit utility customers who genSherman erate their own power — mostly with solar panels — for sending their excess electricity to the grid. While net metering was replaced in sweeping 2016 energ y reforms Scripps w it h new “distributed generation” programs, both are capped at small percentages of the utility’s average peak load.

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Once the cap is reached — which is happening faster as solar installation costs decline — utilities are no longer legally obligated to interconnect new solar-generating customers onto the grid. The number of distributed generation program participants varies by utility, but the Upper Peninsula Power Co. (UPPCO) has now met its cap twice while Consumers Energy — the state’s largest energy provider — could meet its cap by the end of the year. “We’re getting to essentially a land of unknown,” said Laura Sherman, president of the Michigan Energy Innovation Business Council. “The utilities have committed (to state lawmakers) multiple times that they’ll continue to interconnect people, but there’s really no Michigan law to require that.” Moreover, if utilities do agree to interconnect these systems to the grid, it’s not clear how much customers would be credited for excess power sent to the grid. This makes it virtually impossible for installers and their customers to determine how long it might take to earn a return on investment. Once the cap is hit, “There’s no program, timeline, set fees or dispute process — it’s very unclear what will happen,” Sherman said. “Especially of concern is that whatever happens with one application that goes in does not

of lifting the cap include environmental groups and the cities of Grand Rapids and Ann Arbor, which are looking to expand renewable energy generation. Opponents to McBroom’s bill include the Michigan Manufacturers Association, which cited “significant impacts on system costs and system reliability.” In mid September, the Senate Energy and Technology Committee approved resolutions encouraging the Michigan Public Service Commission to study both the compensation side as well as the potential grid effects of more distributed generation. “We’re taking a serious look at that,” MPSC Chairman Dan Scripps told MiBiz. “There are a lot of issues Momentum slowed at play in terms of essential costs to Legislation to raise or eliminate the maintain the grid.” program cap has lanSenate resolutions 142 guished in the state and 143 ask the MPSC to Legislature for years, complete a rate design despite bipartisan supstudy by October 2021 Sponsored by: port. The cap is set at 1 as well as examine interSBAM ENERGY percent of a utility’s peak connecting distributed SOLUTIONS load for the preceding generation resources to five years, which is furthe grid. ther broken down based on the size Consumers and utility officials of a customer’s installation. across the U.S. have maintained that Most recently, a bill introduced a small-scale, customer-generated solar year ago by state Sen. Ed McBroom, power sent to the grid is far more R-Vulcan, to eliminate the cap has expensive than power produced by stalled in a legislative committee that large utility-scale projects and thereheld hearings over the summer but fore reflects a cross-subsidy paid for never put it up to a vote. Supporters by non-solar customers.

mean that same thing will occur for the next one.” According to the MEIBC, UPPCO hit its distributed generation program cap for the second time (it was previously increased) on Sept. 28, while Consumers’ commercial and residential programs are about 90-percent full. Consumers spokesperson Katelyn Carey said the utility prefers not to speculate when or if it would reach its program cap. “While projections range, it is possible that the cap for smaller commercial and residential customers is reached later this year or at some point in 2021,” Carey said.

ENERGY

Separately, Consumers has a rate case pending before the MPSC involving a distributed generation tariff, which could potentially determine the rate at which solar customers are credited and how the interconnection process works. The MPSC is expected to issue an order in the case in December. Aside from the cap, utilities and clean energy supporters have disputed how much customers should be credited for their excess generation even though the MPSC has already determined what it believes is a fair rate, roughly between the retail and wholesale price of electricity. While that may be an ongoing discussion, Sherman is more concerned now with the cap. Scripps can’t comment on active cases before the MPSC, but he said the complexity and conflicting viewpoints on the issue make it an ongoing debate. “There are a whole lot of issues at play,” Scripps said, including determining an appropriate cost of service for utilities, the full “value of solar,” and utility concerns about potentially losing revenue. “Sometimes we’re having three conversations at the same time, which contributes to ongoing disputes on some of these issues,” he said. Absent certainty over compensation and assuming future projects are connected, Sherman said installers are increasingly recommending rightsizing installations to more closely match the energy consumption of a home or commercial entity, or coupling panels with battery storage, to essentially avoid sending excess power back to the grid. MEIBC’s membership includes more than 15 commercial and residential solar installers. “More people are installing batteries and trying to use as much of the power they generate with panels themselves,” Sherman said. Carey said Consumers “is not seeing a noticeable increase in customers who are installing battery storage systems.” Still, MEIBC’s members — especially smaller solar companies — are “really, really worried” and attempting to diversify revenue streams or move into other utility territories. “The cap is a cliff where we don’t know what’s going to happen,” Sherman said. MiBiz / OCTOBER 26, 2020

SMALL BIZ: COPING WITH COVID-19

Startups in the time of COVID Entrepreneurs launching businesses this year discuss pandemic setbacks, successes By KATE CARLSON | MiBiz kcarlson@mibiz.com

ith widespread wedding and formal school dance cancelations during the pandemic, Archie Sudue’s newly opened men’s suit shop has been struggling. Sudue planned to open Mel Styles LLC at 315 S. Division Ave. in Grand Rapids in July, but the pandemic set him back about two months. “My focus is to change the way young men present themselves with affordable,

Archie Sudue, founder of Mel Styles. COURTESY PHOTO

custom-fitted suits,” he said. “I’m just glad to be able to survive during COVID-19 times and am just trying to stay in business.” Despite a year full of unknowns and setbacks for most businesses, entrepreneurs like Sudue have managed to connect with community resources and are launching new businesses in the middle of a global pandemic. Programs including Lakeshore Advantage’s SURGE BoostCamp and the nonprofit SpringGR have still hosted mentoring programs for startups despite remote working constraints. SpringGR switched to a virtual format once the pandemic hit, while SURGE BoostCamp’s

Real Estate, Construction and Property Management

12-week program kicked off its virtual program in September. Sudue secured a $10,908 retail innovation grant last year from the Grand Rapids Downtown Development Authority as well as a couple of smaller grants to help launch his business. But Mel Styles doesn’t have enough employees to qualify for most state and federal pandemic business relief programs. The 35-year-old moved to the U.S. from Liberia about 15 years ago. He worked at Men’s Wearhouse and Macy’s before operating his suit tailoring business in 2017 from his Grand Rapids apartment. Sudue built a following from satisfied customers and word of mouth, but he realized he needed a brick and mortar store after his neighbor called the police after seeing an influx of people coming to Sudue’s house. “They saw people stopping by all the time and assumed we were selling drugs,” Sudue said. “But I was fitting them for suits.” Despite kicking off his business in an economically challenging environment, Sudue said he is still grateful to have a downtown storefront and believes his business will be able to weather the pandemic. “I just opened my business knowing that there would be a light at the end of the tunnel,” Sudue said. “We are stronger than COVID-19.”

‘A shock at first’ New businesses are still opening despite the pandemic because entrepreneurs are “eternal optimists,” said Luciano Hernandez, a SURGE BoostCamp participant launching his business, Spirit Fire Aftermarket Products. The 56-year-old Fennville resident has developed a patented solar-powered marker light. The wireless lights can be affixed to vehicles and do not require the usual wiring or drilling holes, and automatically turn on when a vehicle is in motion. “If you want a light anywhere on your vehicle you usually have to get inside and mess around with your battery and do the wiring,” Hernandez said. “This takes a lot of time and many people do it wrong and can short-circuit their battery during installation.” Hernandez’s solar-powered marker light does not require batteries and is designed to only turn on when a vehicle is moving. He plans to meet with a manufacturer to refine the product, which he hopes to start selling straight to consumers in early November. “Even though I’ve been running my own business for a long time, I haven’t sold my own product before,” Hernandez said. “As entrepreneurs, COVID-19 was kind of a shock at first, but then you adapt and figure out ways to work around it and what you need to do.”

ALL under one roof

Extra time brings opportunity When the pandemic caused the temporary shutdown of The Lafayette House bed and breakfast in Grand Rapids, co-owner Skyelar Hoort knew she should use the downtime to launch her new business. Hoort sells homemade bath salts, salt scrubs, pillow sprays, face masks and sage bundles under Loie Apothecary. She makes the products by hand and sources ingredients from small, local farms. “It’s been the best thing for me to use this extra time to dedicate to the project,” Hoort said. “I started doing some sales at the Fulton Street Farmers Market, which got the word out.” Receptive customers were in search of gifts for people they could not see in person during the lockdown, or were looking for self-care items for themselves, she said.

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Luciano Hernandez, founder of Spirit Fire Aftermarket Products. COURTESY PHOTO

Colton Credelle, founder of Colt Creative LLC.

Now that The Lafayette House has reopened, Hoort has not made it to the farmers market as often, but she sells wellness products on her own website and on Etsy. “I don’t have a physical location, but I’m getting a production space soon,” she said. “It’s been such a weird year, but I’ve been able to do most of it online. A lot of people are looking for something easy to take care of themselves.” Hoort is also a member of SURGE BoostCamp, which has pushed her to get feedback directly from customers about the Loie Apothecary products. “The mentors are phenomenal, they have such good experience and just know the right questions to ask,” Hoort said.

The 28-year-old Grand Rapids resident had been contemplating leaving his full-time job as a marketing director for a real estate company to start his own marketing business. He officially registered the LLC for Colt Creative in late January. “There was no turning back,” Credelle said. “Things were already in motion for it to happen, but the pandemic really made me focus more on the details.” Credelle went through the SpringGR program in the spring, which helped refine his business plan. “My focus is predominantly working with small businesses or smaller organizations and nonprofits,” Credelle said. “I realized my services really appeal best to them because I’m kind of like a pseudo full-service agency.” Running a small marketing operation allows Credelle to be fluid and more personal when working with clients. He’s seeing more companies

Taking the leap Colton Credelle also felt pushed by the pandemic to take a risk and start his own marketing and design firm, Colt Creative LLC.

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COURTESY PHOTO

Skyelar Hoort launched Grand Rapids-based Loie Apothecary during pandemic-related downtime. COURTESY PHOTO move away from having an in-house marketing staff to contract out the work, he said — which is paying off for Colt Creative. “I haven’t had to do any hard marketing,

everything has been word of mouth,” Credelle said. “Already I’ve almost doubled my projections of what I expected I would earn in the first five months of business.”

MiBiz / OCTOBER 26, 2020

REAL ESTATE & DEVELOPMENT

After activity, rent revenues drop, malls stuck in ‘waiting game’ through holiday season By KATE CARLSON | MiBiz kcarlson@mibiz.com

usiness has been brutal this year at the Holland Town Center outdoor mall because of COVID-19 shutdown orders, compounded by the fact that unique retailers don’t have a one-sizefits-all approach for adapting to state orders. A range of retailers operate in the shopping center at 12330 James St. in Holland, including a gym, ballet studio, yoga studio, chiropractic office and a boutique. State public health rules applied differently for the businesses, complicating the reopening process. “It was very hard for businesses to plan and adapt so quickly and a lot of the (business owners) could not do that in a timely manner,” said Ramzi Hassan, president of Edwards Realty Co., which owns the Holland mall. The point of grouping stores together in malls is to increase foot traffic for all of the tenants, but the concept of “leisure shopping” from store to store that drives success at malls has largely been absent during the pandemic. Limited hours, temporarily or permanently closed stores, and public hesitance to shop in-person have all likely contributed to a decrease in foot traffic, Hassan said.

Banking on the holiday Mall owners, tenants and commercial real estate companies are waiting to see how much of this year’s lost sales can be made up during the upcoming holiday shopping season.

Mall owners, tenants and commercial real estate brokers expect the upcoming holiday season to have a major influence on the future of malls and retailers. MIBIZ FILE PHOTO “This winter will be very telling on how sales go, but if more restrictions are put in place it will be very tough,” Hassan said. Also, while several Town Center tenants have benefitted from state and federal relief programs, additional business assistance is uncertain, Hassan said. Sales in November and December have averaged about 19 percent of annual retail sales over the last five years, but can be higher for some retailers, according to the National Retail Federation. This is why Colliers International Vice President Mark Ansara doesn’t expect many retail closures until at least the first quarter of 2021 — after the holiday season either makes or breaks retailers. “Lots of stores are saying, ‘If I’ve held on this long I’ve got to see what will happen in December,’” Ansara said. But Ansara anticipates more roadblocks for malls this year as companies opt out of major instore Black Friday sales, increased online shopping that was already happening pre-pandemic, and COVID-19 changing consumers’ buying habits. “There is still a need for malls, it’s just a question of, ‘When are most customers going to feel safe to shop in a mall again?’” Ansara said. “They’re just playing the waiting game. (Mall owners) don’t have a lot of dollars to get creative.” Malls were shut down for months in the spring and summer, which may further accustom consumers to shop online from home, Ansara said. “At this point I don’t think vacancy has changed significantly. I think landlords and tenants have been able to find solutions up to this point,” said Todd Leinberger, a retail broker at NAI Wisinski of West Michigan. “The fourth

PREIT announced on Oct. 1 that it collected 67 percent of its second and third quarter rents for 2020. The company also saw most tenants on its properties reopen, with 4 percent failing to do so following pandemic-related closures. “We are encouraged by the progress we are making across our portfolio, as evidenced by increasing rent collections, as well as increasing customer traffic,” PREIT CEO Joseph Coradino said in an Oct. 1 statement. “We are also pleased that, through our ongoing discussions with our lenders, we have reached a short-term agreement to extend our covenant relief period Major owners struggle, and now have flexibility to expand our reorganize liquidity facility.” CNBC reported in September PREIT is focused on managthat major mall owner Brookfield ing costs while working toward Property Partners LP planned to a “comprehensive financial lay off 20 percent of its roughly restructuring” to strengthen its REAL ESTATE + DEVELOPMENT 2,000 retail division employees. balance sheet, the company said Sponsored by Brookfield owns malls in almost this month. ROCKFORD every state, including RiverTown Woodland Mall Marketing CONSTRUCTION CO. Crossings in Grandville and The Director Cecily McCabe said the Crossroads in Portage. mall’s tenants saw some pent-up Brookfield saw its operational cash flow for demand for brick and mortar shopping when the the second quarter this year decrease by $23 milmall reopened in June with limited hours. lion compared to the same period in 2019, which “We had lower foot traffic when we initially Brookfield Retail CFO Bryan Davis attributed opened, but the people coming were there to in an Aug. 6 earnings call to pandemic-related shop, and shop well,” she said. shutdowns. Collecting rent from retailers was Woodland Mall lost some tenants but did have difficult during the shutdowns, though it has 10 new shops this year for a net gain, McCabe improved since June, Davis said. said. Some stores have been more successful in Pennsylvania Real Estate Investment Trust reopening, including retailers where outdoor gear Inc., which owns Woodland Mall in Kentwood, has been “flying off the shelves,” McCabe said. also struggled with collecting rent from retail tenants but saw a rebound in the third quarter. quarter is a question mark.” Leinberger also noted the link between the financial stability of malls and restaurants. While casual and larger restaurant chains typically located in or near malls have faced challenges, fast food chains have performed well even without dining rooms, he said. “In many shopping centers and sites having food, drive-thru options will continue to command more of a premium than perhaps those other sites,” Leinberger said.

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Hassan has been working on a few creative concepts to help boost sales and foot traffic at Holland Town Center, including partnering with the Macatawa Market to bring in outside vendors to use vacant storefronts and outdoor space. “There are a lot of creative people in the area and people willing to go to different markets,” Hassan said. Hassan is planning more market events in the future, including a holiday market, as well as a program in which local pop up shops can take over one of the vacant storefronts for a short period of time. “We want to activate our vacant spaces at the center. Whether it’s for one day or one year, we are looking at letting local businesses or startups rent out the spaces,” Hassan said. “I think it will be a fun thing for the community.” As an indoor mall, Woodland plans to increase the number of outdoor entrances for stores to help customers feel safer, McCabe said. Malls like Rivertown Crossings, on the other hand, have multiple levels and a mostly enclosed space, which could mean additional struggles, Ansara said. “It’s not doomsday, but it’s going to have its challenges,” Ansara said. “The local leadership at Woodland Mall and Rivertown Crossings are just trying to keep people calm, but things have improved a little bit. People are going to come back to malls eventually.”

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HOUSING

Continued from page 1 15,000 housing units in the next five years, mostly in rental units.

Incremental zoning changes The Grand Haven City Council will hold a Nov. 2 public hearing on proposed ordinance changes that would support affordable housing. “We’re trying to do small, incremental changes,” said Jennifer Howland, Grand Haven community development manager and director of zoning and planning. The proposed changes would allow for accessory dwelling units, reducing minimum square footage for dwellings and more multi-family homes. While community concerns include the potential effect on historic homes, Howland said the zoning changes are geared toward increasing units in existing homes as opposed to new construction. “We definitely have a need for a variety of housing options at all price points,” Howland said. “We’ve got a higher demand than we’ve Draheim got supply. We’re hoping this will offer more housing for young professionals and people who went to school here and want to come back and settle down.” Policy changes Grand Rapids made this year include permitting duplexes on corner lots by right, said Grand Rapids Planning Director Kristin Turkelson. Future affordable housing policy changes are expected as part of the city’s updated master plan. The city plans to issue an RFP for the master plan process this winter and start the public feedback process in the summer, Turkelson said. That process will likely include questions about whether affordable housing should be concentrated around transit lines or dispersed among neighborhoods, Turkelson said, adding that minimum lot size requirements are a recurring barrier for housing developers. “Developers are having to acquire multiple parcels to get a parcel big enough to do a multifamily development,” she said. “When we look at construction and land costs, the simple math doesn’t make sense for the new units to be affordable.” The city is also considering allowing ground floor residential in traditional business districts, which isn’t currently allowed. The change will be considered at a Nov. 12 public hearing.

Asking voters, scoring projects The Kalamazoo area is taking yet another approach to its affordable housing shortage. On Nov. 3, Kalamazoo County voters will be asked to extend and expand a millage that would provide rental subsidies and permanent housing. The proposed eight-year millage extension would increase from .1 mills to .75 mills, raising an estimated $6.4 million in the first calendar year. Since the original millage passed in 2015, more than 500 families have reportedly found housing assistance, while city officials say the housing need has grown significantly over the past five years. The Kalamazoo Community Foundation also recently launched a loan program to support a range of projects including those that focus on housing equity. The foundation hopes to issue a minimum of $2 million in loans a year. In Holland, the city is considering incentives for affordable housing developments as well as a complete overhaul of its form based code. The Holland City Council voted Oct. 21 to approve a Housing Development Support Policy designed to facilitate the strategic use of local Visit www.mibiz.com

economic and community development tools and incentivize housing projects at all price points. The policy includes a “housing scorecard” that clearly lays out development characteristics the city seeks for projects. The city would then award incentives including brownfield financing, creating a neighborhood enterprise zone, and community development block grants. Offering a percentage of affordable units, incorporating amenities for residents and proximity to public transportation are included in the assessment tool. In addition to the new housing policy, Holland has been going through a years-long effort to put all of its developmental laws into one unified development ordinance, which could lead to more affordable housing, said Holland Senior Planner Jenna Elswick. The ordinance — which includes proposed changes involving duplexes in residential zones and lot size requirements — is expected to be voted on in March.

Overcoming stigma Amid these planning efforts, cities continue to face local opposition to affordable housing development. “Some communities don’t know how impactful some of these changes could be,” Draheim said. “There are also certainly places in Michigan where there is a resistance to building more housing, more multifamily housing, and affordable projects. There are all sorts of historic stigma around that.”

Draheim added that Michigan in general hasn’t moved fast enough to bolster its affordable housing stock, noting that policy changes don’t have to be a multi-year process. “A big wholesale revamping of your entire zoning code can be a long process,” she said. “But some of the smaller steps that link incentives or zoning changes to reduce lot size requirements or parking can be completed in a few meetings.”

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TECHNOLOGY WORK FROM HOME Continued from page 1

“For manufacturing environments, typically all the work is done in the shop and even for the office staff it’s done locally because they interact with the shop floor,” Reiffer said. “When it came to that, some of that had to still push out to remote. There were quite a few (clients) that were caught flat (footed) and had some work to do.” Chad Paalman, CEO of NuWave Technology Partners LLC, specializes in working specifically with manufacturers in addition to professional service organizations like CPAs and legal firms. NuWave operates from locations in Grand Rapids, Kalamazoo and Lansing and also provides local support for businesses in Traverse City, St. Joseph, Jackson and Southfield.

Paalman’s firm also noticed a blend of clients that were able to seamlessly transition to work from home while others — loaded down with desktop computers, on-site file servers and other components that weren’t conducive to effective remote work — required more heavy lifting. “Prior to COVID, we had been moving clients from traditional file server environments to Microsoft Office 365 and Azure,” he said. “The companies that made that move already were somewhat seamless in moving out of their traditional office. Conversely, the ones that had onsite file servers and desktops, they were the toughest.”

A little panic The American Board of Emergency Medicine (ABEM) is a prime example of an organization

that did not have remote work woven into its company culture until the pandemic pushed it in that direction. The Lansing-based organization certifies emergency physicians, develops and administers tests and provides other resources that allow physicians to maintain certification. With a 42-person staff, ABEM went from no remote work to 100 percent remote — all while trying to provide a seamless experience for physicians. ABEM Associate Executive Director of Systems and Technology Michele Miller said the pandemic came with a little panic, but ultimately she knew the staff had the necessary equipment and leaned on NuWave to properly harness it. “We had enough lead time, especially because we had emergency physicians in

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“All of our clients that didn’t have the ability to have (company) cell phones were in a really weird situation where they were giving away personal cell numbers to everyone.” —CHAD PAALMAN CEO, NuWave Technology Partners LLC

New York and California that started to see things happening,” Miller said. “We just came up with a plan. We have enough devices that we can assign one to every person if we had to go remote and we worked with NuWave on how to do it and if we had to enact it.” That included email migration and one area that was crucial to the organization’s operations: the phone system. The company had to be available by phone for physicia ns w it h quest ions or needs. Instead of deploying physical phones, or relying on the personal cell phones of employees, NuWave installed what are known as soft phones to employee online workstations. Calls would ring right to a person’s computer instead of a traditional phone. In fact, Paalman found phone systems to be a crucial — and often forgotten — aspect of remote work. “All of our clients that didn’t have the ability to have (company) cell phones were in a really weird situation where they were giving away personal cell numbers to everyone,” he said. “And, we saw in the first couple months — and it’s still going on — this big adoption to Microsoft Teams voice.”

MSPs adjust The surge in remote work has also changed day-to-day operations for MSPs. Fusion IT, for example, has mostly put onsite projects on pause while it meets the remote needs of clients. NuWave has proceeded with some onsite projects, but it’s careful to do so in accordance with safety orders. Meanwhile, NuWave still has a backlog of projects for companies that have been inspired by COVID to bolster remote access to information and applications. “Still to t his day, if you want to do a Microsoft 365 migration, get in line,” Paalman said. “I wish I had more people to do more migrations faster.” Businesses also expected MSPs to do more than source, implement and secure technology for remote work. While procurement is a major hurdle, MSPs are also tasked with helping businesses with strategies to conquer inadequacies of remote work. This consulting role is one embraced by Grand Rapids-based OST, a large IT firm with additional offices in Minneapolis, Detroit and London. The company acts as a problem solver to make remote work effective. “For instance, one way to bring a team together is by bringing in group-chat tools such as Slack, and teaching managers and team leads to browse the channels ever y day and start up conversations,” said OST Managed Services Practice Manager Matt Glenn. “Add some humor, keep things fun. W hen hav i ng tea m meet i ngs, br i ng i n some video. Allow for flexibility in the work schedule. “The end result not only makes the team effective and efficient at remote work, it also creates an endearing body with your team, and drastically increases retention.” Visit www.mibiz.com

Selma Tucker is passionate about safe and affordable housing. He believes that if a family can’t access the housing market, where most middle-class wealth is held, it will be difficult for them to find stability and prosper. Selma regularly donates to Grand Rapids Community Foundation. He recently named the organization a beneficiary of his life insurance policy. His planned gift will help ensure the Community Foundation’s work to improve the lives of all people in the community continues well into the future. L E T U S H E L P YO U G E T S TA R T E D We’re here to help you understand your options and explore creative ways to leave your mark on the community and causes you love. Give us a call at 616.454.1751. grfoundation.org

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MiBiz / OCTOBER 26, 2020

FINANCE

New Chapter 11 laws offer small businesses a timely, cost-effective lifeline By ANDY BALASKOVITZ | MiBiz abalaskovitz@mibiz.com

or more than 45 years, Purple East has been a stalwart alternative lifestyle retailer in Grand Rapids, gaining a reputation for selling an assortment of clothing, glass pipes and smoking accessories. More recently, though, the future of the company was unclear. Purple East expanded from one to four locations in the greater Grand Rapids area over the past two years, overextending itself ahead of the COVID-19 pandemic that’s wreaked havoc on small businesses — including retailers. In mid April, Purple East Plus Inc. filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Western District of Michigan. The company at the time reported more than $270,000 in unsecured debts owed for property leases, utility payments, receivables, state and federal taxes and business loans. However, it wasn’t a typical Chapter 11 bankruptcy, but one that attorneys expect to see an increasing number of in the coming months. Purple East filed under Subchapter V of the U.S. Bankruptcy Code, which was created by the Small Business Reorganization Act passed by Congress last year and which took effect in February. The law — nearly a decade in the making — was meant to help save small businesses through bankruptcy by reducing the cost and

time of a typical Chapter 11 filing while allowing owners to retain a stake in the company. By late September, Purple East became the first entity in the Western District of Michigan to have a bankruptcy plan confirmed under the Small Business Reorganization Act. Purple East President Drew Phillippy said the process and the ability to emerge from three leases made it relatively easy to shift from four stores to one, which is in operation on Plainfield Avenue in Grand Rapids. “I think a lot of people would have been sad if this company died because of COVID and overexpansion,” Phillippy said. The company plans to pay off creditors over the next three years. “It’s a powerful tool for small businesses to reorganize similar to what large corporations can do,” Steve Bylenga, partner at Chase Bylenga Hulst PLLC who represented Purple East, said of the new law. “We’re going to see more companies similar to Purple East be able to reorganize instead of liquidating and come out in a pretty good position.”

Less costly, more efficient Bankruptcy experts expect to see more cases like Purple East in the coming months. In Michigan’s Western District — which spans 34 counties in the Lower Peninsula and the entire Upper Peninsula — six other entities had filed Chapter

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Purple East President Drew Phillippy says a new federal law making Chapter 11 bankruptcy easier “saved a small business that’s been in the Grand Rapids area for 45 years.” MIBIZ PHOTO: KATY BATDORFF 11 bankruptcy plans under the Small Business Reorganization Act (SBRA) as of Oct. 20. In the Eastern District covering the rest of the state, 10 plans had been filed under the Act. Debtors are a mix of small businesses — retailers, medical practices, investment groups, to name a few — as well as individuals, who can file under the act if a majority of their debt is from their business. Mark Sellers III — chairman and founder of Grand Rapids-based BarFly Ventures LLC, the parent company of the HopCat beer bar chain that filed for Chapter 11 bankruptcy in early June — filed for bankruptcy under the SBRA as an individual in late August. Sellers did not respond to a request for comment. The SBRA was designed to keep small businesses afloat while owners retain control of the company as a sort of mix between Chapter 7 and Chapter 11. The SBRA includes fewer costly requirements under a typical Chapter 11 — for example, it doesn’t generally require debtors to file a disclosure statement. It also seeks to eliminate the potential for competing reorganization plans from creditors. Meanwhile, the law includes a 90-day deadline for a debtor to file a plan after a relief order. The debt for entities seeking reorganization under the SBRA is capped at $7.5 million. As in Chapter 7 cases, a trustee is appointed to oversee an SBRA reorganization plan. Richardo Kilpatrick, president of Troy-based Kilpatrick & Associates PC, is among the designated trustees in Michigan’s Eastern District. Kilpatrick was involved with early drafts of SBRAlike bills around 2010 through the National Bankruptcy Conference. He continued working with Congress through the American Bankruptcy Institute on a new bill, which all stemmed from the small business losses incurred during the Great Recession. Kilpatrick’s role as a trustee mostly involves mediation, he said. He also represents creditors in bankruptcy cases. “It’s been amazing,” Kilpatrick said of the new law. “The expedited process and the return have reduced costs and I think ended up with a better result for the creditors I’ve represented. The opinion generally is very, very good about the statute. It’s really interesting when you can do good while doing well.” Todd Almassian, partner at Grand Rapidsbased Keller & Almassian PLC, said requiring only debtors to file a reorganization plan while allowing them to retain a stake in the company are two key features of the SBRA. Almassian is representing Krieger Craftsmen Inc., a Walker-based manufacturer that filed for Chapter 11 under the SBRA in October. Like Purple East, Krieger Craftsmen officials cited business overextension compounded by the pandemic that led to insolvency. “We’re starting to see an uptick in (SBRA cases) and I think we’re going to see a lot of

successful reorganizations now,” Almassian said. “In the past, the administrative expense burden and the procedural hurdles prevented some small companies from reorganizing.” He echoed Kilpatrick in noting that creditors still are repaid under SBRA plans. “They might not get 100 cents on the dollar, but over three to five years, they’ll get something back,” Almassian said. “It’s a heck of a lot better than these companies liquidating for pennies on the dollar.”

‘Bankruptcy tsunami’ Kilpatrick said some clarity is still needed as the law matures — for instance, when debtors are required to file three- or five-year plans to emerge from debt. Also, he wants to see the debt limit raised from $7.5 million to $10 million. It’s also difficult for consultants and trustees to predict a distressed business’ future income in the middle of a pandemic. “For lack of a better term, it’s all new to all of us,” said Scott Chernich, an attorney and shareholder with Foster, Swift, Collins & Smith PC who’s one of three appointed trustees in the Western District. Chernich served as the trustee in the Purple East case. He suspects additional filings may come from small manufacturers, retailers and hospitality businesses affected by the pandemic. Despite the needed clarifications that will likely come in time, Chernich and the other attorneys who spoke with MiBiz for this story all agreed that the SBRA appears to be working as intended — and that it couldn’t have come at a better time. Pandemic-related bankruptcy filings are expected to rise in the coming months and through next year. Commercial Chapter 11 filings nationwide totaled 747 in September, a 78-percent increase over the same period last year, according to the American Bankruptcy Institute. The ABI noted this month that expiring government relief programs, high unemployment and a “precarious financial outlook for many sectors will likely lead to a dramatic climb in filings in early 2021.” “There’s going to be a bankruptcy tsunami at some point,” Kilpatrick said. But if Purple East is any indication, the SBRA may be a lifeline for at least some small businesses facing dire pandemic-induced circumstances. “From the company’s perspective, we’re just really grateful this law exists,” Purple East’s Phillippy said. “With the combination of expansion and COVID-19, if we didn’t have this Chapter 11 option, there’s no way we could have dealt with both. That really was the move that saved a small business that’s been in the Grand Rapids area for 45 years.” MiBiz Senior Editor Jayson Bussa contributed reporting for this story. Visit www.mibiz.com

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FOCUS: MERGERS & ACQUISITIONS

M&A deals for distressed companies expected to pick up in months ahead By MARK SANCHEZ | MiBiz msanchez@mibiz.com

he COVID-19 pandemic that slammed the economy this spring could generate more M&A deals in the months ahead. Sales involving distressed companies, asset sales and even liquidations could rise toward the end of the year and into 2021, according to M&A and turnaround professionals. They describe a landscape nearly eight months into the pandemic where businesses have exhausted federal Paycheck Protection Program loans they got in the spring and are awaiting a final decision on debt forgiveness, or where the payment deferrals their bank provided on a loan are coming to an end. Some of those companies now feel distress as the pandemic drags on, leading their owners to search for options. “We do think that as that wears off, some of these companies are going to struggle, especially those that may have already been facing headwinds going into COVID or maybe were not in a position of strength,” said Matt Miller, managing

... a lot more of t he se problem s coming to the surface,” sa id Da n Yeoma ns, president of A micus Management Inc. in Grand Rapids. He pointed to Miller Yeomans Wilterdink Friar businesses that were perhaps director of advisory firm BlueWater Partners struggling to make it, and finding a purchaser is LLC in Grand Rapids. “If the present crisis drags the best-case scenario. on and sellers get tired, we would expect to see “There’s also a lot of walkaways out there, and more distressed M&A.” that’s what we’ll deal with first because it’s easier BlueWater Partners has yet to actually see a to deal with,” Yeomans said. “I’m aware of five material increase in M&A deals involving disor six businesses where the assets are just sittressed companies. That could occur toward ting there with the lights off, and the lights are the end of 2020 or the first half of 2021, he said. not going to come back on. So, those walkaways Miller and others say PPP and loan modifiwill be the ones to deal with quickly, and then cations that companies secured last spring may those sales.” have delayed some companies from falling into distress. Settling for less “There’s a lot of seismic activity out there Owners of distressed companies that opt to go and we’re anticipating that there will be at to market will likely have to settle for getting less some point in the next six months from now

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than what they otherwise would for the business, advisers say. If they are experiencing problems, sellers need to repair their financial position and restore earnings before they come to market, said Doug Wilterdink, founder and a partner at DWH LLC in Grand Rapids. “More often than not, you don’t sell the business until it’s fixed,” Wilterdink said. “It is all about cash flow.” If a company is losing money, it’s “not worth anything than the liquidation value of the assets,” Wilterdink said. Taking the time to restore the company’s financial health and positive cash flow does put “a number of other remedies on the table,” he said. “The longer you wait (to fix problems), the fewer remedies that are available,” Wilterdink said.

Exit now Some business owners may prefer not to wait until the pandemic eases and the economy fully recovers to sell. They’re tired, profits and sales are down, and they lack the energy to steer the company through the storm any longer. Max Friar, managing partner at Calder Capital LLC, has signed a few clients lately who want to exit now, even though they likely will have to take less for the business. “The owners understand their valuation is going to take a hit, but they’ve just said, ‘I don’t care. I need to have this off of my back,’” Friar said. “I think 2021 is going to be a year of exhaustion.” Economic outlooks forecast the U.S. economy to grow at a moderate rate through 2021 after a record decline in the second quarter and partial recovery in the third. In a recently updated outlook, Comerica Inc. projected Real GDP growth of 3.7 percent for the fourth quarter. U.S. Real GDP growth will start 2021 at 4.0 percent in the first quarter, followed by 4.7 percent growth in the second, before leveling off in the second half and averaging 2.7 percent for all of 2021, according to the outlook. Comerica forecasts a K-shaped recovery with some sectors doing better than others. “The recovery’s been better than expected on a lot of accounts, but as it drags on, we will hear from more weary business owners about not wanting to go through this,” Miller said. At Grand Rapids investment bank and M&A firm Charter Capital Partners LLC, Mike Brown tells the stories of business owners who decided early this year to sell, had to wait when COVID19 hit, and “who are now saying, ‘OK, I’m sick of waiting. I’ll take less.’” Brown, who runs the M&A practice at Charter Capital Partners, expects to see M&A activity pick up in late 2020 and early 2021 as more owners that navigated through the pandemic decide to sell. Charter Capital Partners in the last few weeks has pitched to more prospective sellers to represent them in a transaction “than we did in the last three or four months,” Brown said. Much of the activity over the next six months with distressed companies will depend on how banks handle clients experiencing difficulty, whether they “start to kick people out,” want a company to refinance, or are willing to further amend credit agreements, Brown said. “Next year’s going to be very busy,” he said, noting businesses that may have done well during the pandemic and — being recession-proof — may seek a premium for the company. Others may be weary after surviving the pandemic and may settle for less. “There’s going to be a lot going on in the first half of the year,” Brown said. Visit www.mibiz.com

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MiBiz / OCTOBER 26, 2020

FOCUS: MERGERS & ACQUISITIONS

Federal agency issues guidance on PPP loans and M&A deals By MARK SANCHEZ | MiBiz msanchez@mibiz.com

he U.S.Small Business Administration’s guidance for companies that got Paycheck Protection Program loans and are now selling aims to keep deals flowing as borrowers await decisions on whether they’ll have debt forgiven. The SBA issued the guidance in early October to clarify the requirements for PPP borrowers going through a change in ownership and for their lenders. The guidance “made it less foggy” and “provides a pathway” for lenders on how to handle changes in ownership for small businesses that secured a PPP loan during the pandemic, said SBA Great Lakes Regional Administrator Rob Scott. “We were getting massive questions from the Scott lending community and folks that want to do acquisitions,” Scott said. “During the course of an economy, there’s a lot of buying and selling of small businesses and we certainly wanted to give guidance so those folks, the lenders and the business owners can continue to do Ashby good deals.” Working through thousands of lenders, the SBA nationally approved 5.2 million PPP loans totaling $525 billion through the end of the program on Aug. 8. In Michigan, more than 128,000 small businesses received PPP loans for $16 billion. PPP borrowers are now seeking forgiveness for the debt, which was intended to help small businesses keep people on the payroll as the economy fell during the COVID-19 pandemic. Borrowers had to put 60 percent of the loans toward payroll expenses over a 24-week period.

Lenders will review and make recommendations to the SBA on whether a PPP borrower qualifies for all or partial debt forgiveness, Scott said.

PPP LOAN TOTALS PPP loans the U.S. Small Business Administration approved nationally, regionally and in Michigan: 5.2 MILLION

Ownership changes Key elements of the Oct. 2 guidance include requiring SBA consent prior to closing if a PPP borrower is going through a change in ownership. The SBA defines a change in ownership as the transfer or sale of 20 percent of a PPP borrower’s stake in the company, or the transfer or sale of 50 percent of their assets, or a merger into another entity. Borrowers must notify their PPP lender prior to a change in ownership and provide agreements and other documents. Sellers and buyers must adhere to terms of the PPP loan and share liability for use of the funds. The guidance provides circumstances in which lenders may approve a borrower’s sale without going to the SBA. SBA consent is not required in instances of an ownership change that “is structured as a sale or other transfer of common stock or other ownership interest or as a merger,” or as an asset sale, according to the guidance. That applies when half or less of the borrower’s stock or ownership interest is sold or transferred and they have submitted a loan forgiveness application that shows how the proceeds were used, or they sell half or more of the assets. A seller would have to open an escrow account to deposit proceeds from the sale equal to what’s owed on a PPP loan that would later go toward paying off the debt incurred by the buyer, should the company not receive forgiveness. In crafting the guidance, the SBA sought to give flexibility for sellers, buyers and lenders on how to handle an outstanding PPP loan in a transaction, Scott said. “You can’t do a one size fits all when it comes to these rules,” Scott said. “We tried to keep it flexible enough so that the lender can be flexible, and the buyer and seller can be flexible.”

$525 BILLION

NUMBER OF LOANS

VALUE

$88.1 BILLION

777,925

$16 BILLION

128,158 U.S.

GREAT LAKES STATES

MICHIGAN

U.S.

GREAT LAKES STATES

MICHIGAN

SOURCE: U.S. SMALL BUSINESS ADMINISTRATION

‘Sorely needed’ guidance The SBA’s guidance was “sorely needed,” said attorney Seth Ashby, a partner in the business and corporate services practice group at Varnum LLP in Grand Rapids. Ashby has seen the issue of how to handle a PPP loan come up in a number of small business transactions. “We have seen this situation arise countless times since the spring and summer and now heading into the fall where a PPP borrower has an opportunity to sell their business and the parties to the transaction need to determine what to do with this PPP loan,” Ashby said. “Pretty much all PPP borrowers are in this together,” Ashby said, referring to those that may be out of a cover period, spent the loan and have submitted a forgiveness application. However, the application hasn’t been processed yet “so technically the loan is outstanding, and yet they have an opportunity to sell their business.” Sellers typically need to secure a lender’s consent to sell when they have an outstanding debt,

Ashby said. A lack of prior clarity on whether a PPP loan may get forgiven “kind of put everyone in a tight spot,” Ashby said, with many lenders reluctant to provide consent to a deal without sellers going to the SBA and a lengthy and “somewhat bureaucratic” review process. “So, deals were getting stalled,” Ashby said. “The PPP lenders are now empowered to make these approval decisions under the right circumstances. As long as this guidance is satisfied, the SBA is telling lenders, ‘You may unilaterally approve a sale of your PPP borrower.’” That does create a “little bit of concern” for buyers that would assume the debt in an asset deal to assure the seller adhered to the SBA guidance and requirements of the PPP loan, Ashby said. “On the one hand, lenders ought to be empowered to approve these transactions, so that should facilitate closings when the guidance is followed,” he said. “The other side of that coin is that buyers also have an interest in ensuring that this guidance is followed and ultimately you can quantify the risk with these PPP sellers that they might not have had before.”

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In Crisis Lies Opportunity: Growth Through M&A During COVID-19

our business may grow through mergers and acquisitions (M&A) despite challenges posed by the COVID-19 pandemic. COVID-19 has clearly dampened appetites for transactions. Statistics from Dealogic show that the value of M&A activity during Q1 2020 plunged 35% globally and 39% in the United States from the prior quarter. While we are seeing improvements, full recovery seems far off. That said, times of crisis create M&A opportunities for those with the vision and resources to take advantage of them. Many private equity groups are sitting on cash that will come back into play as a new normal emerges, and wellpositioned strategic buyers are looking to diversify or grow revenue through M&A or to acquire distressed competitors, suppliers, and customers at bargain prices. While opportunity still abounds, your transaction will need to overcome additional challenges during the pandemic. Success requires an understanding of these unique risks, excellent planning, and experienced counsel who know how to get your deal done in these turbulent times.

Key M&A Issues to Consider During COVID-19 The Deal Process. Most business’s productivity remains disrupted as the COVID-19 pandemic drags on. We have seen this disruption slow down and complicate the deal process. Clients struggle to access information and personnel during transactions. Negotiations have slowed and LOI extensions are commonplace. Even seemingly simple actions such as gathering signatures have suddenly become more challenging. Proactive counsel will help you plan for these inefficiencies and close your deal on time. Due Diligence. The due diligence process helps to identify risks and liabilities, confirm earnings and other financial representations, and otherwise ensure that the buyer is getting what it pays for.

The COVID-19 pandemic has increased the severity of most targets’ risk profile, and so has made due diligence more important while also making it more challenging. Sellers need to prepare for due diligence well in advance, including by identifying and digitizing hard copy records and populating a well-organized virtual data room that allows for comprehensive remote diligence. Buyers need to be thorough in their virtual diligence requests and review, and plan well to minimize in person meetings and inspections. Risk Mitigation. COVID-19 risks have unnecessarily stalled many deals. Most deals can still move forward through thorough diligence, good deal structuring, and fair risk allocation strategies. Buyers more than ever should consider

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asset deal structures that are designed to reduce successor liability risks, particularly for distressed targets. Parties should consider more liberal use of “earn out” structures and customized escrow arrangements to plan for and allocate COVID-19 risks. And counsel must focus closely on risk allocation provisions in the transaction documents, including reps and warranties, indemnification “caps” and “baskets,” and owner liability and guarantees. Parties must be more flexible, creative, and willing to compromise outside of the preCOVID-19 norms. Valuation. The uncertainty in your industry and the economy at large is pressuring valuations. It’s harder to forecast earnings, value assets, and predict whether synergies will materialize when

we do not know what the future holds. Waiting for valuation stability risks losing a buyer’s opportunity for a bargain and a seller’s opportunity to sell and, for some, avoid bankruptcy. Earn-outs and escrows can help bridge valuation gaps, as can working capital and other post-closing adjustments. Experienced counsel can help you apply these tools to turn a valuation gap from a deal killer into a closing. Payroll Protection Program. The Small Business Association (SBA) recently issued a notice that clarifies how a transaction affects a target’s Paycheck Protection Program (PPP) loan. Affected businesses are required to obtain lender consent, and possibly SBA consent depending on how the transaction is structured. Both the seller and the buyer need to work with counsel to avoid PPP-related surprises. Post-Deal Integration. It’s hard to integrate two businesses and their unique systems, operations, and cultures, even during the best of times. First time acquirers often find themselves surprised by the challenge, which can lose customers and hit post-deal revenue hard. Today’s remote-working environment makes integration even more difficult. Good counsel will help you plan early for what comes after closing. The COVID-19 pandemic may have slowed M&A activity, but it has created opportunity for those wise enough to see it. Your deal can close with a little extra planning and creativity, as well as excellent execution. Whether you are a buyer or a seller, Foster Swift can help you navigate these challenges and realize the opportunities in today’s market. Please contact Joel C. Farrar, leader of the Foster Swift Deal Team, at jfarrar@fosterswift.com or 517-371-8305 to learn more.

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MiBiz / OCTOBER 26, 2020

FOCUS: MERGERS & ACQUISITIONS

Pandemic distorts the market as manufacturing M&A deals rebound By JAYSON BUSSA | MiBiz jbussa@mibiz.com

eff Helminski’s private equity firm has an internal goal of sourcing 20 qualified deals each week. While those efforts slowed significantly during May, June and July as a result of the COVID-19 pandemic, Helminsk i — managing partner at Auxo Investment Partners — said his team is now at around 98 percent of that goal year-to-date, highlighting the recent surge in deal f low across a variety of industries that’s being seen nationally.

“I think if people wait too long, they’re going to be greatly disappointed in what they get for that business. If they overstay their welcome, it’s going to be a problem.” — ROBERT STEAD Partner at Barnes & Thornburg LLP

before the end of the year out of concern of changes to the tax code under a potential Biden administration. The fourth category is simply the natural, ambient level of deals, including those that involve owners reaching retirement age. The fourth category of deals moved through the pandemic mostly unhindered, Helminski said. Daniels Stead Helminski Auxo Investment Partners entered “After being kind of right on target prethe pandemic with four deals under letCOV ID, we saw act ua l ly st ronger t ha n ter of intent. The firm closed on two of them expected deal f low in the initial six weeks already and is working to close on the other of when COVID really hit,” Helminski said. two before the end of the year. “Then, it was much slower — around half — in One of t he completed dea ls was t he the May, June and July time frame. Certainly acquisition of Indianapolis-based Precision for the last 60 days, we’ve seen well above our Products Group Inc., finalized on Sept. 1. weekly targets.” Precision Products Group is the parent comW it h compa n ies l i ke At las Die LLC, pany for niche manufacturers Paramount Midway Rotary Die Solutions and Prestige Tube and Euclid Medical Products. Stamping LLC in its portfolio, Helminski’s Grand Rapids-based firm remains active Forging ahead in the manufacturing space. W hen lookAu xo’s approach ref lects t rends nat ioning at companies that are selling right now, ally. According to analysts with BizBuySell, Helminski lumps them into four categories. which tracks deals nationally, transactions The first is owners trying to exit manuin April had declined 51 percent year-to-date facturing companies before the long-term compared to last year. That shrunk to 21 pereffects of COVID become permanent within cent in July while September ended with just the business, dragging down the company’s 5 percent fewer deals year-to-date compared appeal and value. Another segment of sellers to 2019. are manufacturers that have seen a bump While the initial stages of the pandemic in sales because of COVID and are trying to forced some sellers to pull out of the marcapitalize on that short-term surge. A third ket and even sidelined some banks, Auxo group of sellers is looking to close on a deal

Investment Partners slowly proceeded, showing there was a way to move deals across the finish line despite the uncertainty. “Our approach through COVID was one in which we renegotiated exclusivity periods and worked with sellers, putting us in a position where we could continue the diligence process at a very prudent pace” Helminski said. “At the same time, we were watching and eva luating the business through the summer. … Once we had enough comfort and visibility and we could see how the company was being impacted, we were able to get to a closing.” Despite low interest rates that experts expect to stick around for the foreseeable future, Helminski said the landscape created by COVID doesn’t necessarily have to be the catalyst to buy. “We’re long-term investors,” Helminski said. “We’re not as influenced by timeframe consideration as many of our peers. I’d say, for the right business at the right valuation, it’s always a good time to be investing.”

Winners and losers Dustin Daniels, chair of the mergers and acquisitions practice group at Miller Johnson Attorneys, made a similar assessment as Helminski on deal f low and how volume started to pick up in late summer and hasn’t stopped. He s a id t he pa ndem ic h a s c re ate d

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distortion in the market, where certain segments of the manufacturing industry have emerged as winners and losers. “T here a re c er t a i n m a nu f ac t u rer s, depending on what they do, who have experienced no drop and sometimes a pick-up in business due to distortions of COVID and how our economy is working,” Daniels said. “And, vice versa, there have been some businesses unfairly affected because their products aren’t needed as much now. We’ve really seen winners and losers.” However, even among the perceived losers, Daniels said he hasn’t yet seen many owners selling because of the COVID stress. “We haven’t seen a lot of distressed sellers and people who are trying to get out of businesses that maybe haven’t done well,” Daniels said. “I think that’s largely because of PPP and the liquidity provided to the market that has allowed businesses to stay. I think we may see more of that next year.” The pandemic has served as an audition of sorts, shining a light on companies that were able to weather the pandemic and making them an attractive buy for interested parties. “The biggest ta keaway is t hat ma nufacturers that have weathered COVID well will get a positive view to potential buyers because that risk of it coming up again and performing through that — they weathered it well,” Daniels said. “They’ll be viewed as less risky.”

At a crossroads Robert Stead, partner at Barnes & Thornburg LLP who represents company buyers and

sellers, said he has noticed not only M& A activity but also a thirst for joint ventures where manufacturers can latch on to some advanced technology instead of spending the time and money to develop it on their own. Also, in an industry that is somewhat notorious for its aging workforce, aging owners are another issue that can influence if and when it’s time to sell. The pandemic — and the measures it will take for some manufacturers to trudge through it — may have some aging owners thinking hard about the future. “I think they have to take a hard look at their age and just kind of their appetite for making a reinvestment in the business because I think they all understand that they’ll have to,” Stead said. “The other part of it is that they might not have an heir apparent to the business, whether it’s a family member or management team that can buy them out. “Most of these entrepreneurs are good at this — they’re not delusional. At some point, they say ‘It’s going to be a hard and heavy lift for us and we don’t know if we have the energy for it.’ I think those are the people saying it might be time to look around and see what’s out there.” And that’s a decision they’ll have to make relatively quickly before the potential longterm ramifications of COVID weigh the company down. “I think if people wait too long, they’re going to be greatly disappointed in what they get for that business,” Stead said. “If they overstay their welcome, it’s going to be a problem.”

Consider Hungerford Valuation as a key partner in your next transaction. A knowledgeable, unbiased, and well-supported valuation opinion provides the strong foundation necessary for negotiations, as either a buyer or a seller. Whether considering the sale of a business to a third party, transitioning ownership internally to management or to a family member, business owners and their advisors look to Hungerford Valuation for their opinions. Hungerford Valuation helps business owners and their advisors understand the value of their business for a variety of purposes, including: ∞ Mergers & acquisitions ∞ Shareholder buyouts and disputes ∞ Purchase price allocations ∞ Succession and exit planning ∞ Estate planning ∞ Estate and gift tax reporting ∞ Divorce ∞ SBA financing

Let’s chat over coffee or Webex! Kerry Bean, CPA/ABV - kbean@hungerfordvaluation.com www.hungerfordvaluation.com (616) 726-6045 Visit www.mibiz.com

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FOCUS: MERGERS & ACQUISITIONS

Companies show how to make a deal during a global pandemic By MARK SANCHEZ and JAYSON BUSSA | MiBiz

SMALL BUSINESS SALES BY SECTOR

he sale of Paragon Recruiting LLC, a small Holland firm that specializes in recruiting for the information technology industry, was two years in the making. Jen Bradshaw would eventually take over the business from Beth DeWilde using earnouts and putting what she would make in commissions to finance the transaction. The deal proceeded during the COVID-19 pandemic with an expected close by the end of 2020. That’s a year earlier than originally planned and a ref lection of how business in the I.T. industry has held up well in the age of COVID. Despite the crisis, Bradshaw and DeWilde never considered delaying the deal. “We didn’t change anything and we continued to plug right along during the Bradshaw whole thing,” said Bradshaw, senior recruiter at Paragon Recruiting. “We are still doing well and are profitable.” Bradshaw is not planning any changes to the business, other than moving the office from Holland to Grand Haven, closer to her home in Muskegon. “We’re just going to continue to run as is,” she said.

Percent of transactions closed in Q3 2020 by sector as reported on BizBuySell.com 100% = 2,062 transactions n Service n Retail-other n Retail-restaurant n Other n Manufacturing

The Paragon Recruiting deal moves forward as small business M&A rebounds nationally. BizBuySell.com, an online marketplace for small businesses, last week reported that transactions were down 5 percent in September. That’s a significant improvement from the slowdown that resulted from the COVID-19 pandemic that drove a 21 percent year-to-year decline in July and a 51 percent dip in April. Asset sales have become increasingly popular, and buyers are mostly seeking small

5% 13% 42%

16%

24%

businesses they consider “pandemic proof,” according to the website. If a business has performed well or grew during the pandemic, “you’re going to be a very desirable ticket on the market” among buyers who have “come out in droves” looking for deals, said Max Friar, managing partner at Calder Capital LLC and Small Business Deal Advisors in Grand Rapids.

‘Job security’ in software acquisition Among the recent sellers locally was Grand Apps, a mobile app, web and software developer in Grand Rapids with a digital marketing component. Owners Chris Ake, Jon Butler, Jacob Canfield and Johnny Brann Jr. sold the business to employees Tyler Kutt — who most recently served as head of marketing — and Brandon Ross. While technology and digital development is not necessarily an industry that was rocked by the COVID-19 pandemic — in some ways it was quite the opposite — the uncertain times still registered with Kutt. “It definitely set some alarms off with both Brandon and I not knowing how all this would shake out,” Kutt said. “I think (COVID-19) absolutely did affect Grand Apps, just maybe not as long as some other companies.” Grand Apps is an established brand in the Grand Rapids market, providing both apps and custom software development for a variety of

businesses, working with companies such as Haworth Inc. and the Van Andel Arena. The pandemic’s effect on business showed the new leadership at Grand Apps that companies would likely be investing more in mobile apps and digital marketing. Kutt said he has already had encouraging conversations with potential clients. “Once we sat down and thought about it and saw how things were trending, it was almost job security, really, as long as we kept working at it and stayed true to the brand and the work that we do,” Kutt said. As the newly minted owner of Grand Apps, Kutt said he and Ross look to spend the rest of the year stabilizing the business before making any monumental changes. “We’ve done much better than a lot of companies during COVID, but we have not come out unscathed by any stretch of the imagination,” Kutt said. “Really, as we’re transitioning and doing all this, it’s just about stability right now and making it through the rest of the year. Come the first of next year, we might start putting out some new product offerings and some internal, structural changes as well.”

‘Great time to be a buyer’ The pandemic has not only affected deal flow but also how companies come together after closing. Grand Rapids public relations and investor relations firm Lambert & Co. closed on the acquisition of Fairly Painless Advertising Inc. in Holland during the first week of March, just as the pandemic was spreading into Michigan. “This required us to do a swift turnaround in how we do integration,” CEO Jeff Lambert said. The firm — which has three offices in Michigan, plus New York City, Washington, D.C., and Phoenix — used Zoom and Microsoft Teams to bring office staff together and integrate operations. Lambert has made a series of acquisitions. He said virtual connections have actually made the integration process more efficient. As far as making a deal amid an ongoing national crisis and economic uncertainty, Lambert advises others to hold to the basics: Decide whether a deal makes strategic sense for business, hire the right professional advisers, and perform thorough due diligence up front. “If it’s a strategic benefit, it’s a great time to be a buyer,” Lambert said. “It’s certainly a market for the bold and the prepared.”

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RECURRING THEMES OF COVID-19: A View From Counsel’s Desk Smith Haughey Rice & Roegge (SHRR) has been helping clients overcome challenges since 1941. Despite all our shared experiences over the decades, it is unlikely any event has had a more collective impact on our clients and our practice than COVID-19. SHRR responded early on by establishing a COVID-19 Resource Group, staffed by attorneys with a broad range of legal experiences. The Resource Group is committed to helping our clients get through this pandemic with timely advice while continuously monitoring and gathering information on COVID-19. Here are some recurring themes we have observed: 1: More of the Iceberg is Under the Water The Michigan Supreme Court ruled on October 2, 2020 that the Governor’s Executive Orders were unenforceable under Michigan law. It then became apparent that many businesses are not aware of the other bodies of law pertaining to COVID-19, such as Emergency Orders by the Michigan Department of Health and Human Services (MDHHS). MDHHS subsequently issued new Emergency Orders containing restrictions on gatherings, masks, and other items. In addition, other agencies, such as Michigan’s Occupational Safety & Health Administration, may view a lessening of restrictions in a place of employment as a possible violation of an employer’s general duty to furnish a workplace free from recognized hazards. There are also now local governmental authorities and departments issuing their own health and workplace reVisit www.mibiz.com

quirements. Simply, in this environment, it is prudent to understand the full scope of the legal landscape. 2: Protect Your Most Important Resource Employers are continuing to navigate their business in a COVID-19 environment to protect employees while maintaining operations. More recently, we have seen employers evaluate return-to-work policies while also considering remote work policies in the event of a change in circumstances. Employers also continue to adapt to the Families First Coronavirus Response Act and the various leave requirements within that Act, with new challenges, such as unanticipated childcare needs as result of school closures or intermittent school closures now requiring attention. Other areas of focus continue to be on preparedness and response plans, CDC guidance, and the CARES Act. We also anticipate there may be additional employment legislation passed in Michigan in the coming weeks. Although this has been an incredibly difficult time, we have observed that some employers are able to advance workplace culture by focusing on thoughtful policies and good communication. 3: Fault Is Not the Same as Responsibility With COVID-19, there are situations where a party simply cannot perform as previously agreed. Historic “boilerplate” protections are now in the legal spotlight. “Force majeure”

clauses essentially excuse certain non-performance when not due to an act or omission of the non-performing party. In addition, common law performance defenses such as failure of condition precedent and impossibility of performance are also being examined. We have seen this most frequently in landlord-tenant and construction agreements, but other plans and major life events have needed to be postponed or cancelled. Circumstances and precise contractual language are critical to a successful claim or defense impacted by COVID-19. 4: Be Creative in Resolution Court dockets are still backlogged, cases slow to proceed, and there may still be limitations on legal recourse. Many are turning to proactive alternative resolution strategies prior to litigation, that, historically, may have been ordered in litigation. For example, agreeing now to a voluntary mediation might allow a third-party, often an outside attorney or former judge, to provide a level of risk analysis and neutrality into a dispute so that an amicable resolution can be reached. Parties are usually free to engage in such voluntary mediation. Or, possibly, a more binding form of arbitration or some other form of settlement mechanism could be available and should be considered. 5: Plan for the Future Coupled with uncertainty about the future

of the economy and the political climate, it is not surprising that there has been a renewed focus on estate planning (wills, trusts, durable powers of attorney, and patient advocate designations) and business planning (succession plans, buy/sell agreements, and updating corporate governance and compliance). Our clients have been gaining peace of mind by reviewing their old estate plans, revisiting strategies to preserve the health and value of their businesses (including reviewing guidance from the SBA in connection with changes in ownership of businesses that received Paycheck Protection Program (PPP) funds) and engaging in assessments of their opportunities and risks. For more information concerning SHRR’s COVID-19 Resource Group, please contact Smith Haughey attorneys Adam Tountas, Mike Doversberger, or Tom Vitale. This article is general in nature and should not be construed as legal advice or creating an attorney-client relationship. Consultation with legal counsel is recommended for specific situations. MiBiz / OCTOBER 26, 2020

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Contract Deadline: 11.25.2020

12.21.2020

Crystal Ball Special Year-End Edition Contract Deadline: 12.9.2020 EGLE director on 2050 carbon neutral roadmap

Nonprofits seek restored charitable giving tax credits

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Action Metro Health pursuing open-heart surgery program in GR Grand reboot eyes By MARK SANCHEZ | MiBiz msanchez@mibiz.com

etro Health-University of Michigan Health likely will proceed with seeking state approval to perform open-heart surgery in Grand Rapids, a move that would bring more competition for the procedure to the local market. In a filing last week to the Michigan Department of Health and Human Services, Metro Health indicated it may pursue regulatory authority to launch coronary artery bypass surgery, cardiac valve repair or replacement, repair for birth defects of the heart known as

septal defects, and “other identified appropriate services.” Metro Health would spend $3.2 million to renovate and remodel space at its Wyoming hospital to perform heart surgeries, according to the Oct. 8 letter of intent to the state. The move comes nearly four years after Metro Health was acquired by University of Michigan Health System and Michigan Medicine, its academic medical center in Ann Arbor. “Michigan Medicine is world-renowned for cardiovascular care. This new program will bring that expertise to West Michigan, giving patients choice and access to the most sophisticated treatments and world-class cardiovascular

How should marketing change in the wake of COVID-19?

care. We are proud to help make this a reality,” Metro Health President and CEO Peter Hahn said in a statement to MiBiz. The letter of intent to the state signals a care provider’s interest in seeking a certificate of need (CON) to Hahn launch a new clinical service. Care providers typically will file a letter of intent that places them in line for state review during that quarter as the provider makes a final decision on whether to proceed.

See METRO HEALTH on page 3

Aerospace suppliers brace for continued turbulence

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Experts warn of possible mental health ‘aftershock’ from COVID-19

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EXPLORING WHAT’S NEXT Experts preview workplace changes as economy slowly re-emerges

By MARK SANCHEZ | MiBiz msanchez@mibiz.com

f the SARS outbreak 17 years By MARK SANCHEZ | MiBiz ago in Asia is an accurate indimsanchez@mibiz.com cator, behavioral health care providers could see a patient Hikers in Pictured Rocks National Lakeshore in the Upper Peninsula. PHOTO COURTESY OF PURE MICHIGAN eople who have been working from surge in the coming weeks and home for weeks because of the months as the COVID-19 pandemic COVID-19 pandemic will return to a takes an emotional toll on people. decidedly different workplace than One-third of the people in Asia Byhad MARK SANCHEZ they previously once| MiBiz the economythe getspandemic, and with the were unable to return to work full msanchez@mibiz.com restoration of limited funding, going again. time after the SARS pandemic, six Travel Michigan Vice President Changes will span a range of workplace in 10 experienced fatigue, and half he Pure Michigan camDave Lorenz sees an urgency to environments, including offices, shop floors, had difficulty sleeping. that touts the Wearing ramp the Pure Michigan camPAGE 12 PAGE 14 breakroomspaign and conference rooms. In Hong Kong, the suicide rate state as ahaving travel destinapaign back up this fall — in face masks and more distance spiked nearly 32 percent for two tion should soon some form — to support the between workers will return become the norm, years after SARS. Hong Kong also MARCH 16, 2020 • VOL. 32/NO. 11 • $3.00 SERVING WESTERN MICHIGAN BUSINESS SINCE 1988 www.mibiz.com to spur andtemperature winter travel industry that’s popualong with fall routine checkstourism and experienced “increases in persistent and help tourism-reliant small lated continually cleaning and sanitizing the work- by many small businesses. depression, anxiety, panic attacks, businesses that were hitworkstations. hard When working with limited place, tools, equipment and psychomotor agitation, psychotic this summer by the COVID-19 funding, Travel Michigan would Those and other pracsymptoms, delirium, and suicidpandemic. put its resources into tices are all part of thetypically proality,” accordA s M ic h iverbial g a n’s “new t ou r inormal” sm the for“big season” and promote ing to a white GR debates increasing industry continues to reel from to nav-See PURE MICHIGAN on page 15 employers working paper from Pine sites for marijuana igate the deadly pandemic Rest Christian businesses; equity, that has disrupted daily rouMental Health local ownership tines, thrown the economy Services on the concerns remain into recession and may linpotential menSmall businesses around West Michigan have been affected in many ways ger for many months until a tal health effects Kennedy P E R I O D I C A L S By SYDNEY SMITH | MiBiz by the ongoing pandemic. While some are seeing increased business, most Eastburg vaccine is developed. of the COVID-19 ssmith@mibiz.com “As business leaders, you have to make pandemic. companies are being forced to deal with the fallout by getting creative, mansure you’re taking the responsibility for your The white report pulls data from GRAND RAPIDS — Following aging cash and finding new ways to stay engaged with customers and cliemployees,” Kentwood-based Autocam a number of sources to issue a call to mixed messages from the Grand Medical Devices LLC CEO John Kennedy action for care providers to prepare ents. In this Coping with COVID-19 special report, MiBiz speaks with two Rapids City Commission late last said during a recent back-to-work webinar for the “aftershocks” from the pandozen West MichiganBycompanies to hear how they’re navigating the current MARK SANCHEZ | MiBiz month, marijuana advocates hosted by Advantage Benefits Group Inc. “It’s demic and “minimize the fallout of msanchez@mibiz.com hope city officials will ultimately incumbent on us as businesses to make sure COVID-19 on mental health in our uncharted waters. SEE PAGES 12-19 open more properties for medicommunities.” See WHAT’S NEXT on page 8 he coronavirus outbreak that’s batcal and recreational facilities. “ Th e w ar n in g sig n s are tered Wall Street and caused supply On Feb. 25, the commission there right now that we could in PAGE 12 Visit mibiz.com for ongoing coverage of the business implications COVID-19 in West Michigan. chain disruptions for some manuwent back and forth on appliMichigan experience of a significant facturers has yet to interrupt transcations for both types of facilisurge in behavioral health needs actions, although more conversations are ties. The city has approved 24 that emerge out of this COVID crioccurring as part of due diligence, according licenses for medical marijuana sis,” Pine Rest CEO Mark Eastburg to M&A professionals. businesses, while another 14 By ANDY BALASKOVITZ | MiBiz benefits for people active in their state’s Program loan — told MiBiz. “We ought to be precall hosted by the West Michigan Policy Deals that are inInprocess involve a deeper are waiting for approval. The abalaskovitz@mibiz.com system. Michigan, this means workwhich requires 75 pared as a state and a community Forum. As of early May, Sturgis Molded dive into due in situations city hasn’t finalized recreers diligence unemployed as a result ofwhere the panpercent of the loan for that in case that happens.” Products was running at about 10 pers some employers express demic could receive upistoacquiring $962 a week. to be used for payone company ational marijuana zoning regT he s t r e s s, a n x iet y a nd cent capacity involving transportation concern about retainThe federal benefits available roll in order to be depression the pandemic trigand medical devices. The company has another that are sources raw for ulations and won’t start accepting workers who are earnup to 39 weeks, while state benefits forgiven — faced gers can come from the loss of a about 200 employees. materials or components ing applications until April 20. more income through were expanded to more workers backlash from job or income, grief, tand “I’ve called people and there has By JESSICA YOUNG | MiBiz Ea rlier his uncermont h at t he Westing Michiga n from China. Buyers areand Hours after voting to delay unemployment benefits than their extended for 26for weeks. employees, since tainty about the future. At Pine been communication that said, ‘I make jyoung@mibiz.com Automotive Suppliers Symposium in Grand Rapids, asking more informarecreational and pause mediPresta normal paychecks, researchers say Media have shown conthe loan effectively Rest, “we’re experiencing a of rise more by not coming in,’” Presta told Mike Wall, director automotive analysis in Grand tionreports about supply chains, cal applications, the City long-term structural fixes are needed cern among employers means workers would be paid their many of the stressors that are MiBiz. “That’s out there.” he automotive industry is scrambling to in strike Rapids at IHS Markit, forecasted light vehicle sales backup plans who and pay theless Commission reversed course state andinfederal programs. than the amount of of replacement benefits worktypical wages. known riskunits for suiSturgis Molded Products’ operaa balance between near-term execution and toofincrease 16.8 million in the U.S.tothis year, the segcapabilities after the six commissionThe $2.2 trillion CARES Act passed ers aresuppliers. receiving. In at least one case Kelly Presta, vice president at Sturgis said.includes cars, utility vehicles tors and first-line positions make unsteady industry disruption from the cide,” novel Eastburg ment that and pickup ers could not agree on how to Brown in late March included provisions to in Washington state, a company Molded Products Co., shared these less than the maximum amount coronavirus outbreak. trucks. “It’s still very new. move forward. A last-minute See MENTAL HEALTH on page 6 add as $600 in weekly unemployment received a Paycheck concerns during an April 22 conference See UNEMPLOYMENT on page 5 That’s according to industry experts who say the Already, that outlook is changing COVID-19 conEveryone’s that trying to figure it out on Protection the fly, dispute among commissioners effect of the virus, which has been spreading around tinues to develop across the country, he told MiBiz. but if clients were selling source parts from also involved equity and local the globe since late December and shut down producAs of this report, IHS Markit was still finalizing a China, you’re going to have to make sure ownership. P global E R I O revised D I C sales A L projection, S tion in specific regions, has shifted forecasts for but Wall expects the new forethey have a backup supply-chain plan in Commissioners were conautomotive production and U.S. sales downward. cast to drop to 16.5 million units. case there is a major disruption,” said Mike sidering zoning amendments Indeed, Gov. Gretchen Whitmer announced “Everything is happening so quickly and there is Brown, who leads the M&A practice at investrecommended by the Planning the state’s first two presumptive positive cases so much volatility that given the circumstances, 16.5 ment bank Charter Capital Partners LLC in Commission that would have in Oakland and Wayne counties on March 10, fol(million) will still be a very good year,” Wall said. Grand Rapids. eliminated a waiver process See SHIFTING DYNAMICS on page 4 lowed by a state of emergency declaration. for sensitive land uses like reliSee DUE DILIGENCE on page 9 gious institutions and opened more properties for cannabis development. Marijuana advocates have PAGE 11 sought to relax distance requirements in order to expand the number of properties qualified for marijuana business use, By ANDY BALASKOVITZ | MiBiz seeking a constitutional amendment graduated, or progressive, income tax. schools and road and water infrastrucwhich they say could also help abalaskovitz@gmail.com to change Michigan’s flat 4.25 percent The Democratic-backed proposals have ture starting in 2022. The plan would address concerns over a lack of income tax to a graduated structure failed to gain traction in the Republicanreduce the state income tax rate for local ownership. s progressive political advobased on income. The Board of State held state House and Senate. individuals with income of $175,000 or Joe Neller, co-founder and cates seek lower state income Canvassers is expected to decide in the In t he late 1960s a nd 1970s, less and joint filers with income at or chief government affairs offitax rates for most Michigan coming weeks whether organizers can Michigan voters by wide margins below $350,000. According to organizcer at Dimondale-based Green residents while higher earncollect signatures in hopes of putting rejected ballot proposals for a graduers, 95 percent of Michigan residents Peak Innovations LLC, said the ers pay more for infrastructure needs, the question to voters in November. ated income tax. Such a change would would pay a lower state income tax rate Planning Commission rejected the state’s leading business group is “If this qualifies for the ballot, require a constitutional amendment. than they do now. a provisioning center proposed bracing for a highly contentious politfrankly, it would be war,” said Rich However, supporters say growing Of the 41 states with income taxes, by his company because of the ical campaign. Studley, president and CEO of the income disparities and declining pub33 have a progressive structure. Federal site’s proximity to a church, Organizers behind the Fair Tax Michigan Chamber of Commerce. lic services have shifted public opinion. income tax also follows a graduated even though the company had Michigan campaign, which was For years, the Chamber has opposed The Fair Tax Michigan plan would raise model. a waiver from the church. announced in late February, are efforts in the state Legislature for a See INCOME TAX on page 3 $1.5 billion in additional revenue for See STATUS QUO on page 8

P COPING With limited funding WITH restored, Pure Michigan T shifts focus to fall and COVID-19 winter tourism

Former Muskegon coal plant to get new owners

Spectrum Health prioritizes buying local

STATUS QUO

— C ORON AV I RUS I N M IC H IG A N —

Virus concerns drive additional due diligence in M&A transactions

Golf courses bounce back with banner summer

COVID-19 highlights structural changes needed for unemployment system, researchers say

Automotive analysts see shifting dynamics amid coronavirus spread

downtown amphitheater By ANDY BALASKOVITZ | MiBiz abalaskovitz@mibiz.com GRAND RAPIDS — The business group that pushed several major developments over the past 25 years has multiple new priority projects, including a downtown Grand Rapids amphitheater. Grand Action, which reconvened earlier this year after a nearly three-year hiatus, is studying the feasibility of an amphitheater, expanded convention center space and a professional soccer field. On Oct. 2, the Grand Rapids-Kent County Convention/Arena Authority board approved a resolution authorizing the authority to “proceed with efforts to determine whether there is an appropriate site for the location of an amphitheater.” Grand Action has effectively taken over those efforts from a task force appointed by the CAA Board. Grand Action has “embraced this potential (amphitheater) project and likely will get involved in its planning and fundraising for it,” Steve Heacock, president and CEO of Grand Rapids Whitewater and CAA board member, said during the meeting. “We don’t know that for certain yet, but that’s a very, very good potential.” Heacock added that multiple studies over recent years have all concluded a downtown amphitheater would result in positive economic activity, and that “site selection is the next big step.” Two potential sites on Market Avenue along the Grand River have been previously mentioned: 201 Market SW, where the city recently walked away from a separate $270 million development deal, and 63 Market Ave. SW, the site of the former Charley’s Crab restaurant. The three development projects have been on the radar of civic leaders, developers and city officials for nearly five years. Grand Action, which dissolved at the end of 2017 and relaunched in March under new leadership, has retained consulting firm CSL to provide a new market feasibility study on the projects. The study is expected in late November. Grand Action 2.0 is led by Carol Van Andel, Dick DeVos and Tom Welch, regional president of Fifth Third Bank. DeVos is the only holdover from the previous Grand Action team that was also co-chaired by John Canepa and David Frey, both of whom retired. Formed in 1992, the original Grand Action group pushed major downtown developments such as Van Andel Arena, DeVos Place Convention Center, the relocation of Michigan State University’s medical school to Grand Rapids and the Secchia Center, the Downtown Market, renovation of DeVos Performance Hall and the Grand Rapids Civic Theater.

INSIDE:

1.4.2021

Telemedicine Index of 2020 M&A

Contract Deadline: 12.23.2020

1.18.2021

Industry 4.0: Smart Factories Contract Deadline: 1.6.2021

2.1.2021

Cybersecurity Commercial Lending Quarterly: Small Biz Lending Update Contract Deadline: 1.20.2021

Industry 4.0 SEE PAGE 5

Construction industry adapts to new safety protocols

2.15.2021

Work From Home M&A, Deals & Dealmakers Awards Contract Deadline: 2.3.2021

Michigan Chamber prepares for ‘war’ over graduated income tax proposal

PAGE 21

Education & Talent Development Contract Deadline: 2.17.2021

Leaders push for action to raise wages

3.1.2021

INSIDE:

Business of Senior Care

3.15.2021

SEE PAGE 16

Real Estate: Office

Contract Deadline: 3.3.2021

3.29.2021

Utilities & Energy M&A Roundtable

Contract Deadline: 3.17.2021

4.12.2021

Drinking Economy Craft Beverage Roundtable Contract Deadline: 3.31.2021

4.26.2021

Culture & Generational Change Contract Deadline: 4.14.2021

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OCTOBER 26, 2020 / MiBiz

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NONPROFIT ORGANIZATIONS

GR nonprofit lands $1M in state funding for planned early childhood, senior center By ANDY BALASKOVITZ | MiBiz abalaskovitz@mibiz.com GRAND RAPIDS — United Methodist Community House will receive $1 million in state funding for an early childhood education and senior activity center planned on the city’s disadvantaged southeast side. The funding was allocated in the state’s current fiscal year budget, which took effect on Oct. 1 following a budget agreement between Gov. Gretchen Whitmer and the Republican-led Legislature. While details about total project cost and design are still being worked out, UMCH Chief Executive Director Eric Williams said the state budget allocation “gives us the breathing room to move this project forward.” The state funding as well as the Williams project timeline were both delayed because of the COVID-19 pandemic, Williams said. The nonprofit plans to provide childcare for 200 infants and toddlers as well as offer daily activities for more than 500 seniors at the facility. Williams cited recent local studies showing the need for both types of services. State Sen. Winnie Brinks, D-Grand Rapids, helped secure state funding for the project. UMCH is a “staple of our community that brings together generations of Grand Rapidians and helps foster respect, understanding, and cultural awareness,” Brinks said in a statement. “I am proud to have fought for, and won, the inclusion of funding for them in the state’s budget so they can continue that mission. I am eager to see the wonderful initiatives that will grow from it.” The state funding comes as UMCH plans broader organizational changes involving how it’s funded. Williams said the nonprofit wants to move away from a traditional funding model of grants and donations, and the new childcare and senior center represents a potential new revenue stream. Within five years, UMCH hopes to generate enough internal revenue to cover routine operational expenses. “So when we go to donors and ask for funding, we can ensure 100 percent of the dollars go to end users or the clients we want to support,” Williams said. “Our goal is to serve more people.” Founded in the early 1900s, UMCH opened the first childcare center in Grand Rapids in 1936 and was an early adopter of serving senior congregate meals in the city. UMCH typically served about 100 children and 40-50 seniors on its campus before it closed in mid March as the COVID-19 pandemic spread. It reopened in June at 30 percent capacity, which recently increased to 50 percent.

Service organizations look to spread awareness of new expungement laws By ANDY BALASKOVITZ | MiBiz abalaskovitz@mibiz.com

ichigan nonprofits operating in the workforce development and housing sectors see a need to raise awareness among clients following new statewide criminal justice reforms. The “clean slate” bill package signed by Gov. Gretchen Whitmer on Oct. 12 features several nation-leading updates to the criminal expungement process, including automatically clearing certain prior convictions of nonviolent misdemeanors and, in some cases, felonies. Additionally, these prior convictions have been barriers for people who are seeking housing and employment but get turned away by landlords and employers. The legislation had broad support from business, civil rights groups and nonprofit service proSponsored by: viders that have seen firsthand the GRAND RAPIDS effects on tenants and workers. COMMUNITY “This is something we think FOUNDATION is a long time coming,” said Eric Hufnagel, executive director of the Michigan Coalition Against Homelessness. “One of the issues that keeps identifying itself is the difficulty that service providers have in trying to assist individuals who have criminal records.” The seven-bill package — which the Grand Rapids Area Chamber of Commerce called a “top priority, and which was supported by the Mackinac Center for Public Policy and the American Civil Liberties Union — opens Michigan’s relatively narrow and onerous expungement process. It creates an automatic process for expunging certain misdemeanors after seven years and certain non-assaultive felonies after 10 years. For the first time, most traffic-related convictions also are eligible for expungement. Aligning with the state’s recreational cannabis law passed by voters in 2018 and making good on a campaign promise by Whitmer, the laws create a process to set aside most marijuana convictions that would have been legal as of Dec. 6, 2018. Another bill creates a rebuttal process for marijuana-related expungements that places the burden of proof on prosecutors. John Cooper, executive director of nonprofit Safe & Just Michigan that for years has advocated for criminal justice reforms, called the state’s existing expungement process “quite narrow” and a “pretty intensive paper-based process” dating back to the 1960s. “We have known for a long time something had to be done to expand eligibility for the petition process. It’s not serving enough people,” he said, adding that the current process helps a few thousand people a year while hundreds of thousands could benefit under the new laws. Over the next two years, the state will develop an online system to process automatic expungements. Until then, Cooper’s group plans to work with organizations on the ground to notify people about the law changes. “We also think it’s going to be important to provide legal support for people,” he said. “Getting the word out and providing people with the resources they need are two major ways service providers can help.”

NONPROFIT SECTOR NEWS

Lyn Raymond, executive director of the Holland-based Lakeshore Housing Alliance, said the organization’s programs are unlikely to change as a result of the law, although outreach will be key. “I certainly would imagine we would educate the organizations in our network to make sure everyone is aware of the new legislation and how it might affect the people they serve,” Raymond said.

Economic opportunity Lt. Gov. Garlin Gilchrist said at the time of the bill signing that the “clean slate” package is “bigger than criminal justice reform. This is about economic opportunity and full participation in our economy and our society.” Nationwide, tens of billions of dollars are lost annually from the underemployment of formerly incarcerated people, according to various research. Some studies have documented better wages and jobs as a result of expungement. “People who have criminal records find that those follow them around,” Hufnagel said. “I think of it as an albatross around their necks.” This includes one individual from Muskegon who Hufnagel said reached out to the coalition. The individual — who had a criminal record from a decade ago — and his wife were both working full time but were living in a Red Roof Inn. He was repeatedly turned down for an apartment based on his prior conviction. “That’s a prime example of how people have limited choices when it comes to housing when they do have that criminal record,” Hufnagel said, adding that often the process is formulaic with little dialogue between a potential tenant and the landlord. If — ERIC HUFNAGEL the box is checked, they’re Executive Director of the Michigan immediately turned away Coalition Against Homelessness and often are unaware of recourse options, for example. The situation is exacerbated under tight housing markets, he added. “We’re in a landlord’s market,” Hufnagel said. “We have a very tight housing stock when you think about the number of people applying for units.” To Hufnagel, these lingering barriers for people who have already been adjudicated and “served their penalty” amounts to a question of fairness. “To me it is a moral question: How long should people be punished for something that could be as minor as misdemeanor marijuana possession?” he said. “That’s a relatively minor infraction with respect to someone impacting their community. Why do we hold that against people and put them in situations that ultimately will have a negative impact on their quality of life as well as economic viability?”

“People who have criminal records find that those follow them around. I think of it as an albatross around their necks.”

Together, we will recover. Inequities are intensified in times of crisis, and our community has responded with collaboration, innovation and generosity. Learn more at grfoundation.org/covid19 Visit www.mibiz.com

MiBiz / OCTOBER 26, 2020

Q&A Natalia Kovicak

President, Economic Club of Grand Rapids Natalia Kovicak became president of the Economic Club of Grand Rapids in early August after 12 years at The Right Place Inc., most recently as events manager and as facilitator for the Manufacturers Council. A native of Buenos Aires, Argentina, Kovicak calls leading the Econ Club a “dream job” where she can “bring people together” and “bring high-level, relevant content to our community and help our leaders continue to grow and impact our community.” Kovicak spoke with MiBiz about how the Econ Club has adapted to the COVID-19 pandemic and what’s ahead. What interested you in the position at the Economic Club? The Econ Club brings a large platform to do what I’m passionate about — to connect, inform and inspire our business community, and it’s a bigger platform than what I had been doing at The Right Place. To me, the Econ Club is the premier organization to allow all of us to bring information and to engage in big, thought-provoking conversations and to inspire strong strategic leadership. It was risky to change a long-term job for my dream job in the middle of a pandemic, but I’m a true believer that change pushes you to grow and find new ways to do things, and you continue to learn and that’s how you move forward. What is a challenge that came with transitioning to the leadership position during the pandemic? We are social creatures and the Econ Club traditionally brought speakers to a meeting space with 500 or 600 people. We had to figure out how we could continue with our mission to connect, inform and inspire our diverse communities. We had to figure out how we did that effectively, how we could continue advancing our mission and bringing value to our members. Virtually, we can continue to inform on highly relevant topics and thought-provoking speakers. As far as the connection goes, obviously most people like to be in person, but we are going to bring virtual networking sessions with breakout sessions where we will have our members continue connecting and developing meaningful connections. Has the pandemic changed the Econ Club’s focus? Our mission continues to be the same. We haven’t changed who we are, and today it is more relevant than ever that we provide a platform of some sort where our members can develop meaningful connections, get the latest information, and we inspire them to grow as stronger leaders. The way we have changed is bringing that in a virtual platform and we are learning as we go. We are going to be offering virtual networking opportunities. We are going to be offering what we call virtual executive roundtable discussions that will allow us to pick a topic that is relevant, timely and very informative, and then have conversations in smaller groups about that topic. What’s the Econ Club’s biggest opportunity? To push ourselves to continue to be creative and to challenge ourselves to continue to innovate and to learn new ways. Professionally, the pandemic has pushed me to find new ways to continue to bring relevant programs to connect, inform and inspire our community. The other opportunity has been to leverage strategic partnerships and collaborations, to learn from each other, and to embrace the change in a way. What have you learned in your first few months at the Econ Club? That we can be creative, we can bring our community together, and we can continue to bring value to our leaders in either platform (in person or virtual) as long as our mission is relevant. The learning is never comfortable, but when you’re pushed to change and adapt, and be flexible, and create and innovate, you become a stronger professional, and I think we’ve all learned through this pandemic. New ways of doing things for any professional, for any of us — the innovation is what keeps us moving forward. New ways to communicate with our teams, new ways to engage our team players, new ways to collaborate with strategic partners and continue adding value to our communities. What’s new this year for the Econ Club? One of our key strategic initiatives is to improve diversity, equity and inclusion at all levels of the Economic Club. That’s why we are creating the Diversity, Equity and Inclusion Advisory Council, which will provide critical advice on how to purposefully create programs and a meeting environment where diverse members feel that they belong to our club. The goal is to provide critical advice on how to purposely create programming and an immediate environment to attract and retain our diverse members. The other new thing is creation of the virtual roundtable discussions and a new leaders council. We need to find ways where we can motivate our future leaders and develop strategies to help attract them, mentor them and encourage them in a way to develop strong relationships, and also for us to learn from the younger leaders in topics of relevance for them as well.

Interview conducted and condensed by Mark Sanchez. COURTESY PHOTO.

OCTOBER 26, 2020 / MiBiz

IN THE NEWS M&A

n Traverse City-based Hagerty Insurance Agency Inc., an insurer of classic cars and high-end automobiles, has acquired the California Mille car rally from the founding Swig family, according to a statement. The California Mille travels a route along northern California’s mountains and coastal roads and is limited to 65 cars annually. The deal follows Hagerty’s 2019 acquisition of Greenwich Concours d’Elegance, a 25-year-old family-run car show in Greenwich, Conn., and bolsters the portfolio of “immersive automotive experiences” for the Northern Michigan firm. n An employee group took a majority ownership position in investment advisory firm Red Cedar Investment Management. Under the terms of the deal, Delta Dental of Michigan subsidiary The 4100 Group Inc. issued 51 percent of its common shares to Bridge & Vine LLC, a Michigan company owned by a core group of six Red Cedar Investment professionals. The 4100 Group retained a 49 percent equity stake in Red Cedar. John Cassady was named CEO of the new ownership structure that took effect Oct. 1. He also remains chief investment officer at Red Cedar, which employs 13 people and has $1.4 billion in assets under management. n A family-owned Grand Rapids manufacturer with 60 years of experience in polystyrene patterns and prototypes is changing ownership. Van’s Pattern Corp., which operates out of a 40,000-squarefoot facility at 11 Sweet St. NW on Grand Rapids’ north side, recently announced that it sold to LNS Manufacturing Inc., which is based in Schoolcraft. Van’s Pattern uses CNC-controlled cutting machines to create detailed patterns and prototypes for the auto industry in addition to special tool manufacturers and foundries. n Denver-based GrowGeneration Corp., which operates specialty retail hydroponic and organic gardening stores throughout the country, recently acquired Michigan’s Big Green Tomato, a hydroponic equipment store with locations in Taylor and Battle Creek. Big Green Tomato has a strong commercial operation and generates around $16 million in revenue. The acquisition means GrowGeneration now owns and operates six stores across Michigan.

HEALTH CARE

n Ivy Rehab opened a new clinic in Reed City and now has nearly 30 locations in Michigan. Physical therapist Jill Crosby serves as clinic director in Reed City, where the firm offers physical and orthopedic therapy, soft tissue mobilization, chronic pain, post-surgical, arthritis and other treatments. Founded in 2003, Ivy Rehab has more than 225 outpatient physical, occupational, speech therapy and ABA clinics in the Northeast, Mid-Atlantic, Midwest, and Southeast regions U.S. n The American Medical Rehabilitation Providers Association recognized Kent Riddle, president and CEO of Mary Free Bed Rehabilitation Hospital, with its National Leadership Excellence Award. The award recognizes an individual who has exemplified outstanding service and made significant contributions to the field of medical rehabilitation.

FINANCE

n Harbor Springs-based First Community Bank, specializing in family business banking, has opened an office on Cascade Road SE in Grand Rapids. Regional President Mark Brant leads First Community’s commercial banking team. The bank has 11 offices in Michigan, including downtown Grand Rapids. n Comerica Bank donated $350,000 to Michigan Women Forward, a community development organization that works to expand economic opportunity for Michigan women. Comerica’s contribution helps replenish MWF’s Entrepreneur Resilience Fund that helps women-led small businesses recover from the pandemic and reopen their businesses. n Mercantile Bank Corp. recorded lower third quarter earnings amid what President and CEO Robert Kaminski Jr. called a “challenging operating environment” from the COVID-19 pandemic. The Grand Rapids-based Mercantile Bank (Nasdaq: MBWM) reported $10.7 million quarterly net income,

or 66 cents per diluted share. That compares to net income of $12.6 million, or 77 cents per diluted share, in the third quarter of 2019.

REAL ESTATE/DEVELOPMENT

n Bazzani Building Co. is moving its offices from Wealthy Street to a property it is redeveloping as part of a mixed-use project on the city’s West Side. The 16,133-square-foot brick facility at 730 Leonard St. NW was originally constructed as a warehouse and is currently vacant except for Chaser Apparel, which will continue to operate in the space. Construction is set to begin later this year to convert the space into 10 studio and eight single-bedroom apartments along with Chase Apparel’s and Bazzani’s new offices.

EXPANSION

n Oceana County restaurant Silver Lake Chicken Shack is expanding to a location in Grandville. The restaurant, located at 8301 W. Hazel Road in Mears, is a seasonal operation owned by Craig Cihak, who also owns Craig’s Cruisers entertainment centers. The restaurant has gained popularity over the years, which led to branching out with a year-round location close to Grand Rapids, said Scott Butcher, general manager of Silver Lake Chicken Shack. The new location will be at 4505 Canal Ave. SW, just west of RiverTown Crossings mall where Famous Dave’s restaurant formerly operated. n Automotive parts manufacturer Viking Products Inc. is eyeing a larger headquarters in Walker with the planned construction of a 132,600-square-foot facility to accommodate the company’s recent growth. Viking Products proposes the new facility on a 16.8-acre site at 3260 Northridge Drive NW near its current location. The company’s new headquarters would also be located near a new Amazon.com Inc. package sorting and delivery facility. n CMC Family Law Group, which specializes in high-asset divorce, mediation, child custody and other practice areas, recently announced that it would be opening an office in Grand Rapids in addition to offices in Birmingham and Detroit. The firm, founded by managing partner Cristina Crescentini, will also maintain its presence on the west coast, where it operates offices in Beverly Hills. n Koops Automation Systems is embarking on a third Holland expansion project in the last four years. The company, which works with businesses to create factory automation systems, will be investing $445,260 to remodel its facility at 881 Productions Place. The project is designed to create a larger open workspace environment in the facility while adding a lunchroom and additional space to accommodate new machinery. The city of Holland is providing a 12-year Industrial Facilities Tax Exemption for the project.

MANUFACTURING

n Krieger Craftsmen Inc., a manufacturer of plastic injection molds for the automotive, medical, appliance and consumer products industries, has filed for Chapter 11 bankruptcy. Owned outright by Timothy Krieger, the business is headquartered at 2758 3 Mile Road NW in Walker and employs approximately 16 people. Krieger filed under Subchapter V of the Bankruptcy Code, which was created under the Small Business Reorganization Act of 2019. n Multinational chemical producer BASF is closing its herbicide production facility in Muskegon Township by 2022. The facility — which BASF acquired from Bayer CropScience LP in 2018 as part of Bayer’s mega-merger with Monsanto Co. — produces nonselective herbicide glufosinate-ammonium (GA) and its intermediates. BASF is closing a similar facility in Germany as it consolidates operations at other plants in the U.S., Canada and Germany.

FOOD/BEV

n Grand Rapids-based and African American-owned spirits company Motu Viget Spirits announced a new partnership with Meijer Inc. grocery stores. Through the partnership, 50 Meijer locations in the upper Midwest will carry Motu Viget Brut, the company’s inaugural product, which is a sparkling wine produced in Paw Paw in collaboration with St. Julian Winery. Motu Viget products are now being sold in more than 200 locations. Visit www.mibiz.com

Empowering employees to live their healthiest life It’s a well-known fact that one of the best ways to recruit and retain top talent is to offer excellent benefits, the kind that go beyond the basics of meeting an employee’s health care needs and offer more than just reasonable copays and deductibles. With the outbreak of COVID-19, maintaining strong health has become more important than ever, and employees are looking for ways to stay healthy while enhancing their day-to-day lives. If you’re looking to offer your employees a complete health care solution that also meets your business needs, Blue Cross Blue Shield of Michigan can deliver the value you want. With Blue Cross, your employees will not only have access to more doctors and hospitals nationwide, they’ll also get a host of unique benefits that can empower them to live healthier. Programs, such as Blue Cross® Virtual Well-Being webinars, are doing more to help members at no extra cost. These live weekly webinars provide inspiration and motivation to help employees improve their overall well-being. But it’s not just for employees — this program also features live weekly webinars for employers that focus on a variety of wellbeing topics, featuring downloadable content that can be used to help foster a culture of well-being in the workplace.

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The offerings don’t stop there. Another excellent program is the Blue Cross® Health & Well-Being website, powered by WebMD®. Members can access a broad range of health information and resources anytime through the Blue Cross mobile app, or by logging in to their member account at bcbsm.com. These tools are designed to make it easier for your employees to take control of their health. When members access the program for the first time, they can complete a health assessment that helps determine the programs within the app that are right for them. Other resources on the Health & WellBeing website are: • My Health Assistant • Symptom Checker • Health Trackers • Pregnancy Assistant • Personal Health Record • Health Topics Blue Cross offers many more programs, such as Blue 365®, that bring more value to members. Blue365 is a program available only to Blue Cross members that offers discounts on various healthrelated products and services. From workout gear, health magazines and gym memberships to cookbooks, cooking

classes and weight-loss programs, the savings available to members can make it much easier to maintain a healthy lifestyle. Plus, members can get discounts on travel, recreation and health care services such as dental care, LASIK and eye care and hearing aids. You can even access helpful Blue Cross content on Amazon Alexa and Google devices with MIBlue (“My Blue”). Designed to give health tips, information and even workouts, MIBlue makes it easier than ever to make healthy choices in real time. The best part: It’s available to members and nonmembers alike. All these perks and much more are backed by Blue Cross’ 81 years of experience and can become an asset to your workplace. Having the largest network with reliable coverage and wonderful perks is a great benefit to employees. And Blue Cross’ great value and cost predictability benefits employers, too. To learn more about what Blue Cross can offer your employees, visit bcbsm.com/ employers.

MiBiz / OCTOBER 26, 2020

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