Turbulent Times Set the Stage for Middle Market's Best Time

20090126-SUPP--1-NAT-CCI-CL_-- 1/21/2009 10:59 AM Page 1

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and M&A

Inside :

Their home for success pg. S-4

Cleveland faces many challenges, but local business executives will tell you the region remains a great place to start and grow a business. See page S-4. Creativity still getting Turbulent times set the stage deals done for middle market’s best time pg. S-6

favorite saying of Ray Dalton, CEO and president of While there is no one single reason for midsize companies having the medical equipment parts company PartsSource, is a competitive advantage in today’s economy, Dalton believes one “where there is chaos there is opportunity.” variable cannot be overlooked. “Growth companies like PartsSource A Dalton says today’s uncertain and challenging are generally owned and managed by their founders,” he says. “Th e economic picture presents a tremendous opportunity founders generally view their own personal success or failure as being for small to middle market ﬁ rms like his. directly tied to the company’s performance. When things get tough, KeyBank Middle Market Executive Alan Zang admits the current like they are now, we can react swiftly and decisively to meet changing economic environment is challenging. market conditions.” “Our view is that it can play to the strength of middle market Dalton thinks that companies with executives who have little equity companies,” he says. “We have seen evidence to support that within will have the most trouble surviving the changing landscape. our own client base. Th e middle market-sized companies are uniquely “Entrepreneurs who invest their own personal capital and time will do positioned. Th ey generally have adequate size and resources to weather everything they can to see their company prosper regardless of what is Private equity: turbulent times and to ride out some revenue volatility.” going on the world around them,” he says. “Caretakers (executives with port in storm Mark Kiskorna, senior vice president and regional manager for PNC little if any skin in the game) are more likely to be thinking about their Business Credit, wholeheartedly agrees. next job instead of focusing on opportunities that exist in the here and pg. S-8 “Historically, the best lending deals that ever get done, from a now.” structure and yield perspective, get done in these downturns,” he says. continued on S-2

SPECIAL ADVERTISING SECTION • CRAIN’S CLEVELAND BUSINESS • JANUARY 26, 2009 20090126-SUPP--2-NAT-CCI-CL_-- 1/21/2009 10:59 AM Page 1

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ACG Cleveland President’s Letter: A hidden jewel in a great city

f you are a business owner, a we have grown to more than 400 and networking with a diverse and members and guests from more in 53 chapters in North America corporate executive focused members, making us one of the infl uential community of business than 20 cities to this event. and Europe. Th ese members Ion growth and acquisitions, largest and most vibrant ACG people. In addition, each October we recognize the multiple benefi ts of or a professional involved in chapters. Th ese educational and host more than 250 golfers at networking within an infl uential transactions or advising clients Our members work in public networking events include Firestone Country Club in Akron, community of deal-making on corporate growth, then you and private corporations, private monthly breakfast speakers and and each June we hold a popular executives growing companies should be part of ACG Cleveland. equity, investment banking, twice-a-year panel discussions members-only social event at worldwide. ACG, the Association for corporate banking and fi nance, on topics of interest to the deal the exclusive Shoreby Club in If you are a corporate growth Corporate Growth, is the accounting, law and other community. As always, the Bratenahl. or M&A professional, or if your world’s preeminent organization professional services. Th ey join capstone of our year is the annual We have two new programs for fi rm is active in the world of for corporate development ACG Cleveland for two primary Deal Maker Awards dinner, which 2009. In January we inaugurated middle market M&A transactions, and middle market M&A reasons: educational events that honors the top corporations the ACG Cup, a business case we encourage you to apply for professionals. In the 27 years since help them build value in their and dealmakers in Northeast competition that brings together membership in ACG Cleveland or ACG Cleveland was founded, companies and for their clients, Ohio. We attract more than 700 some of the brightest young attend one of our events. Visit us minds from Northeast Ohio at www.acgcleveland.org or call MBA programs. And on Sept. 8 me at (216) 858-3700 and I’ll be we kick off the fi rst annual Great happy to talk with you. Lakes Capital Connection in collaboration with ACG chapters in Cincinnati, Columbus, Detroit, Indianapolis and Pittsburgh. We anticipate as many as 800 deal makers will join us for this two- day event, and we are justifi ably proud that the inaugural GLCC will be right here in our fair city. Of course, there is much more to ACG than ACG Cleveland. Th e Th omas P. Freeman Association for Corporate Growth President, ACG Cleveland has more than 11,000 members Partner, Grant Th ornton LLP Benesch, Friedlander, Coplan & Aronoff LLP is pleased to congratulate the 2009 Association for Corporate Growth Middle market’s best time continued from S-1 Deal Maker Award Winners. PartsSource’s Dalton speaks be,” Dalton says. “We refuse We take particular pride from experience. Recognized to let the national economy as Ernst & Young’s regional be an excuse to stop growing in congratulating our clients Entrepreneur of the Year in 2004, PartsSource.” he was a national fi nalist for Dalton says he runs a company PartsSource, LLC the award in 2007. PartsSource to always play off ense—focusing has received multiple local, constantly on products and The Riverside Company regional and national awards delivery to give his customers an for growth, community service easy choice. Resilience Capital Partners and profi tability, including As one of his core management an ACG Cleveland 2009 Deal exercises, the company plans David Morgenthaler Maker Award. Dalton has been strategically twice a year to responsible for the founding of identify what PartsSource needs seven separate companies and to “look like” over the next six led a GE division that saw him months and then remain focused reporting to Jack Welch. only on things that relate directly Based in Aurora, PartsSource to his customers. has enjoyed compounded growth He says that there will always in excess of 45 percent annually be capital available for good since its inception. PartsSource companies but regardless of what now employs more than 200 is happening around us bad deals associates and boasts a retention are still bad deals,” he says. rate of more than 94 percent. Th ough some industries are hit Others also believe in the harder than others, Dalton says it’s future success of PartsSource. important to remember that no Last July, Massachusetts-based industry is going away completely. Polaris Venture Partners and Opportunities exist to aggregate Mayfi eld Heights-based Primus volume, combine sales staff , Capital invested $50 million acquire technologies and move Cleveland • Columbus • Philadelphia • Shanghai • Wilmington for a 33-percent interest in volume to overcome capacity. www.beneschlaw.com PartsSource. Grant Th ornton partner Tom “Successful companies need to Freeman says middle market be able to explain how investors companies also are in a better will see a return. If they are not position to take advantage of the organized that way, they should continued on S-3

SPECIAL ADVERTISING SECTION • CRAIN’S CLEVELAND BUSINESS • JANUARY 26, 2009 20090126-SUPP--3-NAT-CCI-CL_-- 1/21/2009 11:00 AM Page 1

ADVERTISEMENT S–3 Middle market’s best time continued from S-2 " ,/1/" -t trouble some big companies got appropriate depth and breadth into when credit was easy and of management is a must in any ,iÌâiÊEÊ`ÀiÃÃÊV}À>ÌÕ>ÌiÃÊ>ÊÌ iÊ ÊÊ they went on buying binges. Now situation. ÓääÊ i>Ê >iÀÊvÊ9i>ÀÊ>Ü>À`ÊÀiV«iÌÃ the big company needs to pay In addition, Zang notes, middle down debt and tighten its belt, market companies usually have so it must off er non-strategic management and employees business units for sale. who grew up wearing multiple “Th ere is an opportunity for hats and can expand their role middle market companies that readily versus companies where have a focus in that industry, specialization has crept in with niche players,” Freeman says. “A size. ÓÎäÊ>ÌÌÀiÞÃÊUÊ{äÊ>Ài>ÃÊvÊ«À>VÌViÊUÊ££ÊvwViÃ "iÊ``ÀiÃÃ\ÊÊÜÜÜ°À>>Ü°VÊ non-core asset for someone can Middle market companies also be a core asset for someone else. tend to have strong relationships Th ere are some great bargains in their fi nancing and sales right now.” activities. “Th ese relationships KeyBank’s Zang says the agility with their customers matter of middle market companies the most in tough times when also enables them to tweak their fl exibility is often needed,” Zang business models more quickly says. than large cap companies. When it comes to securing “Th eir response time to their capital, middle markets may have Roetzel & Andress’ entrepreneurial philosophy encourages our attorneys clients and their ability to get all another advantage, Zang says. to understand our clients’ businesses, embrace their goals and recommend internal facets on the same page “Th e reality is that capital for any innovative approaches to achieve those goals. is generally superior to larger use is going to have wider spreads companies,” he explains. over prime or LIBOR than in the PNC’s Kiskorna says middle past few years. However, given "iÊ iÛi>`Ê iÌiÀÊUÊ£ÎÇxÊ >ÃÌÊ Ì Ê-ÌÀiiÌÊUÊ iÛi>`]Ê"Ê{{££{ÊUÊÓ£È°ÈÓÎ°ä£xä market companies are not as the incredibly low levels of prime ÓÓÓÊ-ÕÌ Ê >Ê-ÌÀiiÌÊÊUÊÊÀ]Ê"Ê{{ÎänÊUÊÊÎÎä°ÎÇÈ°ÓÇää encumbered. “It’s like turning and LIBOR, even with a wider

around a speed boat compared to spread many businesses may ÀÊÊÊÊ V>ÌÊÊÊÊ iÛi>`ÊÊÊÊ ÕLÕÃÊÊÊÊ/i`ÊÊÊÊÀÌÊ>Õ`iÀ`>iÊÊÊÊÀÌÊ ÞiÀÃÊÊÊÊ >«iÃÊÊÊÊ"À>`ÊÊÊÊ/>> >ÃÃiiÊÊÊÊ7>Ã }Ì]Ê ° ° a tanker,” he says, adding that an actually pay less in interest.”

During these tough economic times, it is especially important to have a broker that combines global expertise with superior local service. At Hylant Group, our experts are among the most experienced in the world and are the same people who are connected to you, your business and insurance markets worldwide. Our Client International access. Executives are trained to help maximize business efficiencies and protect your Local connection. bottom line by acting in your best interest without distracting barriers. Contact us to learn how Hylant Group can make a difference for you and your organization.

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Businesses say Cleveland home is key to their success

errifi c. Fabulous. company, which sells across for Northeast Ohio as a one-stop Excellent. Perfect. North America. Although site for wind turbines. He says a TStrong. Amazing. a portion of its business company building a turbine can Attractive. comes from Ohio and the six obtain the bolts from Cardinal, Th at’s how executives at many contiguous states, that is not the hydraulics from Parker middle market companies, even half of Cardinal Fastener’s Hannifi n and the list goes on. private equity fi rms and sales. Being located on Lake Erie adds professional service providers Grabner says Northeast Ohio to the attraction. describe Northeast Ohio. Th eir provides his critical needs— Th at’s a positive for Cardinal, reasons are as diverse as the hardworking people and access especially given that Cardinal’s region and their reasons are why to capital for facilities and traditional clients are in they chose to stay and grow here. suppliers. industries such as construction John Grabner, CEO of Cardinal Lean manufacturing, which and oil, which have had fl at or Cardinal Fastener sees its Cleveland location as a competitive Fastener, the largest company Cardinal began about 10 only slight growth in the last advantage as it positions itself to be the primary supplier of large in the hot forge bolt industry, years ago, also provided the few years. With state and federal diameter bolts and fasteners for the emerging North American says he received many off ers opportunity to grow. Grabner mandates to promote alternative wind turbine industry. from other states to relocate says about 40 percent of what energy, Grabner just sees more his business. But he never left. Cardinal manufactures ships opportunities for wind. Photo Credit: Dalton Chuck Cleveland is home to Cardinal the same day, which makes its “It’s the next automotive Fastener’s entire production location even more important. industry,” he says. major advantages to small and for small and middle market facilities. “We’re two shipping days to middle market businesses. businesses,” Berick says. “Cleveland has among the three-quarters of the United EXCELLENT BASE Th ese advantages include: Tom Freeman, a partner lowest manufacturing costs in States. It’s a pretty strong Daniel G. Berick, a partner at excellent service providers for at Grant Th ornton, says the the industry,” he says. weapon,” Grabner says. Squire Sanders & Dempsey businesses of all sizes, large and availability of locally based Cost is always a factor for the Grabner also sees the future LLP, says the region off ers sophisticated private equity professional services enables community, and entities such middle market companies to as JumpStart and BioEnterprise have more personal service that support early- and growth- from people who know the local stage companies. market. “Add to that the low cost of “Th ey can provide much better Our transaction advisory services have a global appeal. living, the depth of the region’s service—they’re more fl exible base in skilled manufacturing and quicker to respond or react,” and advanced materials, and the he says. “If a decision needs scientifi c and technical resources to be made, chances are the provided by the region’s colleges person who lives and works in and universities, and it makes that marketplace is the decision for a very attractive platform maker.”

“A“A real powerhouse” ChambersCh USA

There is a select group of individuals in this world with a passion 4JODFPVSGPVOEJOHJO 4RVJSF4BOEFSTIBTTFSWFEBOETVQQPSUFE0IJPTHSPXJOHCVTJOFTT for mergers & acquisitions. And that group happens to be the DPNNVOJUJFT"TUSBEFIBTFWPMWFE TPIBWFXFoFYQBOEJOHPVSTFSWJDFTUPNFFUUIFOFFETPG professionals in Grant Thornton’s Transaction Advisory Services PVSDMJFOUTBDSPTTPVSSFHJPOBOEBSPVOEUIFXPSME8IFUIFSZPVSOFFETBSFMPDBMPSHMPCBM PVS Group. Our passion for what we do for our clients, our expertise MBXZFSTIBWFUIFFYQFSJFODFUPIFMQZPVSFBDIZPVSHPBMT

and partner involvement, have made us one of the largest %BOJFM(#FSJDLt tECFSJDL!TTEDPN accounting organizations in the world, through member firms in (SFHPSZ,(BMFt tHHBMF!TTEDPN more than 100 countries. And with Grant Thornton LLP, you get the industry experience and client service that’s been our hallmark for more than 80 years. Give Tom Freeman, partner, 32 OFFICES 15 COUNTRIES transaction advisory services a call at 216.858.3700 or e-mail [email protected]. We’ll send you a copy of the ACG/Grant Thornton/NASDAQ OMX whitepaper, $*/$*//"5*t$-&7&-"/%t$0-6.#64t)06450/t-04"/(&-&4t.*".*t/&8:03,t1"-0"-50t1)0&/*9 Top trends in middle-market private equity. It’ll give you an 4"/'3"/$*4$0t5"--")"44&&t5".1"t5:40/4$03/&3t8"4)*/(50/%$t8&451"-.#&"$)]#0(05«+ enlightening look at emerging issues that affect private equity. + + + + + #6&/04"*3&4 t$"3"$"4t-"1";t-*." t1"/".« t3*0%&+"/&*30t4"/5*"(0 t4"/50%0.*/(0 Find out how it feels to work with people who love what they do. 4°0 1"6-0 ] #3"5*4-"7" t #3644&-4 t #6$)"3&45+t#6%"1&45t%6#-*/+t'3"/,'635t,:*7t-0/%0/ .04$08t13"(6&t8"34"8]#&*+*/(t)0/(,0/(t4)"/()"*t50,:0] +*/%&1&/%&/5/&5803,'*3. Financial and Tax Due Diligence | Transaction Structuring | State & Local Tax Planning S Q U I R E , S A N D E R S & D E M P S E Y L . L . P . W W W . S S D . C O M IT, HR, Operational Due Diligence | Merger Integration

SPECIAL ADVERTISING SECTION • CRAIN’S CLEVELAND BUSINESS • JANUARY 26, 2009 20090126-SUPP--5-NAT-CCI-CL_-- 1/21/2009 11:00 AM Page 1

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Private Equity for “Northeast Ohio has a lot of smart people Corporate Recovery who learned to make lemonade.”

Bill Fink, Area Wide Protective Resilience Capital Partners is a leading private equity firm that “Northeast Ohio has a lot of developed was a company that brings both operational and capital resources to portfolio companies. smart people who learned to expanded its services to help make lemonade,” says Bill Fink, these same communities connect We invest in companies with solid business prospects in a variety of founder and CEO of Area Wide with sources for shelter, food, special situations including: Protective, based in Kent. “Yes, prescriptions, utilities and much Ohio lost population, but it is more. • underperformers by no means a dead zone. It “Hospitals in Northeast Ohio • corporate divestitures toughened up. Folks don’t give are very interested in reaching • turnarounds up easily.” into the community and • orphan public companies Displaced from traditional providing assistance to those industry, Fink says people who fi nd themselves in diffi cult morphed themselves and their situations,” Baird says. We target companies headquartered in North America with enterprise into something Today, Human Arc’s 320 operations anywhere in the world, with $25–$250 million in revenue diff erent. employees work with hospitals and EBITDA typically under $15 million. Since our inception in “Looking at the number of and health plans and their 2001, we have acquired 17 companies with $1.5 billion in revenue entrepreneurial companies that patients and members in more have grown up and prospered, than 40 states, while maintaining and over 4,000 employees. it’s nothing short of amazing.” a strong base in Northeast Ohio. Fink has his own reason for “Cleveland is my home and I Contact us: 25101 Chagrin Boulevard keeping Northeast Ohio as his enjoy the many attributes of the Suite 350 company’s home. “More than Greater Cleveland area,” says Cleveland, OH 44122 anything, it’s the strong work Baird, who also sits on the board (216)292-0200 ethic,” he says. of Team NEO. www.resiliencecapital.com Area Wide provides traffi c Baird says that being in control services, including Northeast Ohio can have its fl aggers, sign rental and setup challenges, particularly because Focus on People. Deliver Results. and 24/7 emergency service. It the large health care cluster operates in 13 states, but Fink creates a natural competition for says he fi nds the best workers talent. in Ohio because they are more As for recruiting executives loyal and appreciative, perform from outside the area, Baird on time and have a shorter says, “It’s a bit of a sale to get learning curve. executives to relocate here but “People have the right stuff ,” he once they arrive, they really says, explaining his turnover rate appreciate the city and the in Ohio is less than half of that at region for so many of the quality other locations. of life benefi ts.” Northeast Ohio’s location is another boost for Area Wide Protective. “It’s hard to fi nd a location in the country with more centers of population $ $ $ $ within a 300- to 400-mile 20,000,000 5,000,000 65,000,000 10,000,000 As sole lender for the As sole lender for the As agent for the As sole lender for the radius,” Fink says. Senior Secured Financing Senior Secured Financing Senior Secured Revolver Senior Secured Financing Financing HOME AND OPPORTUNITY CONSTELLATION Born in Greater Cleveland, Mike ENTERPRISES Baird knew there was plenty of opportunity here. So as he Portfolio company of Portfolio company of Portfolio company of Portfolio company of searched for an interesting, Resilience Capital Partners The Riverside Company Protostar Partners Blackeagle Partners Provider of disaster response, fast-paced business opportunity, Manufacturer of antennas & Manufacturer of standard high Manufacturer of custom- insurance restoration & voltage DC-to-DC power supplies engineered metal components he focused on Northeast Ohio. RF electronics reconstruction services January 2008 February 2008 June 2008 August 2008 He built a business plan and launched Human Arc (then Unicare) with two employees and three credit cards in 1984 in A stable lender in an unstable market. Cleveland. Th e company’s focus was With the experience and capital to navigate an unstable market, PNC provides you helping low-income families, with something that is perhaps even more important — confidence. So you can the disabled and seniors maintain your footing in an ever-changing world. connect to government medical To learn more about the stability of PNC Business Credit, call Mark Kiskorna, and cash benefi ts. Th is helps Senior Vice President & Regional Manager at 216-348-8580 or visit pnc.com/abl. Northeast Ohio hospitals help the community and, in some cases, reduce their level of uncompensated care. What PNC is a registered service mark of The PNC Financial Services Group, Inc. (“PNC”). PNC Business Credit is a senior secured lending arm of PNC Bank, National Association, a member of PNC. Junior secured financing provided by Steel City Capital Funding, LLC, a joint venture in which a PNC subsidiary is an investor. Lending products and services require credit approval. ©2009 The PNC Financial Services Group, Inc. All rights reserved. CIB PDF1108-095 SPECIAL ADVERTISING SECTION • CRAIN’S CLEVELAND BUSINESS • JANUARY 26, 2009 20090126-SUPP--6-NAT-CCI-CL_-- 1/21/2009 11:00 AM Page 1

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Creativity gets some middle market deals done, despite difﬁ culties

ncertainty can be the looking to sell must be in tune bane of M&A deal with and be prepared to deal “Unique ﬁ nancing solutions have become critical Umaking. In today’s with new market dynamics.” to adjust to changes in the market and company turbulent times, uncertainty has Mark Kiskorna, senior vice tightened leveraged lending for president and regional manager performance during a process.”

acquisitions, creating a diffi cult for PNC Business Credit new Michael Gibbons, Brown Gibbons Lang & Co. deal environment even in the loan originations in the Midwest, middle market. says the last half of 2008 found Unlike the large cap market, an “almost completely illiquid” of bankers, which requires a LESS “L” IN LBO Financing is pricier, with which fell silent as the credit market with so many lenders broader participation of lenders. Leverage is down, pricing is up spreads over LIBOR ticking markets seized up, middle sitting on the sidelines. His group completed three for all debt tranches, and the up to 650 to 750 basis points, market deals are still getting “We’ve hit unprecedented deals in December alone. As an level of scrutiny has intensifi ed as depending on the deal specifi cs. done—albeit only with a lot times as it relates to the economy asset-based lender, he expects investors’ risk profi les continually Commitment letters are a of creativity or a real gem of a and many diff erent classes. tremendous deal fl ow activity adjust to volatile market rarity and subject to broad fl ex company, says investment banker It’s putting pressure on all size this year, similar to 2008. conditions. It comes down to language. Pricing fl ex can change Michael Gibbons at Brown companies today,” he says. Stephen Perry, senior fi nding creative ways to get the deal economics by as much Gibbons Lang & Co. However, funding is still possible managing director of Linsalata deals done. Gibbons off ers these as 500 basis points—up from 50 “Th ere are buyers out there, and middle market companies Capital, says he expects the market realities: basis points a year ago. particularly for businesses have a higher likelihood of depressed M&A market to Capital is scarce. Th e list of that have the potential to be a obtaining it. As Kiskorna continue through the beginning “open for business” senior cash GET CREATIVE platform company to a private explains, middle market of this year as sellers assess fl ow lenders is very short, and the With leverage down, sponsors equity group or a strong add-on companies have potentially more market conditions. “It will competition for their attention are fi nding creative ways to fi ll to either a strategic or PE buyer,” lending opportunities because slowly improve as credit starts and capital is fi erce. Th e active gaps in the capital structure. says Roetzel & Andress attorney they work with a single bank or to become available and the lenders can cherry-pick the best Equity contribution has reached Jeff Leonard. “But any business lender rather than a syndicate economy stabilizes.” deals because their bandwidth new highs, topping 46 percent is stretched from a surplus of in November, according to opportunities. Standards & Poor’s. Additionally, With the syndication market sponsors are turning to basically dormant, success can alternative deal structures, using still be found in “club” deals, preferred equity investments Pflaljk\Xie\[\efl^_dfe\pkf but those who had been the that mimic debt and mezzanine- dXb\pflic`]\j`dgc\%9lk`kËjdXbè^ fi rst “go-to” debt providers in weighted capital structures to fi ll a transaction are now the least the void in senior fi nancing. And \m\ipk_è^jfZfdgc`ZXk\[% likely to do the deal. National earn-outs and seller notes are commercial banks may be the very much back on the table. last stop for fi nancing, after “Unique fi nancing solutions fi rst exhausting lenders that are have become critical to adjust N_fËj_\cgè^pfl6 private equity fund investors, to changes in the market and and second, local or regional company performance during a commercial banks. process,” Gibbons says. “We have Mezzanine used to be the one transaction that is structured easiest piece of the capital with a senior component of the structure to raise. Mezzanine capital structure that is smaller lenders now are looking across a than the mezzanine. So for a class of assets. Th e opportunity fi ve-times EBITDA valuation, to make an investment in a the capital structure consists of higher-yielding corporate bond one-and-a-half turns of senior or a larger company is causing bank debt, two-and-a-half turns upward pricing pressure for of mezzanine, and one turn of sponsors on mid market deals. equity.” Leverage is down. Th e median Gibbons continues, “In another band stands at two-and-a-half transaction, we are discussing )''/K_\9Xebf]E\nPfibD\ccfe:figfiXk`fe%8cci`^_kji\j\im\[%Gif[lZkjXe[j\im`Z\j to three-and-a-half times for a structure with cash up front, Xi\gifm`[\[YpmXi`fljjlYj`[`Xi`\jf]K_\9Xebf]E\nPfibD\ccfe:figfiXk`fe% senior and total debt for middle cash committed for acquisitions, market leveraged buyouts. Good and ownership contingent on K_\GiXZk`Z\f]N\Xck_DXeX^\d\ek% companies may fetch one to one- future cash-on-cash return and-a-half turns of subordinated targets. Because the company ?`^_Zc`\ekjXk`j]XZk`fe%8ZifjjdXib\kZpZc\j%Fm\i^\e\iXk`fej% debt with total leverage pushing is in a growth industry, there up to four times on the best deals. is signifi cant upside potential

David Hadley Corporation Kfc\Xiedfi\#gc\Xj\ZfekXZk Business Technology Advisory Services 9`cc:Xjk\iÆ)(-+-++)++ Specializing in Due Diligence Corporate Governance Strategic Planning & @em\jkd\ekDXeX^\d\eksN\Xck_

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for the seller if projections are the second largest fundraising multiple for a great opportunity met. We are also working with a year on record. than risk losing it,” Gibbons says. private equity seller that is taking Private equity funds, faced Growing, recession-resilient WHAT IF YOU MUST SELL NOW? back the equivalent of a senior with a large capital overhang industries like technology, debt piece to fi ll the void in and fears that limited partners health care and environmental hat should middle the right steps to maximize senior and junior capital.” could default on their equity services continue to attract Wmarket company value. commitments, are under strong interest. “Th e perceived owners considering a sale Leonard offers these steps GOOD NEWS tremendous pressure to identify fl ight to quality is driving up do in this environment? The to consider: Despite the downturn, positive and execute transactions to purchase multiples for the short and easy answer is if 1. Assemble the right undercurrents continue to drive deploy excess capital. Sponsors strongest performing companies you don’t have to sell, don’t, team. Always an important middle market deal fl ow. are making minority equity – valuations that rival those says Jeff Leonard, a partner step, it has become even Healthy strategic buyers are investments—a new strategy for achieved in the peak of the at the law firm of Roetzel & more critical. Key players in the market and are bidding many—driven by a dearth of deal market last year,” says Gibbons. Andress. include an investment aggressively, fi lling some of opportunities. Th e sharpened “For those gems that are in the But circumstances banker, accountant and the void left by private equity. focus on portfolio company right industries, there are still often dictate that some attorney. It is particularly As economic uncertainty and performance has also made hungry buyers.” businesses have to be sold. important that the team the contracted debt markets smaller, add-on acquisitions more PNC’s Kiskorna also has a And, fortunately, a number understands the current lessen the risk appetite for large attractive in this market. positive outlook for good deals. of businesses have the financing market and can transactions, corporate acquirers “Because the volume and “Assuming a company is not performance and prospects be creative in terms of deal are increasingly shifting their quality of M&A opportunities overleveraged and has strong that will permit a sale with structure. focus down to the middle market. is down, a mid market fund that management, it can get new reasonable pricing even in 2. Make sure the company Fundraising has remained typically completes four or fi ve fi nancing, but it will be more this market. has a good handle on its strong. Buyouts magazine transactions a year may see that expensive than in the past. And Stephen Perry, senior business prospects. A reported $259 billion in capital number reduced to one or two. not everybody can fi t in that managing director at much greater emphasis is was raised last year, making 2008 So it would rather pay a higher box.” Linsalata Capital, says if a being placed on the seller’s company needs to sell in the future versus its historical next six months, it should performance. The business have realistic valuation owner must demonstrate that expectations and be patient. the business is sustainable “In most cases, valuations will and that the business’ be lower and the time it takes customers and vendors 2009 to complete a deal will be themselves are sustainable. longer.” Buyers and lenders will drill Marking our 25 Year Anniversary Staying focused on the down hard on this in their business to maintain solid due diligence investigations. 6 funds, $1 billion raised, performance during the 3. Be prepared to be process will yield the best creative which in all 88 acquisitions, $2.5 billion invested. results, Perry says. likelihood will include some There is no denying that form of seller financing. the rules of the game have If sellers are not willing to changed substantially and provide some type of funding Since 1984, our single mission has been value creation for our will continue to change, support to get the deal done, partners – investors, sellers, management teams and lenders – by Leonard says. As a result, any they need to be prepared to prospective seller must take accept lower pricing. leveraging the tangible operating experience of our principals to fully realize growth opportunities of middle-market private companies. Our steadfast investment philosophy, our commitment to integrity and the results we have consistently attained place us among the premier UPCOMING firms in this investment class. ACG CLEVELAND EVENTS

February 10 May 7 Currently pursuing opportunities in the following sectors: Dinner Th e Ritz Carlton Th e Union Club Afternoon Workshop Industrial Food & Beverage Richard Fearon, CFO, Growing Companies Green Eaton Corp. Health Care Consumer Products Joint meeting with Financial June 16 Executives International Evening Building Products Distribution Shoreby Club Direct Marketing Business Services March 17 Social/Networking Event Breakfast Th e Union Club September 8 – 9 Henry Meyer III, Chairman Renaissance Hotel and CEO, KeyCorp ACG Great Lakes Capital Connection April 23 Breakfast October 5 LINSALATA CAPITAL PARTNERS Th e Union Club Firestone Country Club Stewart Kohl, Co-CEO, Annual Golf Outing Landerbrook Corporate Center One s Suite 280 Th e Riverside Company January 28, 2010 5900 Landerbrook Drive s Mayfield Heights, Ohio 44124 Marriott at Key Center 440/684-1400 s fax 440/684-0984 Deal Maker Awards Dinner www.linsalatacapital.com For more information, contact ACG Cleveland at (216) 696-8484 or www.acgcleveland.org

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“Private equity ﬁ rms are experienced at taking measured and calculated risks, which can assist a Private equity can offer company in seizing opportunities in diﬃ cult times.” a safe port in this storm

Tom Littman, Kirtland Capital Partners ll you need to do is open completed 31 transactions. your retirement account Steve Rosen, co-CEO and Astatement to know co-founder of Resilience Capital Founded among the private equity that the prices of most public Partners, says the number of industry’s pioneers more than 30 years companies have been battered, opportunities presented to the ago, Kirtland has garnered a reputation and in some cases decimated, in fi rm has increased 30 percent for being among the best of partners. the last six months. each of the last six months. Kirtland has been successful throughout a Th is carnage is often more Resilience, which focuses variety of economic cycles by partnering pronounced for smaller public on middle market and lower with strong management teams and companies that attract little or middle market companies in adhering to a philosophy of leveraging no attention from analysts and underperforming and turnaround its internal operating, financial and the markets in general, says Tom situations, expects to complete a strategic resources. This, coupled with a disciplined investment strategy, has Littman, managing partner at similar number of deals this year as allowed Kirtland to create long-term Kirtland Capital Partners. it did in 2007 and 2008, Rosen says. value in its portfolio companies and “Th ese small public companies deliver superior returns to its investors fi nd it diffi cult to raise capital and ACCESS TO CAPITAL and management teams. may feel like tiny rowboats lost in While availability of capital in the the ocean,” he says. current storm is limited, private Private equity can off er an equity-backed companies continue alternative to these public to have access to equity capital companies by providing a more to drive growth and provide Qbsuofstijqt!bsf!Fbtz///evsjoh!hppe!ujnft/ stable capital base, alignment of additional liquidity to weather interests among the company, diffi cult conditions, Littman says. Uif!usvf!uftu!dpnft!xifo!ujnft!bsf!upvhi/ its management team and “Private equity fi rms generally shareholders, a sense of urgency invest from a committed pool and access to additional capital to of capital from a group of stable Kirtland invests in middle-market niche manufacturing, pursue growth, Littman explains. investors. Th is access to equity distribution and business service companies with potential “Lots of companies aren’t good capital increases a company’s for growth organically and/or through strategic acquisition. candidates for public markets but ability to raise debt capital,” are good candidates for equity Littman says. “Debt providers are capital,” says Stewart Kohl, co-CEO willing to extend credit to these of Th e Riverside Company, which companies, in part because they Gps!jorvjsjft-!dpoubdu; Dave Menning, Director of Business Development, [email protected] focuses on the smaller end of the recognize the value private equity 327.6:4.1211!!!xxx/ljsumboedbqjubm/dpn middle market (valued under investors bring to a company.” $150 million). Last year, Riverside continued on S-10

“The most powerful weapon is to have the next move.” ACG - David Bronstein Special Section Calfee congratulates all of the ACG Award Winners on their accomplishment.

This special advertising section is created by Wise Group which is Mergers and acquisitions can responsible for all of its editorial be complex. But through our content, design and advertising sales.

sizeable practice group, years of We help organizations experience, and appreciation communicate with their that each client’s transaction is audience by creating engaging communication pieces. unique, Calfee provides legal For information on special advice and expertise that is sections, contact Tammy Wise practical and cost-effective. at 216.523.1212 x11 Calfee - move forward with or [email protected] confidence.

Calfee, Halter & Griswold LLP Cleveland - 216.622.8200 www.calfee.com Columbus - 614.621.1500

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ACG Cleveland honors top deal makers

he capstone of the ACG is one of Northeast Ohio’s most and nine realized investments— Spieth, Bell, McCurdy & Newell Co. L.P.A. Cleveland program successful startups of the past and 2006—26 acquisitions and 925 Euclid Ave., Suite 2000 Tseason is the annual Deal two decades. Founded in 1987 four realizations. Cleveland, OH 44115 Maker Awards dinner. Now in its to operate on-site healthcare 216-696-700 13th year, the event recognizes clinics for large companies, it was Resilience Capital Partners Fax: 216-696-2706 Website: www.spiethbell.com Northeast Ohio’s engines of acquired by Walgreen in May Resilience focuses on basic General email: [email protected] corporate growth and deal making. 2008. At the time, it had revenues industry companies in the of approximately $60 million and lower middle market that have Established in 1867, we are Cleveland’s oldest law firm. CORPORATE was averaging 20 to 25 percent solid fundamentals but face a PartsSource LLC annual revenue growth. Whole challenging situation. Since its Founded in 2001, PartsSource Health continues to operate founding in 2001, Resilience has Our practice includes work with entrepreneurs and their key is the nation’s only multi- from its 80-employee offi ce in acquired 16 companies with total personnel, closely-held businesses and public companies with manufacturer, multi-modality downtown Cleveland. revenues in excess of $1.5 billion specialized needs. We also have an extensive practice providing alternative parts supplier for and delivered top-quartile returns. advice to individuals with wealth-preservation, wealth-transfer, hospital biomed and imaging PRIVATE EQUITY and succession planning requirements. Our litigation practice equipment. Its annual revenue Th e Riverside Company LIFETIME ACHIEVEMENT handles all areas of employment law, as well as litigation for run rate exceeds $100 million. Riverside is the world’s largest David Morgenthaler large companies, businesses and individuals including trust and In July 2008, PartsSource global private equity fi rm focused David Morgenthaler is widely probate litigation and alternative dispute resolution. Through continued personal attention and involvement in the activities of raised $50 million in a minority on the smaller end of the middle regarded as one of the seminal our clients, we have gained the in-depth understanding required recapitalization led by Polaris market. During 2008, despite fi gures in the modern private to prevent or resolve problems and plan for the future. Venture Partners, Inc. and Primus a challenging environment, equity industry. He founded one Capital Fund VI. Riverside completed 31 of the most successful and highest For a more complete description acquisitions and realized four profi le private equity fi rms in the please visit us at www.spiethbell.com Whole Health Management Inc. investments. Th is followed record country in Cleveland in 1968 and Whole Health Management years in 2007—28 acquisitions headed it for nearly 30 years.

Companies need tech governance your M&A advisor. your insurance advocate.

n important advantage Our clients are aware of the varied risk and opportunities that directly impact deals. Yet being of the private equity prepared requires more than awareness. As an astute M&A advisor, we make all the difference, Amodel is that boards helping clients understand and identify property & casualty risk exposures, healthcare issues, even are generally proactive and set retirement planning. clear vision and strategies. They They need a committed M&A partner to create an integrated strategy customized to the deal’s provide direction and guidance needs. They need an insurance advocate. They need Oswald Companies. and demand accurate reporting that enables continuous feedback and improvement, 800 466-0468 says David Hadley, president of www.oswaldcompanies.com reduce risk. The David Hadley Corporation, an Assurex Global Partner realize rewards. a Cleveland-based technology Ohio | Florida | Michigan | Minnesota | North Carolina advisory firm. The board’s role is the ultimate guardian of shareholders’ investments. Information technology can account for more than 50 YEARS OF TRUSTED CORPORATE percent of a company’s capital spending, he explains, although 2 FINANCIAL ADVISORY SERVICES the business of most companies is something other than creating 0 technology. The need for stronger technology governance Brown Gibbons Lang & Company offers a full range of financial advisory services to help you identify, in these companies is clear, s Mergers develop and implement your company’s goals, whether you are growing or refinancing a business, or he says. Hadley recommends & Acquisitions considering exit strategies. that boards form technology s Debt & Equity oversight committees with As the U.S. partner in Global M&A GmbH, a partnership of more than 40 investment banking firms proper commitment and Placements representing Europe, Asia, the Middle and Far East and North and South America, BGL offers expertise. Committees ensure s Financial unparalleled access to the global middle market for buyers and sellers alike. that technology regularly Restructurings appears on agendas, that issues For more information, contact Michael Gibbons are addressed in a structured s Valuations & at 216 241 2800 or visit www.bglco.com. manner, and that boards have Financial the information they need to Opinions make decisions and give clear direction. Cleveland s Chicago

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S–10 ADVERTISEMENT Private equity can oﬀ er safe port in storm continued from S-8

Kohl says traditional lenders in place and put together a plan Perhaps a company seeks to but this may be exactly the time operating expertise and access to see companies with private equity where a nonperforming loan grow and expand and needs you need it,” he says. extensive external resources. investment as less uncertain. “Th e becomes a performing loan money to buy new equipment, Kohl says that intellectual lender appreciates the safer loan, with new management and new make an acquisition, or handle a TOUGH GET GOING capital is as important as the the deeper pockets,” he says. equity,” Rosen says. “It’s diffi cult new customer. Other companies Littman says companies that are fi nancial capital. “We bring Rosen says borrowers and to completely replace existing may look to private equity able and willing to take chances, a broad base of business lenders have a gun to each other’s lenders with new lenders.” because the owners want to stay focused on the customer, experiences,” he says. “We have head in this environment. Banks Although now may not be recapitalize and fi gure selling a 60 continue to invest in people and worked with many industries in have underperforming loans the ideal time to get the highest to 80 percent stake now will make pursue opportunities are the many diff erent cycles.” and need to turn them around price when selling a stake in the their remaining 20 to 40 percent ones that enhance their market Kohl says these experts can just as companies need to turn company, some businesses are stake worth quite a bit more down positions. help create or refi ne a strategy themselves around. fi nding that a cash infusion is the road, Kohl explains. He says private equity fi rms can and identify ways for operations “Th is is a new opportunity for needed to open opportunities, “Th ese diffi cult times make it help companies accomplish that to be more effi cient, serving as a us—keep the incumbent lender Kohl says. much more expensive to get debt, because they typically have internal development arm for the business

ACG CLEVELAND 2008-2009 Opportunities come and go OFFICERS & DIRECTORS

quickly. It’s good to have OFFICERS V.P., Membership President Daniel P. Filippi Th omas P. Freeman R.R. Donnelley & Sons a bank that sees them Grant Th ornton Martin S. Gates President-Elect Calfee, Halter & Griswold coming from miles away. Patrick Gallagher Edward Howard Peter J. Shipley Resources Global Professionals Executive Vice President Randy Markey V.P., Nominations Capital Acceleration Partners Mathew J. Hanson Emprise Partners V.P., Programs Timothy G. Healy V.P., Public Relations Linsalata Capital Partners Patrick Gallagher Edward Howard Sean McCauley National City Business Credit V.P., ACG Cup Douglas K. Winget V.P., Golf National City Business Credit Rudy Bentlage Chase Business Credit V.P., Sponsorships Joseph F. Maslowski Given the demands of running a company, it’s Terry R. Lardakis Roetzel & Andress Millisor & Nobil Co. understandable when great opportunities pass unnoticed. V.P., Corporate Jeﬀ rey W. Leonard Moses R. Jhirad Unless you have a bank that’s committed to capturing Roetzel & Andress National City Bank COMMERCIAL FINANCING V.P., Special Programs Donald W. Majcher them. At KeyBank, that means maintaining a steady focus Daniel G. Berick Ohio Aerospace Institute STRATEGIC ADVICE Squire, Sanders on the ever-changing dynamics that define your industry & Dempsey, LLP V.P., Great Lakes Capital Connection Eric M. Kuhen James M. Hill MANAGING CASH and market. Coupled with our years of experience, this Marsh Benesch, Friedlander, Coplan & Aronoﬀ , LLP commitment enables KeyBank to help recognize the most Scott Seelbach RAISING CAPITAL Primus Capital Funds James P. Marra promising opportunities. And allows you to look ahead Blue Point Capital Partners V.P., Deal Maker Awards Murad A. Beg Al Melchiorre with confidence. Linsalata Capital Partners MelCap Partners

To learn more, call Alan Zang, KeyBank Middle Howard M. Feldenkris Treasurer Market Executive, at 216-828-7635 Hy-Ko Products Th eodore Wagner Libman, Goldstine, or visit key.com/commercial. Rachel L. Rawson Kopperman & Wolf Jones Day Secretary Commercial Banking Henry E. Seibert M. Joan McCarthy Spieth, Bell, MJM Services McCurdy & Newell DIRECTORS Executive Vice President Michael L. Boeckman Th eodore Wagner Howard M. Feldenkris Libman, Goldstine, Guy C. Fabe Kopperman & Wolf James P. Marra Commercial Financing subject to credit approval. Joseph Maslowski KeyBank is Member FDIC. ©2008 KeyCorp Wendy S. Neal

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that it may not be able to aff ord capital and deal expertise to assist otherwise. its portfolio company, Smart Bassem Mansour, co-CEO of Source Computer and Audio Visual Resilience Capital Partners, says Rentals, in completing two strategic being an operationally oriented acquisitions in a diffi cult M&A private equity fi rm with experience market. Th e acquisitions expanded in running companies is helpful. the company’s geographic reach “We think that’s a critical ingredient and improved its market position. to bring to the table, particularly in “During challenging times, many this economy,” he says. fi rms do not have the capital, Littman says these private experience or people resources equity fi rm resources focus to survive, let alone fl ourish,” on recruitment of talent, Littman says. “Th ese times provide implementation of “lean” principles, a chance for well capitalized and working capital management, externally focused companies to strategic planning, acquisitions and make opportunistic acquisitions on organic growth initiatives. attractive terms. A private equity “Private equity fi rms are fi rm that brings access to capital experienced at taking measured and and deal experience can greatly calculated risks, which can assist a increase a company’s ability to grow company in seizing opportunities in through acquisition.” diffi cult times,” Littman says. Kohl adds, “When properly DEALS TO DO There’s no place like home. structured, there is a near-perfect With more than $3 trillion in With 18 offices around the world, alignment of interests between the global private equity market, the private equity fi rm and the most PE fi rms still have capital we are proud to call Cleveland our home. funded company.” to invest. However, that does not

mean it’s easier to get private Please contact Scott Gilbertson at SURVIVAL BY ACQUISITION equity investments. [email protected] or Private equity fi rms have found “We don’t want to be fooled 216.344.1040 to learn how Riverside has been success in building companies into thinking a frog is a prince,” through strategic acquisitions. Rosen says, explaining Resilience’s investing in and growing companies with Th ese acquisitions can provide conservative approach to $1MM – $15MM in EBITDA for over 20 years. signifi cant benefi ts, including underwriting new opportunities. Terminal Tower adding management talent, “Our overall mantra is to be 50 Public Square expanding the geographic patient,” Mansour says. “We’re 29th Floor presence, broadening product taking a measured approach to Cleveland, OH 44113 off erings, expanding the customer everything.” base, increasing market share, and But private equity fi rms do developing new sources of raw agree that the opportunities are materials. still out there and will be for ATLANTA BRUSSELS BUDAPEST CHICAGO CLEVELAND DALLAS EINDHOVEN HONG KONG LOS ANGELES Last year, Littman relates, years. “Private equity is not going MADRID MUNICH NEW YORK PRAGUE SAN FRANCISCO SEOUL STOCKHOLM TOKYO WARSAW Kirtland Capital provided the away,” Kohl says.

The Association for Corporate Growth congratulates the winners of the 13th Annual Deal Maker Awards

Private Equity Firm Corporate Resilience Capital Partners PartsSource, LLC 216-696-8484 216-696-2582 [fax] The Riverside Company Whole Health 1120 Chester Avenue, #470 Management Cleveland OH 44114 Lifetime Achievement www.acg.org David Morgenthaler [email protected]

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