Middle Market Growth - October 2013 by Association for Corporate Growth

Growth Middle Market

// October 2013

Q&A with C.W. Downerâ&#x20AC;&#x2122;s Ashley Rountree Promising trends in Emerging Markets

Global Strategies Managing Your Investments and Brand Abroad

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executive summary Pam Hendrickson // ACG Global Board Chairman and COO, The Riverside Company

ACG Building a Global Future

e live and work in a global community with more than 46 percent of U.S. corporate sales now taking place outside the United States. Everyone is seeking new growth oppor-

tunities, and we have all realized that we can no longer be successful just by working in our own back yards. This has driven many to go global, but it’s not always a bed of roses. Even a company like Toyota can slip up—it had to change the name of its MR2 sports car in Frenchspeaking countries after learning it was quite close to a slang term for excrement. We want to help our members avoid linguistic and cultural snafus like that, so this month’s issue will include stories about the challenges and opportunities of GOING GLOBAL. This is part of our continuing quest to make ACG a truly global organization. Three years ago, as we collected data for our strategic plan, members told us that they wanted ACG to foster an international network of M&A pros, and we’ve made huge progress toward that goal. Since ACG’s founding in New York 60 years ago, we’ve built almost 60 chapters in nine countries, including 1000 members in countries outside the United States. Building successful cross-border businesses requires trust as well as an understanding of cultural differences and various regulatory environments. Meeting people face-to-face is the best way to build that critical understanding, and ACG is delighted to be part of making that happen. As one of our members is fond of saying, “ACG is where you meet the people you need to know before you need to know them.” We want this to be true on a worldwide basis. Last year, ACG brought together 300 members and guests during a European Capital Tour, which included stops in Frankfort, Amsterdam and Paris. This year will mark ACG’s first large conference outside the United States as we strive to complement our hugely popular InterGrowth conference. EuroGrowth 2013 will be held Nov. 11-13 in London. We’ve built a strong slate of speakers, topics and events that is sure to attract an international crowd of private equity investors, brokers, lenders, intermediaries, corporate executives and development officers from Europe and beyond. EuroGrowth will help you find new opportunities and meet new people who will deepen your understanding of international markets, so don’t miss this event. Another key element of ACG’s strategy is working to support policies and regulations that promote growth globally. Like our other initiatives, this is a global effort, and one that ACG takes very seriously. ACG’s official publication, Middle Market Growth, promotes these policies through compelling growth stories and fact-based advocacy for our industry. We strive to ensure that we can all do business in growthfriendly environments around the world. We’ll share updates on these important efforts throughout the year. I look forward to another year of exciting collaboration among all ACG members, and I hope to see you at an ACG event this year. //

I ns i det heMi ndoft heL i mi t edPa r t ner

Growth Middle Market

// OCTOBER 2013

growth story

Global Strategies In the past year, private equity firms have invested more than $100 billion in foreign emerging markets, and these fast-growing economies are eager for more global PE investors. But for any private equity firm operating in the middle market, understanding the multitude of factors that go into properly managing your deal abroad is critical to its success. Read more.

â&#x20AC;&#x153;One of the most important hurdles to closing crossborder transactions is building trust among dealmakers.â&#x20AC;? // Michael Carter of ACG Connecticut and Carter Morse & Mathias

table of contents

President & CEO Gary LaBranche, FASAE, CAE glabranche@acg.og

Vice President, Communications & Marketing Christine Melendes, CAE cmelendes@acg.org

Editor-in-Chief Kristin Gomez kgomez@acg.org

feature

Emerging Market Appeal The growth in emerging markets investments has been over a decade-long conversation. Since 2001, it has seemed like the rise of these markets is always just around the corner. Now, the trend may finally be coming to fruition. Read more.

in every issue Executive Summary

Manager, Communications & Marketing Larry Guthrie lguthrie@acg.org

Face-to-Face

Manager, Creative and Branding

The Ladder

Brian Lubluban blubluban@acg.org

It’s the Small Things The Leadership

vice president, strategic development Ellen Moore emoore@acg.org For advertising opportunities

departments

Director, Strategic Development

the round

Meredith Rollins mrollins@acg.org

• ACG launches policy site. • Choosing the right global partner. • What’s driving Chinese growth? Read more.

a qualified opinion

acg@work

Ashley Rountree of C.W. Downer & Co. shares his perspective on the international middle market and how to maximize your global presence.

Custom media services provided by The latest Network Media Partners, Inc. middle-market trends and thought leaderAssociation for Corporate Growth ship written 125 South Wacker Drive, Suite 3100 exclusively by Chicago, IL 60606 • The M&A ACG Membership: our team of landscape membership@acg.org Are LPs Peeking Over the BRIC Wall? expert ACG in China. www.acg.org Partners. • Events from Fink2013 Middle Market Growth, Read more. By Billy Copyright ACG East Coast InterGrowth 2013 and the Association and ACG Seattle. for Corporate Growth, Inc. All rights reserved. Read more.

• ACG & Huron Capital Partners educate Congress on the middle market.

the portfolio

Emerging Market Appeal

smart Merrill DataSite provides you with invaluable insights that can be crucial to negotiations. ®

Merrill DataSite provides the ability to track and report each move of every user, down to specific pages viewed – providing superior insight. This intelligence is invaluable in helping determine the best buyer for your deal. Choose Merrill DataSite – the smart, simple, secure global partner in your deal. To find out more, or to arrange a demonstration of our VDR solution, call 1.888.867.0309, email us at info@datasite.com, or visit www.datasite.com today.

www.datasite.com

Face-to-face Connect to your next deal Connect at Eurogrowth // Pam Hendrickson, chairman of ACG Global and COO of The Riverside Company, talks about the value of EuroGrowth to companies wanting to enter or expand in the European market.

Registration Now Open Global M&A Deal Flow. 36 Hours. One Event. EuroGrowth is fast approaching, with the event taking place 12-13 Nov. at the Sheraton Park Lane Hotel Piccadilly in London. This signature ACG event represents the most effective and efficient way to tap into the global middle-market community—all in one convenient location. The event website, www.EuroGrowth.org, details the full program, including four breakout sessions, 21 executive roundtable discussions, and a keynote program featuring Marc Brown, global head of M&A and strategic investments, Microsoft. In addition, the ACG Capital Connection® at EuroGrowth will allow interested private equity firms to network with middle-market professionals from all over the world and promote their funds and portfolio companies, as well as discuss deal flow opportunities with new contacts and existing partners. A list of delegates and ACG Capital Connection exhibitors, as well as program updates, are available at EuroGrowth.org.There are a limited number of registrations available at EuroGrowth 2013. Register by 1 Nov. and save £200. Register today at www.EuroGrowth.org.

The Turnaround Management Association UK Chapter will also host its Annual Conference on 14 Nov., 2013 in London. To learn more visit the TMA UK website.

Face-to-face Connect to your next deal

chapter events October 2, 2013 ACG Richmond Virginia Capital Conference The Jefferson Hotel Richmond, Virginia More info

October 1, 2013 ACG New York Attracting and Retaining Companies on Long Island Ferrari-Maserati of Long Island Plainview, New York More info October 1-31, 2013 ACG Brasil Debate: “Should Brasil be considered part of BRIC?” More Info October 2, 2013 ACG National Capital EGBR: Competitive Real Estate Options The Towers Club Vienna, Virginia More info

October 3, 2013 ACG Atlanta Networking Reception & Dinner Villa Christina Atlanta, Georgia More info October 4, 2013 ACG Chicago Global Rebalancing: A Market Trends Breakfast Meeting The Standard Club Chicago, Illinois More info October 8, 2013 ACG New Jersey Managing Your Company’s (and Your Own) Online Reputation Story Hill Inn Hackensack, New Jersey More info

To have your chapter’s upcoming events featured in Middle Market Growth, please send the details to Editor-in-Chief Kristin Gomez. Be sure to include name of event, time, date, location, cost and information or link as to where to register for the event.

Face-to-face Connect to your next deal

chapter events October 8, 2013 ACG Philadelphia M&A East 2013 Conference Pennsylvania Convention Center Philadelphia, Pennsylvania More info October 10, 2013 ACG Denver DealMakerâ&#x20AC;&#x2122;s Forum Hyatt Regency Denver Denver, Colorado More info October 10-11, 2013 ACG Louisiana Third Annual Taste of New Orleans Roosevelt Hotel New Orleans, Louisiana More info October 14-15, 2013 ACG Charlotte 1st Annual Investment Banking Awards Banquet and Deal Crawl Begins at The Westin Hotel Charlotte, North Carolina More info

October 16, 2013 ACG Western Michigan International Growth II: Growing with Foreign Direct Investment Kent Country Club Grand Rapids, Michigan More info

Visit www.acg.org for an up-todate list of events in your area.

October 16, 2013 ACG Orlando 3rd Annual Wine Tasting Quantum Leap Winery Orlando, Florida More info October 17, 2013 ACG New York 4th Annual Consumer Brands Conference JWT Headquarters New York, New York More info October 22, 2013 ACG Chicago 2013 Midwest ACG Capital Connection McCormick Place, West Building Chicago, Illinois More info

To have your chapterâ&#x20AC;&#x2122;s upcoming events featured in Middle Market Growth, please send the details to Editor-in-Chief Kristin Gomez. Be sure to include name of event, time, date, location, cost and information or link as to where to register for the event.

Face-to-face Connect to your next deal

chapter events

Save the DateS

October 22, 2013 ACG Tampa October Cocktail Event University Club Tampa, Florida More info

November 12-13, 2013 EuroGrowth® 2013 London, England Sheraton Park Lane Hotel Piccadilly More info

October 24, 2013 ACG Maryland Corporate Strategy and Networking Series The Maryland Club Baltimore, Maryland More info

February 4, 2014 Chapter Leadership Conference Grand Hyatt Washington Washington, D.C.

October 25, 2013 ACG St. Louis Annual Economic Forecast with Alan Beaulieu The Ritz-Carlton, St. Louis Clayton, Missouri More info October 29, 2013 ACG Central Texas ACG in San Antonio featuring Eric Smith, Founder & CEO of Unwired Nation, Inc. The Plaza Club San Antonio, Texas More info

Visit www.acg.org for an up-todate list of events in your area.

February 5, 2014 ACG Public Policy Summit 2014 Grand Hyatt Washington Washington, D.C.

April 28–May 1, 2014 InterGrowth 2014 ARIA Las Vegas, Nevada

SPACE IS LIMITED. REGISTER TODAY.

GLOBAL M&A DEAL FLOW. 36 HOURS. ONE EVENT. The premier source for networking and deal flow in the middle market, EuroGrowth brings together more than 200 financial professionals (private equity groups, intermediaries, lenders, limited partners, service advisory firms, corporate executives and development officers) from all industry segments across Europe and the globe, offering attendees three key benefits: capital, connections and deals. With 36 hours of uninterrupted quality networking and exposure to the most influential thought leaders, EuroGrowth is the most effective way to tap into the global middlemarket community in one convenient location. And you’ll form trusted relationships with the people you need to drive business growth today and well into the future.

KEYNOTE SPEAKER ANNOUNCED Marc Brown, Global Head of M&A and Strategic Investments, Microsoft, will be sharing his invaluable insights and expertise.

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With an easyto-navigate design, you can engage with ACG’s public policy initiatives today at www.middle marketvoice. org.

ACG Provides Voice for Middle Market Private Capital Investment Private Capital, Public Good℠ As the leading advocate for the middle market, the Association for Corporate Growth works to advance pro-growth and pro-capital policies and regulation. A key step in this effort was the adoption of a policy agenda in February. But defining the policy issues is just one step to help lawmakers understand how middle-market investment drives growth, creates jobs and stimulates the economy. Continued presence in Washington, D.C., as well as visits throughout the United States, are important to keep the voice strong. To advance that effort, ACG Global launched a new microsite, www.middlemarketvoice. org, as a central hub for middle-market public policy. The site encourages volunteer participation and suport of ACG’s public policy initiatives and provides information and calls to action on issues important to the middle market. From updates on legislative and regulatory affairs, to coalition building, news and more, this is the go-to site for the latest news on what is happening on middle-market public policy matters.

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Choosing the Right Partner for International Joint Ventures Globalization is rapidly becoming imperative

proximately 50 percent of international joint

for U.S. businesses. Last year, 82 percent of

ventures fail. By virtue of their size and lack

middle-market companies expected more

of experience, middle-market companies

than 20 percent of their sales growth would

are more vulnerable to failure than their large

come from foreign markets, according to a

counterparts. Since their bargaining power

survey by the National Center for the Middle

tends to be weaker, they also are more likely

Market (NCMM). Furthermore, the U.S. gov-

to be exploited by unscrupulous partners or

ernment will be hard-pressed to achieve its

government agencies. Consequently, they

goal of doubling exports within five years

must learn to get these alliances right.

without the active participation of such firms. However, just 58 percent of U.S.â&#x20AC;&#x201C;based

Oded Shenkar, fellow of the National Center for the Middle Market, investigated

middle-market companies are active out-

the effect of a parent companyâ&#x20AC;&#x2122;s size on the

side of the country, according to the NCMM

success of international joint ventures. He

study. And many of those have only limited

analyzed data from a nationwide survey of

foreign operations. Roughly a third of mid-

265 CEOs of such alliances, based in China

sized companies cite lack of knowledge

and gathered in the 1990s. He focused on

about international markets as a significant

China due to middle-market companies

barrier to expansion.

identifying it as their top investment priority.

International joint ventures are among

It also is home to hundreds of thousands of

the most common mechanisms used by

alliances and is one of the most challenging

such companies to overcome the lack-of-

investment environments for foreign busi-

knowledge handicap. Unfortunately, ap-

nesses. The following are his key findings: Continued on next page

Read the white paper on this research.

the round News that Matters Three Guidelines for Forming a Global Alliance

joint venture to a large local partner. Middle-

1. Choose larger company partners

such alliances to see whether they can be

In international joint ventures, middle-market

mitigated. In addition, information-sharing is

companies will naturally gravitate toward

especially challenging between partners of

other middle-market companies with whom

different sizes from different countries. Mid-

they share characteristics ranging from strat-

dle-market firms should open direct commu-

market companies should study the risks of

egy to culture. But large international compa- nication channels with their large partners and nies are better able to deliver what middle-

increase the national and cultural diversity of

market companies need. Large partners will

their boards and senior management teams.

likely have connections to key government agencies, which translate into favorable poli-

3. Leverage middle-market expertise in

cies and incentives. They will have better

running the joint venture

access to local markets and greater brand

Although middle-market companies should

recognition, and they will have significant ex-

partner with larger corporations, the joint

pertise in how to modify goods and services

ventures they produce need not be large.

for those markets.

Mid-sized joint ventures have sufficient heft to garner attention and resources from their

2. Be proactive about managing risks

corporate parents. At the same time, they are

Joint ventures with large foreign partners have

small enough to respond quickly to chang-

a greater likelihood of financial success for

ing circumstances. Middle-market firms,

U.S. middle-market companies, but they also

which have the experience and capability to

present greater risk. Large foreign firms often

run mid-sized organizations, can leverage

are in better bargaining positions than their

their expertise and best practices to run joint

smaller U.S. partners. In places like China,

venture operations. Large and influential for-

collusion between state-owned enterprises

eign partners who are more familiar with the

and local regulators can leave middle-market

host environment but may be less proficient

companies with little recourse, as in cases of

in running mid-sized enterprises should not

unauthorized technology transfers from the

intimidate middle-market companies. //

This article is brought to you by the National Center for the Middle Market.

For more middle market insights, visit www.middle marketcenter.org.

the round News that Matters

Major Transportation Investment Drives Growth in China China is on the verge of its next wave of economic growth, similar to U.S. growth in the 1950s and 1960s. Foreign investment in China to support this growth will follow several key macroeconomic investment themes. These include urbanization of second- and third-tier cities, the growth of Chinaâ&#x20AC;&#x2122;s middle class, an increase in consumer products and services, development of a sustainable â&#x20AC;&#x153;green economy,â&#x20AC;? a rapidly aging population leading to an increase in health care products and services, and deregulation of the financial services industry including life insurance, equipment leasing and commercial lending. One of the most important investment themes is related to continued massive transportation infrastructure investment, which provides a foundation for broad economic development. Based on the 12th Five-Year Plan, the Chinese government has major plans to expand the aviation, railway and road networks. Most of this investment will be in the western and northern provinces. The government plans to spend $240 billion during the next 10 years to expand the number of major airports from 175 cities to 220 and increase the commercial aircraft fleet from 2,600 to 4,500. China also plans to spend $350 billion on its rail network to expand the rail network to 72,000 miles by 2020, including 27,000 miles of high speed rail. In addition, the government plans to invest $400 billion on highway expressway expansion projects over the next 25 years, which will expand the national road system to more than 1 million miles, including increasing the number of highway miles from about 50,000 to 80,000 by 2040. For comparison, the United States has about 60,000 highway miles. The economic impact of the expansion of the China national highway system will be similar to the extensive, nationwide impact felt in the United States following the construction of the interstate highway system and the improvement of the U.S. rail and aviation networks 40 to 50 years ago. This is in sharp contrast to the infrastructure investment in China the past 25 years, which was concentrated along the eastern coastline areas around Beijing/Tianjin (Bohai Region), Shanghai (Yangtze River Delta Region) and Hong Kong/Guangzhou (Pearl River Delta Region). The enormous growth in these regions has led to a widening gap between the rich eastern cities and the less developed interior and northern regions, and has caused much social tension. As a result, the government plans to direct most future investment to the less developed western and northern regions. Continued on next page

the round News that Matters Did You Know? The top three European countries for PE investment are the UK, France and Germany.

Impact of Expanded Highways and Rail Networks As the highway and rail networks are improved and expanded into the west and north, factories in those regions will be more accessible to their suppliers and customers. In the United States in the 1960s, for example, when the highway network reached Denver, the time for a 1,000-mile truck shipment to reach Chicago fell from two to three days to 15 hours. This meant a factory in Denver could receive an order from a Chicago customer on a Tuesday afternoon and deliver it by Wednesday morning. This dramatically transformed the nature of doing business in the United States as well as where people live and work. The same will happen in China. The Chinese population will become more mobile, both as business travelers and as tourists. The automobile, hotel, travel, restaurant, car service, distribution, logistics, telecom, electricity, technical training and other related industries will boom. Industrial parks also will expand as businesses set up manufacturing in these new locations with access to plentiful labor, materials and new end markets. During this period China also is expected to rapidly change from an export-oriented economy to a domestic consumer economy, as the growing Chinese middle class becomes much larger and geographically dispersed. The amount of Chinese exports will continue to grow and expand, but the size of the domestic Chinese market is expected to dwarf the export market in the next 10 years. As a result, China is expected to import more and its currency will steadily appreciate in value relative to the U.S. dollar. This will lead to tremendous export opportunities for U.S. companies willing to invest in developing sales and distribution channels in China. What Does This Mean for U.S. Investors? To continue its rapid growth, China will need foreign investment and access to technology and management skills. The Chinese want U.S. and other foreign businesses that are leaders in their industries to invest in China and participate in the worldâ&#x20AC;&#x2122;s fastest-growing economy. There will be abundant opportunities for U.S. corporations and private equity firms to invest in mid-sized Chinese companies that need foreign partners to help them grow. Despite the occasional backlash against some high-profile foreign investments in large Chinese companies, there will be increasing opportunities for U.S. firms to acquire mid-sized private as well as state-owned companies that are leaders in their markets. As a result, the industries that support private equity and corporate M&A in China also will expand, including investment banking, business intermediary services, legal, accounting, tax, commercial lending, industry research and other services. // â&#x20AC;&#x201C;Andrew Rice, Senior Vice President of International for The Jordan Company, a leading global middle-market private equity firm. He also is a past chairman of ACG Global.

the round News that Matters

PitchBook Announces Latest Version of its Platform PitchBook Data, a Seattle-based research firm devoted to the private equity and venture capital industries, has announced the re-launch of its award-winning online research platform. Many in the industry are familiar with PitchBook for its daily newsletter and regular reports but not everyone is aware of its online PE- and VCfocused database and research platform. Since its founding in 2007, PitchBook has emerged as a leading provider of PE and VC data that industry professionals use for business development, sourcing investment opportunities, professional networking and understanding industry trends. After 18 months of development, The New PitchBook Platform features improved advanced search options with real-time, predictive-text search results, as well as stronger analytics and charting tools, new sharing capabilities, expanded company and investor profiles, and an enhanced user interface. John Gabbert, PitchBook’s founder and CEO, shared some insight behind the inspiration for the changes. “The New PitchBook is essentially a culmination of our effort to provide not only the best private equity and venture capital intelligence in the industry, but also the best technology—because what good is the best data if you can’t access it easily, or in a way that is useful, meaningful and powerful? We have always been proud of our data and the product we offer, but we believe that technology has to evolve alongside the needs of the people it serves,” he says. PitchBook has taken home several CODiE awards for its software in recent years: Best Vertical Market Business Content Solution in 2011 and Best Financial Market Data Information Service in both 2011 and 2012. These are a result of its commitment to developing powerful tools and a robust platform with private equity and venture capital professionals in mind. As ACG’s Preferred Private Equity Research Partner, PitchBook offers special benefits to ACG members, including access to PitchBook Lite, a simplified version of its platform. It is available free to members via acg.org under the CapitalLink tab. Additional company information can be found at www.pitchbook.com, and additional feature highlights can be found at pitchbook.com/newplatform2013.

If you have not seen the new platform you can request a demo of The New PitchBook today for free.

the round News that Matters

International DealMaking Looming currency crisis in Indonesia,

Brazilian mining bill threatens to

Thailand spurs M&A interest, but could

hinder M&A activity, lawyers say

stall ongoing deals

The mining reform bill sent to the Brazilian

The looming currency crisis in Southeast

Congress in June, if passed as proposed,

Asia, most pronounced in Indonesia and

will increase the costs and risks associated

Thailand, has aroused interest from over-

with M&A in the sector, said three

seas companies looking at making cheaper

industry advisers.

acquisitions in the region, but has also

Read the full story online.

stirred worry that ongoing deals could stall, industry sources said. Read the full story online.

State-owned companies and mid-caps to drive Russian M&A in 2H13 Activity in Russiaâ&#x20AC;&#x2122;s government sector and

Chinese investment into Mexico

mid-sized deals will help drive M&A in the

may be on the rise, advisers say

second half of the year after a poor start to

More Chinese companies are looking to

2013, sources said.

enter Mexico to take advantage of its rela-

Read the full story online.

tively stable economic environment, its free trade agreements, proximity to the United

Foreign law firm expansion into Israel

States and potential tax benefits, industry

drives local industry consolidation

sources said.

A change of regulation allowing foreign law

Read the full story online.

firms to begin practicing in Israel could spur consolidation within the countryâ&#x20AC;&#x2122;s legal sec-

Planned nuclear reactors across Asia and Russia to heat uranium M&A Within the next few years, Japan, China, India and Russia will have operational nuclear reactors without supply contracts, and anticipation of this may lead to a surge in deals in the volatile uranium sector, industry sources said. Read the full story online.

tor, several industry participants have said. Read the full story online.

These articles on international deals are provided by Mergermarket. To find more stories like this, please subscribe or inquire about a free trial at Mergermarket.

the round News that Matters Hot Spots in African Deal Flow This video is brought to you by Privcap, the leading digital media channel for thought leadership on the private capital markets. To view Privcap’s library of hun-

Webinars

dreds of GP and LP interviews,

Choosing the Right Partner for Global Expansion

visit www.privcap.com. For spon-

Hosted in partnership with the National Center for the Middle Market

sorship or custom video inquiries,

October 3, 2013

contact Gill Torren.

2-3 p.m. EDT

Read the full transcript here.

Mid-sized and small businesses are turning to strategic alliances and joint ventures to help them enter international markets, according to research by the National Center for the Middle Market and the Economist Intelligence Unit. The problem is that these business ventures often fail. But why? Global business experts and experienced matchmakers from Plante Moran and The Ohio State University will discuss what leaders of small and mid-sized businesses should consider to ensure the success of their global partnerships. You are invited to join the conversation and bring your experiences

Tap to watch the video.

and questions. Did you miss the last ACG webinar? No need to worry. Check out ACG’s library of past webinars at any time.

New Study From Evca The European Exploring the impact of private equity on economic growth in Europe A report prepared for the EVCA May 2013

Private Equity and Venture Capital Association (EVCA) recently released

a study that looks

at the correlation between private equity and its positive role in Europe’s economic growth and recovery. Take a look.

the round News that Matters Interactive Benchmarking Tools for Mid-Market Companies Benchmarking information can be a pow-

The following tools can be useful during

erful tool for assessing the competitive

the evaluation process or to evaluate

position of a company. For middle-market

current investments:

companies in the United States, however, accessing this data has historically been dif-

Performance Benchmarking

ficult as this segment has been largely over-

Assesses a middle-market company’s per-

looked in favor of big business on one end

formance/sentiment across the dimensions

of the spectrum and small business at the

of revenue growth, employment growth,

other. That is about to change.

productivity, investments and confidence

The National Center for the Middle Market, a collaboration between GE Capital and

against peer firms by industry, revenue band and geography.

The Ohio State University Fisher College of Business, has developed a suite of bench-

Supply Chain Resiliency

marking tools covering a broad range of

Compares capabilities against vulnerabili-

topics such as performance, compensation

ties to determine the readiness of a middle-

and supply chain. They are based on break-

market business’ supply chain against risks

through research of the U.S. middle market.

and threats.

This segment of the economy, consisting of companies with annual revenues between

CEO Compensation

$10 million and $1 billion, contributes more

Provides min-max and mean data for com-

than one-third of private sector GDP and

ponents of a middle-market executive’s

one-third of U.S. jobs.

compensation such as salary, bonus, stock

By accumulating data from sources such

and other incentives.

as quarterly surveys, in-depth reports and

In addition to these benchmarking re-

academic research, the Center has devel-

sources, the Center is the leading source of

oped benchmarking capability intended to

knowledge, thought-leadership and inno-

serve middle-market companies, policymak-

vative research on the U.S. middle-market

ers, media, academics and service provid-

economy. From academic research to ex-

ers. Private equity plays a large role in this

ecutive education and student engagement,

segment, providing the necessary capital

the Center is the go-to source for valuable

and management expertise to foster contin-

insights and capability for the middle market.

ued growth and economic contribution.

–Doug Farren, Associate Director, The National Center for the Middle Market

To access and use the benchmarking tools and learn more about the Center, please visit the National Center for the Middle Market website at www.middle marketcenter. org.

the round News that Matters

vertical view // The Telecom Industry

$27.3 billion Capital invested in communication and networking deals shrank from $27.3 billion in 2010 to $4.75 billion in 2013.

$4.75 billion

The investment in deals surrounding fiber optic equipment has more than doubled from 5 percent to 12 percent from since 2006.

The number of deals decreased from 87 in 2006 to 33 2013.

The median deal size in 2013 is $129 billion.

56 42

Add-ons have grown from 42 percent in 2012 to 56 percent of buyouts so far this year.

The United States is the leader in telecommunications investment, with the Netherlands, France, Belgium and Australia a tie for second.

There were 14 telecom exits in 2013 compared with 35 in 2006.

20 percent of the deals in 2013 were in telecommunications service providers, followed by 18 percent for cable service 20% providers and wireless communications equipment.

All statistics are from PitchBook for the middle market (deal values from $25 million to $1 billion).

18%

Venable. Where the middle market turns

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How can we help you? To learn more, call us at 1.888.VENABLE or visit us online at www.Venable.com. Charles J. Morton, Jr. | 202.344.4895 | cjmorton@Venable.com

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The Team // From left: Scott Feldmayer, partner; Steve Ellis, senior adviser; Christopher Harvin, partner; Bruce Fryer, senior account manager

Global Strategies Managing Your Investments and Brand Abroad By Christopher Harvin

Photo by David Hills

Global View // Growth opportunities in cross-border deals are increasingly attractive to ensure diversification of portfolios and increase returns.

n the past year, private equity firms have invested more than $100 billion in foreign emerging markets, and these fast-growing economies are continually eager for more global PE investors. For any private equity firm operating in the middle market, understanding the multitude of factors that go into properly managing your deal abroad is critical to its success. In the United States, an increasingly competitive economic climate tainted by the global economic crisis is causing uncertainty. These occurrences, compounded by inhibitive government regulations and oversight, are strangling small businesses, the PE industry and other drivers of economic growth. As a result, growth opportunities in crossborder deals are increasingly attractive to ensure diversification of portfolios and increase returns.

As the Middle East, Africa, the Caribbean and South America begin to mature and become more politically and economically stable, investments in these regions become more attractive. Advances in technology and other first-world resources, seen and used in developed countries, are now commonly used in these regions, making foreign investments more appetizing. However, this makes the landscape more competitive. For this reason it is critical for investors to quickly grasp regional communications, languages, cultural norms, and political and government realities. For many firms, these skill sets may not be among their core competencies. In fact, according to Ramsey Goodrich of ACG Connecticut and Carter Morse & Mathias, â&#x20AC;&#x153;You can try to complete cross-border deals alone, but the real value comes from having someone who can understand

â&#x20AC;&#x153;You can try to complete crossborder deals alone, but the real value comes from having someone who can understand the social, cultural and economic differences between countries.â&#x20AC;? Ramsey Goodrich ACG Connecticut and Carter Morse & Mathias

the social, cultural and economic differences between countries. We have people on the ground who understand negotiation tactics in many different countries, which is invaluable. They can translate that knowledge back to dealmaking American style.” With that being said, several key factors play into the success of overseas deals:

Get Political As a private business that is interested in expanding to emerging markets, it is important to be aware of the nationalistic and protectionist environment, the attitude of the local people, and overall general public opinion at the grassroots level. A number of emerging markets are plagued with socio-political factors that can adversely affect dealmaking. Fragile and unrepresented government institutions exist in many markets. “Having capable, local advisers is very important. Having a full understanding of the cultural norms, government regulations and political regime should not be dismissed,” says Ana Paula de Castro of ACG Brasil and Merrill Corp. Additionally, channeling local politicians and elected officials is paramount in effective global strategies. One need not look further than the Chinese National Offshore Oil Corporation (CNOOC) attempt to merge with U.S. oil company Unocal in 2005. The deal fell through due to unexpected political opposition on the U.S. end. According to CNOOC, “This political environment has made it very difficult for us to accurately assess our chance of success, creating a level of uncertainty that presents an unacceptable risk to our ability to secure this transaction.” Perhaps the deal would have been a success had the Chinese company become more accustomed to the U.S. political environment. Similarly in 2010, the government of Ghana blocked the entry of Exxon into the country to explore oil possibilities due to the distribution of critical information without the government’s permission. Clearly

Photo by David Hills

A number of emerging markets are plagued with socio-political factors that can adversely affect dealmaking.

The Landscape // The aerial view of Botswana in Southern Africa during a flyover by the Sanitas team.

Exxon failed to properly lobby the deal and the government effectively leveraged local media to affect public opinion, highlighting the importance of the approval of the local government and influence of local media with any transaction. Part of the management process must involve reassuring local politicians, who are often political beneficiaries of the investments. In many emerging markets, government corruption and cronyism is still a regular occurrence—particularly in Africa where corruption is rampant. One example, South Africa, which successfully lobbied for inclusion in the BRIC association of emerging national economies in 2010, has recently fallen on measures of government corruption. In fact, over the past 12 years, South Africa’s position on Transparency International’s Corruption Perception Index (CPI) has consistently declined. The country dropped 31 places in the index from 2001 to 2012. The country currently ranks 69 out of 187 countries indexed.

Photo by David Hills

Meeting of the Minds // The team at Sanitas International, Inc. talks about the importance of strategic communications when doing a deal.

Understand the Culture Managing a brand or a company across different regions involves accounting for varying linguistic, cultural norms, ethnicities, political parties, religions and laws. “One of the most important hurdles to closing cross-border transactions is building trust among dealmakers,” says Michael Carter of ACG Connecticut and Carter Morse & Mathias. “There are usually cultural and communication differences that you have to overcome. Building trust enables both parties to get comfortable with this unknown but it takes time and effort to do.” Once there is a stronghold on this, private middle-market companies are at an immediate advantage. But there is more than just understanding the culture. “Having a grasp on the legal and regulatory entities is crucial,” says Andrew Apfelberg of ACG LA and Greenberg Glusker. “The deals we have worked on have been successful because we combine knowledge of the client’s business model, operations and domestic legal issues with the expertise of local counsel in the applicable territory. By using local counsel that grew up in the region and is embedded in the community, we have been able to structure transactions to further the client’s strategic plan and at the same time fit within local customs and obtain tax credits.”

Understanding local elections, religious holidays and having fluency of how a country works and lives are intricate parts of what creates positive movement in an emerging brand or company. Appealing to the masses is most often necessary to the success of a brand. Pam Hendrickson, ACG chairman and COO of The Riverside Company, recalls an example from one of Riverside’s portfolio companies. “We have a Finnish children’s outerwear company that had 80 percent of its sales in Scandinavia and Russia when we bought it in 2011. They wanted to expand to Asia but needed help creating a legal entity in China, establishing relationships with multiple distributors and understanding the different consumer habits of China. Our operating partner in Hong Kong helped them navigate all of this, and they opened their first store in Beijing last fall.”

Digital and Social Intelligence Maintaining a robust digital strategy that includes social and Web messaging in addition to access to current financial and research data is vital in acquiring and maintaining a pulse on a foreign locale. There are endless benefits from knowing what people are saying about your company online while harnessing those comments into information to bolster your brand or secure your deal. When a company uses a combination of social media and proper financial and research data, it only helps to further support a crossborder strategy and increase smart decision making. Charlie Johnstone of ACG UK and ECI Partners LLP says a mix of data and social intelligence is important. Retaining advisers who are familiar with, and have operated in, the local market to ensure comprehensive data collection and drive communications strategies that mitigate reputational risk is a good decision. “Technology and digital media can help, particularly to find opportunities,” he says. “However, you need to know your sector and be able to get good people on the ground to help you get the right deal done,” Johnstone says “We

“You need to know your sector and be able to get good people on the ground to help you get the right deal done.” Charlie Johnstone ACG UK and ECI Partners LLP

In emerging markets such as Africa, having access to current relevant market data is essential.

leverage off our global network of contacts we have built up over 35 years to help find the right people in the right sector in the right countries to help us get the right deals done.” In emerging markets such as Africa, having access to current relevant market data is essential. However, one immediate hurdle to conducting research and analysis in African and other smaller emerging markets is a dearth of easily accessible data. Since data is difficult to come by, investors and private companies should integrate operators who understand the market and can retrieve information from a variety of sources. Manuel Bentosinos of Merrill DataSite says companies can succeed in emerging markets with the right tools and technology. “Merrill is a company that delivers highly specialized services empowered by technology, so we see that every day with our customers,” he says. “A clear example is our virtual data room (VDR), which adds efficiency to all the processes

during a transaction. There are even cases when international investors demand a VDR as a condition to participating in a deal.” While preliminary research can be conducted from behind a computer screen, it takes people on the ground to gain a complete picture of a company and the market in which is exists.

Putting Out Fires Crisis management and preparation plays a key role in successful foreign endeavors and should be a key part of an overall strategy. While in the past companies in the private sector have been tight-lipped, that is often what will get an organization into trouble. In a crisis, “no comment” is not acceptable. Being unprepared for potential risks is often the direct result of inadequate planning and preparation, lack of information or misinformation, or cultural barriers. Succeeding domestically is a task in itself; avoiding crisis when going global is a whole new battlefield. Any middle-market company that steps over the border into a foreign territory is swimming in murky water. When a U.S. company invests in a foreign brand, how will it survive if catastrophe strikes? What damage does that do to the reputation of a brand? A team of global experts who have experience successfully navigating foreign environments can help you avoid major pitfalls and even scandal. “We have done almost 30 cross-border deals in our 25 years at The Riverside Company,” Hendrickson says. “Our global footprint lets us use deal teams from multiple jurisdictions to get cross-border deals done. This helps us to avoid cultural and legal landmines.” The experience of foreign communications and reputation management experts can keep a financial deal from imploding. Although immediate solutions to communications crises may not exist, having a basic understanding of managing a crisis can mean the difference between staying afloat or going under. The path to middle-market growth in cross-border deals is sometimes a tricky one but with the proper guidance and due diligence a foreign investment can offer a wealth of return on investment. // Christopher Harvin is a founding partner at Sanitas International, Inc., a global strategic communication, public affairs, digital media and political advisory firm based in Washington, D.C. He has practiced public, crisis, corporate and political communication in more than 70 countries and was recently recognized as one of the top practitioners in the communications industry.

africa: new opportunities beyond bric // As growth decelerates in traditional emerging economies, smaller economies around the world are becoming the driving engines of growth. In Africa, signs of new growth and investment potential are growing.

• In July, Emerging Capital Partners Private Equity (ECP) announced its Fund III portfolio company, IHS Mauritius Limited (IHS), secured $1 billion of financing to fund the upgrade of existing cellular towers, as well as the construction and acquisition of new towers in countries including Nigeria, Côte d’Ivoire and Cameroon.

• A Cambridge Associates study found that returns from African funds for the 10 years ending Sept. 30, 2012, are on par with other emerging markets over the same period.

South African Ethos VI Fund

$750 Million

$800 Million

Target Close

Final Close

Large Private Equity Firms Are Taking Notice The Carlyle Group is raising funds and hiring new talent as it prepares a renewed push into sub-Saharan Africa. Earlier this year, South African Ethos Private Equity reached the final close of its Ethos VI fund at $800 million, exceeding its original target by $50 million. According to a report in Private Equity Africa, the fund attracted investors from Europe, North America, the Middle East and Africa. Fund VI also featured Asian investors for the first time. Despite such promise, investors should be cautious when entering these markets.

Emerging Market Appeal Are LPs Peeking Over the BRIC Wall? By Billy Fink

The growth in emerging markets investments has been more than a decade-long conversation. Ever since Jim O’Neill, former chairman of Goldman Sachs Asset Management, brought emerging markets to popular attention in 2001, it has seemed like the rise of these markets is always just around the corner. Now, the trend may finally be coming to fruition. Despite the recent hiccups in some emerging nations, the sentiment around the MINTs, CIVETS, TIMPs and SHIMPs is increasingly positive. According to a survey by the Emerging Markets Private Equity Association, “The majority of LPs (nearly 60 percent) expect the dollar value of their EM PE commitments to increase over the next two years.” But the question remains: If LPs are looking to grow their emerging market commitments, how will capital deployment shift in the developed world?

LPs, the JOBS Act and Emerging Markets Just 10 years ago, few LPs would have seriously considered an emerging market investment. However, fundamental shifts in social dynamics, technology and the weakened economy in the developed world have made emerging markets investments more appealing. Nate Suppaiah, managing director of Alternative Emerging Investor, believes the demand for new, creative growth—on both sides of the partnership—has catalyzed the trend. “Global interest is shifting toward emerging markets,” he says. “LPs will begin pushing GPs to move to emerging markets to meet returns, while creative GPs will look to emerging markets for possible opportunities and future funds.” LP interest in emerging markets may also be buoyed by the JOBS Act. While there has been a lot of talk about the impact of the JOBS Act on domestic investing, the new legislation could have a significant impact on international and emerging market investments as well, especially with the removal of the ban on general solicitation. By having the ability to freely advertise to accredited investors, there will be a democratization of capital and smaller funds will be able to contact investors who were previously unreachable thanks to the megaphonic voices of the mega-funds.

“The JOBS Act will afford the smaller funds a place at the table,” Suppaiah says. Many LPs may be receptive to these smaller funds since “small private equity funds, raising less than $250 million, represented nearly 70 percent of funds that closed in the first half of 2013,” reports EMPEA. Martin Okner, co-founder and managing director of SHM Corporate Navigators and current president of ACG New York, is less certain of the impact of the JOBS Act on emerging market investments. “I think it is too early to tell how the JOBS Act will influence the flow of capital between GPs and LPs domestically and abroad,” Okner says. He notes that any shift will likely still be some time away. “Policy is equally as important as legislation and the industry will likely wait until they are confident that the rules are more clearly defined before acting on opportunities,” he says.

Not All Capital Will Leave Although emerging markets are growing in appeal, it is unrealistic to think large LPs will switch their deployments overnight. Instead, a few brave GPs and LPs likely will try to capitalize on the interest in emerging markets. The JOBS Act could encourage their individualist ambitions. The larger LPs may wait for a proven model before deploying more capital to the BRICs, TIMPs and MINTs. A recent report by the International Finance Corporation said LPs tend to be hypersensitive to instability in emerging markets. “While broad macro and governance risks in emerging markets continue to decline, there is a substantial lag in perceptions,” the report said. “Emerging markets are regularly characterized as suffering from macro/political/ governance issues, perpetuating a simplistic perception of actual risks.” In contrast to the report, which came out before the renewed uprisings in the Middle East, not all declining risks remain in decline. The uprisings likely shook the confidence of many soon-to-be investors, as evidenced by a 52 percent decline in EM PE fundraising in the first half of 2013. The dip is a reminder that interest in emerging markets can be quite volatile. The concern for risk could be accented by the nature of the private equity investment vehicle. Not only is the strategy illiquid, “private equity is in the business of protecting their investors’ capital through mitigating risk while growing the value of the operating assets they acquire,” Okner says. An LP

“Global interest is shifting toward more emerging markets. LPs will begin pushing GPs to move to emerging markets to meet returns, while creative GPs will look to emerging markets for possible opportunities and future funds.” Nate Suppaiah Managing Director of Alternative Emerging Investor

may choose to forego the emerging market investment— despite the heightened growth prospects—if it fears the socio-political climate will create unmitigatable risk. The added challenges of opaque due diligence make the process even more uncertain. Even after LPs decide to invest in emerging markets, is it better to invest in a local group with little deal experience or an experienced group with less local knowledge? As Charlie Johnstone of ACG UK and ECI Partners LLP explained, you might need both. “You need to know your sector and be able to get good people on the ground to help you get the right deal done,” he says. Regardless of the general trends, it is important to keep open channels of communication between LPs and GPs with these issues. If LPs begin asking questions about emerging markets, it might pay off to listen carefully to their questions and interests. While it is not in the arsenal of all PE firms to expand to new, developing regions, it is important to stay aware of investors’ interests and find creative ways to help meet their goals. Sometimes even small add-ons or joint ventures by existing portfolio companies can meet shorter-term needs.

Inter-Emerging Market Activity on the Rise In addition to one-off individual investors from the developed world, investments in emerging markets also will come from other emerging markets. “The developed world is still the powerhouse of capital and investment expertise, but the slice of the capital pie coming from other emerging markets is certainly growing,” Suppaiah says. The evidence of inter-emerging market activity is clear: Last year, China overtook the United States as Brazil’s primary trade partner; at the same time, Brazil has the largest private equity fund in Africa. The interconnectivity of emerging markets was echoed by Andrew Dawson of PWC. He wrote, “Trade between the SAAAME (South America, Asia, Africa, and Middle East)

markets is growing much faster than the developed-to-developed and developed-to-emerging market flows.” There is particularly heightened trade between Asia and Latin America and Africa and the Middle East. Maturing beyond previous boom-bust cycles, “many of these [developing] countries are now seeing consistent, responsible growth rates and now have money to deploy in other nations. The techniques they have learned in their own countries can be applied to many other developing markets,” explains Suppaiah. The stronger infrastructures and socioeconomic situations, especially in Latin America, have helped form the bedrock for intra-SAAME trade. Ana Paula de Castro of ACG Brasil and Merrill DataSite in Sao Paulo, notes, “Brazil and Latin America stand out as arguably the most stable politically.” Manuel Bentosinos, also of Merrill DataSite, sees further stability for Latin America. “Mexico would be a perfect example, with a very bright outlook if we consider its underdeveloped financial sector, positive demographics and geographical location. Colombia and Mexico are gaining steam, especially among private equity investors; Peru and Chile should also be considered.” While much of the trade is currently composed of commodities, the further development of the channels and infrastructures will encourage a broader shift to manufactured goods. These new markets, while potential areas for new M&A activity, also invite growth for current portfolio companies. “The opportunities in emerging markets are not just about M&A but also investment in new offices and also new business,” Johnstone says. “Central and Eastern Europe offers a good place to find opportunities—Poland in particular. Africa is growing and we are finding companies in the energy sector getting good growth here, but not through M&A, rather through an increase in sales.” // Billy Fink is a marketing analyst at Axial, the largest online network for deal professionals.

Shape the Dialogue at EuroGrowth’s Keynote Program // EuroGrowth 2013 is right around the corner. This premier international dealmaking event, held Nov. 12-13 at the Sheraton Park Lane Hotel Piccadilly in London, will offer compelling thought leadership, including a keynote program featuring Marc Brown, global head of M&A and Strategic Investments for Microsoft, and moderated by Raphael Grunschlag, managing director, head of European Technology Banking for William Blair. To help shape the dialogue during this session, ACG would like to hear the questions you would propose to the speakers. Simply email your questions to events@acg. org. We look forward to seeing you in London.

World View // Snapshot of Emerging Markets

South Africa invested $1.13 billion in capital in 2012-2013.

India and China were the two emerging markets with the greatest number of deals in 2012-2013. China invested $8.27 billion in new deals; India invested $3.47 billion.

The top B2B countries by number of deals were India, China, Brazil, Poland and Turkey.

The number of deals closed in emerging markets was down from 214 deals closed in 2007 to 174 in 2012.

All statistics are from PitchBook for the middle market (deal values from $25 million to $1 billion).

The investor with the most capital in emerging markets was the Russian Direct Investment Fund at $12 billion.

China, Russia, South Korea and Brazil raised the most capital from 2007-2013.

Mexico raised $1.17 billion in capital from 2009-2013.

We create conditions that are Exactly Right.

For more information: Harry C. Steinmetz Partner-in-Charge Financial Advisory Services 212.375.6741 Harry.Steinmetz@WeiserMazars.com

WeiserMazars provides reflective insight and forward thinking. Our global, industry-focused perspective offers clarity when assessing investment opportunities, creating conditions that are exactly right for growth.

www.WeiserMazars.com

a qualified opinion Ashley Rountree // Managing Director, C.W. Downer & Co.

shley Rountree is the managing director and partner at C.W. Downer & Co. in its Paris office. He has worked in the international corporate development field since 1983 and helped build multinational European teams across three separate C.W. Downer & Co. offices. A former member of the ACG Global Board of Directors, he received the ACG Meritorious Service Award in 2012 for his long-term contributions and service to ACG and the middle market.

select above to see q&a

Where in the world do you see the most middle-market opportunities?

believe the United States and Western Europe offer the best opportunities at the moment. They have the most developed middle market with the largest number of companies. The U.S. economy is finally seeing signs of a lasting upturn after several years of downturn, and I see real opportunities for companies to invest now and get the benefit of a virtuous spiral of rising property values, rising housing starts, rising consumer spending, and a new phase of growth. The one negative I see in the United States at the moment for buyers is high deal prices. Western Europe, despite the sovereign debt and bank balance sheet issues, remains the home of the worldâ&#x20AC;&#x2122;s most prosperous, most highly educated populations, and the most efficient infrastructures for education, logistics, communications and health care. Although Western Europe and the United States cannot hope to enjoy the growth rates of emerging markets, they offer stronger and more secure environments for middle-market companies to thrive. Photo by Sylvain Renard

a qualified opinion Ashley Rountree // Managing Director, C.W. Downer & Co.

select above to see q&a

What makes working and investing in France a good proposition?

tâ&#x20AC;&#x2122;s misleading not to recognize that France is going through a difficult period. In the Great Recession and credit crisis that began in 2008, France was fortunate to avoid the worst of its effects through a combination of good crisis management and built-in shock absorbers which, though they hinder growth in good times, also protect the French economy in bad periods. However, that good fortune has proven a mixed blessing: Thinking they had dodged the Great Recession, the French government did not undertake important reforms with regard to labor cost, labor flexibility, social security and pension costs that Germany enacted during the Schroeder years, and that have been forced upon the crisis-stricken economies of Spain, Ireland and Italy. France maintains a strong central government, which allows it to react quickly once the political will is mustered. So I believe France will, more than any other country in Europe, be able to turn on a dime once the electorate and its political representatives recognize the risk of losing competitiveness. Photo by Sylvain Renard

a qualified opinion Ashley Rountree // Managing Director, C.W. Downer & Co.

select above to see q&a

What cross-border deals do you engage in and What trends Do you see?

uch of our dealflow over the past three years has been characterized by industry consolidation. We find the recent low growth rates in the United States and parts of Western Europe, growth between 0 and 2 percent, encourage companies to reassess their growth objectives. For sellers, this means giving up equity ownership to be part of something larger, more international. For buyers, this means boosting anemic organic growth by acquiring competitors or players in new territories. I believe over the next 10 years we will see a golden age of buy-and-build consolidation across a wide swath of industries in Western Europe. When we look at basic industrial sectorsâ&#x20AC;&#x201D;store fixtures, plumbing supplies, valvesâ&#x20AC;&#x201D;and map the middle-market players in the United States on the one hand, and the middle-market players in Europe on the other, we find four to five times as many dots on the map in Europe! I believe PE investors have an important role to play in this consolidation phase. The good ones bring not just capital, but strategic and intellectual firepower to the management teams of middle-market companies implementing these efforts.

Photo by Sylvain Renard

a qualified opinion Ashley Rountree // Managing Director, C.W. Downer & Co.

select above to see q&a

What is your advice for companies looking to enter into a crossborder deal?

irst, get the right manager. He or she does not necessarily need international experience but needs to be open to the benefits and pitfalls of investing abroad. We had an Irish client mandate us to buy companies in a service industry across Europe and the United States. We found a selection of companies in Germany, France and the Netherlands, as well as the U.K. and the United States. But the manager was British, English was his only language, and he was not as comfortable with the continental European meetings as he was when we were in England or America. Needless to say, the transactions we concluded were in the U.K. and the United States! Second, get buy-in from the top management and the board. Acquiring a business in another country should be a gamechanger for the acquirer. It needs the support of the most senior people in the company. Seek advisers with local capability of course, but advisers who also can speak to your board, your executive committee, and all the decision-makers on the buyerâ&#x20AC;&#x2122;s side. Cross-border acquiring, especially for first-time acquirers, needs a lot of handholding.

Photo by Sylvain Renard

a qualified opinion Ashley Rountree // Managing Director, C.W. Downer & Co.

select above to see q&a

What are the benefits and risks of engaging in cross-border deal flow vs. containing all of your business in one country?

would tend to see it the other way around: What are the risks of containing all of your business in one country? If there are none, you do not need to buy a foreign company. If on the other hand you are running out of runway for growth in your home country, or if foreign competitors are coming into your home market with advantages stemming from their remote locations or their international knowhow, then you had best saddle up and get that international capability yourself !

Photo by Sylvain Renard

From 1995â&#x20AC;&#x201C;2010, private capital-backed companies in Washington grew sales by

173.8%

Private capital helps middle-market companies grow. See how. www.GrowthEconomy.org

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ACG and Huron Capital Partners Host Congressional Staff Members of Congress and their Washington-based staff headed back to their districts during the August recess to meet with constituents and tend to their re-election efforts. For the member of Congress, meeting with constituents helps strengthen relationships with voters and is an opportunity to learn about issues that impact their district. Detroitbased private equity firm Huron Capital Partners took advantage of this timing and with a coordinated effort by ACG Global, hosted the congressional senior staff from the office of Rep. Gary C. Peters, D-Mich. Rep. Peters is an important congressional member to ACG members and the middle market. He is a former investment adviser with more than 20 years of experience and he sits on the powerful House Financial Services Committee. Continued on next page

Tell Us // Middle Market Growth wants to highlight ACG chapters around the world. Share your recent events or member news in 250 words or less, along with a color photo if available, with Editor-in-Chief Kristin Gomez.

acg@work chapter news from around the globe At Huron Capital’s Detroit office, congressional staff heard from senior members of the firm about the importance of the middle market to the growth of the economy and how

If you would like more information on hosting a policy event, please contact Amber Landis, manager of policy communications.

private equity operates day to day. They described how they viewed partnerships with their portfolio companies as a marriage that is about more than just numbers; it’s also about the people and culture. They said it has to be a good fit for all the parties involved—partners, employees and their supplier and customer bases. Huron also provided the congressional staff with insight as to how private equity funds are different from hedge funds. When asked about liquidating assets and systemic risk, Huron highlighted how hedge funds by nature add more systemic risk and can clear assets in two to three days, while it could take up to two to three years for a private equity firm to liquidate all of its assets. Huron noted that unlike traders who stand in front of terminals trading publicly traded securities, private equity investors roll up their sleeves and work with their management partners on day-to-day operational improvement. Huron executives emphasized the importance of knowing and appreciating the relationships with each of their portfolio companies’ customer and supplier bases. They added that the leadership of private equity firms often includes

Private equity practitioners understand the complexities of running a business and the challenges that inevitably arise over time.

former corporate executives. Private equity practitioners understand the complexities of running a business and the challenges that inevitably arise over time. Congressional staffers acknowledged that the role of private equity as operating partner is little-known on Capitol Hill. Of particular importance during the meeting was when congressional staff asked how the lack of lending from traditional sources, such as commercial banks, impacted the middle market. Huron shared that when lending was more difficult to obtain during the recession, private equity was a friend to mid-sized businesses and helped in many instances to weather the storm, providing their portfolio companies with a steady stream of capital to help grow businesses in the economic downturn. If you would like more information on hosting a congressional visit with your firm or ACG chapter, please contact Amber Landis, manager of policy communications. //

acg@work chapter news from around the globe ACG China CIPEF 2013 Lays Out M&A Landscape in China ACG sponsored several panel discussions at the China International Private Equity Conference (CIPEF) in June in Tianjin. The lead panel on M&A in China was moderated by Steve Li, managing partner of Enoch Capital, and included Ming Zhang (M&A director at GE China), Eva Bian (deputy GM, Specialty Chemical Strategy Department at Sinochem International), Martin Ma (M&A general manager at 3M China/Asia Pacific), Jeffrey Wang (managing director at BDA), and Jie Chai (partner, Tian Yuan Law Firm). The panel asserted that M&A in China is on the rise. Chinaâ&#x20AC;&#x2122;s economy is going through structural changes as the government encourages

As a result, more business owners are realizing that it is better to sell the company to a strategic or a PE firm.

consolidation of many industries, so the panelists expected to see more types of buyers as companies look at acquisitions to expand geographically and to increase their product lines within China. One trend they discussed is more Chinese business owners considering a sale of their companies as they look to retire. Most households typically have only one child, and most of these children do not want to take over the family business, leaving own-

ers to sell their mid-sized companies. Most entrepreneurs dream about doing an IPO, but that takes at least two to three years before being listed, followed by a required three-year lock-up period during which they cannot sell any shares. As a result, more business owners would rather sell the company to a strategic or a PE firm. According to the Asian Venture Capital Journal, there have been more than 10,000 PE investments in China during the last five years. This includes foreign PE firms as well as the many new domestic RMB PE funds. Few of these portfolio companies will ever do an IPO, so most exits will be selling to strategic buyers. The panel agreed that cross-border M&A remains complicated due to different cultures and business practices as well as different regulatory approvals, laws and tax policies. Due to potential tax and other liabilities, strategic buyers and PE firms often want to set up offshore holding companies and then buy only certain assets of the target company. This often makes the deal more difficult to complete. Additionally, while the overall due diligence process is similar to the United States, it often takes a lot longer and is more expensive because Chinese companies will not disclose information all at once. Even though potential buyers sign confidentiality agreements, Chinese business owners know it can take many years to litigate a firm that violates the confidentiality agreement. Therefore, many Chinese firms wait until they build a relationship and see that a potential buyer is serious before sharing detailed financial, operations, marketing and IP information. //

For more information about the CIPEF conference please visit the website.

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ACG East Coast Chapters Premier East Coast ACG Event a Hit! ACG New York, ACG New Jersey, ACG Connecticut and ACG Philadelphia sponsored the inaugural “It’s a ‘Shore’ Thing!” event at the Ocean Place Hotel in Long Branch, N.J., Aug. 11-13. This event brought together top dealmakers for high-level panels and discussions, including “The Impact of Private Equity in the U.S. Economy,” presented by ACG Global Immediate Past Chairman Chuck Morton of Venable LLC, and policy updates from Washington, delivered by Jason Mulvihill, general counsel of The Private Equity Growth Capital Council. There also were dynamic panels on the latest trends in the middle market, such as “Fishing for Deals in Rough Waters” and “Industries in Recovery—Will They Sink or Swim?” just to name a few. Featured panelists included Béla Szigethy (Riverside Company), Gretchen Perkins (Huron Capital), Michael Mufson (Mufson Howe Hunter), Alan Scharfstein (DAK Group), James Gaven (Welsh, Carson, Anderson, & Stowe), Gregory Bedrosian (Redwood Capital), Matt Guenthe (GenNX 360), and Bob Fitzsimmons (High Road Capital). Plans are in the works to make “It’s a “Shore” Thing!” an annual event to be held on the New Jersey Shore. Make sure to watch for the 2014 dates. View the event videos. Industries in Recovery–Will They Sink or Swim? Driving Growth in the Middle Market A View From Washington Jason Mulvihill

acg@work chapter news from around the globe

ACG Seattle ACG Seattle Hosts Successful Mid-Market Conference In August, ACG Seattle presented the Northwest Middle Market Growth Conference ™ and ACG Capital Connection® at the Bell Harbor International Conference Center located on Seattle’s magnificent waterfront. The largest of its kind in the Northwest, the conference attracted a broad range of private equity funds from across the country and 300 premier deal executives for a day of intense networking and quality programming. “The conference provided middle-market business owners and deal professionals with an in-depth look at the national and regional M&A landscape and key insights from leading capital providers on today’s ever changing marketplace,” said ACG Seattle Chapter President Chris Behrman. The conference took a special look at the state of the manufacturing industry, the outlook for growth, workforce challenges, managing costs and the overall health of the manufacturing industry for the middle market heading into 2014. Attendees also learned how CEOs of three dynamic and growing private companies from different industries effectively and efficiently grow a company in today’s challenging and uncertain economy. The highlight of the conference featured keynote speaker and mountaineer Ed Viesturs. Attendees left the conference inspired by his story about managing risk, strategy, drive, growth and success through teamwork–concepts they can use daily.

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the portfolio insight from the experts

sound decisions

mid-market trends

Global views

tap buttons to navigate columns

Due Diligence Trends, Role of LPs in M&A Technology Sector Attractive to PE Firms IN THIS ISSUE sound decisions Any company deciding to pursue an M&A strategy for growth in today’s volatile environment realizes the importance of the critical fact-finding mission that is due diligence. A number of trends across global markets accentuate the importance of virtual data rooms in the ever more fastidious due diligence process.

mid-market trends Read an excerpt from the Duane Morris LLP publication, Inside the Mind of the Limited Partner, based on the firm’s trans-Atlantic simulcast of the same title in May. The session convened panels in New York and London featuring LP industry leaders.

Global Views Transformative technologies have the potential to give companies in all industry verticals unprecedented insight into market trends and drive cost savings. Cloud computing, mobile devices and the growth of social networks are a few catalysts driving this transformation.

COMING SOON Read the Portfolio section of the November/December issue for more on the latest middle-market trends, written exclusively by our team of expert ACG Partners. To learn more about contributing to this section, please contact Meredith Rollins, (312) 957-4260 or Ellen Moore, (312) 957-4274. These articles are brought to you by ACG’s Global Partners.

the portfolio sound decisions // Mike Hinchliffe, Ari Lee and Merlin Piscitelli of Merrill DataSite

sound decisions

mid-market trends

Global views

tap buttons to navigate columns

Local Knowledge Is Key in 2013’s Increasingly Tactical M&A World

Market Uncertainty Calls for Thorough Due Diligence

ollowing a tough 2012 for mergers and acquisitions, hopes have been high that 2013 would see a noticeable pick-up in dealmaking activity. According to Merlin Piscitelli, a director at Merrill DataSite, this year generally looks to be mirroring 2012. “The beginning of the year saw significant promise of growth in the dealmaking community. This has, perhaps, plateaued—and of course it only takes one significant setback to then make the market nervous again,” he says. Any company deciding to pursue an M&A

Ari Lee, a director at Merrill DataSite

strategy for growth in today’s volatile

for the Asia-Pacific region, points out

environment realizes the importance of

that current market uncertainty has only

the critical fact-finding mission that is due

increased reliance on thorough due dili-

diligence. A number of trends across glob-

gence. “We now see that firms are paying

al markets accentuate the importance of

more attention to due diligence. We can

virtual data rooms (VDR) in the ever more

infer this from the growing amount of

fastidious due diligence process.

data being requested by counterparties,”

“We have heard from dealmakers that

Lee says. “Firms also look to get document

the market generally has become more

review done in the quickest and most ef-

tactical—companies on both the buy and

ficient manner so they can then turn their

sell side want the pertinent information at

attention to other parts of the process.”

their fingertips, which is of course where

He adds that local knowledge is incred-

a VDR comes in,” Piscitelli says. “The

ibly important in facilitating the dealmak-

seller can use the VDR to upload all their

ing process. “The Asia-Pacific region in

data quickly and efficiently and then track

particular is characterized by having fierce

which documentation has been accessed

local and regional competition; while there

to glean if the potential buyer is serious or

are many large national and international

not. Likewise, the buyer can use this pro-

brands, they compete on a provincial ba-

cess to gain real-time access to any docu-

sis,” he says. “This, combined with the

mentation needed to inform their bid.”

large role the government plays in industry, makes local knowledge paramount to successful, long-lasting business.”

the portfolio sound decisions // Mike Hinchliffe, Ari Lee and Merlin Piscitelli of Merrill DataSite

sound decisions

mid-market trends

Global views

tap buttons to navigate columns Chris Beckmann, a director at Merrill DataSite with a primary focus on the German, Swiss, Austrian and Polish markets,

Mike Hinchliffe

Ari Lee

Merlin Piscitelli

actively and updated when any new information becomes available.” In conclusion, clear signs seem to point

believes that one often-overlooked aspect

toward M&A deals taking longer in the

of managing risk in any transaction is the

current, more tactical climate. The signifi-

airtight documentation of attributable

cance of local knowledge in this environ-

knowledge—knowing who knew what and

ment cannot be underestimated. Flexibility

then being able to prove it. “The impor-

and the need to provide detailed and struc-

tance of this is obviously reflected in the

tured information to all participants in a

increased use of virtual data rooms that we

deal seems to be of growing importance in

are now seeing,” he says.

a market searching for some certainty. //

The value of this thorough, easily analyzed due diligence cannot be understated.

Mike Hinchliffe is a Director for Merrill Data-

“It is all about giving a potential buyer the

Site in its London office; Ari Lee is a Director

best possible means of accessing all rel-

for Merrill DataSite in its Hong Kong office;

evant documentation—showing them what

Merlin Piscitelli is a Director for Merrill

they need to see and helping keep the cost

DataSite in its London office.

down by providing a potential acquirer with a well-structured data room,” Beckmann says. “Buyers need to be managed

the portfolio mid-market trends // Private Equity Group, Duane Morris LLP

sound decisions

mid-market trends

Global views

tap buttons to navigate columns

Myths, Points of Contention and Red Flags: The Co-Investment Conundrum

Read an Excerpt From the New Duane Morris LLP Publication

This is an excerpt from the new Duane Morris LLP publication, Inside the Mind of the Limited Partner, based on the firm’s trans-Atlantic simulcast of the same title in May 2013. The session convened panels in New York and London featuring LP industry leaders including: Erik Hirsch and Jim Strang of Hamilton Lane, Howard Searing of DuPont Capital Management, Kathleen Bacon of HarbourVest Partners, Alan MacKay of Hermes GPE and Mike Elio of the Institutional Limited Partners Association (ILPA). It was moderated by Jennifer Rossa and David Powell of Bloomberg.

s the industry matures and LPs become more sophisticated and focused on their particular needs, it is becoming clear that they are indeed a heterogeneous bunch. Certainly, not all investors are equal when it comes to negotiating terms and conditions such as management fee offsets, waterfalls or co-investment rights. One of the flashpoints where investor opinion diverges most acutely is co-investment rights. “It is cyclical—when it’s all the rage, everybody wants to do it,” says Erik Hirsch, Chief Investment Officer at Hamilton Lane. Better returns and lower fees are the top

“Where a GP actually has a good deal, and

objectives investors hope to achieve with

it’s too big for them to do, and they gener-

co-investment, according to a 2012 Preqin

ally want to distribute to an LP—you know,

survey (see chart).1 More recently, it found

one or two of these—that’s kind of rare,”

that over 40 percent of institutional inves-

says Searing. “For the vast majority of

tors expect to increase their co-investments

LPs,” observes Searing, “it’s really hard to

this year while some 52 percent would like

get it done and you’re going to end up be-

to increase their direct private equity

ing the victim of adverse selection.”

investment in companies.

Finally, he points out that “where most of

In the view of Howard Searing at DuPont Capital, co-investment rights may be a useful GP marketing tool, but for investors “co-investment is an elusive thing.” He thinks the instances where a co-investment makes sense for everybody are rare.

the deals we’re looking at are middle and lower middle market, it’s even harder.”

the portfolio mid-market trends // Private Equity Group, Duane Morris LLP

sound decisions

mid-market trends

Global views

tap buttons to navigate columns On the other side of the aisle is Alan MacKay of Hermes GPE, which manages

investing? According to a recent paper by

about $10 billion, with about half of that

professors at Harvard and INSEAD, co-in-

devoted to co-investment. As he indicates,

vestment programs have consistently un-

“my whole business is built around co-in-

derperformed ordinary fund investments.2

vest, I don’t have a co-investee—everyone’s

The study looked at seven large institu-

a co-investor.” In MacKay’s view, co-invest-

tional investors and found that their direct

ment is “a critical and essential component

investments outperformed co-investments

of the PE portfolio—as are secondaries,

and a wide range of benchmarks for private

actually, but co-invest is a critical, vibrant

equity investments. The authors put the

component of smart private equity, smart

poor performance of co-investments down

use of the asset class and smart portfolio

to fund managers’ selective offering of what

construction.” For MacKay, co-investment

are generally large deals—nearly five times

shouldn’t be a problem if an LP is “sophis-

larger than an average sponsor’s deal. //

ticated and well-resourced.” Hirsch mentions that another big driver is that “GPs today really do not want to do deals with each other—that is like a big nono. They hate it, they’ve all had bad experiences.” And, he notes, “LPs don’t like club deals.” Particularly in the big pre-crisis

Sources 1. Preqin Special Report: LP Appetite for Private Equity Co-Investments, page 5 (2012). 2. Lily Fang, Victoria Ivashina and Josh Lerner, The Disintermediation of Financial Markets: Direct Investing in Private Equity (INSEAD and Harvard Business School October 2012).

What does the evidence say about co-

deals, investors could become overexposed to a single deal and experience sub-par returns. But, according to Hirsch, “coinvestment is almost a necessity for some number of people, it’s just that who can you do it with, and who can actually do it, are much deeper questions.”

Read the full text of “Inside the Mind of the Limited Partner” and Duane Morris’ other timely publications.

the portfolio global viewS // Steven Perkins, National Managing Director of Grant Thornton’s Technology Industry Practice

sound decisions

mid-market trends

Global views

tap buttons to navigate columns

Transformative Technologies Take Center Stage

Cloud Computing Is Smart Business for PE Firms

s private equity firms look for smart places to invest, the technology sector continues to garner attention as the United States finds itself in the early stages of an IT evolution. Transformative technologies have the potential to give companies in all industry verticals unprecedented insight into market trends and drive cost savings. Cloud computing, mobile devices and the growth of social networks are a few catalysts driving this transformation and creating opportunities for private equity. Cloud computing is used to deliver a range

With increased acceptance of the cloud

of IT services, including software as a

there are investment opportunities for pri-

service (SaaS), platform as a service (PaaS)

vate equity firms. Investment opportunities

and others. The cloud’s low entry cost,

come from newer, pure-play cloud vendors

monthly billing model, ease of use, and

looking to grow and gain market share, and

scalability work well in most industries.

from traditional “on-premises companies”

Additionally, the operational costs and

seeking to restructure or augment their

maintenance advantages of cloud solutions

product and services portfolios to support

compared to client-server computing are

the “as a service” model.

huge. According to Gartner, at year-end

Cloud-based solutions are already tak-

2016, more than 50 percent of Global 1000

ing off in the health care sector. The U.S.

companies will have stored customer-sen-

cloud computing market for medical im-

sitive data in the public cloud. This migra-

ages was at $56.5 million in 2010 and is

tion to cloud is attracting more than us-

forecast to grow at a compounded annual

ers—it’s also attracting investors. SaaS and

growth rate (CAGR) of 27 percent during

cloud was the most active segment of the

2010-2018, according to research firm

online and mobile industry during the first

Global Data.

half of 2013, according to investment bank

Private equity firms are taking advan-

Berkery Noyes. In fact, there were 291 M&A

tage of the opportunities in the subsector

transactions in the SaaS and cloud space

as well. In January, Arsenal Capital Part-

in the first half of 2013, representing a 15

ners bought TractManager, a cloud-based

percent increase in volume from 2012.

health IT provider. In March, Halyard

the portfolio global viewS // Steven Perkins, National Managing Director of Grant Thornton’s Technology Industry Practice

sound decisions

mid-market trends

Global views

tap buttons to navigate columns Capital bought OneSource Virtual, a business processing company that operates in

devices and growing social networks is

the cloud.

forcing the reimaging of business mod-

Additionally, when it’s time to exit strateSteven Perkins

“The combination of ubiquitous mobile

els across many industries. A by-product

gics are expected to be willing buyers. Pho-

is the accumulation of large amounts of

to sharing and storage company Instagram

often unstructured and frequently tempo-

is fully integrated using the cloud, which

ral data. Companies that have developed

is part of the reason Facebook agreed to

inventive ways to monitor, analyze and re-

spend $1 billion to acquire the company in

spond to online social media and help busi-

2012. Google, Microsoft and Amazon also

nesses better target consumers are very

have been gobbling up cloud-based compa-

valuable,” says Marc Chiang, transaction

nies as they fight for market share.

advisory services leader in Grant Thorn-

Mobile devices today prove to be one of the most disruptive technologies around.

ton’s Technology Industry Practice. Private equity firms have gotten in on

First they have transformed how people

the action. There were 230 financially

communicate, now they are fundamen-

sponsored transactions with an aggregate

tally restructuring how people conduct

value of $13.5 billion in the online and

business. According to Goldman Sachs, in

mobile industry, representing 12 percent

2012, 64 percent of U.S. phone users had

of the total volume and 20 percent of the

smartphones, and by 2015 that number is

total value, respectively in 2012, according

expected to be 81 percent. Smartphones are

to Berkery Noyes.

evolving as the preferred platform by people around the world. Mobile payments is one hot area that

However, investing in technologies companies is not for the feint of heart. The pace of innovation is measured in

will most definitely change how consum-

months, not years. Sector rotation can

ers shop and pay bills. According to For-

happen rapidly. Private equity firms must

rester Research, U.S. mobile payments will

understand the opportunities and the

reach $90 billion by 2017. E-Content also

challenges related to this massive change

is an area that’s set to explode. M&A deal

while being ready to jump in quickly. //

value in the subsector increased 60 percent over 2011 to $17.5 billion in 2012. Deal flow

Steve Perkins is the National Managing

in the social media marketing subsector

Director of Grant Thornton’s Technology

more than doubled since 2011, according

Industry Practice.

to Berkery Noyes.

the ladder ACG MEMBERS ON THE MOVE George Nemphos of Duane

Eric Markland of ACG Central

Morris LLP was selected by Best

Texas was promoted to COO

Lawyers as a Lawyer of the Year

of INTERA and is in charge of

in leveraged buyouts and private

business operations, mergers

equity law in Baltimore for 2014.

and acquisitions, human

George Nemphos

Eric Markland

resources, information systems, facilities, risk management

Duane Morris LLP welcomed

and contracting.

Jenny Wheater as partner in its Corporate Practice Group

Leigh Ann Schultz of ACG

in the firmâ&#x20AC;&#x2122;s London office.

New York and managing director, Riveron Consulting,

Jenny Wheater

has been named a winner of M&A Advisorâ&#x20AC;&#x2122;s 4th Annual JenniLee Crocker of ACG Richmond has joined Marsh &

Leigh Ann Schultz

40 Under 40 Recognition Awards, which honor the

McLennan Companies, a global

accomplishments and

leader in insurance broking

contributions of prominent

and risk management.

M&A, financing and

JenniLee Crocker

turnaround professionals. Les Alexander of ACG

Karyn Pfeffer of ACG Dallas/

Louisiana joined Jefferson

Fort Worth was promoted to

Capital Partners, an SBIC-

transaction services partner at

licensed fund that makes

Hein & Associates LLP.

mezzanine debt and Les Alexander

equity investments.

Karyn Pfeffer

To submit your promotions, job changes and other accomplishments to the Ladder section of Middle Market Growth, please send information and a color headshot to Editor-in-Chief Kristin Gomez.

it’s the small things Cell-ing Out // Capturing the Mobile Market

MOTOROLA LED THE (10-HOUR) CHARGE // On April 3, 1973, Martin Cooper, a Motorola researcher and executive, made the first mobile telephone call from a prototype weighing 2.5 pounds and measuring 9 inches long, 5 inches deep and 1.75 inches wide. It offered a talk time of just 30 minutes and took 10 hours to recharge. Ten years later, Motorola offered the first commercial portable cellular telephone—at a whopping price of $3,995!

GROWING APP-ETITE // With nearly 7 million new smartphones activated on Christmas Day 2012, an app-downloading frenzy was a foregone conclusion. There were 1.2 billion apps downloaded from December 25 to 31. The time spent with mobile apps is starting to rival television: Consumers are spending 127 minutes per day in mobile apps, compared with 168 minutes per day spent watching TV.

CUTTING TIES TO LANDLINES // In 2012, the number of 25-29 year olds living in a mobile-only household hit a remarkable 60 percent. There is a sharp generational divide: Fewer than 25 percent of 45-64 year old Americans have dared to drop the landline.

MOBILE OVERPOPULATION? // Industry experts predict there will be more mobile devices than people on Earth by the end of 2013. That means mobile data usage is skyrocketing too—mobile traffic worldwide grew 70 percent in 2012. It’s now 12 times what the global Internet was in 2000.

Holiday MIRACLE! // Cyber Monday sales increased 30 percent in 2012, with mobile sales up 96 percent from 2011. The iPad beat all other tablets and smartphones by driving more than 7 percent of online shopping. EBay’s PayPal reported 196 percent more mobile payment volume on Cyber Monday 2012 than Cyber Monday 2011.

The Leadership acg directors ACG Board of Directors //

Chapter Representative Directors //

Directors At Large //

Chairman Pamela Hendrickson* The Riverside Company ACG New York Term expires 8/31/2014

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

Greg Cinnamon Kilpatrick Townsend & Stockton LLP ACG Atlanta Term expires 8/31/2016

Robert Burns Lazard Middle Market, LLC ACG Minnesota Term expires 8/31/2014

Mike Ehlert Capital One Leverage Finance Corp. ACG Houston Term expires 8/31/2015

J.B. Dollison* Crutchfield Capital Corporation ACG Houston Term expires 8/31/2014

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

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

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

W. Braun Jones III Outcome Capital LLC ACG National Capital Term expires 8/31/2014

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

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

Frank Mack Kugman Partners Inc. ACG Chicago Term expires 8/31/2014

Brian Moll Polsinelli Shughart PC ACG Arizona Term expires 8/31/2014

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

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

Durant (Randy) Schwimmer The Carlyle Group ACG New York Term expires 8/31/2014

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

Tom Washbush Benesch, Friedlander Coplan & Aronoff ACG Columbus Term expires 8/31/2015

Joel Rosenthal Schneider Downs & Co., Inc. ACG Pittsburgh Term expires 8/31/2014

ACG Honorary Directors //

Vice Chairman Doug Tatum Newport Board Group ACG Atlanta Term expires 8/31/2014 President & Chief Executive Officer Gary A. LaBranche, FASAE, CAE* ACG Global Chairman of Finance Stephen Prostor Citi Private Bank ACG New York Term expires 8/31/2014 Secretary Richard Jaffe Duane Morris LLP ACG Philadelphia Term expires 8/31/2014 Chairman of InterGrowth 2014 Ken Berryman CapitalSouth Partners ACG Kentucky Term expires 8/31/2014 Immediate Past Chairman Charles J. Morton, Jr.* Venable LLP ACG Maryland Term expires 8/31/2014

Robert G. Coffey Alan B. Gelband

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

*denotes member of Executive Committee

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