Thought Leadership

PDF: Association for Corporate Growth 2018

Cleveland businesses should heed the wealth of M&A opportunity

Brian Kelly, local deals partner, and Alex Brown, deal strategy principal, PwC
For many Cleveland-area businesses, the current business climate is positive. The equity markets have been torrid, with the S&P 500 increasing 23% over the last 12 months, to its highest level. Seasonally adjusted unemployment rate is just 4.1%, interest rates are low and, according to PwC’s CEO Survey, 55% of U.S. CEOs are planning on acquisitions in the next 12 months.

Will blockchain change the world?

Sean T. Peppard, partner, Corporate & Securities Practice Group, Benesch
The fanfare around blockchain has reached epic levels, with publications like Forbes and Fortune predicting that blockchain will change the world. While such headlines are meant to grab attention and arguably exaggerate coming changes, a recent report by the World Economic Forum is predicting that by 2025, around 10% of global GDP will be built on blockchain or blockchain-related technology.

Key questions to answer during due diligence

Mark B. Bober, partner and practice leader in Transaction Advisory Services, Bober Markey Fedorovich
The M&A market remains extremely competitive, and buyer due diligence is more critical than ever. Sellers often seek valuations based upon projected forward earnings and pro-forma adjustments that may not reflect the actual results of operations, which require thorough diligence.

Early preparation and team-building is essential for successful acquisitions

John McGuire, partner, Calfee, Halter & Griswold LLP
Practitioners of transactional work generally agree that we are in a persistent sellers’ market. Pricing multiples remain high, sometimes breathtakingly so. Middle-market sellers are demanding that most, if not all, of their indemnity exposure be offloaded to representation and warranty insurance policies. What should potential buyers who do not regularly engage in acquisitions and dispositions do to be credible and competitive?

Momentum benefits sellers

Andrew K. Petryk, managing director and principal, Brown Gibbons Lang & Company
Aggressive buyers. Hungry lenders. Robust valuations. These are themes we have seen repeated over the last few years and show no signs of abating. Liquidity and the quest for growth are continuing to drive the M&A market with an almost insatiable fervor.

Sidestep private equity’s potential landmines

David Kern and Jon Stefanik, partners, Business Practice Group, Buckingham, Doolittle & Burroughs LLC

At its core, an M&A transaction involving a private equity buyer or seller is no different than any other M&A transaction that involves all of the usual suspects: due diligence checklists, working capital adjustments, baskets, caps, survival periods, carve-outs … you name it. There are, however, several under-the-radar issues unique to deals involving private equity buyers or sellers which, without planning, can become potential problems.

Be strategic when evaluating path to a successful business transition

Scott McRill, shareholder, Private Equity and Transaction Advisory Services Practice, Clark Schaefer Hackett
As the baby boomer generation ages and the Gen Xers and millennials come of age and go off to do their own thing, many businesses owned by boomers are left without a natural successor. Many of these business owners are finding that their children and grandchildren do not want to take over the family business.

Mitigating risk in M&A transactions

Jacob B. Derenthal, partner, Corporate Transactions Practice Group, Walter | Haverfield
Participants in merger and acquisition transactions all tell you they intend to mitigate risk. But in a marketplace with aggressive timelines and competition, too often deals close without parties taking simple precautions.

Championship-caliber dealmakers understand the language of business

Christopher J. Hewitt, partner, M&A Group chair and Corporate Governance Group co-chair, and Jayne E. Juvan, partner, Private Equity Group chair and Corporate Governance Group co-chair, Tucker Ellis LLP
In the context of corporate transactions, making sure that attorneys on the deal team have the capacity to understand the language of business, or lingua negoti, is critical to accomplishing a client’s objectives. 

Managing risk and liabilities as global M&A grows

Jeff Schwab, senior vice president and director of Private Equity Services, Oswald Cos.
Thomson Reuters reported worldwide dealmaking grew 12% in the first quarter of 2017 over the same quarter in 2016, to $777.7 billion. The number of deals in the same time fell 9%. Fewer deals, with larger dollar amounts, result in increased pressure and risks that are more complex.

Indemnification in private M&A deals

Tony Kuhel, partner, Corporate Transactions & Securities Practice Group and vice chair, Cleveland office, Thompson Hine
In most M&A transactions involving a privately held target, the seller’s representations and warranties and its indemnification obligations are the most heavily negotiated provisions in the definitive agreement. While representation and warranty insurance has altered these negotiations when it is used, the fundamental purpose of representations and warranties and indemnification remains unchanged: allocating risk for unknown (and in some cases known) liabilities between the buyer and seller.

M&A for high-growth companies

Michael C. Shaw, partner, Copper Run
Acquisitions can elevate high-growth companies to new levels. Often, companies that can benefit the most from acquisitions are companies that have grown significantly at the cost of structural problems (such as a significant customer concentration). Implementing a regular internal M&A review will help high-growth companies stay ahead of the growth curve and find areas to improve. M&A isn’t just for the slow-growth consolidators.  

New revenue recognition standard could impact quality of earnings

Andrea Slabinski, senior manager, professional standards team, and Joseph Adams, partner, private equity team, Plante Moran
Whether buying or selling a portfolio company or planning a future exit, it is critical that private equity groups understand the new revenue recognition standard. The new model can affect the timing of when revenue is recorded, which could have surprising impacts on quality of earnings. Here’s what it means for your valuation models during due diligence.

Be wary of tempting offers

Charles Aquino, managing director, Western Reserve Partners
Perhaps you’ve spent a lifetime building your business, sacrificing personally for the betterment of your employees and company. Or maybe you are the caretaker of four generations of growth and sacrifice, and it’s your turn to preserve the family legacy.

Employee considerations in a transaction

Michael D. Makofsky, principal, Mergers & Acquisitions, Banking & Finance, and Business & Corporate practice areas, and Jack E. Moran, principal, Employment & Litigation practice areas, McCarthy, Lebit, Crystal & Liffman

Overcome hurdles, improve deal outcomes

Jay Moroscak, senior vice president, Cleveland office, Aon Risk Solutions
The dearth of desirable acquisition targets has created a highly competitive landscape in the M&A market. This competitive situation dictates that buyers be prepared with strategies and tools that facilitate potential transactions.

Market dynamics tilt deal favor toward seller

Albert D. Melchiorre, president, and Matthew M. Sweet, associate, MelCap Partners
The M&A markets are dynamic and constantly evolving. These trends continue to have implications for buyers and sellers. It is particularly important that business owners understand these trends to prepare themselves for a successful transaction.

Private equity continues to evolve

Stewart Kohl, co-CEO, The Riverside Co.
The Riverside Co. has seen a lot of change in private equity since our founding nearly 30 years ago. Part of that change has been seeing some of the things we did become much more common and even necessary for success in this increasingly competitive and challenging environment.

Don’t let due diligence deflect from the deal of a lifetime

Christal Contini, member and co-chair of the Mergers and Acquisitions Practice Group, and Emily Johnson, associate in the Healthcare and Data Privacy and Cybersecurity Practice groups, McDonald Hopkins LLC
For many small business owners, founders and management teams, selling their business is a once-in-a-lifetime transaction. Most have spent years focused on managing and growing their business — not on the task of selling. When it is time to sell, though, it is important to be prepared for the buyer’s due diligence investigation.

Making earnouts work

James D. Vail, managing partner, and James M. Gianfagna, associate, Schneider Smeltz Spieth Bell
In the sale of a business, an earnout entitles a seller to additional purchase price if the target business meets certain post-closing benchmarks. The benchmarks are usually based on the target’s financial performance — generally revenue, gross profit or EBITDA.

Enlist a buy-side adviser to gain the advantage

David Pease, vice president, Pease Acquisition Advisors
W
hat does the typical company do once it decides that growth through acquisition is in its strategic plan? Of the various ways to find acquisition opportunities, there are two main methods to source and complete a deal.

Northeast Ohio’s leading deal makers to be honored

ACG Cleveland 2017-18 Officers and Board of Directors

ACG Cleveland is proud to be part of momentum, growth

Brian Kelly, president, ACG Cleveland and partner, PwC
Cleveland is a city on the move and perpetually growing. From the continued transformation of Cleveland’s neighborhoods and downtown to the evolution of the Euclid corridor, University Circle, coupled with the impressive infrastructure initiatives, we see this growth all around us. Cleveland can again boast of two championship-caliber sports teams, and a third ready for takeoff.

PDF: Association of Corporate Growth 2017

Crain's Cleveland Business' Custom Publishing section downloadable, or flip through online in an easy-to-read format.

Deal sourcing, deploying capital among PE fund priorities in 2017

As we approach the end of 2016, private equity continues to be a significant driver in middle market M&A.  While a number of factors will continue to impose increased operating costs and more competition for deal flow, the industry has largely had a great deal of success in fundraising. 

The seven deadly sins of a unicorn

Akin to a white, wild and legendary beast with a mythical horn, a unicorn in the business world is a private company valued at $1 billion or more that lacks a lengthy track record.

Successful bank acquisitions start with customers, employees, and communities

Paying the highest price isn´t the key to successful bank acquisitions. The banking landscape is littered with banks that overpaid for acquisitions and subsequently found themselves on the block. 

Seeking certainty in uncertain times

By definition, a trend is a general direction in which something is developing or changing. Prior to the end of 2016, the private equity environment trended cautiously optimistic.

Assemble a qualified team to seal the deal

For most business owners, the sale of a business is a once-in-a-lifetime endeavor. Owners should evaluate a sale and how it aligns with their goals and objectives for themselves, their families, companies, and legacies. 

'Materiality scrape' can be more than a minor cut

Any business owner who has sold a business through a merger, stock sale or asset sale has gone through what I like to call the "death march," wading through the various proposed representations and warranties. 

Solid PE ownership key to middle market business management

There are four key elements to effectively manage middle market businesses: strategy, talent, alignment, and governance. 

Don't let a data breach derail the deal

The global cost of cybersecurity breaches in the business world is forecasted to exceed $2 trillion by 2019. 

Cross-border transaction advisers facilitate deals

The U.S. M&A market has seen an influx of Chinese buyers in the last few years. The resource-rich Chinese state-owned enterprises led the wave. 

Managing seller risk in M&A transactions

You've decided to sell your company. You've found the right buyer, the parties are completing due diligence and are negotiating the purchase agreement. It might seem like the perfect time to focus on managing your post-closing risk.

Valuations: Is the tide still rising?

We have witnessed conditions of a seller's market, certainly for high-quality businesses, as the "status quo" for a sustained period. 

Shrewd corporate planning aids in organic growth

Contrary to perceptions created by the pace of M&A activity, not all business owners are clamoring for an exit. Across the landscape are high-functioning private companies planning for expansion. 

4 ways to prepare for raising early-stage capital

Raising capital for an early stage company can be a daunting task. There is a lot of useful advice and "better" practices but unfortunately no definitive roadmap for success.

Transparency can pad a business' price tag

Most studies suggest that 70% to 90% of acquisitions fail to generate the investment returns targeted by the acquirer. 

Dealmakers should prepare for M&A and IPO trends

2016 will go down as one for the record books. The markets were able to shake off several major geopolitical events this year.

Consider value, service when evaluating professional fees in a transaction

When completing a transaction, hiring experienced advisers is critical. However, qualified advisers come at a price, and professional fees can become a significant component of transaction costs. 

Ward off cybersecurity threats

Private equity firms are facing increased scrutiny from investors, regulators, and legislators around cybersecurity. 

High-growth firms should formulate an M&A plan

"We want to do some deals to supplement organic growth, but don't know where to start." This is a common refrain we hear from new clients and prospects.

5 common acquisition landmines to avoid

For an acquisition to be considered successful, one would assume the newly combined entity is better off than either of the parts were previously. Simply put, value is enhanced, not destroyed. 

Company Succession Planning 101

Closely held business owners know they someday need a succession plan, but most are focused on day-to-day operations and delay addressing the transition process.

Making the move to asset-based lending

With the continued economic recovery, more businesses are seeking to expand and diversify. All the more, they're making this happen by leveraging a major financing opportunity still at their disposal: the value they have in their assets.

Is conducting financial due diligence enough?

Private equity buyers need to think twice before limiting their due diligence to financials. Numbers can be checked and double-checked, but they can be unreliable and misleading if they aren't evaluated in the right market context.

Tax insurance bolsters deal security

Tax insurance is one of a suite of risk-transfer insurance products - along with Representations and Warranties insurance and others - that are aimed at addressing deal risks.

Variations to traditional sale offer additional benefits

When owners contemplate a business sale, many envision selling their entire interest to a third party. This traditional type of sale, however, may not always be possible or in the owner's best interest.

Small world means big potential for private equity

In its early years, private equity was largely practiced only in the United States. 

Buyers should be wary of 'copyleft' software

Companies are increasingly using open source software in their businesses, and for some companies, this type of software is critical to their business models. Buyers should be mindful of the unique challenges this software poses in M&A transactions, particularly in terms of a target company's valuation.

ACG celebrates 35 years of Accelerating Cleveland's Growth

What a year to call Cleveland our home. The Republican National Convention, a redeveloped Public Square, a UFC heavyweight champion, the Calder Cup, an NBA championship and World Series baseball.