Photos Courtesy of Nick Hagen
DBusiness magazine partnered with the Association for Corporate Growth Detroit Chapter to honor its recipients of the 6th annual M&A All-Star Awards for 2020 activity. Winners will be recognized during a virtual event, filmed at the Detroit Golf Club, on June 15 at 5 p.m.
DEALMAKER OF THE YEAR
O2 Investment Partners • Bloomfield Hills
Todd Fink • Managing Partner | Jay Hansen • Managing Partner
Luke Plumpton • Partner
WHY O2 INVESTMENT PARTNERS IS THE ACG DEALMAKER OF THE YEAR
When O2 Investment Partners in Bloomfield Hills sold its portfolio company, Vessco Holdings, to Gryphon Investors last November, it represented two years of growth that saw Vessco become a national leader in the municipal water and wastewater treatment distribution market. To raise the company’s value prior to the sale, O2 Investment Partners acquired Kennedy Industries Inc., a provider of municipal and industrial water and wastewater equipment and services in Wixom.
The deals were part of seven transactions last year that had their share of twists and turns, COVID-19 or otherwise. While the firm was able to navigate virtual negotiations, due diligence, and filings, it also had good timing. In January 2020, O2 Investment Partners closed on one of two new platform investments, First Class Air Support in Louisville, Ky.
“They’re an aftermarket distributor of components to cargo airlines, and they also provide maintenance and repairs,” says Luke Plumpton, a partner at O2 Investment Partners, which works with founders and family-owned businesses in the lower middle market with $4 million to $15 million in annual EDITDA. “During the pandemic, the demand for air cargo increased, (while) Kennedy was a significant deal because it was done locally, with 90 percent of (the) shareholders and investors in southeast Michigan, along with the work by UHY Corporate Finance (in Farmington Hills).”
The other platform investment was SIB Fixed Cost Reduction in Charleston, S.C., which offers invoice analysis, cost monitoring, and vendor negotiations. As part of four add-on acquisitions, the Kennedy deal was joined by Crenshaw Consulting Group, an engineering services company in Dallas/Fort Worth; Cost Control Associates, a utility expense management firm in Queensbury, N.Y.; and Potomac Abatement Inc., a specialty construction contractor in Jessup, Md.
Along the way, O2 Investment Partners closed Fund III with $270 million in investments (the first two funds raised a combined $160 million). The Vessco exit was a home run for the firm and its investors. The deal team included Pat Corden, a partner; managing partners Todd Fink and Jay Hansen; and Jim Frye, a senior associate.
“We formed strong bonds with the owners of Kennedy because it was in our backyard (Wixom),” Fink says. “Every deal is different, and you learn a lot working with family-owned businesses. As for the overall VC sector in Michigan, we are all focused on growing and drawing businesses here.”
DEAL OF THE YEAR OVER $50M
Alta Equipment Group Inc. · Livonia
Ryan Greenawalt · CEO | Tony Colucci · CFO
WHY ALTA EQUIPMENT WAS THE ACG DEAL OF THE YEAR OVER $50M
Two years ago, Alta Equipment Group Inc. in Livonia was eyeing an expansion to neighboring states like Indiana and Illinois, along with undertaking strategic acquisitions — but access to capital to finance the endeavors was limited. After researching several options, the company and its advisers dusted off a little-used financial tool known as a special purpose acquisition company, or SPAC. Since then, there’s been a run on SPAC deals.
The offering, where a shell corporation is listed on a stock exchange with the goal of acquiring a private company, sometimes referred to as a SPAC IPO, traces its roots to the early 1990s when entrepreneurs found it difficult to attract mid-market capital to expand their respective businesses. As SPAC deals ebbed and flowed, the number of annual transactions remained low. For example, in 2019 there were 59 SPAC IPOs that had combined capital of $13.6 billion.
Last year, due to a number of factors, SPAC transactions quadrupled to 248 deals that overall accounted for $83.3 billion in capital. Driving demand for more public companies — there are around 4,000 public entities today, as compared to some 8,000 20 years ago — was the ability to generate fees across myriad service providers such as lawyers, accountants, and advisers.
At the same time, the amount of money flowing into investment markets was on the rise, while the SEC became more involved in regulating the transactions — which had the effect of raising the reputation of such deals in the marketplace. “We were at the leading edge of the SPAC wave,” says Ryan, Greenawalt, CEO of Alta Equipment Group, which traces its roots to 1984 when his father, Steven, started the business.
A provider of heavy machinery used in the construction, utility, and logistics market, Alta Equipment Group put its financial advisory team to the test leading up to the closing on Feb. 14, 2020. In addition to the SPAC IPO, the company acquired two other companies as part of the transaction: Liftech Equipment Cos. in Syracuse, N.Y., and FlaglerCE Holdings in Tampa, Fla.
“Following our listing on the New York Stock Exchange, we acquired five other companies that have provided us a strong presence in Michigan, Indiana, Illinois, Florida, Virginia, Maine, Massachusetts, and New York,” says Greenawalt, who worked closely with CFO Tony Colucci in consummating the SPAC. “We more than doubled our revenue from $350 million in 2017 to proforma revenue today of just under $900 million. Plus, we doubled the number of employees (to 2,000) and we kept the company in Michigan.”
DEAL OF THE YEAR UNDER $50M
Peninsula Capital Partners · Detroit
Karl Lapeer · Partner
WHY THE FORMATION OF CENTARIS IS THE ACG DEAL OF THE YEAR UNDER $50M Launching 130 platforms over 26 years, Karl Lapeer, a partner at Peninsula Capital Partners in Detroit, has never closed a deal in which two firms are acquired and merged at the same time. “I tried a few times, and this is the only time we got two transactions to the finish line simultaneously,” Lapeer says. “It all got started two years ago, when the prospective seller approached a potential buyer who said no. And then, a year later, they said yes.”
Seeking a sale, Business Communication Systems Inc., a telecommunications equipment supplier, didn’t need to travel far — just two miles — to approach a possible buyer, Center for Computer Resources. Both companies are located in Sterling Heights, and they’re in the same industry. Forty years ago, tucked inside the Doll and Toy Soldier Shop in Berkley, Family Computer Center Inc., the forerunner to Center for Computer Resources, got its start. It quickly earned acclaim, and was recognized by Atari Inc. as its largest-volume U.S. independent sales outlet in the 1980s.
The combined company, Centaris, is now part of the Peninsula Fund VI Limited Partnership.
Providing services to dozens of small- and medium-sized businesses, today Centaris is a single source for managed IT, voice, internet connectivity, and computer network needs. Prior to the acquisitions and merger, the two enterprises each engaged BeaconView Capital in Rochester to explore a sale of the respective businesses. “We were introduced to the deal by Jack DiFranco from BeaconView in early April 2020, and apart from what came to be a friendship that formed between the two companies prior to the sale, almost every part of the deal was local,” Lapeer says.
Other than Cohen & Co. in Cleveland, which provided accounting services for the deal, the local team included Honigman Miller in Detroit, Reiber Group in Detroit, Comerica Bank (Birmingham office), Kerr Russell Weber in Detroit, Cuthbertson Law in Rochester, Clayton McKervey in Southfield, and BeaconView (seller investment banker).
Lapeer, who worked with his colleagues Dave Hiemstra, a partner, and Andrew Michalak, a vice president, says the deal has plenty of upside. The deal “represented a new platform for us, so down the road if we can collectively grow the business, there may be a sale in three to five years and everyone involved could get a second bite of the apple, or a second exit.”
INVESTMENT BANKER OF THE YEAR
UHY Corporate Finance · Farmington Hills
Alex J. Conti · Partner and Managing Director
WHY ALEX J. CONTI IS THE ACG INVESTMENT BANKER OF THE YEAR
When it comes to M&A transactions, few deals extend to Reykjavik, Iceland, and involve the FTC. Alex J. Conti, a partner and managing director of UHY Corporate Finance in Farmington Hills, was able to balance multiple factors in the sale of College Park Industries Inc., a manufacturer of upper and lower limb prosthetics in Warren, to Ossur in Iceland, which develops, produces, and sells noninvasive orthopedic equipment.
“There were several shareholders with College Park, and none were family and friends,” Conti says. “On top of that, the prosthetic industry is very sparse. There also was an anti-competitive part of the deal. The FTC determined there was a product line, Espire Elbow, that was deemed anti-competitive, so we had to divest that part of the business for College Park during the process of the negotiations. The FTC could have blocked the deal, so we didn’t want that to happen.
“It was almost like a deal within the deal. For College Park, the sale allowed them to pay off the shareholders. For management, they could focus more on the day-to-day business. They needed stable leadership and a dedicated shareholder group to invest in the business. We accomplished all of that. Now there’s one boss, one strategy, and Ossur has deep pockets.”
Overall, Conti and his team oversaw seven sell-side transactions last year. The deals varied in size, location, and industry, in addition to the cross-border College Park deal that required a divesture. To complete that transaction, Steeper Group in England acquired Espire Elbow. The wrinkle in the deal meant the transaction closed in June 2020, rather than the previous year.
Another highlight in 2020 for Conti and his team was the sale of Kennedy Industries Inc., a provider of municipal and industrial water and wastewater equipment and services in Wixom, to Vessco Holdings, a portfolio company of O2 Investment Partners in Bloomfield Hills. In a separate deal, O2 subsequently sold Vessco Holdings. While Kennedy Industries had a few dozen offers, Conti says the company’s management team wanted to remain.
“We had more than 65 bids for Kennedy, so there was a ton of interest,” Conti says. “Kennedy had been operating independently and they wanted to stay in Michigan, and preferably be acquired by another Michigan company. We were able to find a local investor, and now Kennedy really likes being with Vessco, given they have a national reach within the water and wastewater treatment distribution market. It was a win-win deal.”
LIFETIME ACHIEVEMENT AWARD
Justin G. Klimko · Shareholder and President
Butzel Long · Detroit
WHY JUSTIN G. KLIMKO EARNED ACG’S LIFETIME ACHIEVEMENT AWARD
Over the course of 41 years with Butzel Long, Justin G. Klimko has never seen the same deal twice. Joining the firm fresh out of Duke University Law School, Klimko says he appreciates today “how every deal is different, how different the deal process is now in the way deals get done, and what’s included in those deals. There’s been an enormous evolution. And along the way, I got involved with the Association for Corporate Growth.
“It’s a quality organization — and chapter — that highlights and connects the depth and talent of the M&A community in metro Detroit and around the world. The members go beyond lawyers to include bankers, accountants, and advisers. It connects the entire M&A ecosphere.”
Reflecting on his career — as president, a board member, and a shareholder of Butzel Long — Klimko says every skill set, whether refined or limited, can contribute to a successful outcome. “We were doing a deal where a European company was buying an American company, and we worked through everything, including various antitrust issues. At the closing in New York City, we learned at the last minute there were some Italian bonds that could represent a major issue.
“Well, I speak some Italian, and I was able to figure out what it meant. It was just my interest in language that helped get the deal done. We had to call the Italian counsel to confirm everything. As I read the documents and confirmed our understanding with all of the parties, the deal did close. We determined the bonds didn’t pose a threat to the company.”
That was 15 years ago. More recently, Klimko and his team discovered a potential product liability claim may have posed an impediment to closing a deal for a buyer. Facing an unknown impact on the company’s finances, the deal was restructured with insurance solutions and a letter of credit, among other protections.
“When I look back, you went into a room and there were boxes and boxes of files and papers, and you went through everything and took lots of notes,” he says. “Now it’s all on the internet. In the old days, there were no cellphones. If you received documents in the mail, you would mark them up and send them back in the mail. I remember in mid-1985, when Gannett bought the Evening News Association (The Detroit News); it was prior to the JOA. At the end, we had all of these documents with multiple changes, and we had a heck of a time trying to figure it out and put it into readable form.”
ADVISER OF THE YEAR
Howard & Howard Attorneys · Royal Oak
Jeffrey A. Hoover · Member
WHY JEFFREY A. HOOVER IS AN ACG ADVISER OF THE YEAR
Jeffrey A. Hoover was like a football coach directing multiple players on and off the field as the outcome of the game unfolded. But in his case, the competition went into overtime. A member of Howard & Howard Attorneys in Royal Oak, Hoover was the lead lawyer for Livonia-based Alta Equipment Group Inc.’s SPAC IPO, which involved listing the company on the New York Stock Exchange, along with closing two M&A transactions.
“Our core group was 10 to 12 attorneys, and another 40 lawyers from our office worked on the deal,” Hoover says. “For the SPAC, it was long nights (and working on the) weekends from November 2019 to Feb. 14, 2020, to close the deal. It was challenging, especially when you add in the acquisition of two companies in Florida and New York (respectively). It was like handling three major transactions all at once.”
In addition to managing a refinancing of Alta Equipment Group’s existing credit facilities, Hoover negotiated the resolution of other credit facilities held by OEM captive finance partners. To close on the two M&A deals, several dozen legal advisers came into the picture, representing some of the largest law firms in the country. The list included Jones Day, Winston Strawn, Vincent & Elkins, White & Case, Morgan Lewis, and Dickinson Wright.
With negotiating sessions crossing several time zones, there were plenty of deadlines to track and complete. “SPAC allows a different profile of company to become public,” Hoover says. “After the initial deal, there were five other transactions we worked on for Alta, for a total of seven in 2020. Alta really is growing fast, and the SPAC brought them to another level in terms of getting better access to capital that private companies don’t have.”
To complement his legal expertise, Hoover has a degree in accounting and an MBA. He says his understanding of business operations, including the dynamics of operating within a competitive marketplace, allows him to rapidly evaluate and advise his clients on dozens of legal matters, including structuring and negotiating acquisitions and mergers, as well as guiding companies through bankruptcy proceedings.
“The Alta deal was probably the most challenging and rewarding transaction I’ve been a part of,” Hoover says. “Last year was the busiest in my career, and the value of those seven deals is now more than $1 billion. They’ve really been on a growth trajectory over the last five years. As for SPAC deals, we’ll see more of them as long as everything lines up.”
ADVISER OF THE YEAR
Dykema · Bloomfield Hills
Alexis Schostak · Member
WHY ALEXIS SCHOSTAK IS AN ACG ADVISER OF THE YEAR
Before COVID-19, Alexis Schostak might have reasoned PPP stood for Practice, Parenting, and Patience. As a member of Dykema, a large law firm in Detroit with offices in Bloomfield Hills and elsewhere, Schostak moved to the region 13 years ago from New York. Now, with two children, she’s found her legal skills are rubbing off.
As co-lead of the firm’s Paycheck Protection Program work, Schostak says the loans that began to be facilitated and administered last summer and fall by the Small Business Administration 7(a) loan program didn’t come with a rigid rulebook. The initial guidance from the SBA, which wasn’t staffed properly to handle the flood of work, was fairly broad. It was followed by a stream of changes and counter-changes. Through it all, she provided advice to buyers and sellers regarding PPP loans on more than 50 M&A transactions.
“My two children probably know more about PPP than most lawyers know,” Schostak says. “The craziest part was that pre-COVID-19, I didn’t answer my cell phone if I didn’t know who it was. After the pandemic broke out, I took every call. At one point, there was a waiting list to talk to me. I was on the other line and people would hold because they didn’t want to lose an opportunity to advance their client’s interest.”
As an assistant practice group leader in Dykema’s corporate finance group, Schostak’s work focuses on advising private equity clients and their portfolio companies on the complex, customized leveraged finance aspects of acquisition and refinancing transactions. Those skill sets came in handy when the PPP effort began to be facilitated.
From the third quarter onward, Schostak says she’s never been busier. In addition to advising a range of buyers, sellers, and advisers on the SBA guidelines, she participated in webinars; co-authored client alerts; and took the lead on multiple fronts, including negotiating representations and warranties, covenants, specific indemnities, and escrow arrangements.
“The PPP loans were very important to metro Detroit’s business community, as well as the rest of the country,” Schostak says. “It helped keep people employed during the lockdown, and they helped position companies to have a successful second half of the year. One of the biggest challenges was making sure any M&D deal didn’t jeopardize the forgiveness of a given loan. Initially, I thought PPP loans would be a few weeks, but here we are a year later and we’re still working on it.”
Cascade Partners · Southfield
Matthew B. Feldman · Director
WHY MATTHEW B. FELDMAN IS AN ACG RISING STAR
In years past, closing a deal — let alone two — on New Year’s Eve would mean missing out on a celebration. But with one of the biggest nights of the year now a private affair due to COVID-19, Matthew B. Feldman, director of Cascade Partners in Southfield, says closing the transactions was a good way to end what was a dismal 2020 for most everyone.
In one deal, Feldman helped BullsEye Telecom, a mid-market telecommunications firm in Southfield, complete its first buy-side transaction when it acquired Bandwave Systems in New Jersey. The move was ambitious; BullsEye Telecom set a goal of doubling in size. Before Bandwave, which delivers broadband internet connectivity, was identified, Feldman and his team sought out dozens of likely acquisition targets.
“For BullsEye, it was their first acquisition of hopefully many, and when we got engaged, we strategized,” says Feldman, who served as the exclusive buy-side adviser. “You can’t do it organically; you have to do it through M&A. We sat down with the company leaders many times to strategize what part of their business would benefit most from an M&A. While broadband was a smaller part of the business, there were a lot of growth opportunities.
“The goal was to find something straight down the fairway for BullsEye with a company that has a similar product line. It makes it much easier, and it sets them up for what comes next. When we were engaged (in January 2020), we cast a wide net and identified 200 potential companies that fit our client’s buying criteria. We whittled that down to 10 to 12 firms, did the due diligence, and it turned out Bandwave was thinking of selling. It all worked out nicely, and the success came about because of all the strategy work.”
The other deal, in which Feldman served as the exclusive sell-side adviser, was the formation of the Digestive Health Institute from the merger of the Michigan Gastroenterology Institute and Capitol Colorectal Surgery, both of which are located in Lansing. Following the merger in December 2019, the Digestive Health Institute was sold last year to a private equity firm.
Feldman joined Cascade Partners in 2019 following 10 years of investment banking experience, where he led corporate finance transactions across such industries as consumer products, retail, health care, and building products. Overall, he has been involved in transactions that total more than $30 billion in enterprise value. “The key to any deal is to get it done in a way that maximizes value for your client,” Feldman says.