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CCLB 03-03-08 Custom Publish 1 CCLB2/26/20082:06 PMPage 1S–1ADVERTISEMENTACG CLEVELAND: ALL ABOUTM&A AND CORPORATE GROWTHIVibrant deal-makingsector lifts region’seconomyM&A opportunities thatmake good sense still aboundThroughout NortheastOhio and elsewhere,good opportunities stillexist for sellers and buyers ofbusinesses despite the downturnin the economy, according tolocal experts who belong to ACGCleveland, the local chapter of theAssociation for Corporate Growth.However, sellers and buyersmust realize that the process maytake longer and be more complextoday than it might have beenjust a year ago. Knowing what theissues are, who can help identifyopportunities, what financingoptions are available—and more—all are essential to getting the bestdeal possible, the experts say.The 2008 ACG Clevelandspecial section talks in detail about: Private equity’s growing roleas a resource to the NortheastOhio region and bridge to thewider world. With billionsof dollars to put to work,private equity firms will havean impact in this economicdownturn like never before. The outlook for M&A activityin the low- to middle market.Will the middle market be ableto avoid the gridlock that hasshut down deals at the highend of the market? The impact that all thisturmoil is having on corporateborrowers. Banks still wantto extend credit to goodcompanies, lenders say, thoughborrowers likely will have toaccept tighter terms. What sellers can do to improvetheir position and find the rightadvisers to rouse interest andguide them through the process.Turn the page to explorethe many facets of the world ofcorporate growth and the wealthof knowledge and expertiseavailable in your own backyard.f you are a business owner, a corporate executive focused on growthand acquisitions or a professional involved in transactions or advisingclients on corporate growth, then you should be part of ACG Cleveland.The Association for Corporate Growth is the preeminent organizationin the world for corporate development and middle-market M&Aprofessionals. In the 27 years since the Cleveland chapter of ACG wasfounded, we have grown to more than 400 members from acrossNortheast Ohio. With an active membership and a full program schedule,we are one of the most vibrant chapters in ACG.Our members work in public and private corporations, private equity,investment banking, corporate banking and finance, accounting,law and other professional services. They join ACG Cleveland for twoprimary reasons: to bring more value to their organizations throughnetworking with a diverse and influential community of businesspeople, and to participate in educational events that will help themdesign and implement strategies to build value in their companies andfor their clients.To this end, ACG Cleveland holds a variety of educational andnetworking events each year. These include monthly breakfasts featuringCEOs of leading Northeast Ohio corporations, and panel discussions inthe spring and fall that dive deeply into topics of vital interest to the dealcommunity. Each October we host more than 250 golfers at our outingat the famed Firestone Country Club in Akron. In June of each year wehold a social event at the Shoreby Club; last year’s event drew more than130 people for an enjoyable evening of networking, right on the shoresof beautiful Lake Erie.The capstone of our year is the annual Deal Maker Awards dinner inmid-winter. We attract more than 700 members and guests from morethan 20 cities to this event, which honors the top corporations anddealmakers in Northeast Ohio. See page 15 for more on the Deal MakerAwards and for a listing of our 2008 events.Of course, there is much more to ACG than ACG Cleveland. TheAssociation for Corporate Growth has more than 11,000 members in53 chapters in North America and Europe. These members recognizethe multiple benefits of networking within an influential community ofexecutives growing public and private companies worldwide.ACG hosts the world’s premier middle-market M&A networkingevent—the annual InterGrowth conference, attended by more than2,000 people. The 2008 event happens April 9 through 11 in Orlando.During the year, various ACG chapters also host more than 15 “capitalconnection” events, where private equity groups, hedge funds,mezzanine providers and corporate buyers network and meet dealprospects.If you are a corporate growth professional, an M&A professional, or ifyour firm relies upon the world of middle market M&A transactions, weencourage you to apply for membership in ACG Cleveland or attend oneof our events. Visit www.acg.org/cleveland/ or call (216)-696-8484. Or callme at (216) 535-4703. I’ll be happy to talk with you.James P. MarraPresident, ACG ClevelandPrincipalDirector of Business DevelopmentBlue Point Capital PartnersSPECIAL ADVERTISING SECTION CRAIN’S CLEVELAND BUSINESS MARCH 3, 2008
CCLB 03-03-08 Custom Publish 2 CCLB2/26/20082:13 PMPage 1S–2ADVERTISEMENTGoodbye Rust Belt, hello private equityIf Charles Darwin — thefather of the theory ofevolution — and AdamSmith — history’s biggestproponent of free trade andcapitalism — bred, their lovechild would be involved inprivate equity, according toStewart Kohl, co-CEO of TheRiverside Company.Every day, the words “privateequity” grace the pages ofThe Wall Street Journal, thescreens of TV financial newsprograms, and daily and weeklypublications worldwide. Butprivate equity is not somethingthat happens in faraway cities.Northeast Ohio is home to alarge and vibrant private equityindustry that lifts the region’seconomic well-being and itscompanies of all sizes andstripes every single day. Theevolution of private equity isenhancing Northeast Ohio whilereaching beyond visible andinvisible borders to add valueworldwide.Internationally as well asdomestically, Clevelandbased private equity firms likeRiverside, Linsalata Capital, BluePoint, Morgenthaler, KirtlandCapital, and Primus haveflourished, together with a richpool of knowledge, experienceand resource providers thatare necessary to forge complextransactions.“Private equity providesbusiness owners with thepotential for liquidity, capital forexpansion and/or support forownership transitions,” says JohnNestor, senior managing partnerand chief executive officer ofKirtland Capital Partners.Nestor explains that theprivate equity model worksbecause it allows the companyto focus on long-term growth,enabling the business to investThere’s no place like home.With 17 offices around the world,we are proud to call Cleveland our home.Please contact Scott Gilbertson atsgilbertson@riversidecompany.com orin people, technology andcapital expenditures that mighthave been sacrificed when shortterm results were a must.For example, he says, a privateequity investment may be a goodoption for non-core divisions oflarge corporations that may havegrowth potential but have notreceived sufficient investment orattention.Kirtland, which has investedin numerous Northeast Ohiobased companies, followedthis model when it acquiredTruSeal Technologies from RPMInternational, and partneredwith TruSeal’s managementteam to build a stand-alonecompany.MANAGEMENT CAN STAY“Private equity is also ideal forprivately owned companieswhere the founder and/ormanagement team is lookingfor some liquidity while stillhaving a desire to remain inthe business and continue tomanage it,” Nestor says.In exchange for theinvestment, owners usually giveup some control, which can bedifficult, particularly for longtime business owners. However,they should understand thatmany private equity firms likeKirtland do not plan to directlyoperate the business, Nestorsays.At Fairmount Minerals,Kirtland partnered with thefounding entrepreneur and hismanagement team. Together,they created value bothorganically and through strategicacquisitions. The executivesheld 49 percent of Fairmount’sequity and continued to managethe business.After Riverside made aninvestment in Cleveland-basedWorkPlace Media almost a yearago, founder Tim McCarthystayed involved, contributing tothe company’s recapitalization.“As a result, we are ableto have our business on amuch safer financial footingwhile staying engaged in thebusiness,” McCarthy says. “Therecapitalization has allowed usto gain additional expertise aswell as the equity we needed togrow the business.”MORE THAN MONEYPrivate equity firms typicallytake a more strategic perspectivein their acquisitions today thanthey did in the past.Ten years ago, private equityfirms focused almost exclusivelyon the company’s financials.If the numbers showed thebusiness could grow withinthe firm’s three- to seven-yearinvestment, the private equityfirm would invest. “If the firmcouldn’t add a whole lot of valueto the deal, it didn’t matter,”says James Marra, director of216.344.1040 to learn how Riverside hasbeen investing in and growing companiesAnniversarywith 1MM – 15MM in EBITDA for 20 years.Terminal Tower50 Public Square29th FloorCleveland, OH 44113“Today’s private equity firmsdeliver much more than cash tothe businesses they own.”Stewart Kohl, The Riverside CompanyAMSTERDAM ATLANTA BRUSSELSBUDAPEST CHICAGO CLEVELAND DALLAS LOS ANGELESMADRID MUNICH NEW YORK PRAGUE SAN FRANCISCO SEOUL STOCKHOLM TOKYO WARSAWSPECIAL ADVERTISING SECTION CRAIN’S CLEVELAND BUSINESS MARCH 3, 2008
CCLB 03-03-08 Custom Publish 3 CCLB2/26/20082:13 PMPage 1S–3ADVERTISEMENTbusiness development at BluePoint Capital Partners.But, he explains, in today’smarket, which has about 30 to40 times more money than it did20 years ago (by some estimatesas much as 200 billion), privateequity firms are more hands-onabout their investments.Kohl says that can bebeneficial to all parties. “Today’sprivate equity firms delivermuch more than cash to thebusinesses they own,” he says.At The Riverside Company, BluePoint, Kirtland and others, anacquired business will find newresources to help it reach its fullpotential with the additionalexpertise of the firm’s teammembers and outside boardmembers.Riverside provides anoperating partner who workswith the business owner tobring broad perspective andintellectual capital to the table,Kohl says.Blue Point has an operationalexecutive group that is notinvolved in executing deals butmentors the acquired company’stop management, advising ontopics with which they arefamiliar such as marketing, IT orother operation issues.“We’ve got to have resourcescontinued on page 4PRIVATEEQUITY NOTTHE SAMEAS VENTURECAPITALPrivate equity and venturecapital both are aboutmonetary investments, butthat is where the similaritiesend.“They’re two very differentasset classes,” says James Marraof Blue Point Capital.Venture capital investsin start-up companies oryounger businesses that haveyet to fully form. Venturecapitalists typically have anon-controlling stake in thebusiness.Private equity is used in postrevenue businesses — maturecompanies with growthopportunities. A private equityinvestment assumes more than50 percent of shares to acquirecontrolling interest.A GOOD DEAL FOR ALLIn mid-2007, Riverside and Linsalata Capital presided over the merger of Axiom Automotive Technologies, alarge distributor of aftermarket transmission repair parts owned by Riverside, into Cleveland-headquarteredTranStar Industries, a competitor acquired by Linsalata a couple years earlier.That one deal alone dramatically built a Cleveland headquarters company, provided work for area legal,accounting and public relations firms and banks, and aligned the interests of the businesses, the private equityfirms and their investors.TranStar, founded in Cleveland in 1975, now has 500 million in annual sales and 1,700 employees, including200 at its Walton Hills headquarters.Connecting you to capital solutions forextraordinarydresuresults.Our clients rely on National City Business Credit to close their deals with integrity, creativity and flexibility. We delivercapital solutions that leverage the value of your assets and cash flow to finance acquisitions and growth. Our seasonedteam has an impeccable history of executing on proposed terms. No wonder we closed 89 transactions in 2007representing more than 2.0 billion in commitments.National City connects you to a seamless source of capital you can count on. Contact James Cannella, ManagingDirector and Regional Manager, National City Business Credit, at 216-222-2456.Selected Recent Transactions 60,000,000 32,950,000 100,000,000 43,500,000Senior SecuredCredit FacilitySenior SecuredCredit FacilitiesSenior SecuredCredit FacilitySenior SecuredCredit Facilityfor the acquisition ofLead Arranger &Administrative AgentAgentLead Arranger &Administrative AgentLead Arranger &Administrative Agent 81,000,000 75,000,000 65,000,000 30,000,000Senior SecuredCredit FacilitiesSenior SecuredCredit FacilitiesSenior SecuredCredit FacilitySenior SecuredCredit FacilityMONOMOYCAPITAL PARTNERSfor the acquisition ofKATAMAN METALSLead Arranger &Administrative AgentLead Arranger &Administrative AgentLead Arranger &Administrative AgentAgent 16,000,000 13,000,000 10,000,000 10,000,000Senior SecuredCredit FacilitySenior SecuredCredit FacilitiesSenior SecuredCredit FacilitySenior SecuredCredit Facilityfor the acquisition offor the acquisition ofAgentAgentAgentAgentBoston Chicago Cincinnati Cleveland Dallas Detroit IndianapolisNewtYork Philadelphia Pittsburgh St.tLouis WesttPalmtBeachSPECIAL ADVERTISING SECTION CRAIN’S CLEVELAND BUSINESS MARCH 3, 2008
CCLB 03-03-08 Custom Publish 4 CCLB2/26/20082:14 PMPage 1S–4ADVERTISEMENTGoodbye Rust Belt, hello private equitycontinued from page 3to help our businesses reachtheir full potential,” Marra says.“We focus more on businesseswhere we have some expertstatus.”Nestor says that the privateequity model at Kirtland workswell because the firm builds apartnership with the operatingmanagement team.“The sharing of equityownership with the managementteam aligns the interest ofeveryone involved in thetransaction,” he says.Making sure the company’smanagement team is competentand can articulate the company’sstrategic vision for itself as wellas for its place in the market arecritical as a private equity firmevaluates a potential acquisition.“Those things tend to bemore important to us todaythan 10 years ago,” Marra says.“We’re less likely to wander intoa business where we have noknowledge.”RISK TAKERS ASCHANGE MAKERSStephen Perry, senior managingdirector at Linsalata CapitalPartners, says private equityfirms also offer anotheradvantage in part becausethey seek a return on theirinvestment in five years or less.“It creates the need to takeaction sooner rather than later,”he says.The world of private equityinvolves risk-taking, an attributefrequently necessary to spura company’s growth. As Perryexplains, “Private equityinvestors are not reluctant tomake necessary changes.” 5IFZ TFF UIF XSJUJOH PO UIF XBMM /PX UIFZ OFFE BO . " FYQFSU XIP DBO EF¾ OF JU These guys are aware of the varied risks and opportunities that directly impact their deals. But beingprepared requires more than awareness. An astute M&A advisor could make all the difference, helping themunderstand and identify property & casualty risk exposures, healthcare issues, even retirement planning.They need a committed M&A partner to create an integrated strategy customized to their unique deal needs.They need Oswald Companies.8IP JT ZPVS SJTL NBOBHFNFOU QBSUOFSrisk consultingproperty & casualtylife insurancegroup benefitsJretirement plans XXX PTXBMEDPNQBOJFT DPNOhio Florida Michigan Minnesota North Carolinaan Assurex Global PartnerTUSJWJOH UP CFDPNF ZPVS QFSGFDU QBSUOFS“Themost powerful weapon is to have the next move.”- David BronsteinCalfee congratulates all of the ACG Award Winners on their accomplishment.Mergers and acquisitions canbe complex. But through oursizeable practice group, years ofexperience, and appreciationthat each client’s transaction isunique, Calfee provides legaladvice and expertise that ispractical and cost-effective.Calfee - move forward withconfidence.Calfee, Halter & Griswold LLPCleveland - 216.622.8200 www.calfee.com Columbus - 614.621.15001400 KeyBank Center, 800 Superior Avenue, Cleveland, Ohio 441141100 Fifth Third Center, 21 East State Street, Columbus, Ohio 43215SPECIAL ADVERTISING SECTION CRAIN’S CLEVELAND BUSINESS MARCH 3, 2008WHO’S RIGHTFOR OURCOMPANY?ohn Nestor of KirtlandCapital Partners offers thesecriteria to consider whenidentifying a private equity firmwith whom to work: Longevity of the firm Transaction experience Record during economicdeclines Investment criteria Reputation Expertise in a specificindustry Ability to provide strategicand operating guidanceWith many sources and formsof private equity (leveragedbuyouts, recapitalizations,growth capital, mezzaninecapital, venture capital andangel investing), businessowners should consult withtheir trusted advisers for properguidance, Nestor advises. Hesuggests talking with othermanagement teams who haveworked with a private equityfirm to gain insight into howthey operate.Private equity funds rangefrom 5 million to 15 billion,Nestor explains. Most fundshave their own specialties thatfocus on categories such as: Particular industries Stage of business life cycle Value versus growthinvesting Hands-on versus passiveownership.“The key for any managementteam or entrepreneur is to finda partner that is compatiblewith their values, culture andplans for the company anddetermine if there is a basis tobuild a relationship betweenthe management team and theprivate equity firm,” Nestor says.
CCLB 03-03-08 Custom Publish 5 CCLB2/26/20082:14 PMPage 1S–5ADVERTISEMENTM&A enters uncharted waters as economy struggles,private equity growsToday’s market for mergersand acquisitions remindsMark Filippell, managingdirector at Western ReservePartners, of the book, “Dr. Jekylland Mr. Hyde.”“What a difference a year makes,”he says. A year ago “increasedcompetition among private equityfirms as well as heightened interestfrom strategic buyers increasedthe values at which middle-marketcompanies were sold.”Today “the meltdown of thesubprime mortgage market isrippling through the corporateloan market, creating a lack ofliquidity for large transactions,”Filippell says.At the same time, he says, theamount of financial sponsorequity available for investment hasgrown to 300 million, up from 215 million the previous year.That 300 million representsapproximately 800 billion inpurchasing power. “This suggeststhe potential for an M&Arebound, once the debt marketstabilizes,” he says.AT A NEW INTERSECTIONAl Melchiorre, president ofMelCap Partners, a middle-market investment bankingadvisory firm, sees M&A activityat new crossroads.The struggles in the economyare resulting in a tighter creditmarket, but private equity,a driving force in M&A, isreaching record levels every year.Melchiorre explains that whilea downturn in the economy hasaffected M&A activity in thepast, the impact of private equitywas not felt in those previousdownturns.“The role private equity playstoday is so much greater,” hesays.While the values may notincrease, the deals will stillhappen.Investment banker MichaelGibbons at Brown GibbonsLang & Company, says the M&Amarket is still active. “There area lot of companies trying to sell.”But Gibbons says deals done ateight to 10 multiples of EBIDTApricing are a thing of the past.“Those are the exceptions now.The financing is not there forthose deals,” he says, noting themultiples have dropped about aturn and a half.“Cautious” is how Melchiorre“Deals done at eight to 10 multiples of EBIDTApricing are a thing of the past. Those are the exceptionsnow. The financing is not there for those deals.”Michael Gibbons, Brown Gibbons Lang & Companydescribes the M&A markettoday.Banks are not as aggressive intheir lending as they once were,and private equity funds aremore careful about not investingin bad deals, Melchiorre says.“The amount and depth of duediligence in transactions is goingto deepen,” Melchiorre says. “Agood company can perform wellin goo
The 2008 event happens April 9 through 11 in Orlando. During the year, various ACG chapters also host more than 15 “capital . large distributor of aftermarket transmission repair parts owned by Riverside, into Cleveland-headquartered TranStar Industries, a
