DBusiness magazine partnered with the Association for Corporate Growth Detroit Chapter to honor its recipients of the 11th annual M&A All-Star Awards for 2018 activity. Winners were recognized at an event on April 9 at the Townsend Hotel in Birmingham.
Morley Candy Makers, Clinton Township
Brian Jefferson, Former Chairman and CEO
Ron Rapson, Former President
Why the Sale of Morley Candy Makers in Clinton Township was the Deal of the Year Under $50M
When the principals of Morley Candy Makers in Clinton Township, a maker of premium confectionary products sold under the Sanders Fine Chocolatier brand, started exploring a sale of the company last year, they received multiple offers from national and international investors. “We cast a wide net and, as it turned out, we found someone in our hometown to acquire the company,” says Brian Jefferson, former chairman and CEO of Morley Candy Makers.
Enter KNPC Holdco in Madison Heights, a leading manufacturer of nut and trail mix snacks marketed under the Kar’s and Second Nature brands. The sale, completed last October, will allow Sanders added expansion opportunities around the country while Kar’s Nuts will add to its production and product innovation capabilities. What’s more, Sanders will operate as its own division within the combined company. The workforces of both enterprises also remain in place.
“As we explored strategic opportunities for Sanders, it was critical to identify a partner who truly understood and valued our brand and our employees,” Jefferson says. “I had acquired Morley in 2007 with other investors, and I was very active in the sale of the company. I stayed on for a few months afterward to assist with the transition.”
After taking over Morley, Jefferson and Ron Rapson, who was an investor and served as president of the company, signed a national contract with Costco Wholesale. From there, a new automated production line was installed, which led to a significant reduction in labor costs while increasing profitability. The upgrades also boosted the value of the enterprise.
“The deal with Costco really accelerated our growth, and it allowed us to reinvest more money in the business to help profitability,” says Rapson. “That allowed us to attract better employees and enhance our brand, and the results speak for themselves.”
As part of the transaction — the sale price was undisclosed — legal and financial services were provided by Clayton and McKervey in Southfield; Giarmarco, Mullins, and Horton in Troy; Jaffe, Raitt, Heuer, and Weiss in Southfield; and KPMG Corporate Finance in Detroit.
“As part of the deal, Kar’s Nuts acquired property near our operation in anticipation
of expanding the production line,” Jefferson says. “The entire deal, along with the planned expansion, will add more jobs in our region.
We couldn’t be happier with how everything turned out.”
Caidan Enterprises Inc., Detroit
Michael Stines, Chief Legal Officer
Matt Agnone, CFO
Why the Sale of Detroit-based Median Health was the Deal of the Year Over $50M
Between Memorial Day and Labor Day last year, Michael Stines and Matt Agnone helped close one of the most noteworthy transactions in the region when Tampa-based WellCare Health Plans Inc. acquired Meridian Health in Detroit for $2.5 billion.
“One of the first meetings we had for this deal was in New York City, and once the negotiations came to a conclusion, the purchase agreement happened to be signed around midnight on Memorial Day,” says Stines, chief legal officer of Caidan Enterprises Inc., a health insurance agency in Detroit owned by the Cotton family. “It was somewhat unusual, as far as timing.”
At the time, the deal was expected to clear regulatory review and close in the fourth quarter, but the process moved more quickly than expected and the transaction was finalized on Labor Day weekend. “It was complex because Meridian operated in Michigan and Illinois, so there were those approvals, plus the federal government review,” says Agnone, CFO of Caidan Enterprises. “The good news was that the transaction brought a Fortune 500 corporation to Michigan.”
When the deal was consummated, Meridian Health, which was founded by Dr. David Cotton in 1997, had 1,900 employees. Since then, WellCare has hired around 100 more employees. Overall, most of WellCare’s local employees work at One Campus Martius (formerly the Compuware Building). Things could change, though. In late March, health insurer Centene Corp., in St. Louis, agreed to acquire WellCare for more than $15 billion.
As that deal moves toward a closing this summer, Stines and Agnone say one of the key aspects of why the Meridian transaction closed so quickly was the mutual respect the buyer and seller had for one another. “They shared similar values and both operated in the health care space,” Stines says. “Plus, our team had good relationships at the federal and state level.”
Clayton and McKervey, Southfield
Tim Hilligoss, Shareholder
Why Tim Hilligoss is the ACG Adviser of the Year
After working on nearly $1 billion in transactions last year, Tim Hilligoss says one of the highlights was the acquisition of Morley Candy Makers in Clinton Township, a maker of premium confectionary products sold under the Sanders Fine Chocolatier brand. The company was acquired by KNPC Holdco in Madison Heights, a leading manufacturer of nut and trail mix snacks sold under the Kar’s and Second Nature brands.
The sale in October provided Sanders with expanded national distribution opportunities and offered Kar’s Nuts additional production and product innovation capabilities. Sanders is operating as its own division within the combined company, and the workforces of all of the companies have remained in place.
“I’ve been the CPA for Morley for more than 13 years, and we helped them initially with the transition from private equity investment to private ownership,” Hilligoss says. “We treated Ron Rapson, who was president at the time, as a family-owned business. He had money in the company, and we pursued other investors.
“For the new ownership group … we offered advice on business decisions, we looked at what retirement would be like if the company was sold, and we talked about the process of selling the business. We brought in different professionals from our firm as needed, and we worked for three months on the sale of Morley.”
Apart from that transaction, Hilligoss last year assisted a gauge design and manufacturing firm in Michigan with its sale to a company in China. Clayton and McKervey’s financial advisory services also involve working with Chinese companies, and assisting them in enter-
ing or exiting deals around the world —
including with the U.S. automotive market.
To help bring additional value to the firm’s overseas clients, Clayton and McKervey have four Mandarin-speaking professionals on staff. “In some cases, we go into coaching mode to assist our clients because the deals are so complex,” Hilligoss says. “There’s a lot of moving parts as you pursue taxes, accounting, and the structure of a given transaction.”
Peninsula Capital Partners, Detroit
Scott A. Reilly, President and Chief Investment Officer
Why Peninsula Capital Partners is the Dealmaker of the Year
Scott A. Reilly expected to be busier last year, but Peninsula Capital Partners in Detroit had to delay two deals into 2019 for various reasons. Still, last year was one of the best on record for the firm. It acquired 11 companies that, combined, generated $120 million in revenue, and closed on six investments that had an overall enterprise value of $190 million.
In one instance, Peninsula, founded in 1995, acquired two companies in London that provide specialty marketing, public relations, and social media services to the travel and leisure industry. The deal was especially complicated, as one of the companies had a Dubai-based affiliate that also was acquired — adding another layer of international legal and tax issues.
“Anytime you do business overseas or do a deal in the lower- to middle-market, it gets complicated,” says Reilly, who works closely with his colleague, Karl E. LaPeer. “When you’re dealing with Fortune 500 companies, they have talent on both sides of the deal; but with smaller firms, you have to understand all facets of the transaction and proceed with caution. You don’t want to learn about a mistake a year later.”
Part of the challenge was making sure key employees stayed with the respective companies. Reilly and his team oversaw every part of the transaction, while making sure to limit their interaction with key employees so the deal didn’t become a distraction in running the day-to-day operations of the business.
“The value of quite a few companies are in the people and their relationships in a given industry,” Reilly says. “In those instances, you have to create a deal structure that’s designed to motivate the critical employees to stay by offering them potential equity or bonuses. You want them to be your partner for the foreseeable future.”
Foley and Lardner, Detroit
Gjina Lucaj, Partner
Why Gjina Lucaj is an ACG Rising Star
To prevent financial transactions from being slowed by minute details, Gjina Lucaj, a partner at Foley and Lardner in Detroit, encourages everyone involved in a deal to focus on the finish line. “Time is money and, at the end of the day, my goal is to lead our team on behalf of our clients,” says Lucaj, who joined Foley and Lardner in 2010. “Last year, I closed two health care deals, both in the Medicare and Medicaid space, and one of those was WellCare Health Plans Inc.’s acquisition of Meridian Health in Detroit for $2.5 billion.”
In 2018, Lucaj led the teams at her law firm that closed M&A transactions totaling approximately $4.5 billion in aggregate value. In addition to Meridian, she oversaw America’s First Choice’s sale of multiple health plans in Florida and South Carolina, Wynnchurch Capital’s sale of Votaw Precision Technologies and Burtek Enterprises, Olymel’s acquisition of Specialty Foods Group, and Novacap’s acquisition of Kingsdown, as well as several add-on acquisitions.
Lucaj practices general corporate and business law, with a focus on M&A and general corporate counseling. She’s a member of the firm’s transactional and securities, and private equity and venture capital practices. She’s also a member of the firm’s automotive industry team. “I do a lot of automotive work, given we’re in Detroit.”
Her experience also includes domestic and international strategic and private equity transactions across numerous industries. The transactions include M&A, divestitures, financing, public and private debt, and equity offerings. In addition, she provides her clients with general corporate, restructuring, and contract counseling.
“Career-wise, I’ve been involved with a lot of mentoring of our younger associates, and our women’s committee in terms of organizing activities,” Lucaj says. “I’m proud of juggling a demanding career with two young children at home. I take a practical and comprehensive approach to get everything done.”
Greenwich Capital Group, Birmingham
Bob Coury, Managing Director and CEO
Why Bob Coury is the Investment Banker of the Year
In 2018, Bob Coury led 10 separate transactions that consisted of sell-side deals on behalf of private business owners, raising capital to augment growth, engagements for large public companies, and supporting shareholder buyouts. Coury founded Greenwich Capital Group in 2015, following a long career working at large public accounting and advisory firms.
“We work with a lot of companies that are family-owned. With a sale, the transaction is often the biggest single event in the family’s history,” Coury says. “The family wants to see value for all of their hard work, or generations of hard work, and they often want to maintain the culture of the company after the sale, as well as protect the jobs of their employees.”
Last year, Coury led the sale of S. Abraham and Sons, a large convenience store distributor in Grand Rapids that had annual revenue of $1.2 billion, to Imperial Trading Co. in Louisiana. He also oversaw the sale of Dealer Inspire and Launch Digital Marketing to Cars.com.
“LDM and Dealer Inspire had some common shareholders, but they’re two different companies,” Coury says. “They were high-flying digital companies started by young entrepreneurs and, after a few years, they reached a point where a sale would be a lucrative transaction. We got a great valuation, and after the deal was done, I was getting calls from business owners in that space who said, ‘If you can get me that value, I’ll sell tomorrow.’ ”
Coury also worked with Signal Restoration in Troy, which provides property damage services nationwide. “They continue to grow rapidly, and they needed capital to augment their growth. We were able to streamline their capital structure and take something that was complex and improve on it, while making it easier for the owners to operate the business.”
Huron Capital, Detroit
Brian Demkowicz, Co-founder and Managing Partner
Why Brian Demkowicz Earned ACG’s Lifetime Achievement Award
Reflecting on being honored with ACG’s Lifetime Achievement Award, Brian Demkowicz says he feels like he’s reached the middle part of his career. Even so, “I still have a lot of runway in front of me, I feel great, and we have a remarkable team,” he says. “Being honored in this way by ACG is really a reflection of our team. This award is for them.”
Demkowicz launched Huron Capital, a Detroit-based private equity firm, with $31 million in commitments in 1999. Over the past 20 years, Demkowicz and his partners — Mike Beauregard, Peter Mogk, and John Higgins — have built the business into a market leader, raising six investment funds aggregating nearly $2 billion in capital and investing in more than 170 companies.
“I was working in Chicago at a diversified finance company for 10 years, and in 1998 I got the bug to strike out on my own,” Demkowicz says. “I was an independent sponsor on various deals, and then I was introduced to the Vlasic family in Detroit — the one that’s in the pickle industry.
“They were a very early adopter and supporter of mine, and they’re still an active partner in our firm. They made a lot of key introductions. Now we have six investment funds that are focused on specialty industries, consumer goods, consumer services, and business services.”
Earlier this year, Huron Capital, via its New Jersey-based building automation and network integration solutions company, Albireo Energy, acquired EMS Technologies, which offers building automation and network integration solutions. The firm also made a significant equity investment in Washington, D.C.-based WD Lab Grown Diamonds, a producer of large, ultra-high-quality laboratory grown diamonds for the jewelry, scientific, and industrial markets, among other deals.
“To help our growth, we just brought on three partners who are very well-versed in operating businesses as efficiently as possible,” says Demkowicz. “That will bode well for our future.”