DBusiness magazine partnered with the Association for Corporate Growth Detroit Chapter to honor its recipients of the 12th annual M&A All-Star Awards for 2019 activity. Winners will recognized at an event on October 8 at 6 p.m. the Townsend Hotel in downtown Birmingham.
Cascade Partners • Southfield
Rajesh Kothari • Founder and Managing Director
Why Cascade Partners is the ACG Dealmaker of the Year
Even as the COVID-19 virus slowed business activity, Cascade Partners, a boutique investment banking firm in Southfield, reached out to its client base and sought out new relationships. The firm, founded by Rajesh “Raj” Kothari, is coming off its best year on record; last year, it closed nine M&A deals, and three of the transactions totaled more than $100 million each in value.
“This year won’t be as strong as last year, due to the virus, but we’re going to see a good diversity of deals and we just picked up a new client,” says Kothari, who helps lead divestitures, recapitalizations, acquisitions, and other strategic transactions for clients in the health care, industrial, business services, and technology sectors.
Two deals stood out last year, he says. Remington Products Co., a third-generation, family-owned manufacturer of aftermarket footwear insoles and foot care products based in Wadsworth, Ohio, west of Akron, had received an unsolicited offer from Gridiron Capital in New Canaan, Conn. Founded in 1934, Remington was structured as an ESOP (140 employees), which made the deal more complicated.
Remington was unsure of how to proceed and didn’t know if an investment banker could add value to its operations. Ken Marblestone, a managing director at Cascade, says one of the benefits of the deal was Gridiron’s ability to provide capital for growth.
In another deal, the Michigan Eye Institute in Flint was eager to grow, but the group of physicians at the helm found the addition of new locations brought on more management responsibilities. The principals turned to Cascade, which helped arrange a financial partnership with Midwest Vision Partners in Chicago.
“We were impressed by the strength of Midwest’s leadership team, and refreshed by their emphasis on honesty and transparency,” says Dr. Gary Keoleian, a principal of the Michigan Eye Institute. “We aligned quickly after learning about their commitment to patients and the infrastructure they’re building to empower physicians to focus on clinical care.”
NYX Inc. • Livonia
Jatinder-Bir Sandhu • Executive Chairman and CEO
Why the Acquisition of Beach Mold and Tool Inc. was the ACG Deal of the Year Over $50M
What started as a restructuring engagement of Beach Mold and Tool Inc., a provider of automotive, consumer, industrial, and medical components in New Albany, Ind., became a full-fledged sale. Established in 1972, Beach operates from a 550,000-square-foot manufacturing facility that houses more than 130 injection molding machines.
“One of our customers had reached out and said they had a supplier that matched up nicely with our capabilities,” says Jatinder-Bir “Jay” Sandhu, executive chairman and CEO of NYX Inc., a multifaceted automotive supplier in Livonia. “Our customer was interested in putting together a strategic partnership already in their supply base. If we said yes, our customer had a high degree of confidence a deal could be put together.
“As part of our due diligence, we visited Beach Mold. They had been around for 47 years and they got into some distress because of a big launch that didn’t go as planned. We felt our strengths matched up with theirs; plus, it was always my father’s dream to have a medical component division of our business.”
In short order, Sandhu says the acquisition was completed. Soon after, a team of NYX manufacturing experts worked with Beach Mold workers to boost production and improve quality. Today, the company is a positive contributor to NYX’s bottom line, and more workers are being added.
NYX is a minority-owned business enterprise that designs, develops, and manufactures interior and technology solutions for the automotive industry. The company was incorporated in 1984 and has operations in metro Detroit; Tennessee; Windsor, Canada; San Luis Potosi, Mexico; Shanghai, China; and Chandigarh, India.
“This transaction provides growth opportunities and job stability for all our employees and puts NYX in a position to continue to provide value to our customers with new geography, scale, product options, and processes,” says Chain Sandhu, founder and chairman of NYX.
The origin of the deal came when Amherst Partners, a financial advisory firm in Birmingham that provides M&A advisory, management advisory, capital raising, and restructuring services, was engaged by Beach Mold and Tool as their financial advisor in May 2018. In July 2018, Amherst Partners became Chief Restructuring Officer working to create liquidity for the insolvent company.
At this point, Amherst Partners worked with Beach’s customers and vendors to reduce costs from its operations via process improvement. Additionally, Amherst sold Beach’s Virginia Division to a European buyer in January 2019. Virginia was draining cash and drawing resources from its main operation in New Albany, Ind.
Upon the sale of Virginia, Amherst initiated a sale process for New Albany and received significant interest from strategic and financial buyers in the form of multiple letters of intent. Ultimately, NYX emerged as the best solution given their history of sharing some of the same customers, and their success in acquiring and successfully integrating distressed companies into their organization.
Other professionals with a significant role in the sale of Beach to NYX were Warner Norcross + Judd in Grand Rapids (local office in Southfield), which represented Beach, and Wolfson Bolton in Troy, which represented NYX.
All Star Driver Education • Ann Arbor
Sean Roberts • Board Member
Why All Star Driver Education is the ACG Deal of the Year Under $50M
For a private equity firm that was just getting its start last year, HighGrove Cos. in Birmingham moved at a rapid pace. In May 2019, Sean Roberts, managing partner of HighGrove, was introduced to the offering of All Star Driver Education in Ann Arbor. The company is one of the largest providers of driver education in the country, with 97 locations across 16 states.
As the sole employee of HighGrove, Roberts was able sign an LOI shortly after meeting the company, and closed the transaction in less than 90 days. During that time, Roberts, along with a network of investment specialists, performed a full due diligence process, raised debt and equity financing, and negotiated the transaction documents with the seller. He also oversaw the operating agreement with the equity investors.
In addition to the complexity inherent in an independent sponsored transaction, the due diligence process included regulatory requirements to meet All Star’s various state certifications, as well as the company’s proprietary IT system and online course content.
“When you’re part of an established organization, you have colleagues you can draw upon to do any aspect of a given deal, but this was the first time I did a deal on my own,” says Roberts, a former partner with Huron Capital Partners in Detroit. “I was supported by advisers, accountants, lenders, and attorneys, and any M&A deal requires a lot of heavy lifting.”
Roberts also completed a deal with Phoenix-based Express Flooring, which offers a broad selection of residential flooring products directly to consumers throughout Arizona. When an order comes in, the company sends a salesperson to the homeowner, and once the specifications are completed, an independent contractor finishes the job.
“For Express Flooring, I was brought in by another independent sponsor, Long House Partners in Detroit,” Roberts says. “That made things a little easier. Of the two companies, I’m more active in All Star. My vision is to help them expand in both lines of business (in-person and online education). In southeast Michigan, we plan to double the number of locations within five years.”
Doeren Mayhew Capital Advisors • Troy
Brian Basil • Managing Director of Michigan Office
Why Brian Basil is the ACG Investment Banker of the Year
Brian Basil isn’t one to take the first offer that comes down the pike. When the owner of Kay Automotive Graphics in Lake Orion reached out to Basil to sell the company and its real estate assets, an initial offer of $105 million was considered low. “Our team saw that first offer and said we can do much better, so we approached a few different buyers and the accepted bid came in at $200 million,” says Basil, managing director of the Michigan office of Doeren Mayhew Capital Advisors in Troy.
The sales transaction proved challenging due to the fact that Kay, founded in 1997, was the largest automotive graphics company in North America. In addition to a production facility in Lake Orion, the firm had operations in Mexico and Wales. “The owner was older and didn’t have a succession plan,” Basil says. “We completed a strategic acquisition with a German company, which was part of our process of maximizing value by seeking out interested buyers globally.
“One of the hallmarks of our business is that we bring everything to the table. One of my partners speaks five languages, and we can tap into resources in more than 110 countries through our affiliation with the global network of Moore Stephens International Limited.”
In another deal from 2019, Basil was asked by the owner of Belanger Inc. in Northville to undertake a sale. An industry leader in the design and production of premium car wash machinery globally, Belanger had a portfolio of more than 100 patents. Transferring the company’s intellectual property was extremely time-consuming and complex, Basil notes.
Additionally, the seller had a car wash operation that was held out of the deal for the benefit of younger family members. The carve-out required complicated long-term supply agreements, territorial sales agreements, and noncompete agreements.
“The thing that kills any deal is time, so executing deals efficiently is paramount,” Basil says. “Belanger is unique, and the owner was visionary in the space. We leveraged that with the buyer to maximize the value.”
John C. Carter • President, Michigan Market
JPMorgan Chase • Detroit
Why John Carter Earned ACG’S Lifetime Achievement Award
For more than 30 years, John C. Carter has worked in commercial banking for JPMorgan Chase and predecessor organizations like the National Bank of Detroit. Over the course of his career, he has served as manager or executive in charge of various lending and corporate banking groups that provide capital, along with financial products and services, to companies and organizations large and small.
Over the last five years, Carter has helped structure and lead the bank’s $200 million investment in Detroit. He has guided the growth of several Michigan-based companies through IPOs, significant capital raises, and sales/divestitures.
Early in his career, Carter worked with several large metro Detroit corporations, eventually becoming head of the bank’s Automotive Group. In 2001, he was instrumental in forming Michigan’s Middle Market banking team. Since 2013, he has held the title of Michigan president.
“The pillars of our investment for the past five years are focused on the development of small business activity in Detroit,” he told Give Detroit in 2018. “JPMorgan Chase’s contribution is a continuation of the effort to make this community more vibrant and successful. In the last 18 months, we formed the Entrepreneurs of Color Fund, which specifically targets small micro-businesses that are started by minorities and have entrepreneurial instincts.
“The program has grown dramatically, as we’ve funded nearly 60 small businesses — more than half of them are women-owned and two-thirds of them are located in neighborhoods — and have created 1,000 jobs.”
Working in the community, Carter serves as either a member or a director of several nonprofit organizations, including the YMCA of Metropolitan Detroit, Forgotten Harvest, and Judson Center, among others. In addition, he is the longest participating member of the ACG Detroit Chapter (33 years). Carter holds a Bachelor of Arts degree from Alma College and an MBA from the University of Michigan.
TCF Financial Corp. • Detroit
David T. Provost • Executive Vice Chairman
Why the Merger of Equals Between TCF Financial Corp. and Chemical Financial Corp. is the ACG Mega Deal of the Year
A merger of equals — when two firms of roughly the same size form a single new company — sounds straightforward, and yet such deals can be rather complicated. In a majority of M&A deals, acquisitions are often easier to pull off because one company is in control of the management and direction of the expanded enterprise.
In the case of the merger of equals between TCF Financial Corp. (TCF Bank) and Chemical Financial Corp. (Chemical Bank), which was consummated last year, everything from what the new entity would be called to which company’s technology platform was selected was on the table. Today, TCF Bank — with $47 billion in total assets, more than 500 branches — is based in downtown Detroit. A new headquarters is under construction along Woodward Avenue at Elizabeth Street (scheduled to open in 2022).
“When we took a look at the deal, and the synergy and benefits for both of our companies, we got our CFOs involved, we got both management teams involved, we hired advisers, and we started the evaluation,” says David T. Provost, executive vice chairman of TCF Financial and chairman of TCF Bank. “A merger of equals is a difficult deal. There’s no clear person leading the charge, no one side is dominant over the other, and it took six months to look at all of the strategic and social issues on how to combine.”
For Chemical Bank’s leadership team, the most important aspect of the deal was to remain in Detroit, where it was bringing significant resources to the community. The TCF team wanted to keep expanding globally; the company recently entered Australia and New Zealand with its inventory finance business.
“With a merger of equals, you must give up half of your stuff,” Provost says. “So when we use the analogy of two families moving into one home, you have to pick one house, one chair, one couch. And if you have a dog and the other side has a cat, and they don’t get along, one has to go. If you can get through that, you have a merger of equals.”
Clark Hill • Detroit
Steve Pacynski • Senior Attorney
Why Steve Pacynski is an ACG Rising Star
At one point last year, Steve Pacynski, a senior attorney at Clark Hill in Detroit, had three transactions close in a two-week span. “Those were some long nights, and I remember being on a phone call at 1:30 a.m.,” Pacynski says. “I had another deal that closed in November where I was the lead attorney, and took on the full range of negotiating and managing the transaction. I (also) was spending a lot of time at the hospital. The day after we closed, my daughter was born.”
Overall, the lawyer closed more than a dozen M&A transactions last year, equating to a combined value of more than $600 million. Attributing his success to problem-solving, he says he analyzes client issues, develops strategies, and builds a team to see a deal to closing. When he was recently appointed as Clark Hill’s corporate counsel, he became the youngest person to serve in that role in the firm’s 130-year history.
A graduate of De La Salle Collegiate High School in Warren and the University of Michigan in Ann Arbor, where he earned a degree in psychology, Pacynski spent five years as a teacher and researcher before attending the Michigan State University College of Law. To gain more experience while attending law school, he interned at Masco Corp. in Livonia.
In one deal last year, Pacynski oversaw the merger of a large electrical distributor with another company in the same field. Today, the client, McNaughton-McKay Electric Co., is one of the largest electrical distributors in the country, with annual revenue of more than $1 billion. He adds he’s fortunate to have a “loving wife who is an attorney in a different field.”
Pacynski says time management is an essential part of his professional life. “The M&A part of my life can be up and down,” he says. “You’re either racing to get a deal done or you’re strategizing as you wait for all the pieces of a transaction to come together. My practice is industry-agnostic, so I can jump from one field to another, which keeps things interesting. I also do commercial contract review, general business and commercial matters, compliance and general corporate governance, and corporate law.”