Middle Market Growth - July/August 2015 by Association for Corporate Growth

Growth MIDDLE MARKET

// JULY/AUGUST 2015

PE FIRMS FOSTER BEST-PRACTICE SHARING ACROSS THEIR PORTFOLIOS A QUALIFIED OPINION: ROGER DOW, PRESIDENT & CEO, U.S. TRAVEL ASSOCIATION

DIRECT

Travel Charting a Journey with High-Touch Travel Service for Companies

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CUTTING EDGE Pointing the way to success. Forward. Weaver helps manufacturing and distribution companies get their edge—and keep it. The largest independent accounting firm in the Southwest and a top-40 firm in the U.S. Get to know Weaver.

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EXECUTIVE SUMMARY GARY LABRANCHE // ACG Global President & Chief Executive, FASAE, CAE

Journey to the Middle Market

his issue will take you around the world and back again. First, I invite you to take a virtual tour of the United States with ACG’s new Growth Economy data, which reveals the effect private

equity has on the sales and job growth of middle-market companies. As you’ll see when you visit GrowthEconomy.org, you can sort the data by state, metro area and congressional district. And any way you slice it, the data underscores the fact that middle-market companies are the leading engines of growth—and that private capital investment is their fuel. A journey of another kind is the third annual EuroGrowth® conference—ACG’s two-day networking event for anyone in the middlemarket M&A community interested in global dealmaking. EuroGrowth will be held Nov. 16-17 at Amsterdam’s Mövenpick Hotel. You can register and find more details about this exciting event here. Travel is an integral part of the job for many ACG members, as it is for millions of corporate executives, salespeople and others. But the travel industry also represents an M&A opportunity, as highlighted by our lead story on Direct Travel Inc., a portfolio company of Evanston, Illinois-based private equity firm Silver Oak Services Partners. Direct Travel is using a roll-up strategy to consolidate the still highly fragmented corporate travel services market, made up of those businesses that help midsize companies with everything from reservations to event planning at their destination. In a world that has seen the advent of disruptive travel tools such as Uber and Airbnb, it’s no surprise that technology plays an important role in this company’s story. As our Quick Takes feature on medical tourism reveals, a rapidly growing industry is helping patients plan trips for medical procedures outside their local regions. And when it comes to travel planning, many trips start with the popular website Tripping.com, the largest search engine for booking vacation rentals. The brains behind this site offers some interesting insights, as outlined in B-Side. As sharing plays a greater role in where we stay and how we travel, private equity firms, too, are turning to sharing in hopes of fostering the exchange of best practices among portfolio companies, as detailed in our second feature story. Just as a journey of a thousand miles begins with a single step, your journey to all these stories and more begins with a single click. So find yourself a hammock, kick back and make Middle Market Growth part of your summer reading list! //

EXECUTIVE SUITE RICHARD A. MARTIN JR. // Senior Director, Merrill Corporation

HOW HAS THE TRAVEL INDUSTRY FARED IN M&A DEALS OVER THE LAST TWO YEARS?

RM: According to recent M&A articles on skift.com, Marriott is bullish on merger and acquisitions activity, as evidenced by its purchases of AC Hotels, Gaylord Hotels, Protea Hospitality Group, and Delta Hotels and Resorts in recent years. CEO Arne Sorenson said the quartet of acquisitions Marriott made over the last three to four years carried a price tag of $100 million to $200 million at multiples of up to 10 times EBITDA. Looking at Merrill DataSite deal data, in the past 24 months we’ve seen a 31 percent increase in travel and hospitality data room projects in 2014 over 2013, the vast majority being M&A. Looking at projects coded for transportation from that same period, the growth was flat year over year.

ARE PRIVATE EQUITY BUYERS INTERESTED IN TRAVEL TRADE DEALS?

RM: According to an article on ttgdigital.com, “The travel industry is likely to see continued interest from the private equity sector in 2015 as the appetite for investment remains strong.” The article cites research from Catalyst Corporate Finance, which says there were 36 deals completed in 2014, a 24 percent increase over 2013.

BIO // RICHARD A. MARTIN JR. is a senior director at Merrill Corporation, responsible for Merrill DataSite’s global marketing group. Nearly two decades of marketing experience working and residing in the United States, the United Kingdom and Europe has developed Martin’s understanding of disparate corporate cultures and the global financial industry, evidenced by a successful record of growing businesses.

Private equity firms participated in 10 of the deals—compared with nine in 2013. While they remain in the minority, the prices involved tend to be high. The travel sector is doing remarkably well and private equity investors have gone for it big time in 2015.

HOW DOES DATASITE WORK WITH COMPANIES IN THE TRAVEL INDUSTRY TO STREAMLINE POTENTIAL MERGERS AND ACQUISITIONS?

RM: Merrill DataSite provides significant benefits across multiple

transaction types, including M&A advisory, document warehousing, IPO and secondary offerings, asset purchases, venture capital due diligence, biotech licensing, commercial and corporate real estate ventures, bankruptcies, financial restructuring, preparing-for-exit strategies, and many other matters that require extensive document sharing. Continued on next page

EXECUTIVE SUITE RICHARD A. MARTIN JR. // Senior Director, Merrill Corporation

DataSite streamlines the due diligence process by providing secure simultaneous access, full-text search capabilities and robust reporting tools. Thousands of users worldwide can securely access important due diligence data via the Merrill DataSite platform. Given the confidential nature of any transaction employing a data room, security is a high priority. Merrill DataSite employs several layers of security: Merrill DataSite is the world’s first ISO 27001 (originally BS 7799) accredited VDR provider and complies fully with the requirements for an Information Security Management System, or ISMS.

HOW EFFICIENT IS DATASITE AS A TOOL FOR INTERNATIONAL MERGERS?

RM: DataSite is the world’s leading virtual data room for due diligence and has successfully handled mission-critical documentation for its clients globally for decades. Our award-winning platform provides advanced technology and in-depth functionality so you can deliver the right data to your team members easily and instantaneously anywhere in the world. To compete in today’s global markets, successful companies need to communicate in more languages than ever—then quickly, securely

To learn more about Merrill’s virtual data room solution, please visit www.datasite.com.

and accurately translate and localize business materials for a diverse audience. Merrill offers expert language solutions to address these needs. The DataSite platform is localized in nine languages, including English. Our experience, combined with a global infrastructure and international network of linguists and interpreters, ensures that the translation into, or from, a requested language is a secure and seamless process. At Merrill Corporation, we know organizations go through different stages in their life cycle, and we understand the unique requirements each of these stages creates. This has led us to develop a suite of global document creation, management and communication solutions over the last 45 years to meet our clients’ needs. //

MIDPOINTS RANDY SCHWIMMER // Founder and Publisher, The Lead Left

2020: A Business Travel Odyssey

onday, 5:30 a.m. // [Up&Atom© wrist alarm vibrates]. Ugh, time to get up. Can’t believe I have to fly to Havana tonight. Well, I haven’t missed an ACG InterGrowth® in 30

years. Not about to start now. [Checks PhoneDrone© app on wrist]. My lift arrives soon so better get going.

7:30 a.m. // [en route to JFK, aloft at 1,000 feet]. Glad I’m not in that traffic! Don’t know why everybody doesn’t use these personal airlifts. Really great time-saver. Let’s see how my flight is doing. [Checks

BIO //

AirAware® app]. On-time departure. And they’ve booked me for a

Randy Schwimmer is senior managing director and head of origination and capital markets at Churchill Asset Management LLC, a middle-market senior debt provider. He is also founder/publisher of The Lead Left, a weekly newsletter about trends and deals in the capital markets.

massage [Rubways©] while I’m going through security. Sweet!

Content sponsored by

9:30 a.m. // [on plane]. Let me see if I can get a better hotel. [FlyingRoomers.com]. So much easier than that corporate service we used before. Hotels, motels, houses, even student housing! Love the way your luggage gets sent right from the plane to your room [Bagz©].

Tuesday, noon // [checking into Havana Hilton]. Nice ride from the airport. Can’t believe I saw a taxi! What a blast from the past. Just swipe my i-Pass® on this terminal and go straight to my room. Cool that the key barcode is in my wrist phone. Swipe in front of the lock, and [click] we’re in!

1:00 p.m. // My dinner arrangements for tonight didn’t happen. No big deal. [Speaks into wrist phone]. “Sushi. Downtown. Four stars. Reservation for six people. 7:30.” Hmm, two options. First has best reviews, but noise level pretty high. “Book option number two.” Doneski. Continued on next page

MIDPOINTS RANDY SCHWIMMER // Founder and Publisher, The Lead Left GREAT TO HAVE THESE APPS INTEGRATED ON ONE SUPER TRAVEL APP. REMEMBER WHEN YOU HAD TO CHECK EACH APP INDIVIDUALLY? TOTAL PAIN.

5:00 p.m. // Taking a break from networking to check messages. Great to have these apps integrated on one super travel app. Remember when you had to check each app individually? Total pain. Hey, just got an alert the gym is holding my place for the “Six-Pack-in-Six-Minutes” class at 5:30 p.m.!

Wednesday, 6:30 a.m. // [Up&Atom© wrist alarm vibrates]. Oh man, what a headache! Stomach feels even worse. How many Cuba Libres did I have? Better check if there’s a doctor nearby. [EmDeeOnCall®]. Hey, there’s a doctor staying at the hotel! An optometrist. Close enough.

11:00 a.m. // I’d like to do some sightseeing before heading back. Wonder what kind of stuff there is to do. [SitesUnseen.com]. Hey, the Yankees are down here! Love these alerts from my GPS tracking app.

Thursday, 9:00 a.m. // [on plane en route to JFK]. Headed home! Isn’t traveler centricity great? My favorite InterGrowth speaker was the travel site CEO. “We used to experience great technology at work,” she said, “and then want it in the home. Today, it’s the other way around.”

11:00 a.m. // [still on plane]. Nothing worse than filling out travel expense reports. But MassYourCharge® is awesome. All expenses go right from my phone to the corporate office and then get credited to my account the next day. Easy peasy.

3:00 p.m. // [in Uber car, somewhere in Queens]. My travel luck ran out. PhoneDrone© service suspended for some reason. Maybe the weather. Now stuck on the Long Island Expressway.

5:00 p.m. // [still in car, on FDR]. What is the deal with this traffic? [Bumper2bumper©] Oh, great. President Clinton is in town. That explains everything. Thanks a lot, Chelsea! //

“I am delighted that ACG is once again hosting EuroGrowth to help M&A professionals worldwide create cross-border opportunities–all in just two days.” Pam Hendrickson, COO, The Riverside Company

1 6 – 1 7 NOV E MB E R 2 0 1 5 M Ö V E N PICK HOTE L AMS TE R DAM CITY CENT RE AMS TE R DAM, NE THE R LANDS

W W W. E U R O G R O W T H . O R G

Growth MIDDLE MARKET

// JULY/AUGUST 2015

Photo by Sara Rubinstein

FEATURES

Direct Travel Recognizing opportunity in the corporate travel management sector, industry veteran Ed Adams teamed up with private equity firm Silver Oak Services Partners. Together they executed a consolidation strategy to form Direct Travel, a firm that helps businesses book corporate trips while saving them money and troubleshooting travel issues. Read more.

“THERE’S BEEN A SHIFT FROM AGENT-ASSISTED TO ONLINE BOOKING, BUT THAT DOESN’T CHANGE THE FACT THAT WE’RE HELPING CLIENTS SAVE MONEY.” // DANIEL GILL, MANAGING PARTNER, SILVER OAK SERVICES PARTNERS

‘Pollinating’ Best Practices Across the Portfolio PE firms detail their strategies for strengthening communication between portfolio companies to encourage idea-sharing and problem-solving across businesses. Read more.

TABLE OF CONTENTS

PRESIDENT & CEO Gary LaBranche, FASAE, CAE glabranche@acg.org

VICE PRESIDENT, COMMUNICATIONS & MARKETING Kristin Gomez kgomez@acg.org

EDITOR-IN-CHIEF Deborah L. Cohen dcohen@acg.org

IN EVERY ISSUE

DEPARTMENTS

Executive Summary

• Growth Economy Data Gears Up the Middle Market

Executive Suite MidPoints by Randy Schwimmer Face-to-Face Quick Takes The Ladder B-Side It’s the Small Things The Leadership

2014 Association TRENDS All-Media Silver Award, Monthly Trade Publication 2014 Folio Eddie Digital Winner, Standalone Digital Magazine 2014 Apex Award, New Magazine, Journal & Tabloid

THE ROUND • ACG Holds Inaugural Middle-Market Private Equity D.C. Fly-In Read more.

A QUALIFIED OPINION Roger Dow, President & CEO, U.S. Travel Association, Discusses Trends in the Domestic Travel Industry. Read more.

ACG@WORK

ASSOCIATE EDITOR Kathryn Mulligan kmulligan@acg.org

VICE PRESIDENT, EVENTS & PARTNERSHIPS Christine Melendes, CAE cmelendes@acg.org

DIRECTOR, STRATEGIC DEVELOPMENT Maggie Endres mendres@acg.org

BUSINESS DEVELOPMENT Albert Pereira apereira@acg.org

• Independent Sponsors Are Topic of New York Luncheon

MANAGER, MARKETING & COMMUNICATIONS

• Notes from the Field: ACG Tour Promotes Energy Opportunity

Larry Guthrie lguthrie@acg.org

• ACG Chicago Brings Food Industry Experts to the Table

Custom media services provided by Network Media Partners, Inc.

• Spring Film Screening Shines Light on Women’s Issues Read more.

THE PORTFOLIO The latest middle-market trends and thought leadership written exclusively by a team of expert ACG Global featured firms. Read more.

Association for Corporate Growth 125 South Wacker Drive, Suite 3100 Chicago, IL 60606 ACG Membership: membership@acg.org www.acg.org Copyright 2015 Middle Market Growth®, InterGrowth and the Association for Corporate Growth, Inc. All rights reserved.

FACE-TO-FACE CONNECT TO YOUR NEXT DEAL

REGISTER TODAY // Reserve your spot at the advance registration price of €603,79 (€499 + VAT), a savings of more than €240 available through Nov. 11, after which prices increase.

ADVANCE REGISTRATION FOR EUROGROWTH 2015 NOW AVAILABLE

Join 200+ Global Deal-Makers This November in Amsterdam For more than 60 years, ACG has been the middle market’s primary source for networking and deal flow, bringing together M&A professionals from across the globe from a wide range of industries. Join cross-border deal-makers on Nov. 16-17 at the Mövenpick Hotel in Amsterdam for deal flow opportunities, powerful speakers and commentary from leading M&A experts. According to PitchBook, EuroGrowth® 2014 attendees: •• Deployed nearly $2 billion in 2014 •• Are sitting on approximately $11.9 billion of investable capital •• Saw a 39 percent increase in deal activity from 2013 The comprehensive program, including breakout sessions and executive roundtable discussions, covers all topics essential for effective cross-border dealmaking. Experts in their fields will address topics including cybersecurity, emerging market opportunities, the European Union lending landscape and the evolving fundraising environment—just to name a few. For complete details of the event, visit EuroGrowth.org. //

FACE-TO-FACE CONNECT TO YOUR NEXT DEAL

CHAPTER EVENTS Get involved! This summer, ACG chapters across the globe will host hundreds of local events. Check out what’s happening at your local chapter, register and join in on valuable educational and networking opportunities.

ACG Kansas City Wine Tasting at the Kemper Museum of Contemporary Art Left: Todd Pleimann, a partner with Rubin Brown LLP, networked with fellow attendees. Right: Nicole Doyle and Bradley Harrop of C3 Capital greeted guests at their firm’s table.

ACG Charlotte Chapter View Calendar

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ACG Denver Chapter View Calendar

ACG Detroit Chapter View Calendar

ACG Indiana Chapter View Calendar

ACG Los Angeles Chapter View Calendar

ACG National Capital Chapter View Calendar

ACG New York Chapter View Calendar

ACG Philadelphia Chapter View Calendar

ACG Portland Chapter View Calendar

ACG Richmond Chapter View Calendar

ACG San Francisco Chapter View Calendar

ACG Seattle Chapter View Calendar

ACG Tampa Bay Chapter View Calendar

Had a newsworthy chapter event? Send a 150to 200-word summary and high-resolution photos to Associate Editor Kathryn Mulligan.

private equity

we do a great deal

THE ROUND GROWTH ECONOMY

Growth Economy Data Gears up the Middle Market By Amber J. Landis Need concrete proof that the middle market is the U.S. economy’s heavyweight on growth? ACG’s newest Growth Economy data offers just that. For the second straight year, this comprehensive look at U.S. businesses provides clear substantiation that midsize companies are responsible for a disproportionate share of economic improvement as measured by revenue and job creation. Moreover, the updated GrowthEconomy.org data also reveals that private equity investment is the leading driver of jobs and sales growth in the middle market, that broad swath of businesses with $10 million to $1 billion in sales. The Growth Economy website allows users to review middle-market company performance by U.S. region, including by state, congressional district and metropolitan area. “With refreshed data from 1995-2013, GrowthEconomy.org shows that private capitalbacked middle-market companies outperform other companies on sales, which drives employment growth,” said Gary A. LaBranche, CAE, president and CEO of ACG Global. “Private equity investment has a positive, powerful and profound impact on the U.S. economy and specifically on the middle market.” Continued on next page

THE ROUND GROWTH ECONOMY Growth Engines See the next page for a more detailed look at how the Growth Economy data can be used to analyze economic performance by state.

The data helps dispel the notion that midsize companies in sectors as varied as manufacturing, service and tech are slow-growing. Despite representing just 1 percent of all U.S. businesses, middle-market companies are responsible for nearly 27 percent of all U.S. jobs, according to Growth Economy. The research relied on data from two distinct data sets: the National Establishment Time-Series (NETS) database, a catalog covering 55 million unique establishments with more than 300 data fields and 18 years of historical information; and PitchBook, the leading provider of independent private equity research and data. From 1995 through 2013, U.S. private equity-backed companies grew jobs by 83.7 percent, while U.S. companies collectively grew jobs by 27 percent. Well over three-quarters of this growth comes from the middle market. From 1995 through 2013, private equity-backed companies grew sales by 134 percent, while the United States grew sales by 31 percent. Again, more than 75 percent of this growth comes from the middle market. “Coming out of the recession there was little jobs or sales creation of any kind,” said Gregg Cole, research director for the Business Dynamics Research Consortium. “Through the Growth Economy analysis of 55 million companies, it’s clear that private equity— particularly middle-market private equity—helped companies weather the storm.” Please visit GrowthEconomy.org to see what’s happening in your home state or listen to the rebroadcast of an exclusive ACG Middle Market Growth Conversations webinar. //

THE ROUND GROWTH ECONOMY

MICHIGAN // 1995-2013 Michigan has seen tremendous jobs and sales growth driven by its private equity-backed middle-market businesses, including job growth nearly 10 times the rate of all businesses in the state since 1995. Middle-market businesses with sales of $100M-1B accounted for the largest share of that growth.

+100+T 118.4%

86.9% JOB GROWTH IN PE-BACKED BUSINESSES

MI ACG DETROIT

Michigan has 500+ ACG members.

JOB GROWTH % BY SEGMENT 1.9%

SALES GROWTH IN ALL BUSINESSES See the impact of middle-market private equity on your state at GrowthEconomy.org.

SALES GROWTH % BY SEGMENT

MM Seg 1: $10-50M in sales

25.3%

9.3%

MM Seg 2: $50-100M in sales

12.7% 60.9%

60.2% 0%

KEY Small: Less than $10M in sales

1.9% 27.9%

14.3%

ACG WESTERN MICHIGAN

7.1% JOB GROWTH IN ALL BUSINESSES

SALES GROWTH IN PE-BACKED BUSINESSES

MM Seg 3: $100M-1B in sales Large: More than $1B in sales

All stats are from PitchBook and the Business Dynamics Research Consortium at the University of Wisconsin-Extension.

THE ROUND NEWS THAT MATTERS FIRST FLY-IN // PERT members head to Washington.

ACG Holds Inaugural Middle-Market Private Equity D.C. Fly-In By Amber J. Landis On May 20 and 21, members of ACGâ&#x20AC;&#x2122;s Private Equity Regulatory Task Force convened for two days with policymakers at ACGâ&#x20AC;&#x2122;s inaugural fly-in event in Washington, D.C. The event included roundtable sessions with lawmakers from the House Financial Services Committee and regulators with the U.S. Securities and Exchange Commission. The schedule also featured information-packed sessions and updates from Bloomberg Intelligence highlighting industry topics for the middle-market private equity industry in the 114th Congress. ACG formed PERT in October 2014, gathering middle-market private equity chief compliance, financial and legal officers to help address regulatory challenges faced by middle-market private equity funds. More than 20 middle-market private equity professionals from around the country gathered to discuss policy and regulatory compliance best practices with executive and legislative branch decision-makers, including SEC Commissioner Michael Piwowar. Continued on next page

THE ROUND NEWS THAT MATTERS

GET INVOLVED // To learn more about ACG’s public policy initiatives, contact Amber Landis, senior director of public policy for ACG Global.

PERT members also discussed the creation of industry best practices called “PERT Principles.” As these are developed, PERT expressed the desire to work with all stakeholders, legislators and regulators to develop guidelines and enhance compliance programs for middle-market private equity firms. The fly-in provided the opportunity for PERT members to have direct dialogue with legislators and regulators regarding education and advocacy initiatives around middle-market private equity firms. This engagement is crucial to the industry’s continued ability to contribute to the growth of the middle market and the mission of PERT. //

THE ROUND NEWS THAT MATTERS

VERTICAL VIEW // ON THE ROAD

$19.8

BILLION

Middle-market deal count in the travel space has risen steadily in the past five years, to 52 deals in 2014 from nine in 2009.

EXITS

M&A capital invested in travel deals rose sharply in 2014 to $19.8 billion, outpacing both private equity capital ($7.2 billion) and venture capital invested ($1.6 billion).

In 2014, exits of middlemarket travel-related investments rose to 40, having hovered around 20 exits per year between 2010 and 2012.

DEALS

$8.3 BILLION

Large M&A deals in the travel space in 2014 included software company SAP’s acquisition of Concur Technologies, a provider of a cloud-based travel and expense platform, for $8.3 billion.

Cross-border investment in travel-related companies remained relatively steady from 2010 to 2014—rising from 21 to 26 deals—while the value nearly tripled, rising from $2.1 billion to $6.8 billion.

$930

Among the largest recent travel-related private equity deals was Thoma Bravo’s $930 million acquisition in 2014 of TravelClick, which sells hotel management software applications as a service.

MILLION

All stats are from PitchBook.

The United Kingdom is the top foreign country receiving capital from U.S. investors in the travel space, with 30 such U.K.-based deals completed since 2005. France follows with 10 deals.

“If a travel company is just approaching the growth stage without a lot of cash flow, a PE group will have a hard time using leverage, so the assets, user base and technology of those companies are probably more valuable to a strategic acquirer.” —Daniel Cook, senior data analyst, PitchBook

Merrill DataSite

The global due diligence platform for every sector in the business landscape

info@datasite.com www.datasite.com

INDUSTRY VETERAN // CEO Ed Adams identified an opportunity to capitalize on the fragmented corporate travel management sector.

DIRECT

Travel Charting a Journey with High-Touch Travel Service for Companies

BY MAURA WEBBER SADOVI

DIRECT TRAVEL // Service: Corporate travel management Private Equity Backing: Silver Oak Services Partners Strategy: Roll-up of firms in the fragmented travel services market Revenue: $1.54 billion in annualized sales Employees: About 915 Website: www.dt.com

martphones have made it easier than ever for business travelers to book plane tickets and make hotel reservations. What these devices can’t do as easily is help businesses trim their travel budgets, forge alliances with airlines and promptly answer a call from a chief executive who must find a way to get to or from a meeting in an ice storm. That’s where corporate travel management companies like Direct Travel Inc. come in. Beyond booking trips and handling the other front-end work of old-school travel agents, these full-service representatives troubleshoot travel problems, help businesses analyze and manage their travel budgets and much more, in effect functioning as an outsourced travel department. “Would a company let their employees willy-nilly buy computers and office products?” asks Ed Adams, chief executive of Direct Travel Inc. “We’re managing the business-to-business travel process for companies.”

Private equity firm Silver Oak Services Partners is betting on Direct Travel and growing demand for travel management services. It committed $150 million in cash and debt to fund a roll-up of midsize travel management companies under the Direct Travel umbrella. Even as many leisure travelers have forgone travel agents and migrated online to book their own flights, the investment firm says companies still prize the efficiency and cost savings they can achieve by outsourcing their travel management to experts. “There’s been a shift from agent-assisted to online booking, but that doesn’t change the fact that we’re helping clients save money,” says Daniel Gill, managing partner of Evanston, Illinois-based Silver Oak, which invests in services companies in the lower middle market. “Companies with managed accounts definitely save money versus unmanaged accounts.”

“THERE’S BEEN A SHIFT FROM AGENT-ASSISTED TO ONLINE BOOKING, BUT THAT DOESN’T CHANGE THE FACT THAT WE’RE HELPING CLIENTS SAVE MONEY.” Daniel Gill Managing Partner, Silver Oak Services Partners

GROWING MARKET

MANAGING COSTS // Direct Travel’s Lisa Buckner details how her firm helps companies analyze travel budgets to cut costs.

The business travel market that Direct Travel serves is large and growing. U.S. business travel stabilized in 2014 and spending is projected to rise 6.2 percent to $310.2 billion in 2015, according to a report by the Global Business Travel Association. Travel costs are often the third- or fourth-largest expenditure within a company, and a managed travel program can save companies as much as 30 or 40 percent of that expense, says Lisa Buckner, a Direct Travel president who oversees the central U.S. region. “We’ll consult with them on their spend and provide data and various options for decreasing their travel costs.” Silver Oak teamed up with travel industry veteran Ed Adams in 2011 to execute a consolidation strategy in the sector. Their first purchase was Mahwah, New Jerseybased Directravel. Directravel had $200 million in annualized sales, 120 employees and about 127 customers. Since then, Silver Oak has acquired 11 more travel companies. The newly renamed Direct Travel Inc. portfolio of companies now has $1.54 billion in annualized sales, about 915 employees and roughly 1,300 customers. The corporate travel management sector includes giants like American Express and Carlson Wagonlit Travel that serve many of the country’s biggest corporations. Direct Travel competes in the middle market, which is still fragmented and made up of many smaller regional players providing corporate travel services. Adams says Direct Travel is carving out its own niche by focusing on serving companies with annual travel budgets ranging from about $500,000 to $20 million; he estimates there are some 50 travel management companies in that space ripe for takeover. Many of those businesses were started in the 1970s and have owners nearing retirement age looking for an exit strategy.

“A lot of folks that I’ve grown up with in the business would like to have a capital event,” Adams says. By scaling up through acquisitions, Direct Travel can cut costs, leverage its investments across companies and get better deals from suppliers, including airlines and car rental companies. Direct Travel is also cutting back-office costs by moving to one system for its entire portfolio. Last year it tripled its sales force to 15 people from five, and it now has a common brand and marketing team. Those moves have helped increase the organic growth rate of the value of flights booked to 10 percent in the first quarter of this year from a year earlier, up from a low single-digit annual growth rate in recent years, according to John Coffman, Direct Travel’s chief financial officer. “We’re starting to get momentum,” Coffman says.

ROLL-UP STRATEGY // By scaling up through acquisitions, Direct Travel has cut costs and increased its leverage with suppliers.

Direct Travel is also being strategic about how it pursues growth. For example, it has identified the private equity market as an attractive niche. Sam DeFranco, president of Direct Travel’s east region, oversees account development and says the company can tailor its offerings to widely varying businesses owned by the same investment firm. Private equity firms “want elasticity in a travel program,” DeFranco writes in an e-mail. “Sister portfolio companies can be made up of companies with nothing in common from an industry perspective … accordingly, their individual travel policies will differ.”

SEASONED TRAVEL EXECUTIVES

PE STRATEGY // Direct Travel’s ability to customize offerings makes its service appealing for PE portfolio companies, says Sam DeFranco.

Adams, 64, has spent much of his career managing growing travel companies. He founded Professional Travel Corp. in 1983 after identifying the need to consolidate a corporate travel market populated by many small regional players. He used the company as a platform to create Navigant International, a public company traded on the NASDAQ that was sold to Carlson Wagonlit Travel in 2006. At Direct Travel, he has assembled a team of top executives who also worked at Navigant. The Navigant experience has informed the approach of Direct Travel’s management team regarding technology. At one point Navigant began to view itself as more of a tech company, Adams says. He believes it’s important for Direct Travel to remember it is a business services provider first and foremost, despite the preponderance of high-tech mobile apps that push itineraries to business travelers or apprise them of dangers abroad. Direct Travel prefers to partner with technology developers rather than spend money developing its own technology, he says.

Adams’ experience managing fast-paced growth has made him a stickler for keeping customers happy; he believes protecting them from organizational change is essential for retention. “You keep people in the field that touch the customers and you consolidate shared services in those areas that don’t touch the customers,” he says. “We’re paying for recurring revenue and it’s paramount that we retain the customers.” That client-oriented approach is appreciated by customers such as German specialty chemicals company Evonik Industries. Evonik recently signed a new threeyear contract for Direct Travel to continue servicing its 2,000 North American employees. Marvin Mohler, Evonik’s director of procurement and logistics, says he was initially concerned that Direct Travel’s growth strategy would strain its ability to provide good customer service—as had happened with a previous travel management service provider. He’s no longer worried.

“YOU KEEP PEOPLE IN THE FIELD THAT TOUCH THE CUSTOMERS AND YOU CONSOLIDATE SHARED SERVICES IN THOSE AREAS THAT DON’T TOUCH THE CUSTOMERS.” Ed Adams Chief Executive Officer, Direct Travel Inc.

“WE STILL HAVE THE SAME ACCOUNT MANAGER AND THE SAME DEDICATED TEAM, AND I CAN COUNT ON ONE HAND THE NUMBER OF TIMES THEY’VE HAD TO TELL US WE COULDN’T DO SOMETHING.” Marvin Mohler Director of Procurement and Logistics, Evonik Industries

“We still have the same account manager and the same dedicated team, and I can count on one hand the number of times they’ve had to tell us we couldn’t do something,” Mohler says. Silver Oak’s Daniel Gill says the firm’s ultimate exit strategy will be either to sell Direct Travel or take it public, but he has no set time frame. For now, business will continue and companies like Evonik and Blattner Energy, a Minnesota-based company that works on alternative energy projects, will keep counting on Direct Travel to watch their travel budgets and keep their travelers out of trouble. Blattner uses Direct Travel to realize discounts of up to 5 to 15 percent on every reservation, while also getting perks and travel assistance for its roughly 500 travelers. “Whenever we have a snowstorm or there’s a tornado we’ll say, ‘Okay, where do we have people stuck today?’” says Michael Tighe, quality director at Blattner. “Direct Travel will figure out the next opportunity to get them out.” // Maura Webber Sadovi is a financial writer based in Chicago.

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‘POLLINATING’

Best Practices Across the Portfolio BY SANDRA SWANSON

“IF OUR OPERATING TEAM IS WORKING WITH ONE COMPANY WHERE THEY SEE SOMETHING GOOD HAPPENING, THEY ARE LITTLE BEES THAT TAKE IT FROM ONE FLOWER TO ANOTHER AND HELP MAKE SURE IT GETS DEPLOYED INTO THE NEXT COMPANY.” Peggy Roberts COO, Riverside Capital Appreciation Fund for The Riverside Company

ometimes sharing can be good business. As private equity firms maximize the value of investments, they look for ways to help portfolio companies operate more effectively and efficiently. To that end, some firms encourage portfolio companies to help each other overcome business challenges, a process that entails creating ample opportunities to discuss company problems and solutions. When firms make best-practice sharing a high priority, they can spur portfolio company improvement in areas such as human resources, technology, employee productivity and workplace culture. “We’re constantly looking at ways that we can pollinate between our portfolio companies,” says Peggy Roberts, COO of the Riverside Capital Appreciation Fund for The Riverside Company, a private equity fund focused on the middle market. “If our operating team is working with one company where they see something good happening, they are little bees that take it from one flower to another and help make sure it gets deployed into the next company.” One of the most effective ways Riverside spreads best practices is by encouraging direct communication between portfolio companies. “The richness of the learning comes from the peers,” says Roberts, who notes the firm spends a lot of time and money organizing portfolio company events. An example is its annual human resources forum, where representatives from the companies exchange lessons learned on issues such as employee retention and compensation. That sharing is particularly useful, considering human resources departments are often underresourced in middle-market companies. At an HR forum a few years ago, one Riverside portfolio company discussed the hiring portal it had built to streamline employee applications and screening. That gave the other companies some ideas for building their own effective hiring portal, Roberts says.

Another educational opportunity is Riverside’s “miniMBA”—an annual executive management event held at the University of Michigan for portfolio company CEOs, CFOs and/or sales leaders. Moderated by university professors, the event highlights two portfolio companies as case studies. “The case-study portfolio company executives have the benefit of a group of 60 people talking about their company and the challenges, and giving them advice,” says Roberts, whose fund is based in Cleveland. “But it’s also letting the other CEOs think, ‘Wow, I have some of the same challenges—maybe I can take this advice back home too.’” During the past five years, Sun Capital Partners in Boca Raton, Florida, has persuaded all of its portfolio companies to focus on improving workplace culture. The idea originated when one of Sun Capital’s companies used a culture survey (designed by Denison Consulting) and then made changes to address weaknesses. The firm’s CEO saw a connection between better workplace culture and a boost in profitability—and shared that with Sun Capital’s leadership. “It really resonated with us,” says Scott Edwards, managing director. “We always felt that a great company culture would lead to great results.” He adds: “Our view is, if you can measure it, you can improve it.” The survey covers areas such as the company’s adaptability and employees’ understanding of the corporate mission. When companies identify their cultural weak spots, Sun Capital can help steer them toward relevant best practices at other portfolio companies. “If a company is struggling with adaptability, for example, and another company is doing well—we can put them in direct contact,” Edwards says. All portfolio companies take the survey about once a year to gauge their progress and identify problems. For most of the companies, the survey wasn’t a tough sell, Edwards says—when they saw the data showing how their peers had benefited, they adopted it. “But then you have other

“WE ALWAYS FELT THAT A GREAT COMPANY CULTURE WOULD LEAD TO GREAT RESULTS.” Scott Edwards Managing Director, Sun Capital Partners

companies that are more skeptical,” he says. Those skeptics changed their minds after Sun Capital took the culture survey itself and openly shared the results with its portfolio companies. “If we are prepared to do it, and other portfolio companies are prepared to do it, it’s hard to resist that,” Edwards says. One concern he heard was that the survey might take a lot of time. “And we could say, ‘Well, we’re busy and we did it.’”

TECH SHARING

“EVERY COMPANY WE SEE—AND CERTAINLY THOSE WE INVEST IN— KNOWS IT WOULD LIKE TO BE DOING MORE WITH SOFTWARE AND TECH.” Ryan Craig Partner, Bertram Capital

When it comes to technology-related best practices, middlemarket companies often struggle to keep up. “Every company we see—and certainly those we invest in—knows it would like to be doing more with software and tech,” says Ryan Craig, a partner at Bertram Capital in San Mateo, California. But it’s tough for companies to retain tech workers when they are in high demand—and equally challenging to predict whether the return on investment would make hiring tech consultants worthwhile. That leads to postponed investments in potentially game-changing technology assets. In 2010, Bertram created a solution: Bertram Labs, a team that now includes 25 software engineers, designers and digital marketing pros who work solely for Bertram’s portfolio companies. The group has a vested stake in the performance of the fund, which means it’s aligned with Bertram’s interests. Says Craig: “Usually when you have a vendor, their interest is to create a project that goes on forever.” When spreading best practices, it’s a mistake to dictate, he says, noting that Bertram’s investment team is dominated by entrepreneurs who understand what it’s like on the other side of the table. “It doesn’t work if explicit contentiousness is at play,” he says. “We have to be humble, and we have to be willing to put ego aside.”

One best practice came from Supra, a footwear brand operated by one of Bertram’s companies, One Distribution. Supra didn’t have an e-commerce site when Bertram invested in the business, but it did blog about new limited-edition shoe designs every week. Tens of thousands of customers checked those weekly posts, even though the shoes couldn’t be purchased online—or in some cases, at all. Craig and his Bertram colleagues soon observed that content—in this case, blog posts and photos—could be an incredibly valuable asset. “It lets customers find you, instead of you having to go find customers,” he says, adding that most companies spend 10 percent to 20 percent of revenue on marketing. “If we can use content as a substitute for the marketing budget, we can be a whole lot more profitable.” Bertram Labs has helped the portfolio companies develop better ways to wield their digital megaphones. In addition to Supra, another brand benefiting is Paula’s Choice, a maker of specialty skin-care products. Prior to investing in Paula’s Choice, Bertram realized the company had a vast content library. “They were using it well, but we saw an opportunity to use it more effectively,” Craig says. “It was a pretty easy conversation to say (to Paula’s Choice), ‘We understand how to do this technically, and it could have these immediate improvements to the number of people seeing your content and ultimately buying your product.’” Within 30 days of investing in the business, Bertram began implementing those marketing best practices. Revenue at the company in the past 2 1/2 years has nearly tripled—and Craig attributes “a very significant amount” of the increase to the company’s effective use of content as a customer-acquisition tool.

“YOU BUILD CAMARADERIE AND TRUST AMONGST PEERS, AND I THINK YOU CAN HAVE A MORE HONEST AND FRANK CONVERSATION.” Tom Gillcrist VP of Acquisitions and Business Development, Aqua-Chem

FACE-TO-FACE INTERACTION To help best practices proliferate, Altus Capital Partners maintains it’s essential to have portfolio companies regularly meet in person. Since 1998, the Wilton, Connecticut-based firm has paid for company CEOs and CFOs to attend a three-day executive summit. Each meeting usually has a theme, such as lean manufacturing, hiring practices or data security (the focus of this year’s event). Altus brings in experts to address the topic, but the event also provides a chance for portfolio companies to share their own ideas, says Russell Greenberg, managing partner of the firm and a member of ACG Connecticut. Last year, one of the portfolio companies conducted a fireside chat about how it designed a successful management transition plan. The sharing doesn’t stop when the summit ends, thanks to the emphasis on face-to-face networking. “After these meetings, now the CFOs know each other,” Greenberg says. “They will call each other and ask, ‘How did you handle this issue with insurance, how did you handle this bank issue?’” Tom Gillcrist can attest to the power of sharing among peers. He’s VP of acquisitions and business development of Aqua-Chem, part of the Altus portfolio from 2006 to 2014. Gillcrist served as Aqua-Chem’s CFO from March 2012 to May 2015. “Altus heavily focuses on sharing best practices among the portfolio,” including at quarterly board meetings, he says. “Altus always requested we enlighten them on best practices we’d developed since the last board meeting, and they in turn shared best practices they heard from other portfolio board meetings.” For Gillcrist, the annual meetings with other portfolio company executives were particularly beneficial. “Over time, I knew all of the CFOs,” he says. “You build camaraderie and trust amongst peers, and I think you can have a more honest and frank conversation.” Because the companies existed under the same umbrella, it created a safe place to reveal problems, he says. “Sharing best practices is so easy to do, especially in the portfolio environment. If you just reach out, more often than not someone’s already experiencing your issue or has dealt with it—and having someone walk you through their process will help you get to the finish line that much faster.” // Sandra Swanson is a freelance writer based in the Chicago area.

QUICK TAKES RENÉE-MARIE STEPHANO // President and Co-Founder, Medical Tourism Association

Traveling for Treatment

ransparency and access to information are essential for good decision-making by consumers, yet the health care industry remains opaque in many ways. For some patients, seeking care outside their local markets may lead to better

outcomes at a lower cost. To pursue such care, however, they need to know the options available, as well as the price and level of quality, all of which can be difficult to assess. The Medical Tourism Association formed in 2007 to make that information more readily accessible to patients—whether they’re Americans seeking care in a different U.S. region or outside the

BIO // Renée-Marie Stephano, J.D., is president of the Medical Tourism Association, a membershipbased international nonprofit trade organization for the medical tourism and health care industry. The MTA provides strategic development programs for destinations seeking to create programs for foreign direct investment, as well as advisory services for investors interested in the industry.

country, or foreign nationals traveling to the United States for care— as well as to other stakeholders, including health care providers, employers and insurance companies. Renée-Marie Stephano, the trade association’s co-founder and president, explains: “Patients are not going to travel for care unless they can ensure the quality is as good as, if not better, than they can get locally.” To help foster a community equipped to support traveling patients, the MTA works across industries and internationally to establish best practices. From hospitals and clinics to hotels and resorts housing patients during their recuperation to travel agents and other professionals interacting with them during their journey, the association has developed industry-specific training and certification programs to help create an attractive environment for health and wellness seekers. Stephano estimates medical tourism to be a $100 billion industry in terms of health care dollars spent globally, a figure that becomes much larger when one accounts for hospitality and tourism spending associated with traveling for care. Early on, cosmetic and dental services were those most commonly sought by traveling patients, but Stephano says the scope of procedures has since broadened dramatically, largely due to the Internet. Continued on next page

QUICK TAKES RENÉE-MARIE STEPHANO // President and Co-Founder, Medical Tourism Association “It’s expanded with the advent of information on the Web about the quality and the pricing and services,” she says. Health care reform in the United States is also contributing to the increase in medical tourism, according to Stephano. The added costs and

“PATIENTS ARE NOT GOING TO TRAVEL FOR CARE UNLESS THEY CAN ENSURE THE QUALITY IS AS GOOD AS, IF NOT BETTER, THAN THEY CAN GET LOCALLY.”

requirements associated with the Affordable Care Act have led a num-

Renée-Marie Stephano President and Co-Founder, Medical Tourism Association

by waiving copays, covering hotel and airfare costs, or compensating

ber of employers to adopt self-funded health insurance plans, which allow employers to see a direct cost savings from lower-cost procedures. To encourage employees to opt for more affordable treatment, more self-funded plans are incorporating medical tourism options, particularly domestic medical tourism—when an American patient travels to another U.S. region for care. Employers may incentivize employees employees directly with a share of the cost savings. As the global medical tourism industry continues to expand, Stephano sees a number of opportunities for outside investors to participate in its growth. Technology, for one, is an area in need of development. Currently, much of the communication in the medical tourism industry is handled by email and fax, and patient data is managed through spreadsheets, Stephano says. She sees a need for a central technology solution that can manage the entire patient experience—and ensure privacy. Her association has begun exploring the development of such a tool. The establishment of medical tourism zones and health care free trade zones set up by governments presents another opportunity for outside investment, Stephano says, particularly to manage existing health care facilities or build new ones within these zones. Building recuperation resorts, long-term care facilities and specialty hospitals are other areas where she sees the potential for investors to participate in the industry’s growth. While opportunities for private capital abound, educating investors and connecting them with projects remain challenging, says Stephano, whose group is taking steps to help bridge this communication gap. “There’s a lack of connectivity, but a tremendous amount of opportunity, and the competition is actually quite low,” she says. “The opportunity for public-private partnerships is tremendous as well.” //

—KMM

P A R T N E R S I N D R I V I N G M I D D L E - M A R K E T G R O W T H .® To d a y ’s f a s t - p a c e d m a r k e t r e q u i r e s a n e d g e . A C G G l o b a l P a r t n e r s prov ide y o u wit h t h e e x pe r t is e a n d be s t pr a c t ic e s n e e de d t o c l o se t he d e a l .

A QUALIFIED OPINION ROGER DOW // President and CEO, U.S. Travel Association

SELECT ABOVE TO SEE Q&A

BIO //

oger Dow is president and CEO of the U.S. Travel Association, a Washington, D.C.-based national umbrella organization representing

all segments of travel in Americaâ&#x20AC;&#x201D;an industry responsible for generating $2.1 trillion in annual economic output. The association advocates for improved travel facilitation and visa reform, provides authoritative travel research and analysis, and hosts signature events. Dow was instrumental in leading the industry-wide movement that led to the adoption of the bipartisan Travel Promotion Act signed into law by President Obama in March 2010 and renewed in 2014.

Photo by Aaron Clamage

A QUALIFIED OPINION ROGER DOW // President and CEO, U.S. Travel Association

SELECT ABOVE TO SEE Q&A

WHAT IS THE OUTLOOK FOR TRAVEL IN THE UNITED STATES IN 2015 AND IN THE NEARTERM, AND HOW HAS IT CHANGED FROM LAST YEAR?

eople tend to think of travel and tourism as just “fun in the sun,” but this industry has an unbelievable impact on the U.S. economy. Three numbers truly tell the story: $1,147, 15 million and $142 billion. Each U.S. household would pay $1,147 more in taxes without the revenue generated by travel and tourism. Fifteen million American jobs, or one in nine, are supported by travel and tourism. More than $142 billion in tax revenue is generated by travel spending for federal, state and local governments. Travel is also America’s second-largest industry export. International travelers visiting America and spending dollars on American products and services are really no different from an American company selling its products overseas. The good thing about the U.S. travel industry is that our jobs can’t be exported. The future is bright for our industry, with Americans taking more trips and spending more in 2015. The incredible growth in international inbound travel will also continue this year, with arrivals increasing 3.7 percent and spending growing 6.7 percent. The good news for Americans is that with the growth of travel jobs accelerating, a record level of employment in the industry is likely to continue in 2015.

Photo by Aaron Clamage

A QUALIFIED OPINION ROGER DOW // President and CEO, U.S. Travel Association

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PRESIDENT OBAMA HAS SET AN AMBITIOUS GOAL TO BRING IN 100 MILLION INTERNATIONAL TRAVELERS TO THE UNITED STATES BY 2021. CAN OUR INFRASTRUCTURE HANDLE THIS INFLOW?

he president issued an executive order charging several federal agencies to help increase travel to and within the United States by 2021. It aims to generate an additional $92.5 billion in spending in the country on everything from car rentals and hotels to restaurants. However, it also means that we’ll see a total of 850,000 flights, adding severe stress to our current aviation infrastructure. Capacity constraints at our major international gateway airports could spread to 27 airports and 15 metropolitan regions nationwide by 2025. If we don’t work swiftly to expand our infrastructure, we risk not being able to accommodate nearly 14 million of these new international travelers arriving by air, resulting in a loss of $59.6 billion in traveler spending, 477,000 American jobs and $7.1 billion in tax revenue. This impacts all of us and that’s why it’s an American economy issue—not an airport or airline issue. For this reason, U.S. Travel supports a modest increase in the Passenger Facility Charge—a fee that airports use to fund critical infrastructure projects. A recent U.S. Travel survey found that air travelers are willing to pay $4 more to improve their flying experience, as long as those funds go toward airport improvement projects that would enable airports to accommodate more airlines, modernize facilities or reduce delays in and around the airport.

Photo by Aaron Clamage

A QUALIFIED OPINION ROGER DOW // President and CEO, U.S. Travel Association

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WHAT IS THE VISA WAIVER PROGRAM?

he Visa Waiver Program, or VWP, allows prescreened, preapproved international travelers from participating countries to travel to the United States without obtaining a visa for stays of up to 90 days for business or leisure. The 38 countries participating in the program are required to maintain high security standards and share information with the United States. As you can imagine, U.S. Travel strongly supports this program. Hereâ&#x20AC;&#x2122;s why: It actually strengthens our national security. VWP travelers to the United States are checked against multiple law enforcement and security databases before arrival. In 2014, 60 percent of all overseas visitors (outside of Canada and Mexico), or 20.3 million visitors,Â arrived through VWP, spending an average of nearly $4,300 per trip. Those travelers generated $190 billion in total output for the U.S. economy, which also supports nearly one million American jobs. Expanding VWP is the secure way to reach the 100 million goal set by President Obama. In fact, if the VWP is expanded to Brazil, Poland, Israel, Croatia and other countries, it would add one million additional visitors and $10 billion to the U.S. economy, while supporting nearly 61,000 additional American jobs. There is a bill now in Congress that U.S. Travel is backing that would strengthen and expand the VWP called the Jobs Originated Through Launching Travel, or JOLT, Act.

Photo by Aaron Clamage

A QUALIFIED OPINION ROGER DOW // President and CEO, U.S. Travel Association

SELECT ABOVE TO SEE Q&A

TELL US MORE ABOUT THE ‘PROJECT: TIME OFF’ CAMPAIGN THAT U.S. TRAVEL HAS UNDERTAKEN.

roject: Time Off is an initiative to prove the personal, business and economic benefits of taking time off. We aim to shift the culture so that using personal time off is not considered frivolous but essential to strengthening families and improving personal health—a business investment with proven returns. This is especially compelling because we know that time away from the office actually improves productivity upon return. I believe in this campaign so much that not only did I challenge each of my employees to use all of their paid time off last year, I offered a $500 bonus to every employee who did. Employees using all of their vacation time rose to 91 percent from about 10 percent. The increase didn’t harm our productivity; in fact, it had the opposite effect. For businesses, there are hidden costs when employees don’t take their time off. A study by Oxford Economics shows $224 billion sitting on the balance sheets of American businesses resulting from accrued vacation liability amassed over years of employees rolling over paid time off. The billions in unused vacation time represent a potential burden on a business’s financial health and outlook. Prior to U.S. Travel’s time-off incentive last year, we carried more than $350,000 in vacation liability that was growing rapidly each year with just 60 employees.

Photo by Aaron Clamage

A QUALIFIED OPINION ROGER DOW // President and CEO, U.S. Travel Association

SELECT ABOVE TO SEE Q&A

WHAT ARE THE BIGGEST CHALLENGES TO TRAVEL THAT WE SHOULD EXPECT IN THE NEXT DECADE?

he concentrated effort by U.S. legacy air carriers (Delta, United and American) to reinterpret current Open Skies agreements is one major challenge. These agreements—negotiated between the U.S. and its global travel partners—provide free-market access in international aviation, eliminating cumbersome government control of routes, flight frequency and pricing. They promote competition and increase capacity, which drives down airfares and helps travelers. Ticket prices on Open Skies routes are 32 percent cheaper than on regulated routes. Before Open Skies, cities like Dallas, Detroit, Las Vegas and Memphis had limited or nonexistent connections to international destinations. U.S. legacy carriers have thrived under Open Skies, which gave them access to the European Union, and South and Central America. Government subsidies—including billions in direct payments after 9/11, lenient bankruptcy laws that allowed carriers to write off billions of debt and still more billions in pension bailouts— have enabled U.S. airlines to grow into global corporate powerhouses. However, in response to increased competition from the Gulf airlines (Etihad, Emirates and Qatar Airways), U.S. legacy carriers have launched an expensive lobbying campaign that is lurching toward interventionist, protectionist policies that would ultimately do grave harm to the industry. Photo by Aaron Clamage

P A R T N E R S I N D R I V I N G M I D D L E - M A R K E T G R O W T H .ÂŽ Yo u on

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ACG@WORK CHAPTER NEWS FROM AROUND THE GLOBE

EDMONTON CHICAGO LOS ANGELES

NEW YORK

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ACG NEW YORK

Independent Sponsors Are Topic of New York Luncheon ACG New York on April 1 hosted its third annual Independent Sponsor Luncheon, designed to explore the independent sponsor model and its role in private equity investing. The luncheon, titled “A Good Investment, Terrific Management but No Capital? No Problem!” featured a panel of industry experts who spoke about independent sponsors, a deal-sourcing entity that seeks investment opportunities prior to raising capital. Led by event chair and moderator David Acharya, a partner with AGI Partners LLC, panelists discussed the characteristics that make an independent sponsor successful, such as operational and industry expertise. The conversation also addressed the advantages and disadvantages of operating as an independent sponsor rather than as a traditional private equity fund, and how firms can differentiate themselves in the market. In addition to Acharya, the panel featured five partners at leading PE firms along with one attorney. More than 150 attended the event, held at New York City’s Union League Club. //

ACG@WORK CHAPTER NEWS FROM AROUND THE GLOBE AERIAL VIEW // ACG participants with a scale model of the proposed LNG Canada site.

ACG EDMONTON

Notes from the Field: ACG Tour Promotes Energy Opportunity Two ACG chapters in May led a trip to Kitimat, British Columbia, a city at the center of Canada’s efforts to expand liquefied natural gas production, a development that would dramatically boost the country’s economy, despite political hurdles. Fifty participants from ACG Calgary and ACG Edmonton flew to Kitimat on May 1 to explore the area and hear from LNG experts and other stakeholders about plans for the nascent industry. Racim Gribaa of Deloitte was among those who addressed the group, drawing on more than 20 years of experience in the LNG industry. He explained how British Columbia’s exports could fill the gap between supply and demand in the global market. “Now is the time to launch LNG in Canada,” he said. Experts explained why LNG can be stored and safely shipped to global markets. Produced by cooling natural gas and converting it to liquid form, LNG is both nontoxic and nonflammable; as a liquid, its volume is significantly more compact than its natural gas counterpart. Continued on next page

ACG@WORK CHAPTER NEWS FROM AROUND THE GLOBE READY FOR TAKEOFF // Past president of ACG Edmonton David Hardy (center) with members of the Alberta Economic Development Authority.

Securing buy-in from British Columbia’s First Nations communities, whose tribes occupy the region, is among the project’s foremost obstacles. Chief Ellis Ross of the Haisla Nation addressed the ACG group and expressed support for the project based on the jobs it will bring to the local community. He is working with other First Nations groups to help move the project forward. Representatives from the region’s economic development office and Chamber of Commerce spoke to ACG participants about plans for the region and the opportunities and challenges facing M&A professionals in the Alberta and western Canadian markets. //

ACG@WORK CHAPTER NEWS FROM AROUND THE GLOBE

FURTHER READING // To learn more about trends in the food industry, access research and white papers here.

ACG CHICAGO

ACG Chicago Brings Food Industry Experts to the Table ACG Chicago in May hosted its 6th Annual Food Industry Growth Conference, an event designed to engage the community of food business experts. The event featured a series of sessions covering trends and challenges facing food producers and suppliers, with an emphasis on safe, healthy and innovative food solutions. Fresh data from industry research firms Technomic and Mintel laid the groundwork for the day’s discussions with a dozen C-level executives. Meanwhile, panelists represented a diverse swath of businesses in the food industry, including burger chain Epic Burger; milk producer Fairlife, which recently partnered with Coca-Cola; urban indoor produce grower FarmedHere; and fourth-generation meat packer Rose Packing. These participants debated the healthy lifestyle premise based on their varying perspectives on the market, regulation and what can realistically be achieved. More than 250 attendees participated in the May 7 conference. To further engage the food industry community, ACG Chicago will launch “The Grilling Station” on July 29. Growth-stage food and beverage companies can pitch their business concepts, and expert judges will evaluate contestants’ presentations based on financial, operational and marketing strength. //

ACG@WORK CHAPTER NEWS FROM AROUND THE GLOBE

ACG LOS ANGELES

Spring Film Screening Shines Light on Women’s Issues It seems fitting that in the film capital of the world, the Women of ACG Los Angeles group chose to host a film screening this spring; however, unlike other screening events happening in the city, this one wasn’t about red carpet glitz and glam. On April 21, nearly 100 women gathered at the InterContinental hotel for a special screening of “Miss Representation,” an award-winning documentary about sexism in American society and the media. Newswoman Katie Couric, former Secretary of State Condoleezza Rice and activist Gloria Steinem are among those featured in the film, which provides an insightful look at the underrepresentation of women in positions of power in the United States. “The responses we received at the conclusion of the event were nothing but positive and overwhelmingly supportive of women and what we can do together to continue to empower women moving forward,” said Women of ACG Los Angeles President Tracy Washburn Bradley. The Women of ACG Los Angeles committee sought to design an event that was fun, powerful and promoted networking. Before and after the screening, attendees enjoyed cocktails and hors d’oeuvres while making connections with other women in the business community. ACG Los Angeles thanks BDO and Greenberg Glusker for sponsoring this thoughtprovoking and inspirational event. //

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THE PORTFOLIO INSIGHT FROM THE EXPERTS

SOUND DECISIONS

MID-MARKET TRENDS

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IN THIS ISSUE SOUND DECISIONS

MID-MARKET TRENDS

To compete with Airbnb and others in the sharing economy, hotels should play to their strengths and develop a strategy to defend their market share.

Innovation is essential to stay competitive. New research seeks to identify the most effective and efficient use of innovation dollars by middle-market firms.

Unlocking success from integration requires identifying synergies prior to a merger and carefully following through to ensure value is realized.

COMING SOON Check out the Portfolio section of the September issue for more on the latest middle-market trends, written exclusively by our team of expert ACG Global featured firms. To learn more about contributing to this section, please contact Albert Pereira, (416) 560-6455. These articles are brought to you by ACG Globalâ&#x20AC;&#x2122;s featured firms.

THE PORTFOLIO SOUND DECISIONS // Alan Lewis and Dan McKone, Managing Directors, L.E.K. Consulting

SOUND DECISIONS

MID-MARKET TRENDS

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How Hotels Can Beat Airbnb at Its Own Game

ompanies like Airbnb that operate in the sharing economy don’t own assets and don’t provide services directly to customers; they function as third-party clearinghouses, enabling property owners and individuals to monetize their unused assets and time. Lodging site Airbnb has grown at a stag-

Traditional hotel chains should deploy Edge Strategy to maintain market share.

Edge Perspective

gering pace and offers more than a million

While Airbnb has drawn attention for its

listings in more than 34,000 cities in nearly

role as a disruptive channel, its impressive

200 countries. The company’s valuation

valuation is likely built on the expecta-

has soared to an estimated $13 billion—

tion that the company is an “eyeballs” play

more than traditional hoteliers Hyatt,

like the darlings of the social media world.

Wyndham and InterContinental. With a

While this may be valid, if you view Airbnb

simple business model, Airbnb hosts its

with an “Edge” mindset, you can see a dif-

website, provides 24/7 customer support,

ferent business philosophy at work.

vets property owners and guests for safety,

What is Edge Strategy? When growth

and oversees the peer-review system.

slows, many companies look beyond their

Everything else is out of its hands.

core businesses, often overlooking enor-

Business travel remains a small percent-

mous, untapped sources of profit that exist

age of Airbnb’s business but is growing

in the near field. Companies deploying

quickly. Given the company’s web-focused

Edge Strategy, however, look to the bound-

business model and steep growth, should

aries between core and non-core opera-

traditional hoteliers be worried? Indeed,

tions for opportunities; tremendous op-

we think Airbnb is a real threat to tradi-

erational leverage can be realized through

tional hotel brands. As they grow and adapt

exploiting resources and capabilities that

to shifts in market trends, these types of

have already been acquired or developed.

sharing models will become more and more

Any company that recognizes how it can

acceptable to core hotel guest segments.

monetize the underused or spare aspects of its assets and resources is using an Edge mindset.

THE PORTFOLIO SOUND DECISIONS // Alan Lewis and Dan McKone, Managing Directors, L.E.K. Consulting

SOUND DECISIONS

MID-MARKET TRENDS

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The brilliance of the Airbnb model is

Alan Lewis

The characteristics that make a hotel

that it aggregates the spare capacity of

brand successful can be differentiators in

many individuals’ properties into a viable

competing directly with Airbnb at its own

lodging offering. The company recognized

game. We contend that all hotel companies

that individuals’ real estate assets are not

should be exploring how they can launch

fully utilized, and all they need is a part-

a competing brand to Airbnb by offering a

ner to provide a brand to market under

hosting model.

and a channel to book through. Airbnb is

Traditional hoteliers have two choices

essentially filling the same role as a hotel

for responding to the rapid, widespread

company, just accessing real estate from a

and fundamentally disruptive threat

new source.

posed by Airbnb. They can ignore it and risk losing existing customers to the new

Dan McKone

How Can Traditional Hotels Compete?

model as it evolves and continues to gain

Hotels, meanwhile, possess key strengths

vacationer. Or hotels can face it head on,

that Airbnb lacks, which can turn the

deploying a hosting model and brand that

game back in their favor:

capitalize on their core competencies and

•• Power of loyalty: Existing relationships and databases with thousands of loyalty program members •• Marketing presence: Strong brands that customers recognize •• Established infrastructure: Central reservation systems and channel management, third-party channel relationships and presence, and customer service capabilities •• Additional facilities: Spas, gyms, restaurants and more •• Supply chain capabilities: Provision of amenities and cleaning services

share in segments beyond the millennial

expand the dimensions of the evolving sharing economy. // L.E.K. is a global strategy consulting firm that counsels clients in a range of industries on key issues, including strategy, mergers and acquisitions, operations, marketing and sales. The firm has offices across Europe, the Americas and the Asia-Pacific region.

THE PORTFOLIO SOUND DECISIONS // Bryan Brighton, Regional Director, Merrill DataSite, Europe

SOUND DECISIONS

MID-MARKET TRENDS

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Unlocking Post-Merger Integration Success

I Post-merger integration success hinges on identifying synergies and ensuring value is delivered.

n simple terms, the key to unlocking success in a post-merger integration scenario is two-fold. First, careful preparation needs to happen during the due diligence phase to ensure synergies exist between the merging entities and that they will be a good fit. Second, the synergies and value that have been identified need to be delivered through robust communication and rigorous contract management in the newly formed organization. The merger of two organizations means

Getting a grip on these issues early on

assimilating and taking ownership of new

in the merger process is vitally important;

personnel, new contracts and potentially

otherwise value previously identified at

disparate communications procedures

the start of the M&A project can very

that, at best, will need harmonization to re-

quickly evaporate through waste, ineffi-

alize efficiency, and, at worst, need imme-

ciency and lost income.

diate and urgent attention to guard against waste or lost revenue. The experienced and seasoned business

We believe the greatest success in achieving synergy and delivering value comes when companies prepare for their

leaders we work with understand that once

unification throughout the due diligence

the ink has dried on their deal, they need

process and see through the next phase

to quickly get a handle on any conflicting

with implementation of best-in-class tech-

or contrasting processes, document reposi-

nology to manage the contractual and

tories or contract management arrange-

commercial challenges post-merger inte-

ments. Establishing this control creates a

gration inevitably brings. //

new and better “business as usual” routine

Bryan Brighton joined

for their clients, staff, shareholders and

Merrill Corporation in Feb-

external partners. Pulling together the

ruary 2012 to help Merrill’s

operation, managing contracts and renew-

international sales team.

ing commercial agreements quickly helps secure future revenue and ensures ongoing profitability for the new organization.

Based in London, he is Bryan Brighton

responsible for international sales in the United Kingdom.

THE PORTFOLIO MID-MARKET TRENDS // Michael Leiblein, Department of Management and Human Resources, The Ohio State University Fisher College of Business

SOUND DECISIONS

MID-MARKET TRENDS

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The Importance of Organizing to Create and Capture the Value of Innovation

I The OSU Innovation Index will look at how managers can best foster innovation at middlemarket firms.

nnovation is a critical competitive advantage. As the rapid diffusion of information and globalization erodes traditional competitive barriers, the ability to innovate repeatedly and successfully becomes even more important. Companies increasingly look to create and capture value through the introduction of new products and services (smartphones), new processes (automation of production) and new business models (Dell’s consumer model, for one). The importance that managers place

to processes used to create value. Should

on innovation is apparent from recent

managers focus on a deep understanding

surveys sponsored by the National

of their customer base (Procter & Gamble,

Center for the Middle Market. Managers

DeWalt Tools), rely on competitive

say innovation is the “top management

intelligence and trend analysis activities

priority of middle-market firms”; in

(Samsung), or actively develop and

fact, more than a third of middle-market

forecast the progress of new technologies

companies derive more than 20 percent

(Battelle, Bosch)? The second choice

of both sales and profit from new-to-firm

pertains to the business models used to

offerings. While middle-market executives

capture value from novel and innovative

understand that innovation is critical to

solutions. Given that innovative ideas are

their companies’ efforts, many struggle

often misunderstood and risky, how should

to manage the innovation process. A 2010

companies select which projects to fund

McKinsey & Co. study reported that while

within a competing set? Which models are

84 percent of global executives surveyed

best able to capture value for a given type

say innovation is extremely important to

of innovation? The final choice involves

their firm, only 6 percent are satisfied with

the organizational design and leadership

their firm’s innovation performance.

style most likely to deliver value in a given

Our own research suggests that three

context. When is the use of a marketplace

choices are central to achieving desired

of ideas (3M) more effective than a top-

innovation performance. The first relates

down hierarchical structure (Virgin Group

THE PORTFOLIO MID-MARKET TRENDS // Michael Leiblein, Department of Management and Human Resources, The Ohio State University Fisher College of Business

SOUND DECISIONS

MID-MARKET TRENDS

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Michael Leiblein

under Richard Branson)? When are the

outcomes. In addition to providing

rigorous experimental processes advocated

these benchmark comparisons, the

by Siemens and others more effective than

index will leverage current research to

the open and collaborative ones advocated

provide insight about the productivity

by P&G?

of innovation-oriented investments.

In an effort to better understand how

By collecting data on organizational

managers can more effectively foster

approaches, innovation types and success

innovation, the Ohio State Center for

rates of particular projects, we aim to

Innovation and Entrepreneurship has

identify archetypes of resource allocation

developed an Innovation Index. The

and organizational policies appropriate

purpose of the OSU Innovation Index, to

for the middle market; provide insight

be released with our NCMM partners this

into the types of innovation projects that

summer, is to capture and disseminate

generate, on average, the greatest revenue

impressions regarding innovation

growth and profitability; and suggest how

activity within the middle market.

middle-market managers can improve the

The index represents an extension of

efficiency of their innovation investment. //

existing surveys that provide benchmark data on factors such as the level of

Michael Leiblein is a professor at The Ohio

R&D investment, the use of various

State University Fisher College of Business

organizational approaches to innovation

with expertise in competitive strategy,

and measures of particular growth

organization and innovation.

P A R T N E R S I N D R I V I N G M I D D L E - M A R K E T G R O W T H .ÂŽ F r o m c o n s u l t a n t s t o C PA s a n d a h o s t o f o t h e r a d v i s e r s a n d specialists, ACG Global Partners guide the success of more than 90,000 professionals in the middle market worldwide.

THE LADDER ACG MEMBERS ON THE MOVE

Gregg Kaplan

Gregg Kaplan has joined

Jeri Harman, a member of ACG

Pritzker Group Private Capital as

Los Angeles and managing

operating partner for the services

partner and CEO of Avante

team in the firm’s Chicago office

Mezzanine Partners, was named

where he will source, invest in

one of 14 of the Most Influential

and oversee a group of services

Jeri Harman

Private Equity Investors in Los

companies. Kaplan is founder

Angeles by the Los Angeles

of DVD-rental firm Redbox and

Business Journal in the

former president and COO of

publication’s April 27 edition.

Coinstar, an operator of coin Carolyn Glick, a member of

cashing machines.

ACG Los Angeles and a director Hardeep Saini, a member of

with alternative investment

ACG New York, has joined AB

management firm Tennenbaum

Private Credit Investors, the

Capital Partners, was named

private credit group at asset Hardeep Saini

Carolyn Glick

a winner in the Service

management firm AB—formerly

Professional category of M&A

known as AllianceBernstein—as

Advisor’s 40 Under 40 Emerging

managing director. The group,

Leaders Awards. Glick joined

formed in 2014, will focus on

TCP in 2014 and is responsible

private middle-market credit

for sourcing and executing

investments and currently has

credit transactions.

$2 billion of capital to deploy. The team has expanded rapidly to 16,

Jessica Petri, CMP, of ACG

including Saini, and is expected

Global was promoted to

to reach 20 by year-end.

senior director of conference and program services, having

Brian Kerwin, a member of ACG Chicago, was named chair of the

Brian Kerwin

joined the association in 2012. Jessica Petri

She oversees ACG Global’s

law firm Duane Morris’ global

conferences and events,

corporate practice group. He

including InterGrowth and

will lead the 180-member group

Leadership Week, and has

from the firm’s Chicago office,

played a key role developing

which he helped found in 1999.

new programs.

THE LADDER ACG MEMBERS ON THE MOVE

Kaitlin McAuley

Kaitlin McAuley of ACG Global

Watermill Group, a

was promoted to senior manager

Massachusetts-based strategy-

of program services. She is

driven private investment firm,

responsible for ACG Global’s

announced the sale of its

educational content, including

portfolio company Global Tubes,

keynote speakers and panelists

a manufacturer of precision

at InterGrowth and other events,

metal tubing, to AMETEK, Inc.,

as well as ACG’s webinars.

a publicly traded producer of

McAuley joined ACG in 2010.

electronic instruments and electro-mechanical devices

Ariel Lickton, CMP, of ACG

headquartered in Pennsylvania.

Global was promoted to senior

Ariel Lickton

manager of conferences and

Western Reserve Partners, a

events. Since joining the

Cleveland-based middle-market

association in 2014, Lickton

investment bank, announced

has played a key role in the

that it advised Exxel Outdoors,

planning and execution of ACG’s

a manufacturer of camping and

events, including InterGrowth,

outdoor equipment for families,

EuroGrowth, Leadership Week

in its acquisition of American

and board of directors meetings.

Recreation Products. ARP offers a collection of outdoor

AUA Private Equity Partners,

brands and was sold to Exxel by

a New York-based private equity

Kellwood Company, a portfolio

firm, announced that its portfolio

company of PE firm Sun Capital

company Blue Star Media has

Partners.

acquired Minneapolis-based VEE Corporation, a family

LeGrand Lewis was promoted

entertainment company with

to managing director by Salt

touring live stage shows. Blue

Lake City-based Sorenson

Star, a producer and promoter

Capital, where he will continue

of consumer shows, was

to work with the firm’s portfolio

highlighted in a profile of AUA in the April 2015 issue of MMG.

LeGrand Lewis

companies and engage in deal processing and sourcing activities.

To submit your promotions, job changes and other accomplishments, please send details and a high-resolution color photo to Associate Editor Kathryn Mulligan at kmulligan@acg.org.

B-SIDE JEN O’NEAL // Founder & CEO, Tripping.com

FILLING A GAP… “On average people will go to five websites at least before they book a vacation rental, so we’re hoping to save them a lot of time by putting all those rentals in one place at Tripping.com.”

JEN O’NEAL

FAVORITE JOB… “(StubHub) was my entry into business and the tech world. There were five of us then, and I got to really see how a company is built. After Tripping, that was my favorite job.”

STRATEGIC PARTNERS… “For Series A (funding) we looked outside the Valley and brought on investors from Tokyo, and it was probably one of the best decisions we ever made. They were able to bring an entirely different perspective and network to the table.”

Building on a career in the tech sector, O’Neal in 2010 founded Tripping.com, a search engine for vacation and short-term rentals. Previously she served as the fifth employee at online ticket marketplace StubHub and worked at venture-backed companies in Europe and Central America.

EMERGING TREND… “We’re getting lot of interest from the real estate market. People are coming to Tripping.com and booking a home rental near the house they’re buying to experience the neighborhood before they make the final decision.” AHEAD OF THE CURVE… “We launched the site before the market was ready for it. Investors thought we were crazy for building this, and then overnight the market caught up and now everyone’s excited about it.”

“IT’S FUN TO WATCH PEOPLE FOLLOW THEIR PASSIONS, AND SILICON VALLEY IS A UNIQUE PLACE WHERE YOU CAN REALLY SEE THAT HAPPEN EVERY DAY.”

TEAM BUILDING… “As we were hiring, we realized that (our hires) had all been competitive athletes, or they currently are, and that’s interesting because they’re super focused but also really want to win. It’s great for teamwork.”

“BEFORE YOU GO TALK TO INVESTORS, REALLY KNOW YOUR BUSINESS AND YOUR PATH TO REVENUE.” Content sponsored by

Want to tap into the middle market? LEARN ABOUT ADVERTISING OPPORTUNITIES IN MIDDLE MARKET GROWTH AND REACH 90,000+ MIDDLE-MARKET PROFESSIONALS. CONTACT US OR DOWNLOAD THE MEDIA KIT TO GET STARTED TODAY.

DOWNLOAD MEDIA KIT Contact Maggie Endres at mendres@acg.org // 312-957-4257

The official publication of

IT’S THE SMALL THINGS TRAVEL INDUSTRY TRENDS // Wherever you go, there you are

DESTINATION: EMPLOYMENT PARADISE

Travel and tourism make up 9% of global GDP, and the industry is the world’s largest employer, responsible for one in 11 jobs.

A group of private equity investors led by TPG, including Chinese firm Fosun, has bought Canadian entertainment company Cirque du Soleil in a deal designed to fuel the company’s expansion in China.

THE SKYMALL IS FALLING!

In-air catalogue SkyMall, which started in 1990, filed for bankruptcy protection this year, a victim of evolving rules and technology that now let airline passengers keep their smartphones and tablets powered up during flight.

HOTELS LEAVE THE LIGHT ON FOR PE

PE firms have fast become tycoons in the hotel industry, with Blackstone, Apollo and Starwood Capital snapping up brands like Hilton Hotels, the Palms Casino Resort, Motel 6 and the Fairmont San Francisco.

WHERE HAVE YOU CARIBBEAN ALL MY LIFE?

PE firms, including Bain Capital Partners and billionaire Sam Zell’s Equity International, are boosting investments in Caribbean resorts—to the tune of $329 million in 2014 alone—as the region’s traditional lenders scale back operations.

I’M A TRAVELIN’ MAN…

Business travel spending in the United States is steadily rising, with $295.7 billion projected for 2015, an indicator of how the domestic economy is faring.

CHINA BENDS OVER BACKWARD FOR CIRQUE

MONEY TO (SUN)BURN

SHARE AND SHARE ALIKE

Direct spending on leisure travel by domestic and international travelers totaled $644.9 billion in 2014.

Airbnb and Uber lead the charge in the evergrowing “sharing economy.” This consumer peer-to-peer market has been estimated to be worth $26 billion.

—Larry Guthrie, manager, communications and marketing, ACG Global

THE LEADERSHIP ACG DIRECTORS ACG BOARD OF DIRECTORS //

CHAPTER REPRESENTATIVE DIRECTORS //

DIRECTORS AT LARGE //

Chairman Doug Tatum* Newport Board Group ACG Atlanta Term expires 8/31/2015

Brent Baxter Clayton Capital Partners ACG St. Louis Term expires 8/31/2017

Jason Brown Victory Park Capital ACG Los Angeles Term expires 8/31/2016

Bradford Adams TM Capital ACG Boston Term expires 8/31/2015

Jason Byrd The Charter Group ACG Western Michigan Term expires 8/31/2017

Robert Brighton Shutts & Bowen, LLP ACG South Florida Term expires 8/31/2017

Greg Cinnamon Kilpatrick Townsend & Stockton LLP ACG Atlanta Term expires 8/31/2015

Roy Graham Corporate Finance Associates ACG Central Texas Term expires 8/31/2015

Mike Ehlert Capital One Leverage Finance Corp. ACG Dallas/Fort Worth Term expires 8/31/2015

Karen Grexa KeyBank Business Capital ACG New Jersey Term expires 8/31/2017

Brian Gilbreath Merrill Corporation ACG Nebraska Term expires 8/31/2015

Jay Hansen O2 Investment Partners ACG Detroit Term expires 8/31/2017

Ramsey Goodrich Carter Morse & Mathias ACG Connecticut Term expires 8/31/2016

Patricia King Bank of America Merrill Lynch ACG Tennessee Term expires 8/31/2015

Don Lipari McGladrey ACG New York Term expires 8/31/2017

Robert Napoli First West Capital ACG British Columbia Term expires 8/31/2015

Angie MacPhee RGL Forensics ACG Denver Term expires 8/31/2016

Walter Oâ&#x20AC;&#x2122;Haire Valuation Research Corp. ACG San Francisco Term expires 8/31/2017

Gretchen Perkins Huron Capital Partners ACG Detroit Term expires 8/31/2016

Steve Peterson Brass Ring Capital, Inc. ACG Wisconsin Term expires 8/31/2015

Karen Tuleta Morgenthaler ACG Cleveland Term expires 8/31/2017

Hans-Josef Vogel Beiten Burkhardt ACG Germany Term expires 8/31/2015

Tom Washbush Bricker & Eckler LLP ACG Columbus Term expires 8/31/2015

Vice Chairman Richard Jaffe* Duane Morris LLP ACG Philadelphia Term expires 8/31/2015 Chairman of Finance Stephen Prostor* Citi Private Bank ACG New York Term expires 8/31/2015 Secretary J.B. Dollison* Crutchfield Capital Corporation ACG Houston Term expires 8/31/2015 Immediate Past Chairman Pamela Hendrickson* The Riverside Company ACG New York Term expires 8/31/2015 President & Chief Executive Officer Gary A. LaBranche, FASAE, CAE* ACG Global

ACG HONORARY DIRECTORS // Robert G. Coffey Alan B. Gelband *denotes member of Executive Committee

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