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Justin Ishbia, Shore Capital Partners Retail Health From veterinarians to vision specialists, practices are consolidating to improve care, OUTLOOK: cut costs and serve consumers COMMON PITFALLS TO AVOID SPONSOR CONTENT FROM M&T BANK TheMiddleMarket.com

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0C2_MAJ0518CS15774B MA GCM 2 FT 2018 Ad_7.875x10.5_MA FINAL.indd 1 1/29/20184/3/2018 2:05:48 2:48:16 PM PM Contents May 2018 | Volume 53 | Number 05

Cover Story Retail Health From veterinarians to vision specialists, practices are consolidating to improve care, cut costs and serve consumers

20

Watercooler Feature 6 Wild Sports makes 38 Is Coinbase poised “deam deal” for consolidation? • Newell expands divestiture plan 8 Cascadia grows craft beer advisory Guest Articles: 9 FedEx grows e-commerce services 42 Tax reform on and PE

Columns 48 7 imperatives to successful 16 post-merger integration Perspective 18 The Buyside 52 People Moves

46 Outlook Common Pitfalls to Avoid Learn the common mistakes buyers and sellers in M&A make and how to avoid them Sponsor Content From

Cover Photograph: © 2018 Matthew Gilson M&T Bank

May 2018 MERGERS & ACQUISITIONS 1

001_MAJ0518 1 4/4/2018 3:49:24 PM Inside Word

May 2018 Volume 53, Number 05

Editor-in-Chief Mary Kathleen Flynn [email protected] Assistant Managing Editor Demitri Diakantonis [email protected]

Group Editorial Director, Banking and Capital Markets Richard Melville InterGrowth [email protected] VP, Capital Markets Harry Nikpour [email protected] Senior Sales Manager Richard Grant Interviews [email protected]

VP, Research Dana Jackson ike many of you, I will be heading to sunny San Diego for three days of networking [email protected] with top dealmakers at the Association for Corporate Growth’s InterGrowth 2018 VP, Content Operations and Creative Services Paul Vogel L [email protected] May 2-4. The conference is expected to draw approximately 2,000 M&A professionals. Director of Creative Operations Michael Chu I’m looking forward to the keynote by Jeff Immelt, who served as CEO and [email protected] Art Director Nikhil Mali chairman of GE from 2001 to 2017. While his legacy is currently being reexamined, [email protected] Director of Content Operations Theresa Hambel his bio argues that “Immelt transformed GE into a simpler, stronger and more [email protected] focused digital industrial company. He revamped the company’s strategy, global Associate Marketing Manager Leatha Jones footprint, workforce and culture, positioning GE for the future. During his tenure, [email protected] industrial earnings doubled and GE returned $143 billion in dividends, more than in the cumulative history of the company. Immelt was willing to disrupt GE reshaping the company’s portfolio during the last decade, with bold moves such as the $260 billion sale of GE Capital assets, the acquisition of platforms CHIEF EXECUTIVE OFFICER Douglas J. Manoni in Life Sciences and Renewables, adding CHIEF FINANCIAL OFFICER Robert Dennen global energy leader Alstom, the combination CHIEF REVENUE OFFICER Marianne Collins of GE Oil & Gas with Baker Hughes, and EVP & CHIEF CONTENT OFFICER David Longobardi CHIEF MARKETING OFFICER Matthew Yorke the divestitures of legacy businesses like GE SVP, CONFERENCES & EVENTS John DelMauro Appliances, NBC Universal and Plastics. He SVP, HUMAN RESOURCES Ying Wong was the architect of the GE Store, leveraging

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believe a streamlined consumer-facing through M&A to focus on faster growing Wild Sports makes portfolio will help the company focus businesses including candles. Newell “dream deal” on the most important businesses and launched its Growth Game Plan in 2012 reignite the performance in their core to create a “larger, faster growing, more rivate equity-backed Wild Sports has businesses,” Icahn said in a statement. global and more profitable company.” acquired outdoor games company Icahn owns a near 7 percent stake in In 2015, Newell added Elmer’s to KanJam. The target’s founders Newell. its writing division, which houses the PCharlie Sciandra and Mitch Rubin also “Our agreement with Carl Icahn Sharpie brand. In 2016, the company invested in the deal and will remain with reflects our shared understanding of completed the $15 billion purchase of the company. Wild Sports is owned by the complexity of our business and Yankee Candle owner Jarden. Newell Expedition Capital Partners, Centerfield our strategy to win in the rapidly won Mergers & Acquisitions’ 2015 Capital Partners and Cardinal Equity changing retail landscape,” adds M&A Mid-Market Award for Strategic

Partners. Kanjam Newell CEO Michael Polk. Newell Buyer of the Year. Getzville, New York-based KanJam expects the process to generate about More recently. Newell agreed to is known for making disc toss games a new platform to seek M&A in the $10 billion in after-tax proceeds after it buy Chesapeake Bay Candle from its under its own brand. The company has HVAC sector through the investment is completed, and the company is going founders for $75 million and completed a licensing agreement with several Major of Pueblo Mechanical & Controls Inc., to focus on nine core businesses that will the sale of the Rubbermaid consumer League Baseball teams, colleges, and and CenterOak Partners LLC formed a have around $11 billion in sales and $2 storage business to United Solutions entertainment brands such as the Teenage new operating company called TruRoad billion in Ebitda. and sold sells its winter sports unit to Mutant Ninja Turtles and SponeBob Holdings Inc. through the investments Hoboken, New Jersey-based Newell Kohlberg & Co. Newell also completed Squarepants. In addition, KanJam has of JN Phillips Auto Glass and Techna is already taking steps to streamline the $100 million acquisition of candle brand licensing deals with individual Glass Inc. the company’s portfolio through producer Smith Mountain Industries athletes including New England Patriots —By Demitri Diakantonis M&A. In February, the company said and sold Irwin tools to Stanley Black & tight end Rob Gronkowski. it will look at divesting the Rawlings, Decker Inc. (NYSE: SWK) for $1.95 “It’s a dream deal,” says Wild Sports Goody, Rubbermaid Outdoor, Closet, billion. co-CEO Gregg Browne. Wild Sports Refuse and Garage, U.S. Playing Goldman Sachs & Co. (NYSE: GS) makes tailgating and outdoor games, Newell, already selling Cards, Waddington, Process Solutions, and Deutsche Bank Securities Inc. are including cornhole, and has licensing Rawlings, expands Rubbermaid Commercial Products and acting as financial advisors to Newell deals with the National Hockey League Mapa products and brands. Newell said Brands, and Jones Day is acting as legal and National Football League. divestiture plan the process will cut its customer base in counsel. “KanJam’s success internationally half and reduce the number of factories —By Demitri Diakantonis also opens the door for other Wild ewell Brands Inc. (NYSE: and warehouses it operates by the same Sports products and we plan on taking NWL) will further expand count. advantage of those newly acquired its transformation plan after Newell’s transformation strategy relationships.” adds Wild Sports co-CEO Nreaching a deal with activist investor Carl shows the extent that retailers are “Acquirhiring” drives mid- Todd Hines. Financial terms of the deal Icahn. The update from Newell comes struggling to keep their brick-and- market M&A were not disclosed. after the company agreed to add to four mortar stores alive. For example, Toys More and more family- and founder- directors that were nominated by Icahn “R” Us filed for bankruptcy in 2017 and cquiring skilled talent – run businesses in the lower middle- to its board. Newell says “there are further recently announced it will shut all of its “acquihiring” – has become a market are looking to private equity accretive divestiture opportunities,” but stores. Toys “R” Us owns the Babies “R” driver of M&A transactions and a capital to finance their growth strategies. did not specify which brands or assets it Us brand, which is a Newell customer of topA objective of middle-market businesses, Such partnership can provide a handful will consider shedding. baby products. Newell makes Graco car according to a recent Business Pulse of advantages such as a better chance “I believe we will be successful in seats and Baby Jogger strollers. Survey conducted by SunTrust Banks Inc. of finding acquisitions, and access to helping to enhance value in the same Best known as the maker of the (NYSE: STI). more capital and industry contacts. For way at Newell Brands. This company Sharpie brand of pens and markers, For middle-market and small businesses example, Huron Capital has formed has a great stable of brands, and I Newell has been streamlining its portfolio that cite M&A as their top priority over

6 MERGERS & ACQUISITIONS May 2018 May 2018 MERGERS & ACQUISITIONS 7

006_MAJ0518 6 4/4/2018 3:48:30 PM believe a streamlined consumer-facing through M&A to focus on faster growing the next five years, finding valuable skilled portfolio will help the company focus businesses including candles. Newell workers may be an important objective, Cascadia Capital grows on the most important businesses and launched its Growth Game Plan in 2012 say executives of Atlanta-based SunTrust. craft beer advisory reignite the performance in their core to create a “larger, faster growing, more “With domestic unemployment businesses,” Icahn said in a statement. global and more profitable company.” continuing to hover just above 4 percent, services Icahn owns a near 7 percent stake in In 2015, Newell added Elmer’s to one of the lowest levels in a decade, many Newell. its writing division, which houses the companies feel they are at a critical point ascadia Capital has merged “Our agreement with Carl Icahn Sharpie brand. In 2016, the company competing for talent,” says Jason Cagle, with First Beverage Financial, reflects our shared understanding of completed the $15 billion purchase of head of commercial banking at SunTrust. the the complexity of our business and Yankee Candle owner Jarden. Newell “Businesses are looking at all opportunities Carm of First Beverage Group. The our strategy to win in the rapidly won Mergers & Acquisitions’ 2015 to attract and retain employees from deal expands Cascadia’s consumer changing retail landscape,” adds M&A Mid-Market Award for Strategic offering new benefits to sharing advisory services from Newell CEO Michael Polk. Newell Buyer of the Year. tax reform proceeds. Less packaged products, pets expects the process to generate about More recently. Newell agreed to obvious is the role M&A can and restaurants into $10 billion in after-tax proceeds after it buy Chesapeake Bay Candle from its play to help secure a skilled alcoholic beverages - is completed, and the company is going founders for $75 million and completed workforce. This has become particularly craft beers. to focus on nine core businesses that will the sale of the Rubbermaid consumer increasingly important as we Los Angeles-based have around $11 billion in sales and $2 storage business to United Solutions advise our clients.” First Beverage advised billion in Ebitda. and sold sells its winter sports unit to The SunTrust/Radius Global on 25 beverage deals in Hoboken, New Jersey-based Newell Kohlberg & Co. Newell also completed Market Research survey polled the last four years, 18 is already taking steps to streamline the $100 million acquisition of candle more than 500 decision makers of which came in the Cascadia Capital the company’s portfolio through producer Smith Mountain Industries at small and middle-market craft beer segment. In M&A. In February, the company said and sold Irwin tools to Stanley Black & businesses, defined as businesses with $2 2017, First Beverage advised Anchor it will look at divesting the Rawlings, Decker Inc. (NYSE: SWK) for $1.95 million to $10 million and $10 million Brewing Co. on its sale to Sapporo Goody, Rubbermaid Outdoor, Closet, billion. to $150 million in annual revenue, Holdings Ltd. First Beverage’s parent Refuse and Garage, U.S. Playing Goldman Sachs & Co. (NYSE: GS) respectively. Leaders of middle-market company also has a beverage-focused Cards, Waddington, Process Solutions, and Deutsche Bank Securities Inc. are businesses in the survey rank attracting private equity fund that invests up to Rubbermaid Commercial Products and acting as financial advisors to Newell and retaining employees as their top $15 million in businesses. Mapa products and brands. Newell said Brands, and Jones Day is acting as legal concern, and nearly 50 percent of all “This partnership is an exciting the process will cut its customer base in counsel. the survey responders say it is their top next chapter for both firms. The half and reduce the number of factories —By Demitri Diakantonis challenge for 2018. These findings follow combination unites two highly- and warehouses it operates by the same the release of the U.S. Labor Department’s successful and specialized investment count. February Employment Situation report, banking practices, accelerating our Newell’s transformation strategy which showed businesses adding 313,000 shared strategic growth initiatives shows the extent that retailers are “Acquirhiring” drives mid- jobs, the most since July 2016. and enhancing our coverage of the struggling to keep their brick-and- market M&A The SunTrust survey found that 62 consumer landscape,” says Cascadia mortar stores alive. For example, Toys percent of small and mid-market business CEO Michael Butler. “R” Us filed for bankruptcy in 2017 and cquiring skilled talent – representatives believe the U.S. economy Cascadia is a consumer-focused recently announced it will shut all of its “acquihiring” – has become a is strong, and 79 percent are even more mid-market investment bank located stores. Toys “R” Us owns the Babies “R” driver of M&A transactions and a optimistic about their own company in Seattle. Us brand, which is a Newell customer of topA objective of middle-market businesses, strength. But 59 percent of the surveyed In 2018, Cascadia advised baby products. Newell makes Graco car according to a recent Business Pulse business leaders also say that employee Salumia Artisan Cured Meats on its seats and Baby Jogger strollers. Survey conducted by SunTrust Banks Inc. morale could hurt their business’s investment from Grant Peak Capital. Best known as the maker of the (NYSE: STI). performance in 2018. Also, 54 percent Sharpie brand of pens and markers, For middle-market and small businesses say that a shortage of skilled labor and 53 — By Demitri Diakantonis Newell has been streamlining its portfolio that cite M&A as their top priority over percent say higher-than-average turnover

6 MERGERS & ACQUISITIONS May 2018 May 2018 MERGERS & ACQUISITIONS 7

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Top talent Mid-market companies have to deal with the following to attract could hurt performance. Current and retain employees While surveyed business leaders job growth is more than double the agree it is the right thing to do, more expansion in the labor force, and • Shortage of skilled labor than half said the top reasons to offer a a record number of Americans are financial wellness benefit were to retain employed, according to the bank. • Higher-than-average turnover employees and increase loyalty. When identifying M&A More than half of decision makers of candidates, the bank helps its • Employee morale both mid-market and small businesses clients “evaluate company cultures believe that the 2017 Tax Cuts and Jobs and determine upfront the Source: SunTrust Banks Act will have a positive impact, and that strategies necessary to retain key they plan to invest money back into the talent, which is critical to the long-term success of the deal,” company and/or pay employees bonuses and raises. Cagle says. SunTrust operates consumer and wholesale business units, The SunTrust survey found one in four companies currently including corporate and investment banking services under the not offering a financial well-being program plan to do so this SunTrust Robinson Humphrey name. year. (A financial wellness benefit is an education program to help employees manage their finances). —By Keith Button

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and more and more merchants, FedEx expands cross marketplaces, e-commerce and border e-commerce social platforms are looking for innovative, cost-effective ways to capabilities get merchandise from distribution points in one country to customers edEx Corp. (NYSE:FDX) has in another,” Asmus says. “By

acquired P2P Mailing Ltd., a Bloomberg News adding P2P to the FedEx portfolio, U.K. provider of e-commerce we will be able to effectively serve Ftransportation services worldwide. even more elements of the e-commerce market.” Acquiring P2P Mailing allows FedEx to more effectively serve As e-commerce continues to expand and supplant brick-and- the e-commerce market, says Carl Asmus, CEO of FedEx Cross mortar retail stores, M&A has heated up both for e-commerce Border, a FedEx subsidiary that provides global e-commerce companies and for companies that serve the industry, including technologies. P2P Mailing becomes a subsidiary of FedEx Cross transportation and logistics businesses. Border with the deal. On the e-commerce side, recent deals include GTCR “Global e-commerce continues to grow at a rapid pace, and Sycamore Partners taking e-commerce services company

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CommerceHub Inc. private for $1.1 for aerospace and defense companies, and South America, including corporate billion. CommerceHub is a cloud-based helping manufacturers with warehouse pension funds, sovereign wealth funds, commerce network that allows retailers to management, packaging parts, and companies, foundations, better compete online with Amazon.com delivery and distribution. endowments and family offices. (NYSE: AMZN). The new FedEx acquisition, P2P “We are thankful and humbled by Advantage Solutions, a sales and Mailing, is an international parcel delivery the opportunity to prudently invest on marketing firm, acquired digital retail and logistics company that provides behalf of our prominent and expanding marketing agency Brand Connections its customers with “last-mile” delivery base of global Limited Partners,” says from . Brand options, or delivery from a transportation José Feliciano, co-founder of Clearlake. Connections helps consumer companies hub to the consumer. Its customers “We believe that the interest in Fund increase brand awareness across digital include The Hut Group, or THG, an V is an acknowledgment of Clearlake’s media. e-commerce company; retailer M&S; and superior track record and strategy. Recent transportation and logistics Feelunique cosmetics company. Clearlake brings deep industry knowledge M&A include UPS (NYSE: UPS) FedEx Cross Border is a subsidiary of and relationships, access to capital, and recently acquiring Sandler & Travis Trade FedEx Trade Networks, which manages a flexible investment mandate to our Advisory Services Inc., a provider of international freight shipping for its partner management teams in our target global trade compliance services focused customers. “This acquisition is a further sectors: industrials and energy, software on government and industry laws and step in achieving the global mission of the and technology-enabled services, and regulations on the movement of goods FedEx Trade Networks group to provide consumer.” across borders. specialized solutions to customers,” says Investors have been pouring their Middle-market PE firm Quad-C Richard Smith, CEO of FedEx Trade money into private equity, contributing Management invested in transportation Networks. Memphis-based FedEx paid 92 to record-high average Ebitda multiples management provider AIT Worldwide million pounds for P2P Mailing. FedEx paid on deals in the space. The global Logistics to help the company expand has annual revenues of $64 billion and private equity industry raised a record organically and through acquisitions. AIT more than 425,000 employees. $453 billion from investors in 2017, specializes in air and sea freight, ground —By Keith Button according to market research firm Preqin. distribution, warehouse management, The amount raised in 2017 surpassed the intermodal and third-party logistics for previous landmark of $414 billion set 10 customers in the government, life sciences, years earlier. perishables, residential delivery and retail Clearlake Capital raises Clearlake touts a proprietary approach logistics sectors. fifth fund to improving operations at the companies The Jordan Co. recently announced it invests in, and even has a registered it was acquiring a majority stake in iddle-market private equity trademark on its name for the approach: Odyssey Logistics & Technology Corp., firm Clearlake Capital Group O.P.S. The firm describes the O.P.S. provider of global logistics for the has closed its fifth fund method as one that “generates creative freight and transportation industries, Mat more than $3.6 billion in investor solutions to operational challenges and with plans to expand Odyssey’s business commitments. offers resources and expertise that small- through add-on acquisitions. Odyssey The investment vehicle, dubbed and medium-sized companies typically do provides intermodal services, trucking Clearlake Capital Partners Fund V, is not possess.” services, managed services, international the largest to date for the Santa Monica, “We are grateful that investors transportation management, and logistics California-based firm, which has now appreciate the strength of the Clearlake consulting services. raised more than $7 billion from investors franchise in positively transforming PE firm Platinum Equity agreed to since the firm started in 2006. Fund V businesses,” says Behdad Eghbali, buy aerospace logistics company Pattonair has more than 150 institutional investors Clearlake co-founder. “Clearlake creates from Exponent Private Equity. Pattonair from more than 25 countries in Asia, value and provides patient, long-term provides logistics and distribution services Europe, the Middle East, North America capital to dynamic businesses that can

10 MERGERS & ACQUISITIONS May 2018

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benefit from our proprietary Clearlake made a minority operational improvement investment in Diligent, a approach, O.P.S. We believe portfolio company of Insight Clearlake has the investment Venture Partners that provides and operational skills to cloud-based enterprise execute its strategy and governance management generate superior returns at software to company boards this scale.” of directors and senior Fund V has already begun management teams. The investing, and its signed or PE firm acquired Perforce, closed transactions so far a technology development include deals for Diligent software company, from the Clearlake Capital Corp., Perforce Software, Behdad Eghbali José Feliciano Summit Partners PE firm. Janus International Group, Clearlake agreed to buy ProVation Medical Inc. and Wheel Pros. Janus, a supplier of doors and hallways systems for storage units,

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with plans to make it a platform company Silver Lake’s role as a leading investor impact on the sports and entertainment for acquisitions of other industrial and in technology may make OVG a good fit, facilities landscape,” said OVG CEO building products businesses. as state-of-the-art technology will play an Tim Leiweke in a statement. “I am very The PE firm acquired ProVation, important role in Key Arena’s redesign. proud of what we have accomplished in medical software company, from Wolters The rebuilt arena will be aimed at enticing such a short time. This deal with Silver Kluwer, a software and professional the Seattle area’s high-tech workforce Lake provides us with capital to continue services provider, with a similar plan: from companies including Amazon Inc. to grow our business as well as invaluable to build on ProVation as a platform (Nasdaq: AMZN) and Microsoft Corp. expertise and relationships. I am thrilled company through both acquisitions and (Nasdaq: MSFT) to concerts, athletic to have them as my partner.” organic growth. events and other performances. OVG was founded in 2015 by For Fund V, Credit Suisse Securities “We want to do our best to make Leiweke, whose previous roles include was the advisor and placement agent, with this the most tech-savvy arena that’s chief executive of Maple Leaf Sports Simpson Thacher & Bartlett serving as the been built anywhere at any time; what & Entertainment and Anschutz fund’s legal advisor. exactly that’s going —By Keith Button to look like, we don’t know,” Bonderman told GeekWire in an interview earlier in Silver Lake backs Key March. Arena developer “Technology’s impact on the ilver Lake, the technology-focused global media and private equity firm known for entertainment investing in Alibaba Group, sectors has created SBroadcom and Dell, has made a strategic new opportunities investment in the Oak View Group, for OVG,” said Lee an entertainment and sports facilities Wittlinger, managing

company. The investment, reportedly director at Silver Lake, Oak View Group for $100 million, is designed to support in a statement. “We OVG’s growth strategy, including arena firmly believe that OVG is positioned to Entertainment Group, and Irving Azoff, development projects and other strategic become a world-class franchise in sports the legendary manager of the Eagles band initiatives. and live events.” who serves as the CEO of Azoff MSG OVG was recently awarded the right OVG has also partnered with New Entertainment, a joint venture with the to redevelop Key Arena in Seattle with York Mets chief operating officer Jeff Madison Square Garden Co. OVG was partners TPG Capital founder David Wilpon and the New York Islanders to conceived as a “positive disruptor” in Bonderman and film and TV producer form a group that was awarded the right sports and entertainment. The company Jerry Bruckheimer, and was an integral to build a new arena for the Islanders currently has more than 200 employees part of attracting a National Hockey adjacent to the Belmont Racetrack across offices in Los Angeles, Seattle and League expansion team to the market in New York. Additionally, OVG has . OVG’s business divisions for the first time, generating a deposit recently entered the facilities management include OVG business development, campaign of 33,000 tickets in less than business through its acquisition of OVG global partnerships, OVG media two days, according to the company. Los Pinnacle Facility Management, and also and conferences, OVG facilities, Prevent Angeles-based OVG plans a $600 million owns and operates trade publications Advisors and the Arena and Stadium renovation of the arena, aiming to have Venues Now and Pollstar. Alliance, a group of top U.S. venues. the 56-year-old arena renovated in time “In less than three years, Oak View In late 2017, OVG was reportedly for the 2020-2021 hockey season. Group has made a significant positive among the bidders for SMG Holdings,

12 MERGERS & ACQUISITIONS May 2018

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013_MAJ0518 13 4/3/2018 2:48:25 PM Watercooler

which owns Houston’s NRG Stadium, around $10 billion in 2013. Harley-Davidson, Johnson & Johnson, Chicago’s Soldier Field, US Bank Stadium —By Mary Kathleen Flynn NCR, P&G, Serta, Simmons Bedding, in Minneapolis, and the Chesapeake Toyota and Velcro. Energy Arena in Oklahoma City. Toronto Gap Systems controls packaging private equity firm Onex bought the PE-backed Loftware artwork processes throughout the product company in a deal that closed in January. makes first purchase lifecycle, featuring its Smartflow software. “Sports-industry insiders believe Its clients include Bic, Jergens, Kingfisher, firm Silver Lake Partners is oftware Inc., which develops Nisbets and Peroni. Combined, Loftware working on a master plan with James software that manages product and Gap will be able to offer labeling Dolan that, one day, could help him buy labeling for a wide range of client and packaging software for a range of Madison Square Garden — and maybe Lcompanies from FedEx to Johnson & industries, focusing on pharmaceutical, even the Knicks or Rangers,” reports the Johnson, has acquired a developer of SaaS medical device, manufacturing, food New York Post. The news organization software for handling artwork used in and beverage, chemical, retail, and points out that Silver Lake disclosed product packaging. Loftware is a portfolio consumer packaged goods sectors. The a 6.3 percent stake in the Madison company of Riverside Partners, which combined platform will be pitched as Square Garden Co. (of which Dolan is first invested in the Portsmouth, New enabling customers to improve time to the executive chairman) in a recent 13D Hampshire, company back in 2014. market, mitigate risk, reduce supply chain filing, indicating an activist position. The Gap Systems, based in Leeds, England, complexity, optimize costs and increase Menlo Park, California, investment firm provides cloud-based software aimed at agility. said it would like to help MSG create helping enterprises, including customers “Loftware and Gap offer truly long-term value. Bic and Jergens, manage artwork created complementary solutions that the market Silver Lake is a global leader in and developed for product packaging. The needs, especially as companies look to technology investing, with approximately Gap Systems deal is the first acquisition standardize on a single platform that $39 billion in combined assets under made by Loftware. can create, manage and print labels and management and committed capital and “Our investment thesis for Loftware packaging artwork across worldwide a team of approximately 100 investment anticipated growth both organically and operations,” says Paul Goldberg, Gap and value creation professionals located through selective strategic acquisitions Systems CEO. in Silicon Valley, New York, , to extend its leadership position in “Now internal and external Hong Kong and Tokyo. Silver Lake’s enterprise labeling,” says David Belluck, stakeholders in packaging, regulatory, portfolio of investments collectively general partner at Riverside Partners, a quality, operations, manufacturing, generates more than $140 billion of middle-market PE firm headquartered in supply chain and marketing can address revenue annually and employs more than Boston. Loftware’s organic growth since a more extensive set of requirements.” 300,000 people globally. the Riverside acquisition has included a Fueled by the rise of mass consumer Silver Lake’s current portfolio includes global push for customers, opening new markets all over the world, companies leading technology and technology- offices in Germany and Singapore. The that produce packaging and labeling have enabled businesses such as Alibaba company has more than 5,000 customers become attractive acquisition targets for Group, Ancestry, Broadcom Limited, in 100 countries. both private equity and strategic buyers. Cast & Crew, Ctrip, Dell Technologies, Loftware produces barcode labels, —By Keith Button Endeavor, Fanatics, GoDaddy, Motorola radio frequency ID tags and documents Solutions, Red Ventures, Sabre, SoFi, tracking and identifying products all Correction: In the previous issue of SolarWinds, Symantec, UFC and Unity. through the supply chain. Its software Mergers & Acquisitions, the name of In 2017, Silver Lake raised $15 billion aggregates information needed for McGuireWoods was incorrectly styled in in capital to back new technology deals. packaging labels by integrating with its some instances. The correct name of the The fund, called Silver Lake Partners V, clients’ SAP, Oracle and other enterprise firm, which won the M&A Mid-Market is the private equity firm’s fifth buyout applications. Loftware’s customer list Award for 2017 Law Firm of the Year, is fund Silver Lake raised its fourth fund at includes 3M, Abbott, FedEx, Gap, GE, McGuireWoods.

14 MERGERS & ACQUISITIONS May 2018

014_MAJ0518 14 4/4/2018 3:48:53 PM Thank you Mergers & Acquisitions for naming LLR Partners 2017 Private Equity Firm of the Year

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015_MAJ0518 15 4/3/2018 2:48:25 PM Columns

Private Equity Perspective CEO turnover wreaks havoc on hold times and lower returns

By Keith Button

ore than half of CEO turnover at timed: 58 percent of portfolio CEO replacements portfolio companies is unplanned, are made within one year following a deal closing leading to longer hold times and or one year prior to an exit deal, despite the fact Mlower returns for private equity firms, that 39 percent of the PE firm executives say that according to a new survey. replacements during those periods cause the most CEO turnover at a portfolio company is disruption. unexpected 53 percent of the time, including 31 Private equity firms are not doing a very good percent of time when the unplanned turnover job at identifying what’s required for most CEO is driven by the PE firm and 19 percent of the positions, Bililies says. Two of the most important time when it is both unexpected and mutually factors are leadership skills and strategic thinking, agreed to by the PE firm and the CEO, according he says, and 36 percent and 28 percent of survey Private equity to the surveyed PE firm executives. AlixPartners, respondents from PE firms say those two factors, “ a New York consulting firm, and Vardis, a New respectively, are the hardest to accurately assess. rms are not York-based headhunter, surveyed executives from At the same time, portfolio company executives doing a very 53 PE firms and 63 portfolio companies in the recognize the importance of the two factors. Of fourth quarter of 2017 for the survey, titled the the portfolio company executives surveyed, 67 good job at “AlixPartners-Vardis Third Annual Private Equity identifying Survey.” Failure to plan Who’s responsible for portfolio company CEO turnover? what’s required Private equity firms need to step up their planning and preparation, says Ted Bililies, an • Planned and driven by PE firm: 37% for most CEO AlixPartners managing director. “This year’s • Unplanned and driven by PE firm: 31% positions. survey shows that private equity needs to take further action to avoid costly C-suite turnover,” he • Unexpected, 100% mutual agreement: 19% says. “They need to undertake more robust CEO • Planned and driven by CEO: 8% assessment during due diligence, move succession planning to the top of their priority list and set • Unplanned and driven by CEO: 5%

clear expectations upfront with CEOs regarding Source: AlixPartners-Vardis Third Annual Private Equity Survey goals, performance metrics and communications.” ” Unforeseen CEO turnover comes at a cost for percent say that leadership skills allow them to investors. The surveyed PE firm executives say perform at the highest level, while 46 percent that the impact of unexpected CEO turnover is place a similar importance on strategic thinking. a worse internal rate of return 46 percent of the “They’re either trusting their gut, or they’re time and a longer hold time in 82 percent of the going by [the CEO’s] resume,” Bililies says. cases. “They’re not really paying attention to the The AlixPartners-Vardis survey report also individual in the challenges that he or she is going points out that most CEO replacements are poorly to face tomorrow.”

16 MERGERS & ACQUISITIONS May 2018

016_MAJ0518 16 4/4/2018 3:50:56 PM 017_MAJ0518 17 4/4/2018 10:36:46 AM Columns

The Buyside Why businesses need cybersecurity providers more than ever

By Demitri Diakantonis

emand for new and improved Byers, Foundation Capital, and In-Q-Tel. cybersecurity offerings, in some cases “Splunk is committed to continuously pushing spurred by well-publicized data breaches the limits of technology to help our customers Dand ransomware attacks, has created get the answers they need from their data,” says a healthy appetite for M&A with cybersecurity- Splunk CEO Doug Merritt. Splunk, based in San related companies. For instance, Palo Alto Francisco, captures machine generated data in Networks (NYSE: PANW) agreed to acquire real time and turns them into reports mainly to -backed Evident.io, a cybersecurity help cybersecurity teams identify patterns. monitoring company, for $300 million, and According to research firm Gartner: “By 2022, Duff & Phelps is buying cybersecurity and risk 40 percent of all large enterprises will combine management firm Kroll from Corporate Risk big data and machine learning functionality to Splunk is Holdings. support and partially replace monitoring, service “ New York-based Kroll, founded in 1972, pro- desk and automation processes and tasks, up from committed to vides investigative, cybersecurity, due diligence, 5 percent today.” pushing the compliance and physical securi- ty to help companies make bet- limits of ter risk management decisions technology to on people and assets. The target help our serves corporations, financial in- stitutions, law firms and govern- customers get ment agencies. the answers In another recent notable deal, they need. Splunk Inc. (Nasdaq: SPLK) wants to use its cybersecurity product offerings to help companies automate their threat responses. The data analytics provider has agreed to buy venture capital-backed Phantom Cyber Corp. for $350 million in ” Adobe Stock cash and stock. Phantom, launched in Palo Alto, California, in In other related deals: KPMG bought the 2014, assists businesses to automate their security identity and access management business from threat response tasks that are usually carried out by Cyberinc and LLR Partners’ bought cybersecurity security personnel. The target previously received software provider BluVector from Northrop venture funding from Kleiner Perkins Caufield & Grumman Corp. (NYSE: NOC).

18 MERGERS & ACQUISITIONS May 2018

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019_MAJ0518 19 4/4/2018 10:36:48 AM Cover Story Retail Health From veterinarians to vision specialists, practices are consolidating to improve care, cut costs and serve consumers

By Danielle Fugazy

Justin Ishbia Shore Capital Partners

20 MERGERS & ACQUISITIONS May 2018 May 2018 MERGERS & ACQUISITIONS 21

Photograph: © 2018 Matthew Gilson

020_MAJ0518 20 4/4/2018 3:58:37 PM Retail Health From veterinarians to vision specialists, practices are consolidating to improve care, cut costs and serve consumers

By Danielle Fugazy

Sheffield

20 MERGERS & ACQUISITIONS May 2018 May 2018 MERGERS & ACQUISITIONS 21

021_MAJ0518 21 4/4/2018 3:58:41 PM Cover Story

he healthcare industry remains a very hot has made 20 add-on acquisitions, including more place for investment. According to Mor- than 10 in 2017. Smile Doctors grew from 12 gan Stanley, the U.S. healthcare M&A clinics in Texas and Georgia to more than 90 clin- T market began 2018 with almost $39 ics across 11 states and had projected earnings of billion worth of deals announced in January — $35 million in 2017. It is now the largest ortho- the strongest start in over a decade. Many of the dontic dental organization in the U.S. In 2017, companies that are garnering attention from stra- through a recapitalization, Linden Capital joined tegic acquirers and private equity firms have a few as lead investor, while Sheridan and management things in common: they are in subsectors where rolled over equity. there is room for consolidation; they take pressure Delivering high-quality clinical care and oper- off hospitals; and most aim to give patients more ating a small business successfully is challenging specialized treatment, which is believed to lower for doctors, which is why companies that are built the cost of care and improve outcomes. like Smile Doctors are becoming more common, “As consumers, we are all used to having ac- says Fritz Buerger, lead William Blair banker on As consumers, cess to almost any product or service on our the Smile Doctors transaction. “Doctors typically “ phone in minutes,” says Justin Ishbia, founder of have no formal business training. Joining a larger we are all Shore Capital Partners (pictured with his 5-year- corporate entity enables healthcare professionals used to having old yellow lab Sheffield). “As healthcare becomes to focus on caring for patients while offloading more retail-focused, we believe that the winners many of the administrative elements of running a access to in healthcare are those who adapt to the demands small practice. It’s more productive for everyone,” almost any of consumers, and those who rely solely on tradi- says Buerger. product or tional models will be left behind. The traditional Smile Doctors and other consolidators hire sig- models are no longer working, and there is room nificant corporate staff, such as human resources, service on to deliver high-quality care at a lower cost and information technology, marketing and finance our phone build better retail-like models that treat patients professionals who can assist with back-office tasks like valued customers, while also reducing costs such as recruiting, patient scheduling and billing. in minutes. by taking advantage of economies of scale. This “The result is that organizations with more cor- is happening in a variety of niches within health- porate support can deliver a more patient-friendly care.” experience,” Buerger says. “Clinic staff isn’t dis- Here are six subsectors that are garnering in- tracted by administrative tasks and instead can terest from both private equity firms and strategic focus all their efforts on the patient. And that’s acquirers: important because individuals today expect to be ” treated like customers. People are very attentive 1. Dental to poor service, like long wait times or unfriendly rivate equity firms are in hot pursuit of dental receptionists.” Ppractices. The dental market is highly frag- Dental practices are also of particular interest mented, with only 16 percent of dental practices because the industry has experienced consistent, rolled up, according to Harris Williams & Co. To stable growth. The industry isn’t affected much take advantage of economies of scale, private eq- by economic up and down cycles because people uity firms are actively buying up practices all over view oral care as important, regardless of what the the U.S. economy is doing. “Dental is also appealing be- For example, in 2015, Chicago-based lower cause the market is fragmented with a lot of small middle-market private equity firm Sheridan Cap- practice owners seeking to sell – and private equi- ital Partners made an initial investment in Smile ty groups can provide liquidity to these individ- Doctors, a Texas-based provider of orthodontic uals while helping them optimize their practice,” services. Since that investment, Smile Doctors says Buerger. “This change is going on in many

22 MERGERS & ACQUISITIONS May 2018

022_MAJ0518 22 4/4/2018 3:58:42 PM WHAT’S THE DEAL WITH DUANE MORRIS? THAT NAME KEEPS POPPING UP MORE AND MORE AS DEAL COUNSEL

Representative M&A Deals – Strategics & Private Equity

$1 BILLION $4.1 BILLION $1.37 BILLION $631 MILLION Sale of fiber optic Acquisition of majority Advised on the sale Sale to Scientific $350 million licensing operations stake in Asia Pacific of NCell (the market- Games Corporation, disposition of to Crown Castle Breweries Ltd., leading Nepalese a global leader in polypropylene business International Corp. for bringing ownership telecommunication technology-based to Braskem for integrated power/energy/ stake to 82% for operator) to Axiata for gaming, for resource leader

$134.5 MILLION $250 MILLION $567 MILLION $233 MILLION $80 MILLION Acquisition of Isle of Represented biopharma Acquisition of Sensory Representation in Acquisition of oilfield Capri hotel/casino, first innovator Ception in Effects, a privately sale of company automation leader ever outside any tribal sale, with up to $500 held supplier of to Curtiss-Wright Eagle Automation land, for Pueblo of million in milestone food and beverage Corporation Systems Ltd. for POSC Laguna reservation entity payments, to ingredient systems, for for Holdings, a platform NASDAQ-listed company of

$150 MILLION $300 MILLION $115 MILLION $35 MILLION Acquisition of Captek Sale to Madison Dearborn Share repurchase Acquisition of Natural Softgel International, a Acquisition of this Partners for Toronto- from Warburg Pincus Flavors, Inc., a producer leading FDA registered cloud-based middleware based enterprise domain Private Equity VIII for developer for NYSE- of natural and organic manufacturer of name system solutions NYSE-listed higher listed internet flavor products, for custom dietary technology leader education leader telephony provider supplements, for

$44 MILLION $24 MILLION C$563 MILLION $147 MILLION Sale of majority Representation in Acquisition of leading Agreement to sell Sale to packaging negotiation and signing prosthetic device interest to PE leader Construction Claims leader SencorpWhite of a merger agreement manufacturer BionX Apax for Canada-based Group to UK- for designer and with Americas United Medical Technologies weight loss/wellness based Bridgepoint manufacturer of heat Bank for for German prosthetics solutions innovator Development Capital and vacuum sealing for NYSE-listed innovator machinery

For more information on how seriously we take our deals, get Acquisition of engineered Acquisition of 85% in touch with BRIAN KERWIN, Merger with Australia- carbon-fiber composite ownership interest in chair of our global Corporate based global leader in 363 sale of all assets manufacturer Citadel major regional John Practice, at 312.499.6737 or intimate apparel and to these industry for composite pipeline Deere distributor [email protected]. swimwear for fashion/ leaders for injectable and pipework repair network for lifestyle brand innovator drug delivery systems specialist solutions leader

A n A m L aw 1 0 0 l aw fi r m | M o re t h a n 8 0 0 l aw ye rs | E sta b l i s h e d 1 9 0 4 Duane | Morris LLP – A Delaware limited liability partnership | w w w.d u a n e m o r r i s.co m

023_MAJ0518 23 4/3/2018 2:48:28 PM Cover Story

other sectors such as eye care, dermatology and and injured people in their homes. Riverside ex- animal health.” pects to invest in sales and marketing while pur- suing strategic add-on acquisitions to consolidate 2. Home care the marketplace. he hospital setting is the most expensive place “There’s a need for a wide distributed care Tfor patients to receive care, and sometimes network as baby boomers start to age and fewer it’s not the best place to receive care. With the children live near their parents. Most seniors want growing public acceptance of the cost and health to live the best possible life they can at home as benefits of home healthcare, private equity firms independently as possible,” says Stephen Rice, a and strategic acquirers see home healthcare as a principal with Riverside. There’s a need growing line of business--so “ much so that even insurance for a wide companies are buying home distributed health companies. While care network, they will generate extra rev- enue from the deal, the real as baby appeal is controlling their boomers patient network by keep- ing them out of the hos- start to age, pital. At the end of 2017, and fewer insurance giant Humana children live (NYSE: HUM) acquired a

40 percent stake in Kindred ComeForCare near their at Home, the largest home parents. healthcare provider in the nation. The acquisition As a complimentary business, in February, will allow Humana to better manage its Medicare Riverside acquired CarePatrol as an add-on ac- Advantage population, preventing unnecessary quisition to its ComForCare platform. CarePa- hospitalizations. trol franchisees provide senior living advisory and Additionally, according to Zion Market Re- placement services to seniors and their families. search, the home healthcare market is expected to “When the time is right CarePatrol can work grow to $391.4 billion globally by 2021. with ComForCare patients to help plan their next ” “Facility-based care is expensive,” says John steps,” says Rice. McKernan, a principal with the Riverside Co. “And it can be hard for elderly and low-income 3. Pet care people to get around, and it can lead to them ne- t may seem somewhat of a stretch to include glecting their care and then their issues become Ipet care as a sub-sector of healthcare, but maybe more acute and more expensive to treat. We are not so much when you consider that people are actively looking to buy companies that keep peo- increasingly demanding the same level of care for ple out of the hospital setting.” their pets as for themselves. And many of the same Riverside bought ComForCare Health Care trends prevalent in medical practices for humans Holdings in 2017. The home care company is a are present in the practices for pets. The sector is franchisor of ComeForCare Home Care and At benefiting from consistent growth, as pet owners Your Side Home Care. With 196 locations in 34 have more disposable income and spend more states and three Canadian provinces, ComForCare than ever before on their pets. Additionally, more franchisees provide non-medical and private-duty people than ever before are pet owners today. Ap- nursing services to elderly, physically handicapped proximately 68 percent of U.S. households own

24 MERGERS & ACQUISITIONS May 2018

024_MAJ0518 24 4/4/2018 3:58:44 PM Cover Story

a pet; that’s up from just 33 percent in increased desire to work as veterinarians, $39 billion market when you consider 2000, according to IBIS World Report. but not necessarily do the administrative everything from boarding and groom- Add to those tailwinds that there is work of owning a practice. ing to hospital visits, according to Shore no reimbursement risk, and it’s a highly “It’s one of the best healthcare sec- Capital. fragmented industry and it’s no wonder tors, especially in the middle market. To take advantage of the opportuni- private equity firms are clamoring to get New vets are buying businesses at the ty in the market, Shore Capital partner into the space. rate they used to, and at the same time Mike Cooper led the purchases of dozens According to Harris Williams, only 9 you have millennials spending more on of vet practices to form Southern Veter- percent of the veterinary market is con- their pets,” says Ishbia. “Pets are also inary Partners and Midwest Veterinary solidated. That’s compared to 33 percent benefiting from advances in human Partners. Southern Veterinary now has in optical, which is still considered ripe medicine. Vets have learned from hu- 47 locations, while Midwest Veterinary with consolidation opportunities. There man advances how to keep pets alive has 29 locations. “Southern Veterinary is an aging population of veterinarians longer with medications and proce- started out as three locations in Alabama who want to sell out of their practices dures, which is driving longer animal and we acquired 41 locations. Each lo- and an increasing number of new veter- life and more spend in the industry.” cation has about $1.5 million to 2.5 inarians with high student debt and an The veterinary services market is a million in revenue per year. As a consoli-

Untitled-1 1 4/3/2018 6:49:53 PM

025_MAJ0518 25 4/4/2018 3:58:48 PM Cover Story

dated group, we can buy supplies at a better cost, more efficient.” offer more consumer-focused care with later hours TA expects to expand the geography of the and manage the offices more efficiently letting the business. It’s a significant player in India now, but doctors focus on their patients’ needs,” says Ishbia. will look to expand globally through acquisitions. Shore Capital plans to keep buying practices Coating companies continue to attract buy- through its two platforms. Shore isn’t the only one interested in the pet care space. In December, KKR & Co. (NYSE: KKR) acquired PetVet Care Cen- ters from Ontario Teachers’ Pension Plan, L Catterton. PetVet is an acquirer and op- erator of general practice and specialty vet- erinary hospitals for companion animals. Perhaps as a testament to strength of the pet care industry, when Ares Management (NYSE: ARES) sold Nation Veterinary As- Coatings on sociates (NVA) to OMERS Private Equity “ recently, it only sold a minority stake in the pills make

business. NVA is the largest independent Ideal Cures them owner-operator of veterinary hospitals, pet taste better, boarding and daycare centers in the , er interest. Axalta Coating Systems Ltd. (NYSE: Australia, Canada and New Zealand. AXTA) purchased Netherlands distributor Geer- easier to aets Autolak; Audax Private Equity-backed Inno- swallow 4. Pharmaceuticals vative Chemical Products (ICP) bought adhesives and easier to oatings is becoming an increasingly inter- maker Fomo Products Inc.; and PPG (NYSE: Cesting place for investors. In March, TA As- PPG) acquired MetoKote Corp. identify. sociates completed the purchase of Ideal Cures Poddar says most of the players in the market Private Ltd., a supplier of ready-to-use coating are strategic acquirers because the industry is so products for tablets and capsules. Founded in niche. “I don’t see too many private equity players 1999 in India, Ideal Cures’ products are used to in the space that aren’t backing a strategic acquir- provide aesthetic coatings for swallowability and er because it’s such a niche industry. Still, I think taste masking. They also aid in brand recognition, you will continue to see more consolidation in the ” authentication and differentiation. market. We hope to gain market share over time The coating industry is fairly large, about $800 through acquisitions,” says Poddar. million to $1 billion in size, and TA Associates be- lieves that the trend is to outsource the production 5. RCM of ready-to-use, fully-formulated coatings, which t its most basic, revenue cycle management is driven by companies seeking innovative solu- A(RCM) is the billing, reimbursement and tions that reduce processing time and a company’s collection function of a healthcare system. His- carbon footprint. torically, healthcare organizations such as hospi- “As the need for healthcare grows globally so tals handled this function in house. However, as does the need in the pharma industry. The ad- both the need to comply with government reg- dressable market is growing,” says Dhiraj Poddar, ulations and the complexity of RCM increase, a director with TA Associates. “A lot of coating more healthcare organizations are choosing to was done in-house in the past, but the market is work with outside vendors. According to a report shifting toward the outsourcing model because it’s by Research and Markets, the RCM outsourcing

26 MERGERS & ACQUISITIONS May 2018

026_MAJ0518 26 4/4/2018 3:58:51 PM Cover Story

market in the U.S. was expected to grow lower middle-market private equity firm bursement and add to their bottom line. by 15 percent from 2016 through 2021. that focuses on technology and healthcare We are building specialized revenue cycle The better the RCM the better the deals, has invested in two RCM business- platform that we believe will be attractive margins. Top-shelf revenue cycle man- es in the past two years. They are both to a number of buyers in the future, in- agement will increase cash flow, reduce providers of specialized, technology-en- cluding other private equity-backed stra- the cost of collecting payments and al- abled RCM solutions for claims. “There tegic acquirers.” low for fewer denials. Hoping to catch is a significant opportunity for hospitals Riverside invested in Bottom Line the tailwinds in the RCM market, pri- to enhance the revenue cycle function by Systems in 2016 as well as in Medical Re- vate equity firms have been very active in outsourcing to specialized revenue cycle imbursements of America last year. Riv- the subsector. Healthcare IT and RCM providers, especially in the area of com- erside Partners is one of many pursuing deal volume reached 164 completed plex claims,” says Max Osofsky, a general a roll-up strategy in the RCM space. transactions in 2017, up from 130 the partner with Riverside Partners. “Every In 2015, TowerBrook Capital Partners year prior, according to Greenberg Ad- dollar of margin is important to hospi- launched an effort into the space and visors, a RCM and health IT-focused tals, and accessing specialized technology has built R1 RCM through various pur- investment bank. and teams to address complex claims is chases. Additionally, strategic acquirers Riverside Partners, a Boston-based one way hospitals can enhance reim- are interested in the space. In March,

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027_MAJ0518 27 4/4/2018 3:58:55 PM Cover Story

Cognizant (Nasdaq: CTSH) announced its agree- Southeastern U.S. As part of the initial formation, ment to purchase Bolder Healthcare Solutions, a Eye Health America announced the acquisition of privately-held provider of RCM software for hos- the Eye Associates, Clemson Eye and Piedmont pitals and physician practices. Surgery Center, providers of advanced eye care and ambulatory surgery services. LLR was named 6. Vision Mergers & Acquisitions’ M&A Mid-Market onsolidation among eye care professionals Award for 2017 Private Equity Firm of the Year. Ccontinues to be a strong play for private eq- “Ophthalmology is a highly fragmented in- uity firms. Despite years of consolidation it’s still a dustry with no real national player. It’s ready for highly fragmented industry with only 33 percent consolidation. As part of a larger entity, eye care of optical companies consolidated, according to groups can leverage a shared infrastructure, while Harris Williams. There are 23,000 independent gaining access to additional service offerings,” says optometrists and 18,000 ophthalmologists in pri- Kevin Becker, a vice president with LLR. “This Ophthalmology vate practice today. strategy allows the doctors to be focused on pro- “ “Vision, and particularly ophthalmology, has viding high quality patient care.” is a highly historically been an medical specialty in which LLR has been working on its eye care thesis fragmented there were not large regional or national plat- for about two years and partnered with an oph- industry with forms. Rather, the market has and continues to thalmology practice CEO to identify leading eye be served predominantly by local providers and as care platforms. Part of the strategy is to consoli- no real a result there is a high degree of fragmentation. date doctors and acquire surgery centers that only national player. Private equity has started to invest in the sector focus on eye care. to create larger companies with den- sity in a geographic market that can benefit from administrative and other economies of scale, similar to what we have seen in many other ” healthcare sectors,” says Andy Dix- on, a managing director with Harris Williams. In some markets, optometrists and ophthalmologists have joined together in the same clinical prac- tice enabling them to be a single source of comprehensive eye care for consumers and increasing re- Eye Health America ferral capture for medical services, such as surgery for cataracts, which are often de- “Having access to a captive surgery center is tected in routine eye exams. key. Without a surgery center, doctors are forced In addition, as ophthalmology groups scale with- to compete for time blocks in shared multi-spe- in a geographic market, many have opened their cialty centers or hospitals, oftentimes commuting own dedicated surgery centers which can be more back and forth to different locations, which can be cost-effective and generate better clinical outcomes inconvenient for both the doctor and the patient,” than third-party-owned multi-purpose facilities. says Becker, adding that LLR has a significant In March, LLR Partners formed Eye Health pipeline of acquisition opportunities and expects America, a practice management company es- to grow its platform both organically and through tablished to buy eye care practices located in the add-ons over the next five years.

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028_MAJ0518 28 4/4/2018 3:58:59 PM Roundtable

How to Win Deals

SPONSORED BY PRODUCED BY

d36404_Abacus_Roundtable_M&A.indd 1 3/29/18 5:35 PM Danielle Fugazy: How would you characterize the market today?

Jessica Ginsberg (LFM Capital): The market is incredibly competitive. There is a ton of capital out there and so many firms chasing the same handful of deals.

Laurence Lederer (Branford Castle Partners): There’s no question that it’s MODERATOR competitive, but the overall market has Danielle Fugazy been great for us. We focus on $2 million Contributing Editor, M&A to $10 million EBITDA companies; and we are still able to find great companies at reasonable valuations. We’ve been around for 30 years, so we’ve seen differ- Finding and winning deals in today’s ultra competitive M&A environment has PARTICIPANTS: ent market cycles. In today’s market, it’s very competitive in the larger market, but become extremely difficult. Stories of private equity firms going far down Charles Cox, Director, LongueVue the road in a process only to lose the deal to a competitor have become the Capital we’re still able to find attractive compa- norm. As a result, some private equity firms have worked very hard to dif- nies and good valuations at our end of Jessica Ginsberg, Vice President, the market. ferentiate themselves from the competition and their strategy is working. This LFM Capital roundtable, sponsored by Abacus Finance, explored how some private equity firms have differentiated themselves, what makes them unique and how it Laurence Lederer, Managing Charles Cox (LongueVue Capital): There Director, Branford Castle Partners, is a record number of active private has helped them find and close deals. LP equity firms in the market with a record, Eric Petersen, Senior Vice or near record, number of assets under President, Abacus Finance management, so that in itself makes the market very competitive. Moreover, there has been an influx of independent sponsors, family offices and corporate strategics looking to invest in attractive companies, which makes the market even more crowded and competitive.

Eric Petersen (Abacus Finance): There is a flood of capital chasing after a finite number of deals. In some of the auction processes when a banker is bringing a quality asset to the market, you get a spike in valuations and you get a spike in leverage, which makes it very difficult for firms to compete.

Fugazy: What makes your firm unique?

Petersen: On any one auction deal, we’re listening to a handful of presentations. So we get to hear the front end pitch of why firms think they are different, and how they differentiate. It’s the firm’s DNA that will really resonate in a management presentation.

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d36404_Abacus_Roundtable_M&A.indd 2 3/29/18 5:35 PM Danielle Fugazy: How would you Lederer: Our culture and our his- characterize the market today? tory absolutely make Branford unique. We’ve been around for 30 years and Jessica Ginsberg (LFM Capital): The were founded by our chairman, John K. market is incredibly competitive. There is Castle, so we have that long history. We a ton of capital out there and so many were a for John K. Castle firms chasing the same handful of deals. prior to raising a fund and we have a very strong reputation in the market- Laurence Lederer (Branford Castle place. Our legacy separates us. If we Partners): There’s no question that it’s are meeting with a company owner competitive, but the overall market has who has founded the business or it’s been great for us. We focus on $2 million a multi-generational family business, to $10 million EBITDA companies; and our roots as a family office and having we are still able to find great companies two generations of the Castle family at reasonable valuations. We’ve been “Our legacy involved, appeals to certain sellers. The around for 30 years, so we’ve seen differ- separates us. If executives and managers with whom PARTICIPANTS: ent market cycles. In today’s market, it’s we’ve worked are our best advocates. very competitive in the larger market, but we are meeting They often work with us on multiple Charles Cox, Director, LongueVue Capital we’re still able to find attractive compa- with a company opportunities and a number of former nies and good valuations at our end of owner who has portfolio company executives are now Jessica Ginsberg, Vice President, the market. Branford LPs and advisors. LFM Capital founded the Laurence Lederer, Managing Charles Cox (LongueVue Capital): There business or it’s a Ginsberg: We are unique because Director, Branford Castle Partners, is a record number of active private we are so focused on manufacturing. LP equity firms in the market with a record, multi-generational That stems from two of our founding Eric Petersen, Senior Vice or near record, number of assets under family business, partners having significant operating President, Abacus Finance management, so that in itself makes our roots as a experience before getting involved in the market very competitive. Moreover, private equity. They spent the bulk of there has been an influx of independent family office their careers at companies like Dell, sponsors, family offices and corporate and having two Caterpillar, and Ditch Witch and really strategics looking to invest in attractive know, for example, what a plant floor companies, which makes the market generations of should look like and feel like. It’s a story even more crowded and competitive. the Castle family that resonates really well with business owners who appreciate that we have Eric Petersen (Abacus Finance): There involved, appeals lived through many of the challenges is a flood of capital chasing after a finite to certain sellers.” they face day to day. We can provide number of deals. In some of the auction capital, but we can also add value in processes when a banker is bringing a Laurence Lederer, many different ways from introductions Managing Director, quality asset to the market, you get a Branford Castle Partners, LP to people in our operating networks to spike in valuations and you get a spike in helping source add-ons. leverage, which makes it very difficult for firms to compete. Cox: Since inception, LongueVue has been very suc- cessful in collaborating with entrepreneurs and ap- Fugazy: What makes your firm unique? proaching every relationship with a partnership mental- ity. Our two founders were entrepreneurs, and our initial Petersen: On any one auction deal, we’re listening to investor base was mainly composed of high-net-worth a handful of presentations. So we get to hear the front entrepreneurs, people who were successful at growing end pitch of why firms think they are different, and how their businesses. An entrepreneurial and partnership they differentiate. It’s the firm’s DNA that will really mentality are encoded in our DNA, and our transac- resonate in a management presentation. tions reflect this unique approach. For example, we utilize creative incentive structures with back-end

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d36404_Abacus_Roundtable_M&A.indd 3 3/29/18 5:35 PM weighted rewards for management Fugazy: If you find a proprietary deal because it’s where we came from and teams, which aligns our objectives and do you find management hires a it’s what we know. A great example of creates substantial skin in the game. banker anyway? that is our strong connection to an MIT Upon a successful exit, our entrepre- grad school program called Leaders for neur partners and management teams Ginsberg: We’ve closed two platform Global Operations. Three members of gain the opportunity to realize outsized deals and one add-on acquisition our small team graduated from the pro- equity ownership and returns. through our direct sourcing process gram, earning both MBAs and Masters and we have never found that to be of Engineering degrees. That program Another testament to LongueVue’s the case. We typically hear from own- has created a really strong operating partnership mentality is after we closed ers that our story is different from other network and candidate pool for us as our first fund, we had a series of suc- firms and they want to get to know us we look to add to our portfolio company cessful exits. And the majority of those and learn more. management teams, which we believe entrepreneurs liked the way we did is differentiating, especially for funds of business and chose to be LP’s in our Cox: We implement a two-prong our size. second and third fund. “By building strategy in our sourcing efforts. We are an authentic always building and nurturing our valued We also started our direct sourcing plat- Fugazy: How do you think most relationship at an relationships with investment banks with form on day one, and that actually came private equity firms source deals actionable opportunities. In combination before we started building relationships today? early stage, we with these efforts, our firm is investing with bankers and brokers. are often the first more resources engaging non-tradition- Ginsberg: Most firms play in broad al deal sources that can facilitate early Cox: We try to continuously enhance competitive auction processes. A call when they introductions to entrepreneurs. On the and evolve our business development pretty typical way to see a deal flow is are looking for a front end, we have an opportunity to and marketing strategy. In addition to through maintaining relationships with establish mutual trust and share objec- traditional sourcing efforts, we engage bankers, brokers, and buy-side types partner to help tives with an entrepreneur considering operating executives directly, hold town of folks. take their business partnership options. By building an hall meetings and host brown bag to the next level, authentic relationship at an early stage, lunches in an effort to educate profes- Lederer: At Branford we use an we are often the first call when they are sionals and prospects on the potential of “all-the-above” strategy. You have to either today, looking for a partner to help take their a private equity partnership. these days. We have a robust network tomorrow, or in the business to the next level, either today, of intermediaries from the larger firms tomorrow, or in the future. In a very crowded and competitive mar- to one and two-person shops. We future.” ket, we are always open to building new utilize a partner-led sourcing model, Charles Cox, Petersen: As much as everyone likes a relationships and telling the LongueVue so the partners at Branford are on the Director, nice proprietary deal at a reasonable story. We strive to take every meeting road meeting with these folks, making LongueVue Capital valuation, you certainly can’t discount and are not afraid of kissing a few frogs sure we continue to maintain robust the bank process. The efficiency and along the way. Recently, we have done a deal flow. Of course we also look for value the investment bankers provide is great job of covering our backyard and proprietary deals, and that’s when our network and our tremendous. finding talented entrepreneurs that are history come into play. We provide buy-side incentives open to a private equity partner. for brokers to bring us opportunities even though they Lederer: We’ve certainly had situations in which we’ve may not have a sell-side mandate. Also, we’ll provide entered into a direct non-competitive acquisition Ginsberg: Private equity has a bad rap incentives to our network of former executives and process. But there are other situations in which a seller in a lot of circles. We see it as part of our job to tell a managers to bring interesting opportunities to the table hires an advisor or broker and they run a very limited different story. We’re not scary. We’re not going to buy as well. process, which can also be a very beneficial dynamic. your business, close your plant, and fire your people. We are going to invest in your company, develop your Ginsberg: In addition to relying on bankers, we have a Fugazy: When you launch a new firm in such a people, grow your business, and really do right by your very robust direct sourcing platform. We reach out to crowded market were you consciously trying to be legacy. That’s the picture of private equity we are trying thousands of business owners every year and connect different? to portray. with several hundred. We find that our background tells a unique story that is interesting to business own- Ginsberg: We launched in the fall of 2014. We have Cox: From the beginning we decided to be very hands- ers and helps us start to build relationships. always been incredibly focused on manufacturing on, proactive and accessible. We work closely with our

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d36404_Abacus_Roundtable_M&A.indd 4 3/29/18 5:35 PM Fugazy: If you find a proprietary deal because it’s where we came from and management teams and it has created do you find management hires a it’s what we know. A great example of a very successful track record for us. banker anyway? that is our strong connection to an MIT The CEOs from former LongueVue port- grad school program called Leaders for folio companies are our best references. Ginsberg: We’ve closed two platform Global Operations. Three members of deals and one add-on acquisition our small team graduated from the pro- Lederer: Our track record of success is through our direct sourcing process gram, earning both MBAs and Masters the best calling card. When sellers hear and we have never found that to be of Engineering degrees. That program how our former portfolio companies the case. We typically hear from own- has created a really strong operating have done, hear from former managers ers that our story is different from other network and candidate pool for us as that have worked with Branford and firms and they want to get to know us we look to add to our portfolio company are still involved with our firm, and hear and learn more. management teams, which we believe about the returns that were generated, is differentiating, especially for funds of that’s what gets folks interested. Cox: We implement a two-prong our size. strategy in our sourcing efforts. We are “We’re not going Fugazy: What resonates with lenders? always building and nurturing our valued We also started our direct sourcing plat- to buy your relationships with investment banks with form on day one, and that actually came Petersen: The word DNA keeps popping actionable opportunities. In combination before we started building relationships business, close up over and over. I think what is dif- with these efforts, our firm is investing with bankers and brokers. your plant, and ferent is what’s not replicable by other more resources engaging non-tradition- fire your people. firms. We talked about the process, al deal sources that can facilitate early Cox: We try to continuously enhance the machinery for sourcing deals, but introductions to entrepreneurs. On the and evolve our business development We are going underlying the processes and proce- front end, we have an opportunity to and marketing strategy. In addition to to invest in your dures there has to be something distinct establish mutual trust and share objec- traditional sourcing efforts, we engage and unique about a firm that actually tives with an entrepreneur considering operating executives directly, hold town company, develop makes them stand out. You can’t easily partnership options. By building an hall meetings and host brown bag your people, grow replicate a 30-plus year track record, authentic relationship at an early stage, lunches in an effort to educate profes- specific operating roles, or an opera- we are often the first call when they are sionals and prospects on the potential of your business, and tionally entrepreneurial background, looking for a partner to help take their a private equity partnership. really do right for example, without actually having business to the next level, either today, by your legacy. invested in and lived those experiences. tomorrow, or in the future. In a very crowded and competitive mar- ket, we are always open to building new That’s the picture Fugazy: Other than price, what Petersen: As much as everyone likes a relationships and telling the LongueVue of private equity resonates with bankers? nice proprietary deal at a reasonable story. We strive to take every meeting valuation, you certainly can’t discount and are not afraid of kissing a few frogs we are trying to Lederer: They want certainty to close, the bank process. The efficiency and along the way. Recently, we have done a portray.” especially at our end of the market. value the investment bankers provide is great job of covering our backyard and In the $2 million to $10 million EBITDA tremendous. finding talented entrepreneurs that are Jessica Ginsberg, range you’ve got independent sponsors open to a private equity partner. Vice President, LFM Capital and other similar bidders. It can be a Lederer: We’ve certainly had situations in which we’ve bit of the Wild West. Obviously price is entered into a direct non-competitive acquisition Ginsberg: Private equity has a bad rap going to be the major factor, but firm process. But there are other situations in which a seller in a lot of circles. We see it as part of our job to tell a reputation and confidence of close go a long way. hires an advisor or broker and they run a very limited different story. We’re not scary. We’re not going to buy process, which can also be a very beneficial dynamic. your business, close your plant, and fire your people. Ginsberg: We think our focus on manufacturing and We are going to invest in your company, develop your operations helps us stay front of mind with investment Fugazy: When you launch a new firm in such a people, grow your business, and really do right by your bankers. They know our story speaks well to business crowded market were you consciously trying to be legacy. That’s the picture of private equity we are trying owners and they also appreciate having someone at different? to portray. the table that can bring operating expertise and a stra- tegic vision, not just financial improvements. Ginsberg: We launched in the fall of 2014. We have Cox: From the beginning we decided to be very hands- always been incredibly focused on manufacturing on, proactive and accessible. We work closely with our Cox: As a firm, we strive to have open and honest

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d36404_Abacus_Roundtable_M&A.indd 5 3/29/18 5:35 PM communication at all times, and we has helped us. We try to be as flexible Lederer: We continue to see activity from independent believe this style resonates with invest- as we can with different situations. sponsors. Branford is open to working with different ment bankers when price may not be the kinds of independent sponsors. They may have a deal primary objective for a transaction. As a Cox: We certainly do not want to get ready, but they need funding and if they result, this approach has led to a number painted into a corner. But I think part- have the right expertise we’re happy to of pre-process introductions. nership relationships are what we focus work with them. On the other side of on. And it happens that most of your the coin, Branford has ultimately won Fugazy: Do you find firms trying to key relationships are in some proximity processes where the independent spon- replicate what you’re doing and is that to where you’re headquarters are at a sor won the first round but their equity even possible? point in time. We’ve done a tremendous financing didn’t come through. We hang job in cultivating those relationships around and try to say in touch in case Ginsberg: Firms are definitely being more and actionable opportunities. an independent sponsor extends them- proactive in seeking out proprietary deals selves and can’t get to a close. – I think launching a direct sourcing plat- Fugazy: Where do you see things form can be intimidating and is a little “You can’t easily headed in the near future for the Cox: LongueVue has enjoyed success- like finding a needle in a haystack, but we replicate a 30- industry? ful partnerships with two independent are very committed to keep looking. sponsors, and we will continue to en- plus year track Lederer: Fortunately in our end of the gage value-added independent sponsors as part of our Lederer: You can’t replicate the 30-year record, specific market, there are enough great small sourcing strategy. history of Branford Castle or the decades operating roles, or companies and we can find them at that John K. Castle has spent as a leader reasonable valuations. We don’t try to Fugazy: From a lender’s perspective, when are you and innovator in the private equity in- an operationally necessarily predict exactly what’s going looking at independent sponsors versus family office, dustry. I think that is well-received by the entrepreneurial to change in the private equity market versus lower middle market private equity firms, who banking community and by sellers when overall, but Branford’s model has been do you prefer to work with? they understand our track record. People background, able to continue to surface these really do try to copy each other in this market, for example, nice companies. We expect that to Petersen: We come in a little bit little later in the but you can’t copy that kind of history without actually continue into the future. process. It’s been mentioned a couple of times; the and firm reputation. certainty of close becomes a much bigger deal. So having invested Petersen: I don’t think it will get less Cox: We have many relationships in the in and lived those crowded or less competitive either. Southeast, but we invest coast to coast. For firms that raise capital, there is a The constant theme and differentiator experiences.” pretty defined deployment and return in winning deals has been our fit with cycle, so it will not turn for a year or 18 Eric Petersen, management and commitment to part- Senior Vice President, months; it takes time. nership. Abacus Finance Cox: We plan to stick to our knitting Fugazy: Do you ever find that you’re too as we move forward. We are situation- specialized? driven, opportunistic value investors, and we are very prudent with the way we leverage our Ginsberg: We look at manufacturing through a broad businesses. In a hyper-competitive market, you have lens – we see everything from general industrial deals, to continue to evolve your sourcing strategy. Whether which are very comfortable for us, to companies that your positioning is through sector, geography, culture or make medical or food-related products. We are also history, you need to clearly promote your brand. When very flexible in terms of the situations or stories we you leave a meeting, your message must resonate. will invest in. We don’t have a recipe; we look at each deal on its own. A great example of that is manage- Ginsberg: I agree. We’re constantly trying to sharpen ment dynamic. We are really open to looking at deals our pencil on what we do and how we do it. The direct where management is transitioning out and we need to sourcing process is a great example of that. We are bring in new people from day one. We are also always constantly updating our messaging and changing the excited to partner with the existing teams who want to processes on the back end to make sure we are as ef- stay on and grow their businesses. Being open-minded fective as we can be.

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d36404_Abacus_Roundtable_M&A.indd 6 3/29/18 5:35 PM has helped us. We try to be as flexible Lederer: We continue to see activity from independent when you start to rank those different equity sources, a as we can with different situations. sponsors. Branford is open to working with different committed fund and family offices tend to do well. And kinds of independent sponsors. They may have a deal then when you get to independent sponsors, it can be Cox: We certainly do not want to get ready, but they need funding and if they a little more challenging. It does weigh painted into a corner. But I think part- have the right expertise we’re happy to “Fortunately in our into our underwriting where the equity is nership relationships are what we focus work with them. On the other side of coming from. on. And it happens that most of your the coin, Branford has ultimately won end of the market, key relationships are in some proximity processes where the independent spon- there are enough Fugazy: It does seem that family to where you’re headquarters are at a sor won the first round but their equity great small offices and independent sponsors are point in time. We’ve done a tremendous financing didn’t come through. We hang more frequently part of the process job in cultivating those relationships around and try to say in touch in case companies and now. Are you finding more sellers are and actionable opportunities. an independent sponsor extends them- we can find them interested in patient capital today? selves and can’t get to a close. Fugazy: Where do you see things at reasonable Ginsberg: We hear hesitation from headed in the near future for the Cox: LongueVue has enjoyed success- valuations.” business owners on the buy-and-flip. industry? ful partnerships with two independent We tend to believe that because we’re sponsors, and we will continue to en- operationally involved in our portfolio Lederer: Fortunately in our end of the gage value-added independent sponsors as part of our companies and truly want to enact change, it will take market, there are enough great small sourcing strategy. longer to add the kind of value we want to add. We will companies and we can find them at likely hold our investments longer than what is average reasonable valuations. We don’t try to Fugazy: From a lender’s perspective, when are you for private equity. necessarily predict exactly what’s going looking at independent sponsors versus family office, to change in the private equity market versus lower middle market private equity firms, who Lederer: When we were a family office, I don’t believe overall, but Branford’s model has been do you prefer to work with? there were too many opportunities that were won able to continue to surface these really because of a potentially longer hold period. I don’t nice companies. We expect that to Petersen: We come in a little bit little later in the believe with the situations we’re seeing now that folks continue into the future. process. It’s been mentioned a couple of times; the are turned off by the fact that we will help for a finite certainty of close becomes a much bigger deal. So period of time until the sale to the next, best owner. Petersen: I don’t think it will get less crowded or less competitive either. For firms that raise capital, there is a pretty defined deployment and return cycle, so it will not turn for a year or 18 months; it takes time.

Cox: We plan to stick to our knitting as we move forward. We are situation- driven, opportunistic value investors, and we are very prudent with the way we leverage our businesses. In a hyper-competitive market, you have to continue to evolve your sourcing strategy. Whether your positioning is through sector, geography, culture or history, you need to clearly promote your brand. When you leave a meeting, your message must resonate.

Ginsberg: I agree. We’re constantly trying to sharpen our pencil on what we do and how we do it. The direct sourcing process is a great example of that. We are constantly updating our messaging and changing the processes on the back end to make sure we are as ef- fective as we can be.

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037_MAJ0518BC M&A Ad_7.875x10.5_735403_Final.indd 37 1 4/3/20183/1/18 2:48:28 9:58 AMPM Feature WILL COINBASE After overseeing 40 transactions at LinkedIn, Emilie Choi has joined the exchange for Bitcoin and other digital LEAD A WAVE currencies as vice president of business development. OF M&A IN milie Choi has joined Coinbase as vice president, after an eight-year tenure at LinkedIn, where she oversaw 40 transactions in her role as vice president of corporate development. In her new role at Coinbase, CRYPTOCURRENCY? EChoi will lead corporate development, business development and By Mary Kathleen Flynn business operations for the venture capital-backed startup, which provides an online exchange for digital currencies, including Bitcoin, Ethereum, and Litecoin. The cryptocurrency sector may soon be ripe for M&A, and Coinbase may be in a good position to do some consolidating. Coinbase

38 MERGERS & ACQUISITIONS May 2018 May 2018 MERGERS & ACQUISITIONS 39

038_MAJ0518 38 4/4/2018 3:57:20 PM Feature WILL COINBASE After overseeing 40 transactions at LinkedIn, Emilie Choi has joined the exchange for Bitcoin and other digital LEAD A WAVE currencies as vice president of business development. OF M&A IN milie Choi has joined Coinbase as vice president, after an eight-year tenure at LinkedIn, where she oversaw 40 transactions in her role as vice president of corporate development. In her new role at Coinbase, CRYPTOCURRENCY? EChoi will lead corporate development, business development and business operations for the venture capital-backed startup, which provides an online exchange for digital currencies, including Bitcoin, Ethereum, and Litecoin. The cryptocurrency sector may soon be ripe for M&A, and Coinbase may be in a good position to do some consolidating. “Choi’s deep experience leading world-class corporate development teams will help move Coinbase into new markets. ” Coinbase

38 MERGERS & ACQUISITIONS May 2018 May 2018 MERGERS & ACQUISITIONS 39

039_MAJ0518 39 4/4/2018 3:57:26 PM Feature

“Coinbase is moving fast into a new phase of technology companies are in the early stages. In the company’s journey,” said Asiff Hirji (pictured, addition to VC firms, big tech companies and some left), president and COO of Coinbase, in a financial services companies have been investing. March 5 blog post announcing the appointment. Partnerships identified in a recent roundup by “Emilie’s deep experience leading world-class CNBC included: Citi, Goldman Sachs and corporate development teams will help move JPMorgan Chase are backing Axoni, which is Coinbase into new markets and opportunities working on applying blockchain technology to globally by leveraging acquisitions, strategic banking; Visa, Nasdaq, Citi and Capital One investments and partnerships.” have made direct investments in Chain, which lets financial institutions create and store digital We want Advocate for founders assets on private networks; and Google is backing “ t LinkedIn, Choi led dozens of acquisitions, Ripple, which provides financial institutions to connect with Aincluding: Lynda, Bright, Newsle, Connecti- with money-transfer technology, and LedgerX, a entrepreneurs fier, Slideshare and Fliptop, as well as LinkedIn’s cryptocurrency deriviatives platform. and teams joint venture in China and strategic investments around in Cornerstone On Demand and G2 Crowd. Backing blockchain the world Prior to LinkedIn, Choi worked at Warner Bros., hoi’s appointment came during a busy time where she developed long-term strategies for the Cfor Coinbase and for the cryptocurrency who are WBTVG digital businesses, including TMZ, industry in general. The startup unveiled the passionate Kids WB, Essence and The WB, and at Yahoo Coinbase Index Fund, which is designed to give Inc. (Nasdaq: YHOO), where she advised the se- investors exposure to all digital assets listed on about building nior management team and executed high-profile Coinbase’s exchange, GDAX, weighted by mar- innovation in transactions, including Flickr and Yahoo’s original ket capitalization. “Index funds have changed the investment in Alibaba. way that many people think about investing,” the crypto “In addition to her deep experience building said product manager Reuben Bramanathan. “By space. and scaling at high-growth companies, Emilie’s providing diversified exposure to a broad range of reputation as an advocate for founders through assets, index funds enable investors to track the every step of the M&A process makes her the performance of an entire asset class, rather than perfect fit for Coinbase,” said Hirji. “As part of having to select individual assets. We’re excited our vision to create an open financial system, to give our customers the ability to invest in the we want to connect with entrepreneurs and potential of blockchain-based digital assets as a teams around the world who are passionate whole.” about building innovation in the crypto space. Coinbase also announced the appointment ” Emilie has an outstanding record of building of Eric Scro (pictured, right) as vice president of strong relationships with founders and in finance. Scro most recently held the position of creating environments where entrepreneurs can head of finance at the New York Stock Exchange, continue to execute on their vision within larger an investor in Coinbase. companies.” Meanwhile, the cryptocurrency industry Coinbase may be well poised to consolidate still has the feel of the wild west. But there the emerging crypto currency sector. Founded in may be a new sherrif in town. On March 7, June of 2012 and headquartered in San Francisco, the U.S. Securities and Exchange Commission Coinbase has raised $217 million from venture said that many online trading platforms for capital firms, including Andreesen Horowitz, cryptocurrencies should be registered and subject Union Square Ventures and Ribbit Capital, SV to additional rules, suggesting the digital currency Angel and Funders Club. sector will be under scrutiny for some time to To date, the investments in blockchain come.

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Experience matters.

041_MAJ0518 41 4/4/2018 11:18:19 AM Guest Article WHAT TAX REFORM The Tax Cuts and Jobs Act will affect capital gains on MEANS holding periods for portfolio companies. FOR he timeline for the consummation of an Tequity-based transaction varies depending CARRIED upon multiple factors that in part are beyond a seller’s control. However, fund managers have historically focused on ensuring that their carried INTEREST interest allocation is subject to the more favorable By Jeffrey Bilsky and Stephen Sonenshine long term capital gains tax rates by meeting the AND one-year holding period requirement under the Internal Revenue Code (“IRC”). As a result of the Tax Cuts and Jobs Act, passed into law on PRIVATE December 22, 2017, fund managers could find their carried interest allocations subject to tax at ordinary income tax rates rather than the more EQUITY favorable capital gains tax rates. Overview of Carried Interest Rules nder the newly enacted IRC Section 1061 Uunder the Tax Cuts and Jobs Act, a partner’s allocation of long term capital gain may be recharacterized as short-term capital gain, which is taxed as ordinary income rather than the more favorable long term capital gains rate. Based on the tax rates now in effect, capital gain allocations will be taxed at 23.8 percent (excluding state taxes) whereas ordinary income allocations will be taxed at a maximum rate of 40.8 percent (excluding state taxes). In general, when a fund sells an asset (e.g., stock in a portfolio company), the gain on the sale will be treated as a capital gain. To the extent the disposed asset has been held for more than one year, the gain will be characterized as long- term and subject to the lower capital gains tax rate. However, if this gain is allocated to a partner holding an “applicable partnership interest” the gain will be recharacterized as short-term capital gain to the extent the disposed asset was held for less than 3-years. The newly enacted IRC Section 1061, therefore, creates a 3-year holding period

May 2018 MERGERS & ACQUISITIONS 43

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The Tax Cuts and Jobs Act will affect capital gains on holding periods for portfolio companies.

he timeline for the consummation of an with respect to certain assets instead of the 1-year Tequity-based transaction varies depending holding period under the previous tax regime. upon multiple factors that in part are beyond a Under these new rules, the term applicable seller’s control. However, fund managers have partnership interest means a profits interest historically focused on ensuring that their carried issued by a partnership operating an “applicable interest allocation is subject to the more favorable trade or business” to a partner in connection long term capital gains tax rates by meeting the with the performance of services. In other words, one-year holding period requirement under the a carried interest received by a fund manager is Internal Revenue Code (“IRC”). As a result of an applicable partnership interest if the fund is the Tax Cuts and Jobs Act, passed into law on operating an applicable trade or business. A fund December 22, 2017, fund managers could find that raises and returns capital in connection with A partner’s their carried interest allocations subject to tax at investments in securities, commodities, rental or “ allocation of ordinary income tax rates rather than the more investment real estate, cash, options or derivative favorable capital gains tax rates. contracts with respect to securities, commodities, long term rental or investment real estate will be considered capital gain Overview of Carried Interest Rules operating an applicable trade or business. nder the newly enacted IRC Section 1061 may be Uunder the Tax Cuts and Jobs Act, a partner’s Here are some key takeaways: recharacterized allocation of long term capital gain may be • As a result of the Tax Cuts and Jobs Act, as short-term recharacterized as short-term capital gain, which fund managers could find their carried is taxed as ordinary income rather than the more interest allocations subject to tax at capital gain. favorable long term capital gains rate. Based on ordinary income tax rates rather than the the tax rates now in effect, capital gain allocations lower capital gains rates if held for under will be taxed at 23.8 percent (excluding state three years at the time of exit. taxes) whereas ordinary income allocations will • Properly tracking the holding period be taxed at a maximum rate of 40.8 percent attributable to the disposed asset becomes (excluding state taxes). critical and raises a significant trap for ” In general, when a fund sells an asset (e.g., the unwary, especially when a fund (or stock in a portfolio company), the gain on the its portfolio company) intends to grow sale will be treated as a capital gain. To the extent through acquisitions. the disposed asset has been held for more than • This change in the required holding one year, the gain will be characterized as long- period and the potential for ordinary term and subject to the lower capital gains tax income taxation is causing fund managers rate. However, if this gain is allocated to a partner to reassess the structure (and financing) holding an “applicable partnership interest” the of potential add-on investments, tax gain will be recharacterized as short-term capital classification of portfolio companies, gain to the extent the disposed asset was held for structure of monetization events, and the less than 3-years. The newly enacted IRC Section terms of their carried interest. 1061, therefore, creates a 3-year holding period • Fund managers should consider the

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potential pitfalls associated with their capital of $75M ($175M disposition proceeds traditional structures to ensure the less $100M total invested capital). Under the favorable long term capital gain treatment terms of the Fund, LP operating agreement, GP is obtained in current and future is allocated 20% of this gain, or $15M. transactions. Of the $15M long-term capital gain allocated to the GP, $6M will be recharacterized as short- Trap for the Unwary term capital gain calculated as follows: he recently enacted IRC Section 1061 has • Total long-term capital gain recognized by Tcaused fund managers to increase their the fund equals $75M ($175M of proceeds focus on carried interest allocations and whether less the $100M of total invested capital) these allocations will result in long term capital • GPs share of this gain is $15M ($75M * gain. The key determining factor is whether the 20 percent). Change in the disposed asset has been held for at least 3-years. • GPs share of gain recharacterized as short- “ Accordingly, properly tracking the holding period term capital gain is $6M ($15M * 40 required attributable to the disposed asset becomes critical percent). holding period and raises a significant trap for the unwary, In order to minimize the amount of capital is causing fund especially when a fund (or its portfolio company) gain recharacterization, consider an alternative intends to grow through acquisition or is classified whereby PortCo obtained debt-financing on managers to as a flow-through entity (i.e., partnership) for 12/31/2017 and 3/31/2018 instead of equity reassess the U.S. income tax purposes. financing from Fund, LP. Structuring these structure of This change in the required holding period subsequent investments as debt-financing would and the potential for ordinary income taxation have prevented PortCo from issuing new stock potential is causing fund managers to reassess the structure to Fund, LP, which would have been a disposed add-on (and financing) of potential add-on investments, asset with a holding period of less than 3-years. investments. tax classification of portfolio companies, structure This change in financing structure for these of monetization events, and the terms of their investments would result in all of the carried carried interest, including incremental interests interest allocation being subject to the more granted under waiver or cashless favorable long term capital gain tax rate. contribution arrangements. Conclusion: Consider the following example: he enactment of IRC Section 1061 under ” und, LP raises $100M of capital with Tthe Tax Cut and Jobs Act extended the Fcommitments of $1M to be contributed by the holding period needed to obtain the favorable general partner (GP) and $99M to be contributed long term capital gain tax rate. As fund managers by the limited partners (LPs). Depending on assess additional opportunities to deploy capital overall performance of the fund, the GP will be or evaluate potential monetization events for a entitled to an allocation of up to 20% of gains portfolio investment, the fund manager should recognized on investment assets. consider the potential pitfalls associated with their On 1/1/2017, Fund, LP invests $50M in the traditional structures to ensure the favorable long acquisition of a portfolio company (PortCo). term capital gain treatment is obtained in current Fund, LP invests additional capital in PortCo and future transactions. and contributes these funds to PortCo on several dates, including: 6/30/2017 ($10M), 12/31/2017 Jeffrey Bilsky is the technical practice leader for ($25M), and 3/31/2018 ($15M). BDO’s national tax office partnership taxation On July 1, 2020, Fund, LP sells the interest group. Stephen Sonenshine is a partner in BDO’s in PortCo for $175M recognizing long-term transaction advisory services practice.

44 MERGERS & ACQUISITIONS May 2018

044_MAJ0518 44 4/4/2018 3:55:55 PM 045_MAJ0518 45 4/3/2018 2:48:29 PM Outlook SPONSOR CONTENT FROM M&T BANK Common Pitfalls to Avoid Learn the common mistakes buyers and sellers in M&A make and how to avoid them

Hugh Giorgio is a Managing Director in the Investment Banking division of M&T Bank. Hugh has been with the Debt Capital Markets group within the Investment Bank for over 15 years and leads Sales and Trading with a particular emphasis on Leverage Finance. Below is a Q&A with Hugh about some of the common pitfalls made by buyers and sellers in M&A and how to avoid them.

What are some of the most common the buyers and their reputations.  ere are have never bought a company before, or mistakes you see buyers make? many more details beyond sale price that doesn’t have the capital to get the deal done. Due to the current bullish market have to be worked out and entrepreneurs Investment bankers know the buyers and conditions, buyers are often asked to without advisors typically stumble through understand their reputation. We never want shorten the due diligence process. Buyers are the process. to see a deal fail, so we strive for committed beginning to accept sell-side due diligence Another pitfall is not having the right “no-outs” purchase agreements. reports more frequently as a result of these fi nancial systems in place. Many companies We ensure buyers are properly vetted and market conditions. Typically, a buyer would have a bookkeeper, but not a CFO or the transaction will continue to progress. We bring in their own consultants rather than someone who has the skill set to go through like to have insight into the “100-day plan” accepting a seller’s advisor’s reports including the diligence process with the buyer. A to fully understand a seller’s plans regarding quality of earnings. Another common company with insuffi cient fi nancial systems integration in general. It gives us a perspective mistake is that buyers underestimate the time and no sell side advisor may well pay the price into issues and concerns they may have and and eff ort involved in systems integration. in the form of a lower transaction value.  e an ability to track progress. System integrations rarely go smoothly and ultimate goal of a sell side advisor is success the impact on your employees and fi nancial at the right price and structure, and errors in How do you counsel your clients? performance can be signifi cant. Finally, fi nancial systems result in broken deals or a Overall our general advice is: hire an both buyers and sellers alike frequently re-traded price. investment banker, professional fi nancial underestimate the importance of cultural We also urge sellers to take caution when advisors and transactional attorneys, and get fi t and governance issues. Understanding agreeing to a minority equity deal. If things your fi nancial house in order. Talk to other roles and responsibilities is important in this go well it can be quite lucrative; however, people who have sold their business. Know regard. if things turn south, negotiations can be your counterparts in the deal and start to challenging and sellers may have a negative understand how they perform.  is is a seller’s On the other hand, what are some of the fi nancial outcome. market and with the right people representing common mistakes you see entrepreneur you, it’s a great time to sell. But on the buy sellers make? How can an investment banker help? side, buying when multiples are high and For an entrepreneurial seller, it’s usually Recognizing we are talking about people are being forced to rush, mistakes can, their fi rst time taking institutional equity and entrepreneurs who are likely selling a business and do, happen. they often misunderstand the importance of for the fi rst time, having proper representation hiring the correct advisors to assist with the is critical. It’s obviously an emotional decision ©2018 M&T Bank. Member FDIC. Equal Housing process. From time spent in the industry and and a process in which they don’t have Lender. All rights reserved. knowing their competitors, entrepreneurs experience. Investment bankers deal with believe they know who the right buyers of these transactions on a daily basis. We take  e content of this page is for informational and educational purposes only. Nothing herein should be their business will be and don’t necessarily the emotion out of the process and bring the considered or relied upon as legal, tax, accounting, want to pay for professional advice. However, discipline necessary to make a sound decision. investment, or fi nancial advice.  e author assumes no these are very complicated transactions and Many times sellers will think they know responsibility or liability for the specifi c applicability of the information provided. Please consult with the professionals sellers need competent advisors and legal who their buyer will be, but they don’t realize of your choice to discuss your situation. counsel.  e right advisors know most of that the company they have in mind may

46 MERGERS & ACQUISITIONS May 2018

d35171_M&T-Outllook_MA-May2018.indd 46 4/4/18 11:03 AM The best way through the most complex transactions? Starting with the right advisor.

At M&T Investment Banking Group, we work side by side with middle-market companies, using our resources, expertise and capabilities to craft a personalized strategy for each unique situation. We help our clients navigate transformational events – from sale to developing complex financial structures for growth or liquidity – offering our experience and meticulous execution to deliver the best possible outcome. To learn more, contact Rob White at 410-244-4892, Stuart Smith at 410-244-4876 or Ian Pemberton at 410-244-4829.

MERGERS & ACQUISITIONS  CORPORATE FINANCE  RECAPITALIZATIONS  OWNERSHIP TRANSITIONS

Equal Housing Lender. ©2018 M&T Bank. Member FDIC.

013_MAJ0318 13 2/6/2018 5:40:49 PM CS17430/ Mergers & Acquisitions / 7.875”w x 10.5”h / .25” bleed / 4C Guest Article

Having an open line of communication with employees is one way to help a merger succeed. 7 IMPERATIVES t’s a tale of two Big 4 studies. e Deloitte M&A Trends Report fi nds that corporate and private equity executives forsee an acceleration Iof M&A activity throughout 2018 “in both the TO SUCCESSFUL number of deals and the size of the transactions.” e PWC M&A Integration Survey, meanwhile, reports on a less enthused crowd. Many F1000 POST-MERGER executives who’ve undertaken a merger or acquisition during the last three years bemoan a lack of “high performing deals.” INTEGRATION Anyone else see a disconnect? We’re in search of the pot of gold promised by the merger of complementary companies, but that end-of- rainbow fortune has proven elusive. e culprit? Integration. A recent roundtable on merger integration with participants from over 15 leading private equity fi rms including H.I.G. Capital, Lightyear Capital, and Trilantic Capital Partners revealed that the integration rainbow is littered with pitfalls that can befall even the most well-matched of mergers: “A lot of executives make the mistake of believing the end of the project plan marks the end of the integration, but there’s still much By John Jureller more work to be done in order to achieve the real benefi ts of the merger. Full integration probably takes three times as long as you’d think. Acquiring companies need to have the persistence to see it all the way through. Many don’t.” The roundtable further identifi ed seven imperatives to integration success.

7. Size Doesn’t Matter: Or, at least, not as much you might think. “Time, eff ort and complexities are much more related to scope than scale.” In a scale acquisition, the buyer seeks an enlarged presence in a particular market and targets a competitor in a related sector. “Even when we are talking about two giants, this is usually a more straight-forward deal. Integration is easier if it’s an adjacency to what you have in your portfolio today.” Scope buyers, on the other hand, often use their acquisition as a springboard into new and

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Having an open line of communication with employees is one way to help a merger succeed.

t’s a tale of two Big 4 studies. The Deloitte unfamiliar territory. “Because these deals are less M&A Trends Report finds that corporate and about streamlining operations and exploiting cost private equity executives forsee an acceleration synergies, the investment of time to win over the Iof M&A activity throughout 2018 “in both the hearts and minds of management, to explain the number of deals and the size of the transactions.” vision behind the acquisition, will be far more The PWC M&A Integration Survey, meanwhile, significant.” That holds true even when the size of reports on a less enthused crowd. Many F1000 the companies merging would suggest otherwise. executives who’ve undertaken a merger or “We had a Goliath in industry A swallowing up a acquisition during the last three years bemoan a David in industry B. Because it was a scope deal, lack of “high performing deals.” it was critically important for the management Anyone else see a disconnect? We’re in search team to feel good about coming into a new of the pot of gold promised by the merger of environment, and so we spent far more time complementary companies, but that end-of- massaging the David integration than we would rainbow fortune has proven elusive. The culprit? have suspected based on deal size alone.” Is this a Integration. “ time to get A recent roundtable on merger integration 6. Start at the Beginning: Or, in deal speak into the with participants from over 15 leading private that would be the at the CIM (confidential equity firms including H.I.G. Capital, Lightyear information memorandum). “Is this a time to get weeds on Capital, and Trilantic Capital Partners revealed into the weeds on merger integration planning? merger that the integration rainbow is littered with No. Too much resource allocation too early on pitfalls that can befall even the most well-matched is an unsustainable model against aggregate deal integration of mergers: “A lot of executives make the mistake success. But, the outset of the transition process planning? of believing the end of the project plan marks is the time to make reasonable and conservative No. the end of the integration, but there’s still much integration expectations, such as: revenue and more work to be done in order to achieve the real expense synergies, operating expense and capital benefits of the merger. Full integration probably expenditure integration budgets, and integration takes three times as long as you’d think. Acquiring timelines.” companies need to have the persistence to see it all The truth is, however, many of the initial the way through. Many don’t.” evaluations now happen before, well, the beginning. “It’s very rare that we will get a CIM ” The roundtable further identified seven that’s the perfect fit for one of our portfolio imperatives to integration success. companies around which we don’t already have a perspective. Either that’s because we always vet 7. Size Doesn’t Matter: Or, at least, not the market for add-on acquisitions or because, as as much you might think. “Time, effort and is happening with more frequency, prospective complexities are much more related to scope acquisitions will actually call us with a synergy than scale.” In a scale acquisition, the buyer seeks plan. For example, we just bought the number an enlarged presence in a particular market and one player in a market and the number two player targets a competitor in a related sector. “Even called us and said ‘we’re doing a couple million when we are talking about two giants, this is bucks in Ebitda, but we can deliver you more usually a more straight-forward deal. Integration than double that through synergies and here’s a is easier if it’s an adjacency to what you have in corresponding cost plan.’” your portfolio today.” Scope buyers, on the other hand, often use 5. The PMO VIP: Who heads the PMO their acquisition as a springboard into new and (Project Management Office) may be just as

May 2018 MERGERS & ACQUISITIONS 49

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important a decision as whether to have one in in the importance of institutional owner the first place. On the latter question, having communication. That’s particularly true in a one is always the ideal state. Certainly there are CEO transition or in a carve-out scenario. “But, those rare portfolio companies that have the for the most part, employees don’t want to hear internal skillset to be a self-sufficient acquisition from Mr. Wall Street PE guy. They want to hear machine, and where, given the internal dynamics from their CEO/management. So we plan a town and competencies of management, a PE-supplied hall schedule. We say to the CEO ‘sorry, not sorry, PMO is not necessary. “But, ideally, we would but for the next two months you will be on the have a dedicated PMO in every situation, even road meeting with every single person face to Employees if it’s a small tuck-in, because you need someone face, communicating, our vision, our plans, their “ bird-dogging the integration to realize the future.’ If they won’t buy in to that, we won’t buy.” don’t want to hear from synergies and to get the basic integration stuff done. Otherwise, there’s just too much work for 2. Have a Pen Pal: Communications, they say, Mr. Wall Street any sort of management team to do.” is a two way street. Yes, you need ambassadors of PE guy. The merger is a shiny new toy that can distract the new message, but you also need sources for the from day-in-day-out operations; the PMO on-the-floor, off-the-record feedback. “I call these They want to ensures it does not through the creation of a guys my pen pals. When you go to a town hall hear from their separate integration entity. But, who heads that tour with the CEO, what really happens is you CEO/ entity? Someone who is senior, well respected, take the regional leadership team out to dinner and has the credibility to spearhead integration and they want to feel like the leader of their management. efforts. Sometimes that person can be found in fiefdom within the organization. They like to hear either the acquiring or absorbed companies. But themselves talk and that can be the most valuable just as often, even when that skillset is found, the way to hear the issues that are not bubbling to the necessary bandwidth is not. In those cases, it’s best surface.” These are the people to whom you, as to look for either an external operations agent. intuitional owner, give your cell phone. These are the people whose calls you take. ” 4. It’s All About The People: Therein lies the 3 most important priorities of any integration 1. Define Success:“One thing I’ve been effort: people, people, people. “A successful surprised by is how people cling to structure. If integration boils down to keeping most of the you put together a very detailed governance plan, people that I want to keep.” If retention is the I’ve found that people respond well to being told name of the game, then communication is best what to do, which can be leveraged to accelerate way to play. Intuitive as it may sound, it can be integration activities.” It’s a fair, sound statement, difficult to keep the workforce fully aligned. but the other side to that coin is less that they Early and ongoing communication with love a task list, and more that they respond well employees it critical to deal success. “You want to to knowing what success looks like. “People like tell your people off the bat, ‘Listen, we know it’s knowing they have achieved something at the going to be bumpy for a while, but here is what end, which is why distilling success down into the end of the road is going to look like.’ And concrete, measurable goals is paramount. If you then you want to hug all of the people that you can measure it, you can align to it. If you can want to keep forever, and hug all of the people measure it, you can communicate to it. If you can you want to keep at least through the transition.” measure it, you can achieve against it.”

3. Look Who’s Talking: The question John Jureller is managing director at Accordion, the then becomes: just who is doing that hugging? private equity financial consulting firm focused on There are some PE professionals that believe the Office of the CFO.

50 MERGERS & ACQUISITIONS May 2018

050_MAJ0518 50 4/4/2018 3:54:26 PM 051_MAJ0518AM&AA-Summer18-v2.indd 51 1 4/3/20183/27/18 2:48:31 10:28 PMAM People

New Hires and Promotions By Demitri Diakantonis

Chad Abraham was appointed to chief executive firm’s deal activity in the Asia-Pacific region. Chan officer of Piper Jaffray Cos. (NYSE: PJC) was previously with Khazanah Nasional Berhad, the effective January 1, 2018. Abraham, previously the of Malaysia. firm’s global co-head of investment banking and capital markets, succeeds Andrew Duff, who will Stephanie Davies has joined New York-based remain chairman of the Piper Jaffray board. Stout Risius Ross LLC as co-head of sponsor coverage in the firm’s investment banking group. Michael Axelrod has been named CEO at Prior to Stout, Davies was the head of business Swander Pace-backed Passport Food Group. development for Staple Street Capital. He was most recently a president at TreeHouse Foods Inc. (NYSE: THS). Swander Pace invested in Steve Dearing was hired by Stephens Inc. as Passport, a manufacturer of internationally flavored a New York-based managing director. Joining the foods, in 2017. firm’s equity capital markets team, Dearing has Stephanie Davies more than 30 years of experience in transactions Victor Barcot has joined Houlihan Lokey covering the transportation, industrial, healthcare, (NYSE: HLI) as a managing director in the firm’s oil technology, media, energy and real estate sectors. and gas exploration and production group. Barcot, based in Houston, previously served as managing Mark Emrich has joined Murray Devine director at Deutsche Bank (NYSE: DB). Valuation Advisors as a managing director in the firm’s New York office. Previously working in Todd Beauchamp was hired by Latham & the same capacity at Anagenesis Capital Partners, Watkins LLP as a partner in the firm’s Washington, Emrich leads Murray Devine’s New York business D.C.-based payments and emerging financial development activities with a focus on alternative services practice. Joining from Paul Hastings, investment firms and intermediaries. Beauchamp holds experience in payments regulatory, complex transactional and corporate matters. Sarah Fitts has joined Schifff Hardin’s New York office as a partner. Previously with Debeboise & Jay Blackman has rejoined Vinson & Elkins as Plimpton, she focuses on M&A in the energy sector. counsel based in Houston. Previously counsel at Willkie Farr & Gallagher LLP, Blackman represents Ryan Flanders was hired by Monroe Capital Sarah Fitts private equity investors in M&A, dispositions and as vice president, where he will serve on the firm’s strategic investment transactions. investor relations team. Flanders was most recently the head of private debt products at Preqin. David Burdette has been promoted from vice president to director at Prairie Capital Andrew Fulford has been named vice president of Advisors. Based in Atlanta, Burdette specializes corporate development at St. Louis investment firm in transaction financing, M&A and ESOP analysis. HBM Holdings. Fulford was most recently with He previously worked as a manager at Willamette Graybar Electric Co. HBM invests in middle market Management Associates. businesses that have up to $25 million in Ebitda.

Cheryl Carner has been promoted to senior Gene Gorbach has been promoted from senior managing director at Solar Capital-backed associate to investment partner at middle market Crystal Financial. She focuses on business private equity firm Arsenal Capital Partners. development and underwrites financing for mid- Gorbach joined the firm in 2008 and serves on the market companies that need capital for M&A. board of three healthcare companies, including: BioIVT, TractManager, and WCG. He has previously Datuk Ben Chan joined Ontario Teachers’ worked at American Capital, Madison Dearborn Li Han Pension Plan as a managing director to lead the Partners and J.P. Morgan (NYSE: JPM).

52 MERGERS & ACQUISITIONS May 2018

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TJ Graham has joined Cooley as a partner in Andy Hurd was hired by healthcare focused the firm’s technology group. He focuses on M&A private equity firm Cressey & Co. as an and corporate divestitures that involve software operating partner in Chicago. Hurd mostly with consumer products and digital media. He recently served as CEO of healthcare analytics was previously with WIlson Sonsini Goodrich & company MedeAnalytics, which was acquired by Rosati. Thoma Bravo in 2015.

Former Food Network CEO Erica Gruen joined Jim Hyatt has been named CEO at Golden Gate Oaklins DeSilva+Phillips as a senior advisor. Capital-backed restaurant chain California Gruen is known for introducing shows such as the Pizza Kitchen. Hyatt is the former CEO of Iron Chef and Emeril Live. Ruby Tuesday. Golden Gate acquired California Pizza in 2011. Li Han has joined O’Melveny’s Hong Kong Caroline Jury office as a partner. Previously the general counsel Caroline Jury was hired by Morrison of Shanda Group, Han focuses on private equity Foerster’s London office as a partner. Most and M&A. recently with Clifford Chance, Jury represents financial institutions and private equity firms on Wade Hansen has joined Los Angeles-based cross border M&A and lending. Intrepid Investment Bankers as a managing director where he will focus on M&A in the Karin Kovacic has joined Monroe Capital’s healthcare, technology and digital media sectors. originations team as managing director, East He was previously the co-founder of MHT Partners Coast region. Prior positions included senior vice and founder of Cabrillo Advisors. president at Alcentra Capital and roles at CBIZ Inc. and Fifth Street Capital. Tyler Harrington has been promoted to managing director at Crystal FInancial. He Justin Lindsey was hired by General Atlantic concentrates on underwriting and portfolio as an operating partner, in New York. Lindsey management. is the former chief analytics officer of Bamtech Media, and he will help General Atlantic’s portfolio Scott Hauncher was hired by Huron Capital companies leverage data and analytics in order to Michael Nolte as a partner. Most recently with Superior help drive revenue growth and make operational Capital, Hauncher focuses on investments in the improvements. manufacturing and business services sectors.

Richard Hooper has been named CEO of SK Alexis Maskell was hired by Citigroup Inc. Capital-backed Tri-Tex, a Saint-Eustache, (NYSE: C) to co-head the firm’s European, MIddle Quebec-based producer of adhesives and East and African (EMEA) alternatives assets sealants. He replaces Natalie Laham, who will group, including private equity, sovereign wealth stay with the company as a minority shareholder. funds, pension funds and family offices. Based Hooper was mostly the CEO of chemicals company in London, Maskell was mostly the co-head of SummitReheis, which was sold to Elementis Plc investment banking at HSBC, where he focused in 2017. SK Capital invested in Tri-Tex in 2017. on private equity.

Ryan Mollett has joined Angelo, Gordon & David Hunter joined Salt Lake City-based Co. as global head of distressed debt. Mollett private equity firm the Cynosure Group as a was previously with GSO Capital Partners, the managing director and head of investor relations. global credit investment arm of Blackstone Group Blake Otte Hunter was previously with Partners Group. LP (NYSE: BX).

54 MERGERS & ACQUISITIONS May 2018

054_MAJ0518 54 4/4/2018 3:50:39 PM People

Wesley Nissen has been hired as a partner at specialty industrials team. care company that owns the Cantu, Dr Teal’s, Chicago-based Neal Gerber Eisenberg. Nissen Eylure and Body Fantasies brands. CVC acquired works with family offices and asset managers on Blake Otte was hired by New York-based PDC in 2017. M&A and capital raising. He was previosuly with Stout Risius Ross LLC as co-head of sponsor DLA Piper. coverage in the firm’s investment banking group. Evren Ozargun has been promoted to senior Prior to Stout, Blake previously headed business managing director at Crystal Financial. He is Michael Nolte was appointed as chief executive development and capital markets at AloStar Capital responsible for managing a team of underwriters officer of Bracket, a clinical trial technology for the Northeast region. and portfolio managers, as well as working closely services provider backed by Genstar Capital. Nolte . with Crystal’s business development officers in joins Bracket after served as CEO of Influence Health. John Owen has been named chief financial assessing and structuring new deal opportunities. officer at PDC Brands, which is backed by Brian Orkin has been promoted from principal to CVC Capital Partners and Leonard Green Stephen Paras has joined Star Mountain investment partner at Arsenal Capital Partners. & Partners. Owen most recently served CFO Capital as a managing director. He was previously Orkin joined Arsenal in 2010, and works in various of beverage company Beam Suntory. Stamford, the head of U.S. leveraged loan capital market at business development and strategy roles on the Connecticut-based PDC is a beauty and personal Merrill Lynch.

055_MAJ0518 55 4/4/2018 3:50:41 PM People

Jonathana Pearce has been promoted to partner Elizabeth Kemery Sipes has joined Perkins at Austin, Texas-based private equity firm Blue Coie’s Denver office as a partner. Previously Sage Capital. He is responsible for sourcing and with Bryan Cave, Sipes advises private equity executing investment opportunities, and portfolio funds, private invvestment funds and hedge company monitoring. funds.

Debra Richman was hired by Alvarez & Kenny Smith has been promoted to managing Marsal as a managing director in the firm’s director at Crystal Financial. He is responsible healthcare group in New York. In her role, Richman, for sourcing and structuring new transactions will advise payors and providers to hospital from private equity sponsors. systems on revenue growth strategies. Richman was previously the vice president of healthcare Robert Stein has joined Akerman as a business development and strategy for Nielson. partner in New York where he will co-chair the Debra Richman firm’s corporate finance and lending practice. He Kerr Robertson was hired by William Blair as focuses on leveraged buyouts and debt financing a managing director based in the firm’s recently- across the middle-market. Stein was most opened office in Charlotte, North Carolina. recently with Kirkland & Ellis. Previously a managing director at Wells Fargo Securities, Robertson holds experience advising Kanji Takenaka has been hired by Ardian private and publicly traded companies in the as managing director and head of the firm’s healthcare sector. new Tokyo office. Takenaka joins the private investment firm with senior role experience at George Rupp was hired by JCR Capital as a Simplex Real Estate and Fortress Investment managing director, where he will oversee the firm’s Group. fundraising efforts. Rupp was most recently with Kayne Anderson Capital Advisors. Denver-based Jason Urband was promoted from principal JCR is a real estate-focused alternative investment to partner at Denver private equity firm Lariat firm. Partners. Urban focuses on investments in the comsumer services, tech-enabled services and Nikhil Sathe has joined Milwaukee-based packaging sectors. Kerr Robertson logistics-focused advisory and consulting firm Armstrong & Associates as a managing Christopher Vaughn has joined Venable director where he will lead its M&A group. Sathe LLP’s corporate practice as counsel. Based in most recently served as CFO at transportation Baltimore, Vaughn focuses on domestic and provider Genpro. international M&A, divestitures, debt and equity financings. Vaughn previously served in the Deb Schoneman has been promoted to president U.S. diplomatic corps as a foreign service of Piper Jaffray effective January 1, 2018. officer in the Office of the General Counsel of the Schoneman joined the firm in 1990, and most U.S. Agency for International Development. recently served as CFO and global head of equities. The CFO role is now assumed by Tim Carter. Mark Voccola was hired by Ardian as co-head of the firm’s U.S. infrastructure group in New Roy Seroussi has been promoted from principal York. He was previously with Ares EIF, which was to investment partner at Arsenal Capital part of Ares Private Equity. Partners. Seroussi also joined the firm in 2008, and serves on the board of Cyalume Technologies, Eric Weiner has been promoted to partner Inhance Technologies, Elite Comfort Solutions, at Blue Sage Capital. He is reponsible for Kanji Takenaka and Polymer Solutions Group. sourcing and executing investment opportunities.

56 MERGERS & ACQUISITIONS May 2018

056_MAJ0518 56 4/4/2018 3:50:46 PM 0C3_MAJ0518 3 4/3/2018 2:48:21 PM FROM TO UNSOLD GOLD

Hilco Merchant Resources offers consulting, management, and disposition services to retailers around the world. Hilco provides healthy or distressed retailers with critical solutions to maximize retail inventory value.

• Analyze and accurately determine the retail • Equity or fee arrangements to buy and sell asset value. retail inventory. • Design, organize and implement store-closing • Facilitate M&A through inventory due diligence events, including on-site supervision. and availability of capital for unwanted assets. Comprehensive solutions for today’s complex retail challenges.

Gary Epstein at 847.418.2712 or [email protected]

VALUATION I MONETIZATION I ADVISORY

0C4_MAJ0518 4 4/3/2018 2:48:23 PM

Retail Services Ad – Bulleted Version

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