Middle Market Growth - November/December 2019 by Association for Corporate Growth

NOV/DEC 2019

// THE OFFICIAL PUBLICATION OF ACG

Handle with Care For FragilePak, delicate shipments drive solid business

· CUSTOMIZED SALELEASEBACK PROGRAMS · COMPLIMENTARY EVALUATIONS & CONSULTATIONS · PROPRIETARY BUY & RECAST PROGRAM · INCREASED EBITDA & ARBITRAGE PROCEEDS · LEASEHOLD VALUATION & RENT RESTRUCTURING · ASSET ANALYSIS & VALUATION

info@stnladvisors.com | www.stnladvisors.com NEW YORK · NEW JERSEY · CHICAGO · LOS ANGELES

FROM THE EDITOR

Unpacking Supply Chain Disruption

KATHRYN MULLIGAN Editor-in-Chief, Middle Market Growth

utonomous trucks, drone delivery and other headlinegrabbing innovations in shipping can sometimes feel like science fiction. It now takes robots in the sky to grab our attention, a reflection of how far technology has progressed, and how quickly. Mention next-day delivery and no one bats an eye. These futuristic advances tend to happen at the two ends of the size spectrum. On one end is Amazon, which has invested billions into technology to speed deliveries and improve the customer experience. On the other are countless startups promising disruptionâ&#x20AC;&#x201D;some of which have landed in Amazonâ&#x20AC;&#x2122;s shopping cart themselves. In between are the middle-market companies whose services are responsible for getting many a shipment to our doorsteps. Take Progistics Distribution, a logistics and transportation company based in Oakland, California, and the subject of our cover story (p. 18). Progisticsâ&#x20AC;&#x2122; FragilePak service focuses on transporting bulky deliveries. While it might not be delivering treadmills or couches by drone, getting an oversized item to its destination on time and undamaged is a technical marvel in its own right. Operating in a highly fragmented industry, logistics and distribution businesses are natural targets for private capital. Progistics has used funding from HCAP Partners to support the expansion of FragilePak, which has grown to become a $75 million business since Progistics started the service in 2015. Meanwhile, many private equity funds are pursuing buy-and-build strategies to create larger transportation platforms. By offering strategic guidance, these firms are helping companies adopt new technology to improve operations and address challenges like the truck driver shortage (p. 10). For many companies across industries, the greatest looming threat today is tariffs. In our second feature story (p. 26), we look at the role investors and advisers play in helping middle-market companies adjust to global trade disruption, and how supply chain is becoming a greater focus for buyers during due diligence. Amid changes to trade policy, technology innovation and customer expectations, the logistics and distribution industry is undergoing a sea change. For the many founder-led middle-market companies looking to gain market share, innovate and adapt to an increasingly complex global trade regime, having the financial and strategic guidance from trusted partners might make the difference in whether they stay afloat. //

MIDDLE MARKET GROWTH // NOV/DEC 2019

EXECUTIVE SUMMARY

ACG Global Welcomes New CEO

MARTIN OKNER Chairman, ACG Global Board of Directors, and President and COO, dpHUE

middlemarketgrowth.org

very issue of Middle Market Growth features a profile of a growing midsize company, spotlighting its business model, the competitive landscape and the leadership strategies of its executives. Strong, effective leaders are essential for any organization to thrive, and that’s true for ACG as well. After an extensive search for the right candidate, I’m pleased to report on behalf of the ACG Global board of directors the selection of a new president and CEO, Tom Bohn. Tom joins ACG having served for the past six years as CEO of the North American Veterinary Community, where he more than doubled revenue through new business platforms and mergers and acquisitions. He has over 20 years of experience working with associations and has served on the board of a private equity-backed company. Tom’s experience growing organizations aligns with ACG’s mission of driving middle-market growth, and the ACG Global board looks forward to partnering with him to expand ACG’s offerings and increase value for members. Tom will step into the role on Dec. 1, ahead of what promises to be an eventful year. In the run-up to the federal elections, ACG has been providing nonpartisan, fact-based research and stories to policymakers and media outlets in response to attacks directed at private equity and financial services from presidential candidates. We will continue to defend the middle market against misinformation by speaking publicly about the many ways private capital drives U.S. economic growth. MMG serves as an important vehicle for highlighting this message through stories of job creation and sales growth that private capital investment helps drive. The theme of this issue, logistics and distribution, is particularly illustrative of how the middle market relies on private capital. The industry impacts many ACG members, including PE firms and advisers that work with logistics and distribution companies, and the businesses that rely on transportation networks to distribute their products. As the COO of a multichannel beauty company, I’ve seen how the distribution landscape has changed and why it’s an area that all companies should pay close attention to. MMG recently released its 2020 editorial calendar. I encourage you to take a look and tell our editorial staff about the growth stories of the companies that you lead, those that you advise, and those in your portfolio. Sharing examples of the innovation, revenue growth and job creation happening in the middle market is essential if we want policymakers, the media and the country to understand the vital role private capital plays in the economy. //

Tell Us Your Growth Story Every issue of Middle Market Growth spotlights a fast-growing, innovative business. Check out our 2020 editorial calendar and share your suggestions of who should be on the cover.

JAN/FEB // Buildings & Infrastructure MAR/APR // Health & Wellness

Interested in Sharing Your Story Ideas? Contact Kathryn Mulligan, Editor-in-Chief P: 312-957-4272 E: kmulligan@acg.org

MAY/JUNE // Automotive & Mobility JULY/AUG // Energy SEPT/OCT // Consumer Products NOV/DEC // Manufacturing

View More Find more content online at middlemarketgrowth.org

MIDDLE MARKET GROWTH ONLINE

EDITOR-IN-CHIEF

MMG CONVERSATIONS

Kathryn Mulligan kmulligan@acg.org VICE PRESIDENT, COMMUNICATIONS

Karen Craven kcraven@acg.org

ONLINE

DIRECTOR, CREATIVE & BRANDING

Brian Lubluban blubluban@acg.org

Visit middle marketgrowth.org to read the latest

MANAGER, CREATIVE & BRANDING

issue and web-

Michelle McAvoy mmcavoy@acg.org

exclusive content.

What Do Physician Practice Owners Think of Private Equity? Tom Turmell, founder and managing director of

NEWS

TMT Capital Partners, spoke with Middle Market Growth about strategies health care entrepre-

ASSOCIATE, MARKETING & COMMUNICATIONS

Benjamin Glick bglick@acg.org VICE PRESIDENT, STRATEGIC EVENTS & PARTNERSHIPS

Christine Melendes, CAE cmelendes@acg.org DIRECTOR, STRATEGIC DEVELOPMENT

Kaitlyn Fishman kfishman@acg.org

MMG WEEKLY

neurs are using to grow their businesses, and

The latest middle-

the common questions he hears about private

market trends,

equity, which continues to be active in acquiring

SALES MANAGER

ACG events and

physician practices.

Joy Meredith jmeredith@acg.org

timely industry content.

THE LADDER

PODCAST Find this interview

Monthly e-news-

and others by searching for “Middle

letter about

Market Growth Conversations” in

professional

Apple Podcasts and Google Play.

development news, trends and jobs. Subscribe at middlemarket growth.org/

JOIN IN Find us on Twitter, Facebook and LinkedIn

subscribe. @ACG_MMG

Association for Corporate Growth 125 South Wacker Drive, Suite 3100 Chicago, IL 60606 membership@acg.org www.acg.org For advertising inquiries, call (312) 957-4271. Copyright 2019 Middle Market Growth®, InterGrowth® and Association for Corporate Growth, Inc. All rights reserved. Printed in the United States of America.

Search for Association for Corporate Growth Search for Middle Market Growth

middlemarketgrowth.org

ISSN 2475-921X (print) ISSN 2475-9228 (online)

WWW.BRIDGECAPITALASSOCIATES.COM Take control of your securities transactions FINRA Licensing & Registration Regulatory Compliance Support Compliance with FINRA, SEC, & State Agencies

Become An Independent Contractor Mergers & Acquisitions Investment Banking Capital Acquisitions Private Placements

Member FINRA/SIPC

NOV/DEC 2019

DONâ&#x20AC;&#x2122;T MISS QUICK TAKES Women in Trucking 15

A QUALIFIED OPINION Supply Chain Scrutiny 16

IN FOCUS DHG Is Made for the Middle Market 36

IN THIS ISSUE Letter from the Cover and above photo by Ed Carreon

GROWTH STORY

Editor 1 Executive Summary 2

Handle with Care

Executive Suite 8

Transporting large, heavy items is delicate business. The industry average for damage during shipping can exceed 10%. The leaders of Progistics believed they could do better. With state-of-the-art technology and a focus on customer experience, the company launched its FragilePak service in 2015. Four years later, it is generating $75 million in revenue and increasing its market share in the competitive home delivery space. 18

Perspectives 9 The Round 10 Midpoints by John Gabbert 14 Policy Points 32

TREND

Trading in Turmoil Abruptly announced tariffs, trade disputes and related policies are forcing thousands of midsize U.S. companies to navigate a trade regime that is constantly shifting, prompting them to diversify their supply network and respond to a new set of questions from investors. 26

middlemarketgrowth.org

The Portfolio 40 Growth Economy 44 ACG@Work 45 The Ladder 50 Itâ&#x20AC;&#x2122;s the Small Things 52

A P R I L

2 0

–

2 2 ,

2 0 2 0

A R I A

R E S O R T

C A S I N O

LET’S DEAL YOU IN. InterGrowth returns to Las Vegas in 2020. REGISTRATION OPENS DECEMBER 2019 AT

L A S

V E G A S ,

N E V A D A

EXECUTIVE SUITE

Competing in a Crowded Market F How can PE firms compete

JAY M. AIDIKOFF Title: Managing Director Company: The Valufinder Group, Inc. Location: New York City Expertise: Jay Aidikoff is the founder of The Valufinder Group, a buy-side investment banking organization focusing on the middle market. Over the course of their careers, Valufinder’s key players have completed more than 350 transactions representing over $8 billion in transaction value.

middlemarketgrowth.org

when sourcing deals in their target markets? With an estimated 4,000 buyers looking to acquire all types of companies, there is fierce competition in the market today. One of the first things a buyer can do to increase exclusive and targeted deals is to have powerful reasons for looking at a particular company or industry, and to share those reasons with various deal sources. Second, a buyer can bypass a competitive auction by having their own program of contacting targeted companies and presenting their reasons to owners before they pursue selling. These reasons must be presented so they resonate with owners as being both legitimate and compelling so that sellers want to learn more about the buyer and the opportunity. However, a successful program typically requires time, highly skilled research and marketing assets, and professionals with expert social and deal skills. If your organization doesn’t have these resources to mount a sustained and systematic campaign, then you should consider discussing your criteria and goals with a buyside adviser that is set up to perform exclusive deal sourcing campaigns. F How has the role of buy-side

advisers evolved? As the demand for exclusive, targeted and non-auction deal flow has grown, so too has the role of the buy-side

adviser. Advisers today have expanded beyond simply generating one-off leads to systematically prospecting a targeted industry in order to generate proprietary deal flow. Once potential targets are identified, the buy-side adviser’s process and expertise for contacting, establishing chemistry and facilitating deals are key in helping to start and move a deal forward. If both buyer and seller are well-informed about transactions, the adviser’s role may focus primarily on facilitating the flow of information, arranging calls and meetings, and acting as a sounding board for both sides in the exchange between a buyer’s probing questions and an owner’s sensitive answers. However, in circumstances where the seller lacks selling experience, the buy-side adviser often becomes a counselor to the seller, who may require advice on a number of different diligence items and personal issues. A good buy-side adviser has deep experience in dealing with the issues, questions and concerns common to many novice sellers and can reduce the sellers’ anxiety by providing appropriate answers to common questions. A modern adviser will regularly act as the deal’s ombudsman by speaking to both sides to ensure that important information is disseminated, misunderstandings are avoided, schedules are kept, and everyone remains focused and positive as they move toward closing. //

Content Provided by ACG Partners and Featured Firms

PERSPECTIVES

PERSPECTIVES // Looking Ahead

“We decided that we had to be different than just every other company out there. We wanted to be in different niche markets where it wasn’t so price competitive.”

STUART SMITH CEO of Buehler Companies, a moving, logistics and storage company, speaking at ACG Denver’s Rocky Mountain Corporate Growth Conference about entering new markets—from setting up model homes to transporting Girl Scout Cookies in Colorado

“Supply chain is typically one of the second largest expenses in any organization, but often one that’s hidden because there’s no line item on a P&L to really show that. It’s foundational to every business.”

WENDY BUXTON President of Lynnco Supply Chain Solutions, speaking at ACG New York’s Value Creation Conference about using supply chain as a growth lever

“We still have at this point an aging ownership of privately held businesses and as we approach this period of uncertainty … the worry of the recession is probably going to be enough to push some of those 55- or 60-year-old owners to start thinking about

FOR MANY FAMILY-OWNED COMPANIES, THE MOST IMPORTANT THING IS NOT GETTING THE MOST MONEY, BUT GETTING THE RIGHT BUYER. DORI BREWER A partner at Perkins Coie LLP, speaking at ACG Seattle’s Northwest Middle Market Growth Conference about working with

that transition.”

family-owned companies

JEFF SERVAIS Principal, private equity, at CliftonLarsonAllen, speaking during an ACG Middle-Market Insights Webinar, “Cloudy with a Chance of Tariffs and a Recession: 2020 Forecast” about why he expects to see more lower middle-market companies come to market in 2020

MIDDLE MARKET GROWTH // NOV/DEC 2019

THE ROUND

TOMASZ ZAJDA / EYEEM/ GETTY IMAGES

As Driver Shortage Worsens, Trucking Companies Shift Gears Benjamin Glick

s recently as three years ago, PS Logistics, an operator of flat-bed trucks based in Birmingham, Alabama, hired most of its drivers through a conventional application process. Prospective employees would send in their resumes, interview with the company and try to position themselves as the best candidate for the job. Today, that process has been flipped on its head, says Houston Vaughn, the company’s president and COO. “Now you’ve got call centers selling the company to the driver.” The phenomenon Vaughn describes is one that has become common for trucking companies across the country as the number of unfilled positions in the transportation industry continues to climb. In 2018, there was a shortage of more than 60,000 drivers, a 20%

middlemarketgrowth.org

increase from the year before, according to the American Trucking Associations, an industry advocacy group known as the ATA. Despite leveling off slightly in 2019, the number of open driver positions is expected to increase to 160,000 by 2028, caused mainly by an aging workforce. Stuart Smith, president and CEO of Buehler Companies, a transportation company headquartered in Aurora, Colorado, that focuses on moving, logistics and storage, estimates that his company could transport 30% to 40% more volume if only it could find more drivers. “It’s hard to run a business when you can’t hire anyone,” he says. To thrive in the competitive labor market, middle-market transportation businesses have had to offer greater compensation and flexibility for their drivers. Many companies have offered sign-on bonuses ranging from $1,000

to $15,000. At PS Logistics, bonuses have more than doubled over the last few years, Vaughn says. According to the Bureau of Labor Statistics, the median salary for drivers of heavy trucks and tractor-trailers is around $43,000, but Vaughn and Smith say starting wages in the industry can be between $50,000 and $70,000. Earlier this year, Wal-Mart announced it would raise salaries for new and existing drivers to nearly $90,000. Despite the potential for high wages, many young people remain skeptical of the trucking lifestyle. The average age of a driver is 46, according to the ATA, and as older workers retire, younger drivers aren’t filling their places. A career that can require up to 11 hours a day on the road for three weeks at a time can be too demanding for many. “It’s hard to

find millennials that want to do this kind of work,” Smith says. A recent federal policy decision could make an already difficult job even harder, according to those in the industry. A rule from the Department of Transportation that went into effect in late 2017 requires commercial motor vehicles to install electronic logging devices, known as ELDs, and imposes strict rules for how long a driver can be on the road. The rule’s architects say it was designed to create a safer work environment for drivers, reduce accidents and improve reporting. But drivers say the mandated breaks keep them on the road and away from home for longer periods of time. For those paid by the mile, it could mean a lower paycheck. Revving Up Acquisitions The trucking industry is highly fragmented. As John Gabbert writes in Midpoints (p. 14), the average trucking company owns three or fewer vehicles, leading to limited routes and, ultimately, few options for drivers. But steady acquisition activity in recent years has begun to change that. In the second quarter of 2019, 62 deals with disclosed values above $50 million were announced in the global transportation and logistics sector, according to a report from PwC. Although deal volume was relatively flat from the previous quarter, total transaction value increased by 34%, reaching $25 billion. With $18.6 billion invested, financial buyers represented 73% of total deal value during the quarter. PS Logistics is among the active buyers in this space. In February 2019, the company acquired its sixth transportation business in three years. Those additions have allowed the company to offer a wider variety

“THE BIGGEST WAY TO COMBAT A LABOR SHORTAGE OF ANY KIND IS TO CREATE A WORK ENVIRONMENT THAT ENABLES YOU TO RETAIN THE WORKERS THAT YOU HAVE.” GREG BELINFANTI Senior Managing Director, One Equity Partners

of routes to drivers, which gives it an advantage over smaller companies when competing for drivers. Through M&A, two trucking companies gain access to each other’s clients. Their drivers now may only have to travel between nearby shipping hubs, rather than taking on a cross-country contract—flexibility that many smaller companies lack. Buehler’s acquisitions have expanded the company’s operations across the Southwest, so drivers don’t have to spend weeks on the road away from home. “We’re within 500 to 700 miles from each branch, and you could make it to each branch in a day or a day and a half,” Smith says. Drivers First For private equity firm One Equity, which bought PS Logistics in March 2018, increasing company value and creating a better work environment go hand-in-hand—an attitude that Greg Belinfanti, the firm’s senior managing director, calls a “driver-first mentality.” In addition to flexible routes, PS Logistics aims to generate cost savings by acquiring smaller flatbed carriers and helping them make their fleets more efficient. The savings can be passed along to drivers in the form of pay increases, he says. One strategy PS Logistics employs is to reduce the number of hauls where a truck transports an empty trailer,

referred to as “deadhead.” Coupled with other streamlining initiatives— like bringing multiple dispatch systems for different companies under one system—PS Logistics increases its fleet efficiency and is able to produce more revenue per truck, and reinvest in technology that benefits its drivers. PS Logistics has also created a path for drivers to become owner-operators. It adopted what Belinfanti calls its “lease-purchase program,” where PS Logistics purchases trucks and after a few years leases them out to drivers. Ultimately, the company is making it possible for a driver to buy the vehicle so that he or she can become an independent hauler. “We are creating a path for drivers to control their own independent businesses,” he says. Through these measures, PS Logistics has reduced the driver attrition rate to around 60%, according to Belinfanti. According to the ATA, driver turnover in the first quarter of 2019—the latest figures available— was 83%, which is 10% lower than in the year prior. “If your turnover is down, that must mean you’re doing something favorable vis-à-vis your workforce,” Belinfanti says. “For PSL, our huge focus is on driver retention. The biggest way to combat a labor shortage of any kind is to create a work environment that enables you to retain the workers that you have.” //

MIDDLE MARKET GROWTH // NOV/DEC 2019

THE ROUND

ACG New York Event Taps Into PE-to-PE Dealmaking Kathryn Mulligan

record number of private equity firms raising capital has made dealmaking more competitive than ever, prompting many funds to turn to an unlikely source for market insight and deal flow: each other. Thanks to vast amounts of dry powder and the growing number of firms targeting smaller deals, it’s increasingly likely that a private equity-backed company will be purchased by another PE fund at the end of its holding period. In 2010, 36% of private equity-backed exits involved a sale to another PE firm, according to PitchBook. By 2018, that figure had risen to 48%. In response to high prices and competition, a growing number of PE firms are focusing on the middle market or lower middle market, where valuations can often be lower. That segmentation has created a feeder system for bigger firms. “As a lot of smaller funds have come into existence, they can be ideal incubators for companies that we’d be looking to buy,” says William Gonzalez, senior vice president of business development at Audax Private Equity, which looks for platform investments with $8 million to $50 million in Ebitda. Even as PE funds look to sell a business at the end of the investment period, or once a company has reached a certain size, private equity

middlemarketgrowth.org

E The 2019 PE Summit brought together private equity firms for one-on-one meetings

may still be able to support further growth. “They have to return capital to their investors, so it makes sense to exit at the time, but it doesn’t mean a lot can’t be done to increase the value of that company from Year 5 on, or from that exit on,” says Michele McHale, a partner at audit, tax and advisory firm Plante Moran and the leader of its private equity practice. Several years ago, a member of ACG New York’s board of directors observed a growing trend. A number of private equity firms that had traditionally reached out directly to business owners were starting to contact smaller funds to learn about a business before it came to market,

according to David Hellier, a partner at Bertram Capital and chairman of the board of ACG New York. At the same time, the chapter was seeing large funds, which often buy companies from other PE firms, participating in ACG New York events. “Based on those two factors, I set up a committee to explore launching a program that facilitated an opportunity for large, medium and small private equity firms to meet and discuss portfolio companies and sector interests, as well as best practices,” Hellier says. This year marked the fourth time ACG New York has hosted the event over the past three years. On

Aug. 20-22, approximately 30 seniorlevel deal professionals gathered for the PE Summit, hosted in White Plains, New York. Meetings were scheduled in advance of the invitation-only event to pair small funds that could be potential sellers, large funds interested in buying platforms, and medium-sized funds like Audax that could act as either buyers or sellers. For Luke Johnson, a partner at Arcline Investment Management, a private equity firm that closed its inaugural $1.5 billion fund in March, participating in the event helps position Arcline to compete for deals in the future. “Relationships with a private equity seller can be very helpful when evaluating a deal in a competitive auction, and events like these are conducive to building such relationships,” Johnson says. “I have an ability to pick up the phone and call that relationship and register our interest, articulate our enthusiasm for the business, and convey our commitment to delivering a successful outcome for the seller.” This can sometimes make the difference between winning and losing a deal, adds Johnson, who served on the event’s planning committee as part of his role on the ACG New York board. The program also featured networking opportunities and roundtable discussions restricted to private equity participants. The Greater Good Although funds are the primary audience for the PE Summit, sponsoring firms say they find value in supporting the event. This year, ACG New York limited the number of sponsors to five firms and guaranteed they would have

meetings with private equity funds. Plante Moran’s McHale, who participated in five pre-scheduled meetings during the summit, says sponsoring this event offers Plante Moran a chance to engage with funds one-onone and provides greater value than some other conferences, where sponsors may only receive booth space and recognition on signs. The event has also helped attract larger private equity funds than those that typically attend ACG events, according to participants. After attending the private equity dealmaking event in previous years, members of some buyout funds have joined ACG New York’s board of directors and participated in the chapter’s other events, which could help create new transaction opportunities within the ACG community. “From the perspective of the quality of the organization, when the board is comprised of partners from wellknown, successful private equity funds, it reflects well on the organization and is good for the entire ecosystem,” says Carl Roston, co-chair of the corporate practice group at law firm Akerman, one of the summit’s sponsors. Participating funds say they will continue to work with investment banks, and they don’t expect to walk away from this event with a deal in hand. Instead, they view building relationships with other PE firms as a way to set themselves apart in a crowded market and to get a foot in the door long before a business comes up for sale. “It’s certainly an environment where you have to have a robust sourcing strategy,” says Audax’s Gonzalez. “The greater the visibility you have into deal flow that’s relevant to your strategy, the better.” //

FIND YOUR

IDEAL CANDIDATE WITHOUT SORTING THROUGH

HUNDREDS THAT AREN’T.

POST YOUR JOB O P E N I N G T O D A Y. JOBSOURCE.ACG.ORG

MIDDLE MARKET GROWTH // NOV/DEC 2019

MIDPOINTS by John Gabbert

Will Autonomous Trucks Drive Away Fleet Management?

ransportation and shipping are huge segments of the U.S. economy, but they’re highly fragmented and cost-heavy. The average American trucking company owns and operates three or fewer vehicles, and driver compensation accounts for nearly a third of all transportation costs. It’s a complicated industry, involving countless intermediaries and lots of paperwork. Orbiting around trucking is the fleet management industry. Its systems track and maintain vehicles, manage drivers, and help reduce inefficiencies and keep costs down for businesses. But fleet management could soon look much different, thanks to autonomous vehicle technology. While self-driving cars monopolize headlines, their 18-wheeled counterparts are better positioned to make large gains in the years ahead. For one, it’s easier for software-guided vehicles to navigate open highways than crowded city streets. From a business standpoint, the industry is facing a significant driver shortage, and regulations limit the amount of time drivers can stay on the road. Autonomous trucks, on the other hand, can operate 24/7. Some believe the transition to autonomous vehicle technology in the commercial market could begin in as few as three years. Self-driving trucks probably won’t replace humans entirely; the market will likely be a hybrid for the foreseeable future, with human co-pilots on duty for certain tasks and in case of system failures. But

middlemarketgrowth.org

if trucks can be directed by software, that will radically change how fleets are managed. Drivers will no longer need to be coached or managed, and smart vehicles that capture data about activity and maintenance will eliminate the need for traditional tracking and monitoring. Autonomous trucking opens up a new form of fleet management, as well. Fleets of company trucks can drive close together and draft off one another, reducing a literal headwind in the form of fuel costs. So far, there haven’t been many acquisitions involving autonomous trucking companies. When deals do occur, they will likely be massive if they involve a major transportation player, such as FedEx or UPS. Industry research suggests such technology will make it possible to double output while spending at 25% of current levels. Large corporations have already begun demonstrating their interest in autonomous solutions. Tesla, Uber and others have been experimenting with their own products. Others, like Lockheed Martin, UPS, Volvo and Denso, have invested in high-profile startups, including Peloton Technology and TuSimple. All told, self-driving technology will have a significant impact on fleet managers, negating the need for many of their services. Once the industry starts to see the full impact of computer-run transportation, it’s likely a new kind of fleet management will emerge—one designed to serve vehicles that drive themselves. //

JOHN GABBERT Founder and CEO, PitchBook

QUICK TAKES

Driving More Women into Trucking

lthough men have long made up the majority of commercial haulers in the U.S., one woman-led company hopes to address the trucking industry’s persistent gender imbalance. Joyce Brenny, founder, president and CEO of Brenny Transportation, a transportation and logistics company based in St. Cloud, Minnesota, has spent most of her life around trucks. She learned to drive tractors on her family’s farm at a young age, and after graduating from high school, she turned down a college scholarship to drive for a lumber company. In the early 1980s, Brenny took a job in sales for a transportation company and worked her way up to general manager. “Trucking is the only career I’ve ever had,” she says. Despite her success, Brenny remembers seeing unequal treatment of employees based on gender. “Women just were not being offered positions,” she says. “There was a derogatory feeling about trying to promote women in our office or even give them raises. It was frustrating.” When Brenny tried to negotiate a raise for a co-worker, Bonnie Supan, and the company’s leadership refused, she took it as a sign to move on. “I felt like I could do it better.” When Brenny opened Brenny Transportation in 1996, she hired Supan, who is now a vice president. The company Brenny and Supan left has since gone out of business. Today, Brenny Transportation has more than 100 employees and generates around $24 million in revenue annually. It has grown more than

CHRIS MONETTE / EYEEM/GETTY IMAGES

10% every year for the last 23 years, according to Brenny. The industry’s gender imbalance has improved over the last two decades, but the driver workforce is still overwhelmingly male. According to the Women in Trucking Association, which Brenny Transportation joined in 2009, women make up only 6% of the driver population. At Brenny Transportation, women make up about 10% of drivers, while half of the company’s office staff are female. The No. 1 concern preventing women from entering the industry, Brenny says, is safety. “When a woman’s out there by herself, it can be scary.” To provide a safer work environment, Brenny Transportation invests in additional security devices and newer rigs that break down less often. When a driver has to stay at

a location overnight, the company takes an active role in finding safe places to park. These practices have the potential to improve the job quality for all drivers, “but I think I might look a little bit more at security for our female drivers because—having been one—I know what they’re facing,” Brenny says. Trucking is a difficult job, but making it better for everyone is a passion for Brenny, who serves on the board of directors for the Minnesota Trucking Association and on the American Trucking Associations’ safety policy committee. She says she uses her position to advocate for changes that lead to higher pay and increased safety. “I want to be a voice for the truck drivers,” she says. “They’re busy driving.” // – Benjamin Glick

MIDDLE MARKET GROWTH // NOV/DEC 2019

A QUALIFIED OPINION

Leslie G. Brand, III CEO, Supply Chain Solutions Inc. Leslie Brand is the CEO of Supply Chain Solutions Inc., a global supply chain and transportation management solutions company headquartered in Grand Rapids, Michigan. SCS works with businesses of all sizes to help them drive efficiencies quickly and over the long term through transportation, logistics and technology solutions. Brand corresponded with MMG about the impact of tariffs and technology innovation on companies’ supply chains.

“AT THIS POINT IN TIME, THE TECHNOLOGICAL CAPABILITY NEEDS TO BE PAIRED WITH A FOUNDATION OF REGULATION AND INFRASTRUCTURE BEFORE WE SEE WIDESPREAD USE OF AUTONOMOUS VEHICLES IN PUBLIC SPACES.”

MORE ONLINE Find more interviews at middlemarketgrowth.org.

middlemarketgrowth.org

For a U.S. middle-market company whose supply chain will be impacted by tariffs on Chinese goods, what’s the first step it should take to prepare? Start with an accurate foundation. Verify that the harmonized tariff schedule codes, known as HTS codes, on your imported products are correct. Use accurate HTS codes to explore whether the product has been granted an exclusion from the tariffs, and explore whether you should file for an exclusion. Next, prepare your customers for higher prices. Work with customers as needed to pass along enough of an increase to cover the tariff. Analyze your costs to understand your minimum recovery requirement. Finally, explore other options. Strategic sourcing might allow you to source from other countries or add value to the Chinese imports elsewhere, in order to legally obtain a revision to the country of origin. Accelerate inventory turns by ordering Chinese product in lower quantities with greater frequency, in order to minimize your in-stock level of high-duty items. Network with other importers or specialists to explore other opportunities.

What impact do you expect trade conflicts and supply

chain uncertainty to have on M&A activity in the logistics industry? “Uncertainty” defines in one word the focal point with respect to M&A activity. In short, uncertainty increases risk for buyers, resulting in lower valuations for sellers. Whether sellers agree with buyers on revised valuations determines the impact on M&A activity. Specifically, the trade conflict destabilizes the China-U.S. logistics pipeline, which in turn upsets the predictability of revenue, earnings and cash flow. Buyers should understand the extent to which a target logistics company depends on trade with China. The impact of high tariffs hurts companies that outlay duty on behalf of clients, as their working capital leverage suddenly tumbles. Meanwhile, overall lower shipment volume between China and the U.S. hurts revenue as long as the trade conflict persists.

What are the most meaningful changes that technology has brought to the logistics industry in recent years? The shipping community makes microeconomic decisions every minute, shaping the logistics industry. Technology enables better decisions by improving the match between logistics requirements and available services.

What are these technologies? One example is cloud-based visibility that improves real-time tracking, which enables shippers to make timelier, less disruptive adjustments to demand plans. Another example is fully functional transportation planning and execution software that quickly calculates the price and service trade-offs related to routing decisions. A third is electronic logs for truck drivers. While known mostly as a regulatory burden, these logs allow fleet managers to improve utilization of both drivers and vehicles. A final example is smart warehouse management software and warehouse automation, used to improve

inventory velocity and labor productivity while shrinking order fulfillment cycle times.

How do you expect autonomous vehicles to impact logistics and transportation, and when will we see widespread adoption? Opportunities for autonomous vehicles in logistics fall into two categories depending on whether there is a perception of high risk to public safety. Logistics activities in low-risk situations have been evolving since the 1980s, as wire-guided, fixed route autonomous vehicles move inventory within the four walls of a warehouse. Today, autonomous vehicles in the

warehouse move safely using vision technology. As the price of automation falls, autonomous forklifts and other warehouse vehicles promise rapid proliferation. Vehicles that travel in public spaces like roads and flight paths present challenges. At this point in time, the technological capability needs to be paired with a foundation of regulation and infrastructure before we see widespread use of autonomous vehicles in public spaces. Meanwhile, closed circuit, fixed-route experiments continue to demonstrate the technical feasibility of safe solutions. //

Unlock Your Companys Potential

HURON CAPITAL has a long history of partnering with business owners. We are dedicated to growing companies by creating a shared vision, implementing our high-impact buy-and-build strategy and bringing our strategic resources to bear.

LEADING THE WAY WITH FLEXIBLE INVESTMENT STRATEGIES + STRATEGIC private equity investments + TRUSTED industry expertise + AUTHENTIC founder-friendly partnerships

313-962-5800

huroncapital.com

MIDDLE MARKET GROWTH // NOC/DEC 2019

Handle with Care For FragilePak, delicate shipments drive solid business

BY S.A. SWANSON

J With advanced technology and a focus on customer service, FragilePak is differentiating itself in the home delivery market

JHORROCKS/GETTY IMAGES AND PROGISTICS

oel Ritch, founder and CEO of Progistics Distribution, has spent more than 30 years thinking about the best way to deliver packages. He’s also thought a lot about poorly loaded trucks and rogue forklifts—specifically, how they frustrate companies that sell large products like furniture, appliances and exercise equipment, and the people who buy them. Order a few large items online, and chances are you’ll receive a damaged one, usually because the box had a close encounter with heavy equipment or toppled over in the back of a truck. Ritch says that when shippers use forklifts or load items like sofas alongside traditional freight (like skids of food), chances are some of the consumer products will end up damaged. To address that problem, Progistics, a logistics and transportation company based in Oakland, California, introduced a new service four years ago, called FragilePak. It delivers large, heavy items directly into consumers’ homes, sometimes installing or assembling those products. FragilePak promises the manufacturers it works with that their products will be delivered intact. Last year, FragilePak’s damage rate was 0.2%, according to Ritch.

MIDDLE MARKET GROWTH // NOV/DEC 2019

FRAGILEPAK Year launched: 2015 Customers: Retailers shipping bulky and heavy items Annual revenue: $75 million Investor: HCAP Partners Investment impact: Operations center expansion in Nevada, from a 3,000-square-foot facility to a 10,000-square-foot space, plus 35 new jobs and $1 million in additional payroll in the state

FRAGILE INDUSTRIES

Photos by Ed Carreon Photography

E Progistics CEO Joel Ritch, right, with Frank Mora, a partner at HCAP Partners, Progistics’ investor

FragilePak relies on technology to minimize problems while shipping products efficiently, an approach that is paying off. Since it launched in 2015, FragilePak has grown its annual revenue to $75 million. Although FragilePak operates in a highly competitive space, it’s not easy for rivals to duplicate its success, according to Ritch. For him, the service represents more than fast, damage-free delivery. FragilePak prides itself on making a good impression when bringing packages inside a house. “When you go into somebody’s home, it requires another level of competency. You have to respect their home,” Ritch says. “Others treat it more as just a delivery, as opposed to an experience.”

middlemarketgrowth.org

During Progistics’ early days in the late ’80s, when it operated under a different name, it provided a service that was a precursor to FragilePak. The company delivered fax machines to businesses and home offices, setting up the machines for customers and providing a few minutes of Faxing 101. The company also worked as a sameday delivery service, primarily for documents, including tickets to concerts and sporting events. By the mid-1990s, Ritch could see that the trend toward email and document digitization—particularly in Silicon Valley, where his company was based—would make much of his delivery business obsolete. He expanded the company’s offerings by adding bigger trucks equipped to transfer more than documents. The company handled deliveries for local businesses, many of which were internet-based companies. But when the dot-com bubble burst at the turn of the century, many of Ritch’s customers did, too. Around 2002, technology created another opportunity for the company in the form of plasma televisions. Customers were drawn to their sharp resolution and thinner size, and they purchased many of these TVs online, a new

concept at the time. Instead of delivery requests coming from local stores, they came from thirdparty logistics companies contracted by manufacturers to distribute their products. Ritch’s business began delivering TVs to consumers’ homes, but it was difficult work, he recalls. The televisions had to be bolted to skids because they could not tilt. The experience helped the company—which changed its name to Progistics in 2010—learn how to deliver heavy, bulky products and laid the groundwork for FragilePak. As Progistics began delivering other large items to homes in California, Ritch and his team observed an industry problem that could be turned into a competitive advantage. Because shippers often used forklifts and loaded items like furniture with other freight, such as skids of food or industrial products, Ritch estimates about 15% of the products Progistics received were damaged. “They were moving a spa like they moved a skid of paper,” he says. “The large trucking companies had no idea how to move a couch and had no idea how to move a spa.” He remembers opening the back of a truck and seeing expensive items marred by forklift holes. The proliferation of online purchases increased the likelihood of buyer’s remorse and raised the volume of return shipments. Products were at risk of damage on the way to the consumer and, increasingly, on their way back to the seller. Progistics decided to develop a nationwide service that would promise damage-free delivery for big items. FragilePak would focus on bulky and heavy shipments—stuff most FedEx or UPS trucks don’t carry. Protecting those products would require hand-loading and unloading, as opposed to forklifts, and careful control over each package at every step of the journey, from the manufacturer to the consumer’s home. (Assembly is included with about 60%

of FragilePak deliveries.) In industry parlance, FragilePak would own the first mile through the last mile.

A SOFTWARE SOLUTION Two years after launching the service, Progistics received about $8 million in mezzanine capital from San Diego-based HCAP Partners. The firm was drawn to FragilePak’s tech-driven approach. Its investment allowed Progistics to finalize development of software that would make the FragilePak service possible and to hire the staff needed to roll out its offerings nationwide. The technology was designed to connect a network of nationwide carriers, create a scheduling

G Ritch has helped his company evolve amid technological disruption

“OTHERS TREAT IT MORE AS JUST A DELIVERY, AS OPPOSED TO AN EXPERIENCE.” JOEL RITCH Founder and CEO, Progistics

MIDDLE MARKET GROWTH // NOV/DEC 2019

in to one system and see the exact location of their product. Before HCAP invested, it hired a tech consultant with logistics experience to assess the software under development for FragilePak. “The trucking industry is not one of those at the vanguard of innovation,” Mora says. The company received feedback that its software was “going to be a big deal,” he adds. In addition to information technology, efficient shipping requires proper infrastructure. FragilePak owns seven facilities across the country, where freight is unloaded and transferred to another truck within hours (and never stored for more than a day). FragilePak also has 92 “finalmile” locations, where freight is loaded onto vehicles that make home deliveries. “The more final-mile locations you have, the closer you are to the [consumer], which means you can have faster delivery times and lower costs,” Ritch says. HCAP Partners’ capital also helped the company expand its National Operations Center in Nevada from a 3,000-square-foot facility to a 10,000-square-foot space. While HCAP seeks a strong return from its investments, it also strives to have a positive impact on companies and their local communities, according to Mora. HCAP’s investment supported 35 new jobs, including senior-level positions, totaling approximately $1 million in additional payroll in Nevada, he says. E Frank Mora’s firm, HCAP Partners, aims to make a positive impact on communities through its investments

system that made deliveries convenient for consumers, and provide other functions like billing, inventory control and managing returns. It also included tracking capabilities; without them, there’s no easy way for a customer to pinpoint a bulky shipment’s location. Unlike a UPS or FedEx delivery, a single large package is often handled by multiple third-party delivery providers with different systems, making it difficult to track, says Frank Mora, a partner with HCAP. But that’s not the case with FragilePak, which doesn’t contract with other shipping companies. Its drivers, who include independent contractors as well as FragilePak employees, are all connected on FragilePak’s software system. As a result, customers can log

middlemarketgrowth.org

A FIX-IT CULTURE FragilePak’s technology impacts more than tracking packages. It also plays an important role in the care promised to customers, who entrust FragilePak with products such as treadmills, refrigerators, sofas and rugs. “More than a thousand people every day are engaged with our software in some way, shape or form, from the home delivery experts to the customer service people, to our customers, to our warehouse dock supporters,” says Daniel Perussina, FragilePak’s chief information officer. For example, FragilePak’s software provides dock workers with best practices for loading trailers correctly, so heavy packages can withstand a long journey without toppling over.

SIMONKR/GETTY IMAGES

Photo documentation helps track each package. Workers use mobile apps to photograph a box when FragilePak receives it, loads or unloads it, and when it’s brought into the consumer’s home. “Having proof of the condition of freight is valuable if it comes damaged from the manufacturer,” Perussina says. It also provides proof that an item has been delivered. If there’s an obstacle that prevents delivery (a road closure, for example), the driver is instructed to take a photo to document it. To create a positive experience for the end user, FragilePak’s customer service team gathers relevant information to help the delivery go smoothly and enters it into FragilePak’s system. Sometimes the company picks up a product from the manufacturer’s warehouse; other times the manufacturer delivers it to one of FragilePak’s facilities. Either way, as soon as FragilePak receives a package, it immediately contacts the consumer to ask a series of questions: Do you have a gate code? Can a 24-foot truck come down your street? Where would you like the truck to park? What phone number and email should we use to send you updates? Responding quickly to customer needs is part of Progistics’ culture. “When we see a problem, internally our mandate is: We need to fix that

“FOR BOTH PARTIES TO BE INVOLVED IN THE DEVELOPMENT OF THE SOFTWARE, THEY ALL HAVE TO UNDERSTAND EACH OTHER.” DANIEL PERUSSINA Chief Information Officer, FragilePak

immediately,” Ritch says. That requires having an agile technology team equipped to address problems as soon as possible. Most days, FragilePak has an hour-long call where members of the senior management team from the operations side—logistics planners, regional managers or those in the call center— can discuss concerns. In addition, the tech team holds weekly calls with most of FragilePak’s major customers, so they can hear about their priorities directly. There are about 15 staff members in the technology department, most of whom are software developers based in the Bay Area. When Perussina interviews a potential employee or consultant, he doesn’t just care about tech skills. “I look for the ability to speak in layman’s

MIDDLE MARKET GROWTH // NOV/DEC 2019

“WHEN WE SEE A PROBLEM, INTERNALLY OUR MANDATE IS: WE NEED TO FIX THAT IMMEDIATELY.” JOEL RITCH Founder and CEO, Progistics

E Ritch and a warehouse manager at a cross-dock in Santa Fe Springs, California

terms,” he says. Perussina challenges candidates to pretend he doesn’t know what they’re talking about and to explain their answers as though speaking with a nontechnical user. That matters, he says, because you can’t solve a problem quickly unless you can communicate clearly with customers. “For both parties to be involved in the development of the software, they all have to understand each other.”

‘AN EVER-EVOLVING BUSINESS’ Perussina says the company is considering new ways technology could improve the FragilePak service. That includes implementing RFID scanning in its warehouses to keep track of products within the facility and as they come and go. Augmented reality could have useful applications, too. 3D representations of boxes would provide a better way to assess the volume of freight moving through the system and allow for better instructions for loading trucks efficiently. Machine learning could also play a role. For example, if FragilePak parks in front of a highrise building for a delivery and the building owner threatens to tow the truck, “that would be a data point that we could reuse,” Perussina

middlemarketgrowth.org

says. The next time a driver goes to this location, their mobile app could instruct them to park in the garage around the corner, rather than on the street. Aggressive landlords are just one of many obstacles facing home delivery, which can be a challenging endeavor, even for experienced logistics companies. One of the largest U.S. truckload carriers, Schneider National Inc., announced a service called First to Final Mile in June 2016 after acquiring Watkins & Shepard Trucking Inc. and Lodeso Inc., which provided last-mile home delivery and an online tracking tool. Schneider shut down First to Final Mile in August 2019, noting that the unit’s operating results were “significantly below expectations.” Ten years ago, low-cost providers dominated home delivery for bulky items, with little focus on the consumer experience (and the mud tracked through their homes by workers). That has changed, particularly during the past five years, says Lee Clair, managing partner at Transportation and Logistics Advisors, a consulting firm in Highland Park, Illinois. Like FragilePak, more companies are offering so-called “white-glove” delivery, which involves

a two-person team that unpacks products, removes packing debris from the home, installs or assembles items if needed, and wears shoe covers to protect floors. “It has matured from being a knuckle-dragger business to a technology business,” Clair says. Much of that tech focuses on consumers’ needs. For example, XPO Logistics Inc., a large provider of last-mile deliveries for heavy and bulky items, introduced voice-enabled delivery tracking in 2018 for Amazon Echo and Google Home speakers. Some shippers are acquiring smaller companies to add the necessary technology and home delivery capabilities. “There are a lot of transactions going on in this space,” Clair says, “and a lot of opportunity for private equity and investors.” One example is lastmile delivery company MXD Group. Ryder, a publicly traded transportation company, acquired the business from Platinum Equity in 2018, expanding its capabilities for white-glove delivery of large items. Although Amazon isn’t yet a competitor in the home delivery of bulky products, Clair expects the e-commerce giant will try to expand beyond its success with smaller parcels. During a September 2019 earnings call, FedEx CEO Frederick Smith acknowledged that Amazon was one of four main competitors. Outside of FragilePak, Progistics’ other services include middle-mile delivery (such as supply chain transportation that delivers freight to retailers’ distribution centers), and last-mile home delivery for non-bulky items. The company has more than 800 employees— about 700 drivers and 100 employees in its network operation center. Ritch says he and his team plan to double FragilePak’s revenue in 2020, as e-commerce continues to grow. Despite that opportunity, the company’s

leaders are under no illusions that their business is easy. “We do not sit idle for one moment in terms of thinking that we’ve figured out everything,” Ritch says. “Every customer has different requests and different types of needs, so you have to constantly be adapting to everybody’s requirements. It’s an ever-evolving business.” // S.A. Swanson is a business writer based in the Chicago area.

MIDDLE MARKET GROWTH // NOV/DEC 2019

TRADING IN

TURMO

BY JOANNE CLEAVER

OIL

o some midsize companies caught in the crossfire, international trade policies are starting to feel like a pinball machine: random, cascading and pointless. Kal Beidas, board member and former president of Aetna Bearing Company, based in Livonia, Michigan, has long had smooth working relationships with precision bearing manufacturers in China. The quality of their products is essential to Aetna’s finely engineered parts, sold to customers in industries ranging from agriculture to automotive. Swapping in a new supplier simply on the basis of price and politics could undermine Aetna’s goals for growth, product design and quality. Trying to sidestep tariffs costs Aetna time, money and energy; complicates planning; and infuses discussions with investors with a newly urgent factor. The company finds itself redirecting resources to figure out which high-quality products might be less expensive to source from suppliers in other countries—and how much it will cost to reconfigure contracts, shipping and logistics, especially if the Trump administration changes course. Further straining Aetna’s resources are the lengthy negotiations with customers around passing on a portion of the tariffs. Aetna is focusing on the big picture: Finding and vetting new suppliers is probably smart in the long run anyway. Like Beidas, company leaders and investors are on edge as they feel out the tipping point where the cost of securing new, less expensive suppliers outweighs the transition costs and hassle. Abruptly announced tariffs, trade disputes and related policies are forcing thousands of midsize U.S. companies to navigate a trade regime that is constantly under construction. No sooner do firms learn one workaround when another barrier pops up.

PAO DUELL / EYEEM/ GETTY IMAGES

MIDDLE MARKET GROWTH // NOV/DEC 2019

“ONCE YOU INVEST IN THAT MOVE, YOU AREN’T GOING TO MOVE THAT CAPACITY BACK TO CHINA AT THE DROP OF A HAT.” BRIAN BUNKER Managing Director, Asia, The Riverside Company

LITTLE NOTICE, LESS PRECEDENT The tariffs and related trade policies have been announced with little notice, short deadlines and with seemingly scant concern about the practical and financial fallout for companies. The escalating trade war commenced in January 2018, when the Trump administration announced it would apply tariffs to solar panels and washing machines imported from China to offset what it claimed were below-market prices skewed by Chinese government subsidies. In April, China announced its own tariffs, on the food commodity sorghum, purportedly to combat dumping by U.S. suppliers. Dumping undermines local producers and skews market rates. Tariff ping-pong took off from there, with each country escalating the scope and amount of tariffs. The debate about tariffs has been complicated by the administration’s claim that the extra expense applied to certain imports would not ripple through to producer costs or consumer prices. In fact, economists do detect rising prices due to the tariffs. By mid-2019, hundreds of products were included in the broadly written U.S. tariffs, though exceptions are rampant. For example, while the book publishing industry sorts out the complications, it was announced in late August that Christian Bibles were exempted. While large companies have the luxury of assigning teams to sort out the implications of tariffs, midsize companies face hard decisions about how to redeploy resources to hire experts to analyze, strategize, renegotiate and reorganize around the new rules.

middlemarketgrowth.org

LOOKING BEYOND CHINA The element of surprise is an unwelcome factor in the Trump administration’s trade war with China. It’s not just that the tariffs are inflicted, but that every decision and every deadline seem to be written in invisible ink. In some cases, company leaders go through the effort to confirm to themselves, customers and investors that they need to stay the course with Chinese suppliers. For some, the parts and materials they need are not available in the U.S. “Some contracts are cut in stone but are conditioned on things outside our control. We give our customers options,” Beidas says. “If we don’t view it as a permanent tariff, and if we think that tariff is likely to be among the first to fall off once the U.S. and Chinese politicians reach an agreement, we want to offer customers options as to how they handle it now.” For investment firms with large portfolios, tariffs can impact multiple holdings at once and raise questions about sourcing relationships. About 10 of the 70 companies in the portfolio of The Riverside Company, a private equity firm headquartered in Cleveland, are hit hard by the China tariffs, according to Brian Bunker, a managing director at the firm. That translates to about $30 million in imports that have been affected by tariffs of 10% to 25%. Shifting swiftly to suppliers in Taiwan has added retooling and related contract and logistics costs for those companies, but it is also softening their long-term risk, Bunker says. “Once you invest in that move, you aren’t going to move that capacity back to China at the drop of a hat,” he adds. If there’s a silver lining to the hailstorm of tariffs, it’s that the near-daily headlines have made everyone keenly aware of new opportunities. Companies, investors and advisers say that alternative suppliers, from Taiwan to Mexico, are wasting no time in welcoming U.S. companies of all sizes. “Many of our clients are committed to China for the long term,” says Bob Oberlies, who chairs the Asia practice for Minneapolis-based law firm Fredrikson & Byron. “But China has been

swiftly moving up the value chain and is less interested in being the manufacturer of the world for lower-technology products.” As labor and other prices rise in China, U.S. companies have increasingly turned to second- and third-tier cities within China, and to other countries, he says. “Each new wave of tariffs is forcing them to diversify faster and more broadly.” But could tariffs dog new deals? That’s the rub, says Oberlies. “The U.S. administration’s trade policies are not limited to China, so it’s not entirely clear what countries will be ‘safe’ from future tariffs,” he says. “The U.S. has indicated it will be looking at Vietnam. Mexico has had its own issues, with U.S.Mexico relations hitting several rough patches over the past couple years. Accordingly, we’re helping clients expand their supply chains into a broader group of countries, and to build backup plans for the backup plans.”

ASKING THE RIGHT QUESTIONS By the time the second round of tariffs on Chinese goods gusted in this summer, firms had barely digested the implications of the first round. “In late 2018, when a lot of the clients we were working with weren’t sure how to react to it, some overpurchased inventory. Now they have a strain on liquidity,” says Claudine Cohen, principal and Northeast lead for the transactional advisory practice for New Yorkheadquartered CohnReznick. Trade skirmishes are erupting on so many fronts that the Peterson Institute for International Economics constantly updates its timeline of the countries and products involved, and when the tariffs go into effect. The turmoil is becoming part of the landscape, albeit one that’s constantly evolving. “Now, it’s

GIOVANNA GRAF / EYEEM/ GETTY IMAGES

like we’ll wake up and see what they’re threatening today,” Cohen says. Doug Pallotta, a partner with San Francisco CPA and advisory firm OUM & Co., has seen clients impacted directly by the fast-moving trade developments. “One manufacturer we work with had a piece of equipment on a boat, headed for installation in their U.S. factory, and the price tripled while it was on the water,” he says. “But even then, it was cheaper than what they’d have paid in the states. There can be a compelling price differential.” The policies are so sweeping and tenuous that they create a riptide that can take down seemingly solid deals. Joan D. Hellmer is managing partner of a Radnor, Pennsylvania-based independent

MIDDLE MARKET GROWTH // NOV/DEC 2019

“THE MIDDLE MARKET IS CAPABLE OF REACTING MUCH FASTER TO BIG DISRUPTIONS. THE BIG PLAYERS MAY HAVE THE RESOURCES AND MAY HAVE SOME INFLUENCE OVER SOME POLITICAL DECISIONS, BUT SMALLER ONES CAN REACT MORE QUICKLY.” SVEN JOST Partner, BPM

WANGANQI/GETTY IMAGES

sponsor that works closely with family offices seeking to invest in family-owned companies. Hellmer spent several months and tens of thousands of dollars assessing the likely effect of the tariffs on a potential investment: a home improvement distributor that commissions its own brand of cabinets and supplies, almost all from Chinese manufacturers. Hellmer hired a platoon of lawyers and export consultants to pinpoint exactly how tariffs would affect contracts and prices. For example, if a load of goods was purchased and partly paid for as it was loaded onto a ship, and a round of tariffs went into force while the shipment was on the water, at what point and to what degree would the tariffs be added to the customers’ price? “We found out how many accommodations the manufacturers in China are willing to make to keep the business,” Hellmer says. “Some would even offset the tariffs almost dollar for dollar.” But that wasn’t enough. Hellmer didn’t believe the firm could deliver a sufficient return to

middlemarketgrowth.org

investors due to the unpredictable trade war and the likelihood that the distributor would be forced to pass on substantial accumulated costs. One of the potential investors walked away and the deal fell apart. “This is a new thing included in due diligence,” Hellmer explains. “This used to be one of the last pages of the due diligence deck and now it’s at the front. People want to know how you’re prepared for this and you have to provide the information in a digestible and educated manner. What do tariffs mean for a company’s earnings, for shifting risk, for a competitive position? Everybody is going to ask those questions.”

GLOBAL TRADE’S MANY FRONTS While the U.S.-China trade dispute grabs the most headlines, it’s one of many issues impacting companies with global supply chains. The impending decoupling of the U.K. from the European Union, known as Brexit, is a tempest in a teapot, say advisers. While the political process has been stop-and-go, it is at least a process with a defined goal. The U.K.’s erratic approach to Brexit has already prompted some midsize companies to simply move their European offices or relationships to Ireland, says Sven Jost, the partner who oversees transfer pricing services for San

Francisco-based accounting and advisory firm BPM. In his view, Brexit confusion stems not from the goal but from how to achieve it. “It’s not the same as the China tariffs because it’s taking more time to unfold,” he says. The Trump administration’s tariffs extend beyond China and have hit products from numerous countries and trading blocs. Meanwhile, the renegotiation of the North American Free Trade Agreement, now known as the USMCA, has introduced changes to tariffs on goods traded among the U.S., Canada and Mexico. The various tariffs are one consideration during a company’s valuation, but they are superseded by bigger factors, Cohen says. Strength of management teams, long-term growth trends, material availability, demographic trends and the looming recession are all deeper currents than political whims. The recreational vehicle industry, for instance, rode high on a tsunami of retiring baby boomers. Now, tariffs are just one factor deflating its momentum, she says. Eventually, the dust will settle. When it does, midsize companies might just emerge as the surprise winners, predicts Jost. “Right now, the middle market is squeezed, but it has a huge advantage,” he says. “The middle market is capable of reacting much faster to big disruptions. The big players may have the resources and may have some influence over some political decisions, but smaller ones can react more quickly.” Jost suggests that, with the right guidance and capital, middle-market companies could weather the trade war and come out on top. “As the dust hopefully settles, one way or another, there may be midmarket players who come out of this a lot stronger, especially if you have a couple of strategic investors on your side to help you maneuver through it.” //

TACKLING TARIFFS While they’re seeking a firm grip on a slippery situation, company leaders can coach themselves to take the long view. In doing so, they can advance their change-management skills, says Peter B. Stark, a San Diego-based adviser to C-level leaders. White-knuckling through the challenge is a tempting tactic, but it will wear you out and drain staff morale. Instead, Stark suggests focusing on the horizon. That classic advice for overcoming seasickness applies to erratic tariffs and international economics, too. “People want to see you moving the company forward with positive actions. Focus on what you can control,” Stark says. If staff start to crumble under the barrage of changes, break down big projects into measurable, incremental goals that teams can both accomplish and celebrate. Doing so also fosters “collaboration and communication, which accelerates the change,” he adds. Company CEOs and their colleagues can also adopt these tactics to turn tariffs into a chance to strengthen investor relations: ɋɋ Tap your investor’s network. Don’t hesitate to ask them to put out a query to their own networks to find a specialized expert for precise guidance. ɋɋ Report any solutions back to your investor so they can quickly share wisdom that works with other companies in their portfolios. ɋɋ Track the escalating impact of tariffs. Adapting gradually to incremental, if irregular, cost changes can obscure the cumulative impact. It’s cold comfort, but because everyone in the supply chain is affected, the ice is already broken for hard conversations about trimming and absorbing costs. Advisers recommend calibrating the type and amount of information that company leaders provide to investors according to their expectation for ongoing company ownership. Focused, on-point information about exactly what items and lines of business are currently most affected by tariffs and new policies is better than a flood of data, according to advisers. Give investors your best read of the situation and your best ideas for next steps with the information you have now and outline how you are being flexible, instead of trying to build numerous scenarios.

Joanne Cleaver has been covering entrepre-

“Ultimately, your goal is to spark the confidence that you’ll

neurship and business growth for over 30 years

figure it out, no matter what ‘it’ is,” Jost says.

for national media, as both a staff and freelance

-Joanne Cleaver

journalist.

MIDDLE MARKET GROWTH // NOV/DEC 2019

POLICY POINTS

Middle-Market Representation Grows on Capitol Hill Utah congressman joins caucus focused on middle-market growth

“AS A MEMBER OF THE MIDDLE MARKET GROWTH CAUCUS, I WILL BE ABLE TO SHARE MY EXPERIENCES AS A LOCAL MAYOR WHO WORKED WITH MANY MIDDLEMARKET COMPANIES AND BUSINESSES.” BEN McADAMS U.S. Representative, D-Utah

MORE ONLINE Find updates and insight on policy issues at middlemarketgrowth.org.

middlemarketgrowth.org

hanks to an ACG member, the number of voices on Capitol Hill supporting middle-market businesses recently became one stronger. On July 9, Rep. Ben McAdams, D-Utah, announced his intention to join the Congressional Caucus for Middle Market Growth, a bipartisan coalition of policymakers who raise awareness of the market segment that employs 44 million people in the United States. “As a member of the Middle Market Growth Caucus, I will be able to share my experiences as a local mayor who worked with many middle-market companies and businesses,” says McAdams, a former mayor of Salt Lake County. “It also gives me a way to connect with like-minded members of Congress who share the goal of growing the middle market through smart policy.” McAdams, who took office in January 2019, first learned of the caucus from an enterprising ACG member, Sharon Dow, an operating partner, independent director and managing executive based in Cambridge, Massachusetts, and Park City, Utah. The two discussed the coalition during ACG’s Middle Market Fly-In on June 19, when Dow and other business professionals gathered in Washington, D.C., to educate lawmakers and their staff about the economic impact of the middle market.

The face-to-face meeting between Dow and McAdams was organized after the two met earlier in the month during a strategy summit in Utah attended by local and national political leaders. At the summit, Dow struck up a conversation with McAdams without knowing he was a member of Congress. “He only mentioned that he worked in Washington,” she says. Only later in the conversation, after they exchanged business cards, did Dow discover who he was. “That says something about his character. He’s a very approachable guy,” she says. As Dow and McAdams joined other summit participants for a hike up Bald Eagle Mountain, a peak about 36 miles east of Salt Lake City, Dow took the opportunity to speak with McAdams about the vital role of midsize companies, private capital and the upcoming fly-in hosted by ACG. Intrigued, McAdams’ office remained in contact with Dow and ultimately scheduled a one-onone meeting to take place during the fly-in. Prior to their meeting, Dow researched McAdams and other members of Congress whose staff she was scheduled to visit. “I wanted to know their history so I could have the right inflection on certain issues,” she says. For example, Dow learned that while McAdams was mayor of Salt Lake County, he was a vocal supporter

VOICES OF THE MIDDLE MARKET In-depth interviews about the trends

E Operating Partner and Independent Director Sharon Dow (center) spoke with Rep. Ben McAdams during ACG’s Fly-In on June 19, which led him to join the Congressional Caucus for Middle Market Growth. Also shown are Jerome Romano, TM Capital Corp. (left) and Douglas Friedenberg, Jigsaw Capital.

of measures that encouraged economic development in the region. “Jobs and growth have always been important to him,” says Dow, who supplemented her research with information provided by ACG’s public policy team, including data from GrowthEconomy.org, which tracks job creation and sales growth in private capital-backed companies. Following the recommendation of ACG’s policy advisers, Dow made sure to highlight a company in each member’s district and the number of jobs it has created in recent years. “One of the tips given at the prep session was to make the story real for them,” she says. Less than a month after meeting with Dow in D.C., McAdams signed on as the newest member of the Congressional Caucus for Middle

Market Growth. Dow has also received follow-up emails from other congressional offices asking to meet the next time she visits Washington. Reflecting on the fly-in, Dow says the key to her successful visit was to go one step beyond education and show how private capital can help advance lawmakers’ goals of stimulating economic growth and job creation locally. “I think members of Congress hear a lot of things like ‘fix this thing for my local area,’ and they want to have a meaningful impact in their districts,” she says. “Offering help with major issues like job growth can go a long way.” //

impacting midsize companies and M&A. Guests include CEOs, economists, private equity investors and other influencers who discuss what they’re seeing in the market.

LISTEN & SUBSCRIBE TODAY.

– Benjamin Glick

MIDDLE MARKET GROWTH // NOV/DEC 2019

POLICY POINTS

ACG Urges SEC to Simplify Rules for Raising Capital

SCOTT GLUCK Special Counsel, Duane Morris LLP

MORE ONLINE Find updates and insight on policy issues at middlemarketgrowth.org.

middlemarketgrowth.org

aising capital can be challenging for middle-market companies and private equity funds, due in large part to the various types of exempt offerings that exist. The current regulatory framework is such that determining whether an offering should be classified under Regulation A or under Rule 506(b) of Regulation D, for example, requires time, financial resources and outside expertise that middle-market organizations often do not have. To determine whether to simplify the regulatory framework around capital raises, the Securities and Exchange Commission in June initiated a two-month period for the public to weigh in on proposed changes. ACG’s public policy team collected feedback from its membership and submitted a comment letter in September recommending that the agency harmonize its offerings and offer additional clarity—with the goal of making it easier for middle-market companies and private equity funds to raise capital to support growth initiatives. Middle Market Growth spoke with Scott Gluck, special counsel at Duane Morris LLP who works on regulatory issues on behalf of ACG Global, about the comments submitted by ACG to the SEC, and why this issue affects nearly all ACG members.

What are “exempt” offerings and how do they impact ACG members and the middle market?

Federal securities law requires that every offering or sale of securities be registered with the Securities and Exchange Commission, unless an exemption from registration is available. Registering an offering with the SEC is a very time-consuming, costly and onerous process. Exempt offerings serve as an alternative for capital formation and are a crucial source of funding for the middle-market businesses and private funds that form the core of ACG’s membership. Capital raised through exempt offerings is frequently referred to as “private capital,” and it serves as a critical tool for helping midsize companies to grow their operations and create jobs.

Q A

Why is the SEC requesting feedback about harmonizing securities offering exemptions? In recent years, Congress has expanded the number and types of exemptions available to issuers. These efforts have increased the options available to companies and private equity firms seeking to raise capital, but it has also resulted in a complex framework for exempt offerings. Middle-market organizations in particular may find it difficult to navigate this regulatory web. They have fewer resources than their larger counterparts, yet they may be more likely to take advantage of exempt

“IN ITS COMMENT LETTER, ACG DESCRIBED HOW HARMONIZING EXEMPT OFFERINGS IS LIKELY TO REDUCE COMPLEXITY AND COST, MAKING IT EASIER FOR MIDDLE-MARKET COMPANIES AND FUNDS TO RAISE CAPITAL THAT THEY CAN THEN USE TO CREATE JOBS.”

offerings. Through its request for comment period, the SEC sought public feedback on a broad range of issues to enable the agency to undertake a comprehensive review of the design and scope of the framework for these exempt offerings. The ultimate goal of the request for comment is to harmonize the rules and regulations governing exempt offerings and to facilitate capital raising and capital formation.

Q A

What feedback did ACG provide to the SEC as it relates to raising capital? In its comment letter, ACG described how harmonizing exempt offerings is likely to reduce complexity and cost, making it easier for middle-market companies and funds to raise capital that they can then use to create jobs. In its letter, ACG also addressed the definition of an “accredited investor.” Many exempt offerings restrict or prohibit individuals who do not meet the definition of an accredited investor from participating in the offering. The current definition is based solely on a person’s annual income or the amount of their assets. ACG recommended that the SEC expand its definition to include individuals who have passed FINRA examinations; have specific industry knowledge or expertise; have a level

of sophistication outside of the financial sphere, regardless of income or net worth; or who pass an accredited investor examination. A related issue involves “knowledgeable employees” of private funds. These individuals are considered “qualified purchasers” under the Investment Company Act, but they are not considered accredited investors under the securities laws— which is a much lower standard. These knowledgeable employees are generally not permitted to invest in the funds their firm sponsors, even though they are fully aware of the potential risks because they work there. ACG argued in the comment letter that this anomaly should be corrected.

Q A

What other issues did ACG address in the letter? Another issue ACG commented on relates to the definition of “general solicitation” or “general advertising.” One of the key requirements for one of the most popular exemptions, the Rule 506(b) private placement, is that no general solicitation or general advertising can take place in connection with the offering. These terms are not defined, creating confusion for ACG members as to what does and does not constitute a general solicitation.

ACG’s comment letter also described why private fund advisers should be able to communicate with data aggregators, such as Pitchbook or Preqin, without their actions being considered a general solicitation. Currently, any communication with these market publications—even to correct erroneous information published on their platforms—could be considered a general solicitation. ACG’s Private Equity Regulatory Task Force has met with the SEC multiple times to discuss this issue, and the recent comment letter presented another opportunity to communicate to the SEC that this is an important issue for ACG and its private equity members.

Q A

What happens next?

Comments in response to the SEC’s concept release were due Sept. 24. These will be published on the agency’s website and reviewed by SEC staff. After the review period, the SEC may begin proposing changes to the existing rules and regulations. ACG’s public policy staff will be tracking the issue closely and will update ACG members about new developments. // Compiled by Kathryn Mulligan

CONTACT To take advantage of future opportunities to help shape ACG’s advocacy efforts, join ACG’s Public Policy Interest Group by contacting policy@acg.org.

MIDDLE MARKET GROWTH // NOV/DEC 2019

From left, DHG LLPâ&#x20AC;&#x2122;s Scott Linch, Blythe McAulay and Ben Redman

Photos by Peter Taylor Photography

IN FOCUS DHG LLP

Made for the Middle Market DHG’s strategic and flexible approach makes all the difference

t’s no secret that M&A is booming in the middle market. Deal activity is at an all-time high, private equity firms hold record amounts of dry powder, and family offices, mezzanine funds and others have joined the ranks of investors looking to deploy capital. As M&A activity has picked up, so has demand for private equity services tailored for the middle market. DHG LLP, a public accounting firm headquartered in Charlotte, North Carolina, recognized these emerging trends a decade ago and set out to build a dedicated private equity services practice. With its vast industry expertise and exclusive focus on the middle market, today the firm serves as a one-stop solution for private equity firms, portfolio companies and founderowned businesses at every stage of a transaction. To serve those clients and compete in the M&A marketplace, DHG launched its transaction advisory services practice in 2010. Three years later, it formalized its private equity practice. Between 2015 and 2017, the firm honed its focus on private equity and middle-market M&A further by adding private equity sales, operations and business development leaders and creating an investment banking team, DHG Corporate Finance. “From the outset we have viewed DHG Private Equity as a key component of our firm’s mission to bring relevant solutions to our clients, so we have invested heavily in talent at all levels of the practice and throughout our footprint to fuel our growth,” says Matt Snow, DHG’s chief executive officer. The firm’s private equity practice now includes more than 100 dedicated private equity

Content Provided by ACG Partners and Featured Firms

audit, tax and advisory professionals, who work with businesses valued between $1 million and $600 million and private equity funds with assets under management ranging from $500 million to $20 billion. DHG offers buy-side and sell-side due diligence, plus financial and consulting services, including audit, tax, valuation, IT advisory and risk advisory. “Our goal is to partner with funds to provide multiple solutions across their portfolio and throughout the entire life cycle of any investment,” says Scott Linch, managing partner of DHG Private Equity. “Our clients want to increase the value of their businesses and reduce risk.”

STRATEGIC COLLABORATION The U.S. middle market is made up of more than 200,000 businesses with between $10 million and $1 billion in revenue, the equivalent of the third-largest global economy, according to the National Center for the Middle Market. With that breadth comes diversity, requiring a flexible and tailored approach when working with midsize companies and investors. Through strategic collaboration, DHG helps clients ranging from founder-owned businesses to seasoned deal-makers to navigate transactions across more than 20 industries, spanning everything from health care to technology to manufacturing. The firm’s deep industry expertise makes it a good fit for funds that invest across many sectors, and for those employing a buy-and-build strategy. “When you are building a platform and have, say, seven, eight or 10 add-ons, you’re bound

MIDDLE MARKET GROWTH // NOV/DEC 2019

“OUR GOAL IS TO PARTNER WITH FUNDS TO PROVIDE MULTIPLE SOLUTIONS ACROSS THEIR PORTFOLIO AND THROUGHOUT THE ENTIRE LIFE CYCLE OF ANY INVESTMENT.” SCOTT LINCH Managing Partner, DHG Private Equity

E Above: Blythe McAulay, chief of staff, DHG Private Equity. Below: Ben Redman, managing partner, DHG Transaction Advisory Services (left) and Scott Linch, managing partner, DHG Private Equity

to have a few that will be complicated,” says Ben Redman, managing partner for DHG’s Transaction Advisory Services practice. Deep industry knowledge enables a diligence team to quickly evaluate what a particular management team has—or has not—done, he says. “We know what red flags to look for on behalf of our clients.” Quality and efficiency are a focus for all DHG’s engagements, according to Redman, not just add-on deals. A typical timeline for transaction advisory services is three to four weeks, he says. By the end of that time, the client has their quality of earnings, tax diligence and usually IT diligence as well. Through years spent working with private equity clients, DHG’s team is equipped to move quickly and to handle anything that comes up before, during and after a deal. “Our professionals are familiar with the routines and speed of private capital investors, meaning we have typically seen most challenges and are not surprised by them,” Linch says. One way DHG helps clients is by guiding business owners who are receiving outside capital for the first time. For an entrepreneur new to the process of selling to private equity, DHG’s professionals are able to educate both parties to overcome common issues associated with these transactions. “We bridge the gap between sophisticated institutional investors and middle-market companies,” says Blythe McAulay, chief of staff for DHG Private Equity. “We spend a lot of time sharing our knowledge with buyers, sellers and investment bankers. We’ll sit down and say, ‘Here are the critical deal components and here’s how you can prepare.’”

middlemarketgrowth.org

At every stage of the deal cycle, one DHG relationship manager proactively orchestrates the appropriate resources needed to ensure all client needs are met. The firm always provides a senior leader—a partner, principal or director— to accompany clients during every transaction. “Our private equity clients can be confident there will be a seasoned professional sitting down with the management team of the target to help the process move along,” Redman says.

A FLEXIBLE APPROACH DHG’s customized approach with middlemarket companies means it’s often a better fit

for a private equity fund than a large competitor would be. Among DHG’s clients is Pamlico Capital, a Charlotte-based private equity firm that invests in family-owned companies with $20 million to $100 million in revenue. In 2015, DHG did a quality of earnings report for a prospective investment called MetaMetrics, a small data analytics startup founded by two academics. DHG increased buyer confidence and seller awareness through the entire process to ensure it went smoothly with all stakeholders. “If we had used a Big Four accounting firm, they would have descended with a big team and a boilerplate list of information requests,” which can overwhelm a small company, says Scott Stevens, a partner at Pamlico. In contrast, DHG brought “a streamlined list of items that were thoughtful and relevant to what we needed to learn.” The DHG team walked the controller through what was needed in a straightforward, non-threatening way, while still providing accurate and precise information, according to Stevens. “DHG has a better approach, one that works in the middle market,” he says. Today, DHG supports Pamlico with transaction advisory services while also providing audit, tax, valuation and advisory solutions to select portfolio companies. While DHG’s focus lies heavily in the middle market, it’s seasoned team can also cover larger

DHG AT A GLANCE ɋɋ Year Founded: 1959 ɋɋ Employees: More than 2,000 across the U.S. ɋɋ Geography: DHG serves clients across all 50 U.S. states and internationally ɋɋ Private Equity Services Offered: Fund, transaction advisory, portfolio company, exit and corporate finance services across more than 20 industries ɋɋ Transaction Advisory Services Practice: More than 350 deals last year, 50 dedicated professionals across five major markets ɋɋ Awards: 2019 Best Workplace in Consulting & Professional Services (Best Place to Work and Fortune); 2019 Best of the Best Firms (Inside Public Accounting)

transactions as well, since the size and scope of many private equity firms’ investments vary widely. With more funds in the market competing for assets, quality deals have become more difficult to come by. DHG has served as a source of deal flow for private equity clients, helping them identify companies in a crowded investment environment. As private equity firms look to buy attractive assets and generate a positive return, having a trusted partner with extensive middle-market private equity experience is more important than ever. “We help our clients acquire, build and improve businesses,” McAulay says. “We understand how our role can add value at any stage of the deal life cycle.” //

MIDDLE MARKET GROWTH // NOV/DEC 2019

THE PORTFOLIO

Starting the IoT Journey MID-MARKET TRENDS // How to turn data into value

T Anthony Casciano President and CEO, Siemens Financial Services, Inc.

he internet of things, known as IoT, is a network of interconnected objects and systems that produces data. The realtime information it shares allows businesses to secure a competitive advantage through improvements in productivity and efficiency, as well as insight into customer needs. With data shared by IoT, companies can determine how the performance of one object impacts another, and better measure and manage company operations across the entire enterprise. IoT has many applications, ranging from data about how customers use products and services, to predictive maintenance in rail operation, management of energy usage, and factory floor optimization. For example, real-time information delivered from sensors can reveal usage patterns that can change the way business is conducted. Research has shown that while many businesses identify the growing importance of leveraging IoT and digitalization in daily operations, few have started to incorporate it. Out of approximately 750 executives polled by Siemens and Harvard Business Review, 74% of respondents said they believed IoT will be a competitive differentiator, yet only 36% said they are using it in their core operations. Modernizing existing operations and implementing change management processes stand as the two biggest barriers to adopting IoT. However, embracing IoT and the digital transformation can lead to many benefits and competitive advantages. In fact, by not investing in IoT, businesses put themselves in danger of falling behind today’s industry standard and risk becoming obsolete. IoT helps companies create new customer-centric business models for their products. Previously, industrial business models centered around selling customers on the value that a product provides over its useful life. This is still

middlemarketgrowth.org

an important component of business models today, but the way that value is being delivered is changing due to the growth of “industrial consumerism.” Companies today need to focus more on the customer experience attached to the product being sold. This is how the company differentiates itself from its competitors, and consumer experiences have a large influence on expectations in the B2B world. As they increase their investments in IoT, companies will have to prepare themselves for the threat of cyberattacks. Despite the value that IoT can provide, connecting machines and equipment to cloud-based platforms makes companies susceptible to online attacks. Given the increasing threat of cyberattacks and data breaches in today’s technological world, companies and investors must be flexible and comprehensive in their due diligence when considering acquisitions. Proactively prioritizing cybersecurity and implementing detailed incident response plans are essential steps businesses should take. Companies should take a “think big, start small, scale fast” approach as they incorporate IoT into their operations. This involves driving IoT from a business case, not pushing a technology into operations simply because of its fascinating potential. Digitalization is a key competitive advantage for all businesses to stay successful and relevant in the minds of consumers and end users. IoT has already set sail, and companies must make an investment and drive business models that create consumer value in order to stay afloat. For resources about investing in IoT, such as whitepapers from Siemens and other industry thought leaders, visit www.digitalizewithsiemens.io. // Anthony Casciano is president and CEO of Siemens Financial Services, Inc. He also leads the IoT efforts of the business in the United States.

Content Provided by ACG Partners and Featured Firms

THE PORTFOLIO

Solving the Human Resources Puzzle SOUND DECISIONS // Five ways to build an effective HR strategy

G Mike Ross Manager, Innovation and Development, Insperity

rowing companies depend on many things, such as operations, finance, sales and technology. But human capital often gets overlooked. People are a company’s most valuable asset, and businesses that get the human capital piece right are a step ahead of the competition. While there are many nuances to the human resources puzzle, here are five ways to improve growth potential: Bolster company culture. Corporate culture is the thread that runs throughout the fabric of a company—from employee engagement and productivity to processes and organizational alignment. But as a business grows, its culture can fall victim to neglect. To keep company culture from taking a dive, businesses should focus on maintaining communication, set expectations and share them. When employees know the company’s mission, its values and what’s expected of them, they can focus on doing things that align with the company’s goals. Focus on recruiting and retention. Businesses in growth mode sometimes can’t fill their positions fast enough. But hiring without having a strategy could create more problems than it solves. That’s why a recruiting strategy is crucial. Companies should have a job description and a list of attributes for the job. Use top performers’ characteristics and attributes to develop an ideal-candidate profile. Companies should also be mindful of the employment brand. What are reviewers on job sites saying about the company? Is the position being advertised accurately? Will current employees recommend the company to their connections? It’s important to make every effort to retain good employees. It’s costly to fill the same positions repeatedly. Companies that focus on rewards, recognition, training and

Content Provided by ACG Partners and Featured Firms

communication are doing what they can to keep good employees. Minimize HR-related risk. Businesses are vulnerable to potential HR-related missteps, such as unemployment claims, discrimination and fines. Just because it hasn’t happened yet doesn’t mean it can’t. Having guidelines and policies in place is best when dealing with risk reduction. This can start with an employee handbook that all employees know and use, and extends to training, communication, hiring and performance-management practices. Emphasize development. The best business leaders know that a company’s growth doesn’t come from maintaining the status quo. The same holds true for the people within that company. To move the company forward with innovation and productivity, its people must continue learning. To be effective, a professional development program should support the company’s goals. Consider various types of learning, such as online courses, lectures and coaching. Also, consider giving top employees stretch assignments that will challenge their skills and creativity. Get ready for the next phase. Preparing for the next move—whether it’s merging, selling or exiting—should include a clear assessment of the organization, its key players, culture, productivity, compensation system and processes. Having this information will help potential buyers assess the quality of a business’s human capital infrastructure. And for those looking to sell, it can increase the company’s valuation and attract a higher caliber of buyer. // Mike Ross is manager, innovation and development, at Insperity. He has a background in corporate finance and strategy and is responsible for M&A activity at Insperity.

MIDDLE MARKET GROWTH // NOV/DEC 2019

THE PORTFOLIO

Going Green in the Middle Market SOUND DECISIONS // Sustainability benefits businesses and stakeholders

S Anthony DeCandido Partner, RSM US LLP

ustainability is an important way for businesses to connect with stakeholders and showcase their mission and core values. Yet middle-market companies have fallen behind larger corporations in their sustainability efforts because they often lack the experienced personnel and financial resources needed to make them happen. Companies in this segment also struggle to develop metrics integral to driving and maintaining sustainability performance. Consumers today are increasingly interested in why a company does what it does, not just what it offers. Initiatives by a number of leading global brands reflect this growing trend: Cisco, an internet networking company, commits to limiting materials waste; electronics retailer Best Buy trains teens from underserved communities for tech-reliant jobs; and many companies enlist minority- or female-led teams to encourage diverse viewpoints.

“AS THE MARKETPLACE INCREASES THE IMPORTANCE OF SUSTAINABILITY, MIDDLE-MARKET LEADERS SHOULD SEE THIS AS A CREATIVE WAY TO STRENGTHEN THEIR BUSINESSES WHILE SIMULTANEOUSLY CONTRIBUTING TO SOCIETY.” The Best of Both Worlds Middle-market businesses often face two seemingly conflicting choices: optimize profitability or do right by society. While most list sustainability as a strategic priority, few experience robust value creation. According to RSM’s Middle Market Business Index survey, over 90% of middle-market executives indicated their companies were engaged in some form of social responsibility—but only 38% had a formal plan in place.

middlemarketgrowth.org

Middle-market companies should not put off sustainability. As the marketplace increases the importance of sustainability, middle-market leaders should see this as a creative way to strengthen their businesses while simultaneously contributing to society. They can achieve value through sustainability by focusing on policies and procedures for initiatives in areas such as energy and materials efficiency, vendor selection practices, people engagement, community outreach, health and wellness, education, gender equality, and diversity and inclusion. A New Frontier Today, employees and suppliers require full access to a company’s sustainability strategy and prefer a level of transparency that was formerly offered only to boards and C-suite executives. Social media offers a front-row seat to the previously unseen inner dealings of business. Society is accustomed to greater levels of access and consumers want to align with the mission and values of an organization’s brand. In the future, technological advances such as the internet of things—which sends and receives data through the interconnection of everyday devices—will help middle-market companies determine the impact of sustainability initiatives in real time. Middle-market companies need to develop sustainable solutions so that they can operate as part of a larger supply chain that demands such solutions, while also attracting new customers or employees who seek them out. Middle-market companies are not in the spotlight as often as large companies when it comes to sustainability, but their future success depends on embracing sustainable thinking and actions. // Anthony DeCandido is a partner and financial services senior analyst at RSM US LLP.

Content Provided by ACG Partners and Featured Firms

THE PORTFOLIO

Transportation and Logistics M&A MID-MARKET TRENDS // Tips for investing in this market

O Greg Lafin, Managing Director, BKD Capital Advisors

verall, mergers and acquisitions activity within the trucking, transportation and logistics market has been flat or slightly declining in 2019. That trend is expected to continue through the balance of the year for a number of reasons. While e-commerce and condensed consumer delivery expectations are fueling growth, tariffs are slowing import traffic and adversely impacting volumes. Industrywide, downward pricing pressure continues. Meanwhile, driver shortages are still a top issue and firms using independent contractors remain under heavy scrutiny. Another challenge comes in the form of fuel expense, which continues to rise due to commodity price stabilization and higher taxes, thus pressuring profit margins. At the same time, technology investments continue to rise, particularly in the areas of driver safety and compliance, fleet management and migrations to customer-centric cloud platforms. The trend toward adopting green initiatives continues to add cost to fleet additions as many firms try to incorporate alternative-fuel vehicles to enhance efficiencies and satisfy customer requests and demands. Finally, industry consolidation continues as smaller firms, outside of certain specialty niches, are challenged to compete and invest. Recommendations for Investors Whether it’s preferable for a logistics or transportation company to be asset-heavy or asset-light depends on the nature of the sale. Both of these platforms are needed to move freight. Asset-heavy transactions are valued approximately one-third less from an adjusted EBITDA multiple perspective; however, they do offer significant downside protection given the liquidation value of the fleet assets. Asset-light transactions are viewed more favorably because

Content Provided by ACG Partners and Featured Firms

the significant annual investment in fleet assets is eliminated. Relationships and niches typically drive the premium in asset-light transactions, making retention of key employees and customers a critical factor. For sellers, it’s wise to market companies with sell-side due diligence in hand because often it leads to enhanced value. The potential financial and compliance surprises during diligence are usually removed, which helps improve initial valuations, increases the certainty of closing value and can speed time to close. Key areas of focus continue to be state and local taxation, employee versus independent contractor reporting, revenue recognition, and capital lease and operational lease accounting standards, along with overall financial integrity. Overall, the broad M&A landscape continues to be a seller’s market with near record-high valuations. The trucking, transportation and logistics market will continue to consolidate, offering PE and growth-minded companies an opportunity to build some exciting, accretive enterprises. This industry continues to change and disrupt the norms of the past with technological advancements, including autonomous fleets using artificial intelligence and drone delivery. Innovative and operationally intensive companies will emerge as winners in this future state. Companies will continue to outsource delivery, warehousing and more, thus focusing on their core competencies, opening the door for more—and new—customer acquisition opportunities within the industry. // Greg Lafin is managing director of BKD Capital Advisors. This article is for general information purposes only and is not to be considered as legal advice. Consult your BKD adviser or legal counsel before acting on any matter covered in this update. Article reprinted with permission from BKD CPAs & Advisors, bkd.com. All rights reserved.

MIDDLE MARKET GROWTH // NOV/DEC 2019

GROWTH ECONOMY

UTAH // 1998â&#x20AC;&#x201C;2017 Private equity-backed businesses in Utah grew jobs at more than four times the rate of the broader business community over the past two decades. Meanwhile, sales at PE-backed companies grew at more than twice the rate of other businesses in the state. Over the past 10 years, IT accounted for 31% of private equity deal value in Utah while business-to-consumer deals made up 28%.

SALES GROWTH % BY SEGMENT

SALES

1.4% 45.3% 39.9% 13.4%

ACG UTAH

JOB GROWTH % BY SEGMENT 0.1% 16.2% 35.3% 48.5% 0%

101.9%

SALES GROWTH IN PE-BACKED BUSINESSES

42.3%

SALES GROWTH IN ALL OTHER BUSINESSES

Small: Less than $10M in sales MM Seg 1: $10-50M in sales MM Seg 2: $50-100M in sales MM Seg 3: $100M-1B in sales Large: More than $1B in sales

JOBS

GROWTH IN PE-BACKED BUSINESSES

GROWTH IN ALL BUSINESSES

JOBS CREATED BY PE-BACKED BUSINESSES

143%

34.8%

13,545

MORE ONLINE See the impact of middlemarket private equity on your state at GrowthEconomy.org.

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

middlemarketgrowth.org

ACG@WORK

H ACG CHICAGO ACG Chicago got out of the office and spent an evening down by the lake for the chapter’s Summer Social on the Beach. The event was held at the Shore Club, an event venue facing Lake Michigan, and drew 85 attendees. This event offered ACG Chicago members a new venue to network with colleagues and make new connections.

ACG CLEVELAND F ACG Cleveland hosted its Women in Transactions panel event, “Finding Your Next Deal-Making Edge: Recruiting Women into M&A,” which drew a record 77 attendees. The panel was hosted at the Alex Theater and a cocktail hour was held at the rooftop lounge of Metropolitan at The 9 in the heart of downtown Cleveland. Pictured from left are Cary Zimmerman, KJK; Suzanne Miklos, O.E. Strategies, Inc.; Leslie Carno-Harf, Corporate Search Consultants; Corrie Menary, Kirtland Capital Partners; and Christine Jaroszewicz, Stout.

ACG Cleveland brought together 21 past chapter presidents for dinner at Delmonico’s Steakhouse to honor them for their service and to provide an opportunity for them to discuss their experiences leading the chapter. Seated at the center of the group is current ACG Cleveland President John Grabner along with ACG Cleveland chapter executive Joan McCarthy, standing at center.

MIDDLE MARKET GROWTH // NOV/DEC 2019

ACG@WORK

ACG DETROIT F ACG Detroit’s NextGen group hosted one of its biggest events of the year, the 6th Annual NextGen Summer Soiree at Urbanrest Brewing Company in Ferndale, Michigan. RMA East Michigan Young Professionals and TMA Detroit NextGen helped organize the event, which brought together more than 150 industry professionals to network over locally brewed beer and pizza supplied by a local restaurant’s food truck. The location changes every year to a new popular spot in Metro Detroit.

H ACG GERMANY ACG Germany launched a new event series in Munich at La Villa on Lake Starnberg. The 70 attendees represented Munich‘s leading investment banks, financial investors, M&A advisers and C-level executives, who promoted the international network that ACG offers to middle-market deal-makers. The event was sponsored by Baker Tilly, Platinum Partners, SAXO Equity and La Villa. Pictured from left are Frank Stahl, Baker Tilly; Jeremy Harrison, ACG UK; Harald Klien, ACG Austria; Katja Lindo, La Villa; Susanna Fuchsbrunner, ACG Germany; Titus Schurink, ACG Holland; Alexandra Sichart, La Villa; Ludwig Hoos, ACG Germany; Eva Katheder, ACG Germany; Christoph Winkelkötter, gwt Starnberg; Peter Harter, Saxoquity; and Michael Krüger, Platinum Partners.

middlemarketgrowth.org

MID-SOUTH ACG CAPITAL CONNECTION F Co-hosted by ACG Kentucky and ACG Tennessee, the Mid-South ACG Capital Connection drew more than 400 attendees to Louisville, Kentucky, where the event was held at the Omni Louisville Hotel and Churchill Downs. In addition to the networking opportunities provided for business owners and services professionals, the event also featured Kentucky highlightsâ&#x20AC;&#x201D;bourbon tasting, distillery tours and horse racing.

Louisville Mayor Greg Fischer (pictured) delivered an address at the conference, and attendees also heard from bourbon entrepreneur Wes Henderson, co-founder and chief innovation officer of Angelâ&#x20AC;&#x2122;s Envy. The chapters alternate the location of the conference between Louisville and Nashville each year.

H ACG LOS ANGELES More than 40 participants competed in a tennis tournament hosted by ACG Los Angeles and held at the renowned Los Angeles Tennis Club located near Hollywood. Pictured is Dean Jackson, RSM US LLP.

MIDDLE MARKET GROWTH // NOV/DEC 2019

ACG@WORK

ACG SOUTH FLORIDA F ACG South Florida held its second Women Connect Mixer at Topgolf. This event is designed to facilitate connections between women leaders in the dealmaking community to share experiences and contacts, and to help one another succeed through networking and professional development.

H ACG TORONTO More than 30 attendees gathered at the Aird & Berlis LLP office in downtown Toronto for the USMCA Breakfast Seminar to discuss the impact of the United States-Mexico-Canada Agreement. Pictured from left are Mike Fenton, president and CEO of ACG Toronto; Armando Ramos, CIDEL Asset Management; Porfirio Thierry MuĂąoz-Ledo, Consulate General of Mexico in Toronto; Randy Williamson, Aird & Berlis LLP; Nik Nanos, AmCham Canada; and Rodrigo Contreras, Sericea Labs.

Nearly 100 industry executives attended ACG Torontoâ&#x20AC;&#x2122;s Young Professionals social at the rooftop patio of the National Club in downtown Toronto for an evening of networking and professional development. The event was organized by the Young Professionals committee and sponsored by Donnelley Financial Solutions, Euclid Transactional, Gardiner Roberts LLP, Grant Thornton LLP, McMillan LLP and RBC.

middlemarketgrowth.org

SUMMER DEALMAKING CONFERENCE F ACG New York hosted the Summer Dealmaking Conference along with ACG Philadelphia and ACG Boston. The annual event drew 120 attendees to Gurney’s Star Island Resort in Montauk, New York, and featured a networking event specifically created for dealmaking professionals and advisers. Below, some of the event’s attendees pose for a photo on a dock located at the resort.

CONTACT Want to share photos from your recent chapter event? Email us at editor@acg.org.

MIDDLE MARKET GROWTH // NOV/DEC 2019

THE LADDER

Ballard Spahr, a national law firm, has appointed BRIAN DOERNER and MAGGIE TATTON as co-practice leaders of the firm’s Mergers and Acquisitions practice group. Doerner, who also serves as co-practice leader of the firm’s Life Sciences and Technology practice group, and Tatton represent public and private companies and private equity funds in mergers and acquisitions, divestitures and spin-offs, restructurings and recapitalizations, and cross-border transactions. They also provide ongoing legal services related to general corporate governance, contract review and negotiation, strategic initiatives and joint ventures.

KORI S. CAREW has joined law firm Seyfarth Shaw as chief inclusion and diversity officer. In this newly created role at Seyfarth, Carew is responsible for advancing the firm’s inclusion and diversity strategy, and accelerating its existing portfolio of award-winning programs and external partnerships. Prior to joining Seyfarth, she served for the past seven years as director of strategic diversity initiatives at law firm Shook, Hardy & Bacon.

Huron Capital, a lower middlemarket private equity firm based in Detroit, announced a new partner has joined its Flex Equity team, TONY PULICE. An experienced industry professional who has held leadership positions at Rockbridge Growth Equity Management and Goldman Sachs, Pulice will use his experiences and skills to identify, execute and manage non-control equity investments for the firm.

middlemarketgrowth.org

SARITA GAVHANE has joined Edgewater Capital, a performance materials investment firm, as vice president. As a member of the firm’s investment team, she is responsible for identifying and developing key investment themes for new investment opportunities, transaction execution and supporting the management teams of portfolio companies. Gavhane joins Edgewater Capital from Canal Holdings, where she served as vice president.

Carl Marks Advisors, a New York-based investment bank, has added DANIEL IRELAND (top) as managing director and PAUL HUETTNER (below) as vice president. Both will work toward expanding the firm’s health care, retail, higher education and family business practices. Ireland, who will focus on restructuring and corporate finance, most recently served as managing director at FTI Consulting. Huettner was most recently an associate at Chilmark Partners.

JIM OWEN has joined Stout as a managing director in the firm’s Investment Banking Group. He brings more than 20 years of experience executing mergers and acquisitions, debt and equity financing, capital raising, board advisory, valuation and strategic alternatives analysis for middle-market and large companies, and he has deep experience in the construction, engineering, utility services and industrials sectors. Before joining Stout, Owen was a senior advisor at Verit Advisors.

Trinity Hunt Partners, a middlemarket private equity firm based in Dallas, announced it has promoted GARRETT GREER (top) to principal. Since joining Trinity Hunt in 2016, Greer has executed multiple platform investments and add-on acquisitions. He also assists with evaluating new investment opportunities and managing portfolio companies. Trinity Hunt also promoted JOHN OAKES (below), to vice president. Since joining the firm in 2015, Oakes has supported the firm’s investments. As vice president, he will assist in sourcing, deal execution and portfolio company growth initiatives.

Global law firm Morrison and Foerster has added two partners to its San Francisco office. JESSICA ISOKAWA has joined the firm’s Global Private Equity Investments and Buyouts Group and will also work closely with its Global Mergers and Acquisitions Group, while BRADLEY KONDRACKI has joined its Emerging Companies and Venture Capital Group.

JOHN CURRY has joined WILsquare Capital, a St. Louis-based private equity firm, as vice president. Curry joins the firm having graduated with an MBA from the Wharton School at the University of Pennsylvania. Prior to business school, John spent seven years at investment bank Robert W. Baird & Co., where he participated in a wide range of M&A and financing transactions for middle-market companies.

StepStone Group, a global private markets specialist, has named SCOTT HART as co-CEO. Hart, who has worked at StepStone for 12 years, serves as head of private equity and as a member of the executive and private equity investment committees, and helps to run the firm’s global co-investment practice. As co-CEO, Hart will work closely with Monte Brem, a founding partner and CEO since 2007, to oversee the firm’s management and strategic direction.

GERALD CONNOLLY has joined Potter Electric Signal Company—a provider of products to the fire and life safety industry and a portfolio holding of San Francisco-based private equity firm Gryphon Investors—as CEO. He succeeds the previous CEO, who elected to retire after 40 years with the company. A 30-year veteran of the building solutions and fire safety industry, Connolly most recently served as president of Legrand SA.

Pharos Capital Group, a physician-founded health care private equity firm, has promoted RYAN SHELTON to principal. Shelton, who has been with the firm since 2006, is responsible for evaluating and executing investment opportunities, performing transaction due diligence and working with management teams to implement operational and growth strategies. He previously served as vice president.

MORE CAREER INFO Watch for more career information in The Ladder monthly e-newsletter.

MIDDLE MARKET GROWTH // NOV/DEC 2019

IT’S THE SMALL THINGS

TRENDS IN TRANSPORTATION AND LOGISTICS // Get a Move On

Consolidation Makes Waves In 2019, just three shipping groups—2M, Ocean

The average number of miles trucks travel annually continues to climb in the U.S., and so do carbon

portion of the world’s seaborne traffic. With more

dioxide emissions. To keep up with fuel consump-

consolidation expected in the future, analysts fore-

tion standards in the U.S., truck prices are set to

see higher shipping rates due to less competition.

increase, which is driving the transportation indus-

However, increased consolidation is also driving

try to electrify fleets. By 2025, the global electric

the construction of larger vessels, potentially

truck market is expected to account for 10% to

offsetting some cost surges. – Forbes and Deloitte

15% of total truck sales. – MarketResearch.com

Platooning Puts Trucking in Line It may be decades before fully autonomous vehi-

Unmanned and Undaunted E-commerce giant Amazon and parcel delivery ser-

cles enter commercial shipping. In the meantime,

vice DHL are among the companies to promise pack-

transportation companies could adopt new strate-

age delivery by drone. While these delivery services

gies such as platooning, where a group of vehicles

are still under development, the global drone logistics

travel together under automatic guidance, led by a

and transportation market is expected to grow 21%

human driver at the front of a convoy. Advocates

to more than $15.5 billion by 2024, according to one

say platooning can increase fuel efficiency, ease

report. – Market Research Engine

– ERTICO – ITS Europe

All Things Considered The dispersed network of sensors and other devices that make up the internet of things (IoT) promises to yield operational efficiencies and revenue opportunities for organizations that apply it to their supply chains. IoT has enabled companies to track the movement of goods in real time, assess vendor relationships, forecast inventory demand and analyze customer habits. Spending on IoT technologies is set to double from $235 billion in 2017 to $520 billion by 2021. – Forbes

Electric Trucks Revving Up

Alliance and THE Alliance—made up a large

traffic congestion and decrease driver fatigue.

From Factory Floor to Your Door Direct-to-consumer shipping is gaining ground. A survey published by market research company eMarketer showed that customers expect more than 40% of spending will go directly to manufacturers in the next five years. Those sales could translate to $130 billion by 2025, requiring supply chains to adapt to meet this growing demand. – Logistics Management Magazine

—Benjamin Glick SURIYAPONG THONGSAWANG/ GETTY IMAGES

ÂŠ 2019 Wipfli LLP

Itâ&#x20AC;&#x2122;s a Muddy MIddle Market,

thInk of us as your all-terraIn VehIcle. Great deals and legendary stories are made in the trenches. Risk is high. Reward is higher. You often take the road less traveled and value a guide who knows the terrain. Wipfli is your Private Equity Guide, your all-terrain vehicle, powering through with accounting, tax, technology, and advisory services. From fund and transaction advisory services, to portfolio performance and management, you get powerful direction to plow forward, achieving growth while balancing compliance. Gear up. Gain More Traction with Wipfli.

wipfli.com/privateequity MIDDLE MARKET GROWTH // NOV/DEC 2019

METAL

HEADS Mills, foundries, fabricators, service centers: we know our strengths. Hilco Global has provided more than 7,500 appraisals in the metals industry - with asset values ranging from $5 million to over $1 billion. Thatâ&#x20AC;&#x2122;s pretty heavy. We can help you become Asset Smarter at www.HilcoGlobalAssetSmarter.com. Contact Gary Epstein at 847.418.2712 or gepstein@hilcoglobal.com

middlemarketgrowth.org

VALU A TION + MO N E T I Z A T I O N + A D V I S O R Y