2017 ACG M&A All Stars
The Association for Corporate Growth Detroit Chapter and DBusiness magazine honor the 10th annual winners.
DBusiness magazine partnered with the Association for Corporate Growth Detroit Chapter to honor its recipients of the 10th annual M&A All-Star Awards for 2016 activity. Winners were recognized at an event on April 11 at the Townsend Hotel in Birmingham. In addition to the honorees on the following pages, the Detroit Chapter of ACG Global — a 400-member professional organization focused on middle-market growth, private investment, and M&A work — honored Scott A. Reilly, president and chief investment officer of Peninsula Capital Partners in Detroit, with its ACG Lifetime Achievement Award. ACG Global also cited the Detroit Chapter as the ACG Chapter of the Year (second year in a row). In turn, Douglas P. LaLone, a partner at Fishman Stewart in Bloomfield Hills and president of ACG Detroit, received a 2017 Meritorious Service Award from ACG Global, while Sharon Kimble received the President’s Award for Excellence and Achievement as a Chapter Executive.
Why Huron Capital Partners is the ACG Deal Maker of the Year
In 2016, Huron Capital Partners started two new funds that, combined, totaled $650 million. Another $550 million was raised to acquire companies in the middle market with a valuation of under $200 million. Overall, the firm operates six funds that account for some $2 billion in investments
The company also closed on 20 acquisitions last year, including Good Sportsman Marketing in Minnesota, a designer and distributor of branded hunting accessories such as trail cameras, deer feeders, and LED lighting products, and Systems Inc. in Wisconsin, a manufacturer of hydraulic, pneumatic, and mechanical loading dock leveling equipment, truck restraints, and specialty dock equipment.
“We operate in three broad industry sectors — business services, specialty manufacturing in the industrial sector, and consumer products,” says Brian Demkowicz, managing partner of Huron Capital Partners. “We avoid industries that are too cyclical, that focus on one commodity, or that we don’t have a lot of knowledge about.”
The firm, which has 30 employees and represents another 11,000 workers among its overall portfolio operations, has built a “highly efficient finance, accounting, and compliance staff,” Demkowicz says. A three- to five-member team within Huron Capital oversees each portfolio company, and the individual teams meet monthly to review set goals such as operational efficiency, talent or equipment needs, and profit targets. The company’s board of directors meets quarterly to review all of the portfolio companies.
“Our formula is very people-centric,” says Mike Beauregard, senior partner at Huron Capital. “We spend a great deal of time in due diligence, assessing companies and the leadership of a company we may acquire. We look for fundamentally sound businesses, whether family owned or run by an entrepreneur. Sometimes, an entrepreneur or a business leader reaches a plateau, so we create some scale in leadership by bringing in a COO or a CFO so the leader can focus on their expertise and work with us on identifying and executing growth opportunities.”
Last year, the firm entered into a new line of investment called “Flex Equity,” and supported it by raising $100 million. The new offering enables the company to invest in businesses where the owner needs capital to boost growth opportunities — a market it says is underserved. As part of the launch, Huron Capital recruited a team of investment experts from BMO Private Equity US in Chicago to operate the fund.
In addition, Huron Capital recruited David Zilco, former vice chairman of Garden Fresh Gourmet in Ferndale, which was sold to Campbell Soup Co. in June 2015 for $231 million, to transform a portfolio company, Victoria Fine Foods in Brooklyn, N.Y., from a regional player to a national leader.
To that end, Huron Capital invested $2 million to boost Victoria’s manufacturing production, cut waste by 50 percent, added operational improvements and, with Zilco’s expertise, took the food company from a regional discount Italian purveyor into a national, high-end pasta sauce maker that now sells its products at Walmart and Costco. As a result of that success, Huron Capital sold Victoria — which it had acquired for $70 million in 2011 — to B&G Foods last year for $1.3 billion.
“At the beginning of our ownership of any company, we lay out the different scenarios that could happen as we move forward, and then we go about making it happen,” Demkowicz says. “It typically takes four to five years to meet all of our goals. We want to make between three to five times our original investment when we sell — and when we sell, the companies continue to perform like they did when we had them because of the plan we put in place."
Why Piston Group’s Acquisition of Irvin Automotive Products Inc. in Pontiac is the ACG Deal of the Year
When Japanese-based Takata was looking to sell key assets to stave off a possible bankruptcy resulting from the installation of some 70 million faulty airbags in cars and trucks worldwide, the Piston Group in Detroit was approached about acquiring Irvin Automotive Products Inc. in Pontiac, a Takata subsidiary.
With 150 employees in Pontiac and some 1,700 workers at production facilities in the United States and Mexico, Irvin Automotive produces a number of components including seat covers, visors, arm rests, and head rests for Ford Motor Co., FCA, and other OEMs. The company does not produce air bags.
“The deal was being marketed with a great deal of urgency due to Takata’s recall issues, and we had less than 45 days to negotiate the purchase agreement, do the due diligence, do all of the financing, and consummate the closing,” says Rick Bolton, partner at Dickinson Wright, a law firm in downtown Detroit that worked with KPMG, Comerica Bank, Bank of America, Huntington Bank, The Private Bank, Cyprium, and other entities.
“We had a whole team of subject matter experts in various specialties work on the deal, including a financing team, a due diligence team, and a group that oversaw all of the needed regulatory filings,” Bolton says. “It was one of the fastest deals we’ve ever done. Because it was an international deal, we had to be regulatory compliant in the U.S. and Mexico. Plus, we negotiated under the cloud of a potential bankruptcy being filed at any time.”
Complications arose because Takata operated all of the internal accounting and other systems at Irvin Automotive, and there wasn’t time for the Piston Group to put its own team in place prior to the closing. As a result, Dickinson Wright signed a nine-month transition services agreement following the closure, to ensure a smooth progression in hiring accountants and other management staff.
The Piston Group initially structured its $170 million stock offer relying on Representations and Warranties Insurance to protect itself in case something went wrong, and to limit any exposure from the seller surrounding its faulty airbag systems. But prior to the closing, the insurance carrier wasn’t comfortable with issuing a policy due to uncertainties surrounding Takata, so the Piston Group negotiated an escrow structure without insurance.
Since its completion late last year, the deal has added $500 million in annual revenue to the Piston Group’s existing $1.8 billion in yearly sales. It also brought the company its first international presence via three plants in Mexico, which sets up the business to expand into Europe, Asia, and other markets.
What’s more, it allowed the Piston Group to provide manufactured components to its value-added assembly services, which opens up the door for the company to expand to other industries such as aerospace, transportation, and furniture. Irvin Automotive’s senior management team, including CEO Joe Finn, was retained as part of the deal and is charged with increasing revenue three times the current amount within the next three fiscal years.
Vinnie Johnson, chairman and CEO of the Piston Group in Detroit, says he was attracted to Irvin because it was a well-run business with a strong management team, along with respected design and manufacturing capabilities, that complemented the Piston Group’s operations. Moreover, Irvin had created an attractive model to the OEMs through combined design and manufacturing abilities and enhanced transparency on pricing as a direct supplier.
“This makes the Piston Group a real player in the marketplace,” Johnson says. “We now have enhanced capabilities and access to new customer opportunities.”
Why Angle Advisors is the ACG Investment Banking Firm of the Year
Angle Advisors, an investment banking firm in Birmingham founded in 2010, prides itself on reaching across borders and working with different cultures. It also has a strong track record of closing deals via a months-long process of researching and identifying an array of prospective buyers until a sale is consummated.
In some cases, the level of difficulty in closing a deal requires nuances on both sides of a given acquisition. Take the sale last year of Conform Technologies, an automotive supplier in Bingham Farms, to Wuxi Gissing Auto Parts in China.
Because the deal was the first in North America for Wuxi Gissing, the auto parts manufacturer had concerns about how the U.S. legal system could favor the American shareholders of Conform Technologies, along with its sister companies, Detroit Technologies and DTI Enterprises.
Combined, Conform and its partners operated four manufacturing plants in the U.S. that produced nonwoven fabrics, polyester staple fibers, and other products for the automotive industry. While the sale resulted in a four times cash-on-cash return in less than four years’ time, closing the deal was a difficult task of juggling multiple needs and concerns.
“We have a long history of completing international transactions, largely with North American-based clients that are selling divisions in the U.S. or to buyers in Europe, Asia, South America, and elsewhere,” says Cliff Roesler, co-founder and partner of Angle Advisors, which has 34 employees. “In addition to the concerns from the Chinese buyer, we had to work through the separate needs of four different shareholders at Conform.
“I can’t say what those needs were, but we had to accommodate all of them if we were going to close the deal. At the same time, what helps us is that we have the capabilities of communicating in eight different languages, and we have an office in Shanghai (as well as Wiesbaden, Germany, and Manchester, England).”
Another challenge in closing a deal — last year Angle Advisors completed 13 deals with a total value of $566 million — is identifying prospective buyers, especially strategic buyers who often will pay more for a company that operates in a desired sector.
“We prefer to sell to strategic buyers as opposed to financial buyers because strategic buyers have a real need, while financial buyers may be more passive investors,” says Kevin Marsh, co-founder and partner at Angle Advisors. “Last year, 11 of the 13 deals we did were to strategic buyers.”
Consider the sale last year of Texas-based Rockwell American — a supplier of light-duty truck axles, fenders, and other parts — to DexKo Global in Novi. Because DexKo was Rockwell’s largest competitor, both companies had reservations about sharing proprietary financial data.
“We set up nondisclosure agreements to protect the data that was going back and forth, and there was an extreme degree of forecasting that was needed on our part because the buyer was an expert in the field,” Marsh says. “The buyer could debunk our profit forecasts in a second, and even as they had a team pore over our figures, it was good to know there were no changes to the forecast.
“In another instance, we advised Philips Service Industries in Livonia on the sale of its Evana Automation division to Preh IMA Automation in Germany, which was a subsidiary of Joyson Electronics in China. Joyson wanted an absolutely quiet deal. You’re never sure of who talks to who, but word never leaked out until the deal was done.”
Why Matt Hare is an ACG Rising Star
Matt Hare is persistent. In the leadup to the acquisition of Albireo Energy in New Jersey, Hare — principal of Huron Capital Partners, a private equity firm in downtown Detroit that invests in and operates several dozen companies — reviewed more than 200 potential acquisition candidates, and personally visited with 15 of the businesses.
“We flew around the country off and on for over 18 months before we had the first deal in place, which was the acquisition of Albireo Energy in 2014,” says Hare, 35. “Not every investor does it that way, and since then we’ve done seven more deals. It was part of our Exec Factor program, where we hire a seasoned CEO in a given industry and then work with them to identify potential acquisitions.”
Huron Capital often acquires a lead company in a given field, and then looks to add other businesses — called add-on companies — within the sector as way to drive efficiencies, combine operations, or share talent or technology. In the case of Albireo Energy, the seven other companies Huron Capital acquired included Energy Options Inc., Electronic Control Systems, Green Total Solutions, and Advance Power Control, plus three others.
Hare earned an MBA from the University of Michigan’s Ross School of Business in Ann Arbor and joined Huron Capital in 2008, following a three-year stint with P&M Finance. During his time at Huron Capital, he’s closed 42 transactions. The toughest deal, he says, was the acquisition of Jensen Hughes, a fire protection engineering consulting firm in Baltimore.
“We invested in Jensen Hughes in 2011, and I worked on it from the first day the book (incorporation papers) came in,” Hare says. “Early on, the CEO passed away unexpectedly so we worked with one of the board members to have him be the CEO. We had nine add-on businesses in that space, and we sold it at the end of 2015 for a very nice return. That one had a lot of moving parts.”
Other deals Hare has worked on include:
• Optimum Plastics — Optimum Plastics is a producer of films for the industrial, medical, automotive, consumer, and packaging markets in Wisconsin. Hare led the negotiation of the deal in 2012 and nearly doubled the size of the operation by adding new lines of business.
• Ronnoco Coffee — Hare worked with Blue River Financial Group in Bloomfield Hills to review more than 500 add-on candidates, which led to seven completed deals following Huron Capital’s acquisition of Ronnoco Coffee in St. Louis in 2012. In addition to the acquisition work, Hare worked with the lender group to arrange a dividend recapitalization of the business, returning a meaningful portion of Huron’s capital with no change in ownership.
• XLerate Group — XLerate Group is a provider of dealer-to-dealer auto auction services within the used car industry. Hare worked with the management team in Indianapolis to develop a strategy for acquisition sourcing and integration, which resulted in four add-on deals in the past two years. The effort included the addition of Grand Rapids Auto Auction and Greater Kalamazoo Auto Auction.
• InterVision Systems — In the summer of 2016, Hare led the acquisition of this California-based company. He is currently working with the management team to identify add-on acquisition targets, along with launching a new corporate development strategy.