January 27 - February 2, 2014

Transcription

20140127-NEWS--1-NAT-CCI-CL_--
1/24/2014
3:24 PM
Page 1
Vol. 35, No. 4
Entire contents © 2014 by Crain Communications Inc.
$2.00/JANUARY 27 - FEBRUARY 2, 2014
Taking
fight vs.
disease
to heart
If sin tax
fails, an
even bigger
issue looms
Clinic physician is bringing
biomarker research to new,
and even commercial, level
By JAY MILLER
[email protected]
Stadium and arena
improvement costs
could be a liability
for general funds
By TIMOTHY MAGAW
[email protected]
It began seven years ago as a quiet fishing expedition into the chemicals found within our blood,
but it since has morphed into a major unraveling
of mysteries associated with heart disease and has
resulted in some of the most talked-about research
from the Cleveland Clinic in recent memory.
Now, the Clinic and the architect of the research, Dr. Stanley Hazen, are taking the findings
mainstream.
Dr. Hazen, section head of preventive cardiology and rehabilitation in the Clinic’s heart and
vascular institute, and his team of researchers in
2011 announced they had discovered a potential
new biomarker for heart disease that could identify people at risk of heart attack, stroke and death
even when traditional screening tools fail.
The biomarker, a previously unnoticed compound in the blood known as TMAO (for
trimethylamine-N-oxide), is produced by the liver after bacteria in the gut digests red meat. TMAO
now is believed to be an even stronger predictor
of heart disease than cholesterol levels.
At the time of the initial research, little had been
done to connect what goes in the gut with the nation’s top killer — heart disease.
DR. STANLEY HAZEN
Position: Section head of preventive cardiology and
rehabilitation in the Cleveland Clinic’s heart and vascular
institute
KEY NUMBERS
■ 20: Dr. Hazen serves as a reviewer for more than 20
scientific journals
■ 50: He has more than that many patents to his name
■ 200: He has published more than 200
peer-reviewed articles, invited reviews and book chapters
Source: Cleveland Clinic; Photo: Marc Golub
It’s likely that Cuyahoga County
voters will be asked May 8 to decide
whether to extend the taxes on cigarettes, beer and liquor that have
been used to pay the cost of building
and maintaining the playgrounds of
Cleveland’s three major league
sports teams over the last 24 years.
Sin tax opponents ask a fair question: Why should the county’s smokers and drinkers bear the cost of the
region’s major sports facilities rather
than the wealthy team owners?
But it is not the most relevant
question in the debate over extending the tax for another 20 years to
pay for capital improvement at Progressive Field and Quicken Loans
Arena and to assist the city of Cleveland in paying for improvements at
FirstEnergy Stadium.
The better question is: If not the
sin tax, then what?
Without passage of the tax, which
could raise as much as $13 million a
year for the next 20 years, the city
and the county could be forced to
cover improvement costs from their
general funds. Or, they simply could
reject the teams’ requests for the upgrades and risk legal efforts to break
their leases and move the teams.
See TAX Page 6
See HEART Page 43
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1/24/2014
CRAIN’S CLEVELAND BUSINESS
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JANUARY 27 - FEBRUARY 2, 2014
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Alliance Hospitality Inc. looks to expand
FOR LEASE
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Two potential hotel
sites will depend on
rezoning decisions
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[email protected]

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Alliance Hospitality Inc., a hotel
company based in Lewis Center,
Ohio, wants to build a Hampton
Inn & Suites in Strongsville and a
Holiday Inn Express in Westlake.
However, both projects share the
same hurdle: Alliance needs to rezone a site in each suburb to proceed.
Ironically, thanks to the location
of its parcel, Alliance faces a
tougher go in Strongsville where
Ohm Patel, managing director of
Alliance, said his family got its start
in the hotel business. Alliance now
owns and operates 22 hotels, including a Hampton Inn in Middleburg Heights, but before forming
Alliance in 1984, Mr. Patel said his
family owned and operated a small
hotel, the Scottish Inn, on Pearl
Road.
Alliance wants to locate its proposed hotel on Falling Water Road
near the point where the side street
intersects with busy Royalton Road,
which is home to multiple offices,
shopping centers and SouthPark
Mall. The developer wants to rezone a vacant five-acre parcel on
Falling Water to motor services,
which allows construction of a hotel, from shopping center and office, a zoning classification that
does not allow a hotel.
The Strongsville proposal faces
an uphill battle. George Smerigan,
Strongsville city planner, and Brent
Painter, the city’s economic development coordinator, oppose the rezoning. The suburb’s planning
commission voted against the proposal Dec. 16 and it is scheduled for
a public hearing Feb. 18 before
Strongsville City Council considers
it for final action.
Mr. Smerigan said the idea “undermines the very concept” of the
city’s zoning, which puts compatible businesses together, by interjecting a hotel into an area with a
residential neighborhood on one
side and shopping centers and office buildings on the other.
Mr. Painter said putting the hotel
on Falling Water would deprive the
city of more income tax receipts
from office or medical uses on the
site, which is in a heavily developed
area with little empty land.
However, Mr. Patel maintains the
Hampton Inn would fit the site because a line of trees would block the
hotel from the view of neighboring
homes.
In Westlake, Alliance has asked
the city to rezone to hotel use from
industrial a similar-size parcel at
30500 Clemens Road. The site adjoins three hotels.
Westlake City Council’s planning
and zoning committee voted at its
Dec. 3 meeting to authorize the
city’s law department to draft an ordinance to rezone the site, the first
step in the suburb’s rezoning
process.
Cleveland chefs give crowdfunding a chance
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WHAT’S COOKING
Mr. Sawyer and his wife, Amelia,
say plans are in the works to launch
a Kickstarter campaign that aims to
raise a yet-to-be-determined portion of the estimated $200,000
needed to open their latest concept,
Trentina, a 50-seat University Circle
eatery that is inspired by Ms.
Sawyer’s northern Italian heritage.
“We want to raise money on our
own, without business partners or
other outside influences,” Ms.
Sawyer said.
Once the appeal goes live, customers will have the option of donating money at different tiers, and
in turn receive rewards based on
the donation level. Rewards could
include cooking classes, pasta and
recipe home delivery, a cocktail
named in honor of the contributor
or an in-home meal prepared by
Mr. Sawyer.
“The rewards will be a great and
creative way to give back to our
supporters,” Ms. Sawyer said.
The Sawyers are among a fledgling group of social media savvy
food entrepreneurs who are looking
to crowdfunding platforms such as
Kickstarter and Indiegogo to raise
money for various projects, yet retain full ownership stakes. The online sites permit creative project organizers to issue various perks or
rewards in exchange for different
contribution levels.
“A lot of small businesses are
hesitant to raise money from outside investors because it is timeconsuming, expensive and intrusive,” said Sean Peppard, a
securities law attorney at Cleveland-based Ulmer & Berne.
“Crowdfunding plays into a person’s ability to give money to something they are passionate about and
believe in.”
Some are successful; others don’t
reach their goal, which must be met
within 60 days.
Courtland and Jenny Rocco, for
example, on Jan. 11 exceeded their
Kickstarter goal of $15,000, with 153
backers pledging $16,667 to help set
up a micro dairy on their West
Salem farm.
Edwins Leadership & Restaurant
Institute, the Shaker Square nonprofit that trains and prepares former prisoners for restaurant industry employment, reached in
October 117% of its $25,000 goal,
with 116 Indiegogo backers raising
$29,356.
And Pour Cleveland last April
raised $2,235 on Indiegogo, which
was more than double its $1,000
goal.
Achieving a successful crowdsourcing campaign was the final
step in winning a Charter One
Foundation grant competition that
enabled the coffee bar to open in
downtown’s 5th Street Arcades.
Some local food projects that
have fallen short of their goal over
the last year include a pizza fire
Volume 35, Number 4 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly, except for combined issues on the fourth week of December and fifth week of December at 700 West
St. Clair Ave., Suite 310, Cleveland, OH 44113-1230. Copyright © 2014 by Crain Communications
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REPRINT INFORMATION: 800-290-5460 Ext. 136
A screenshot of Sawyer’s YouTube
video explaining the project.
truck that only met $1,025 of its
$15,000 goal; a heavy metal-inspired cupcake bakery with $1,619
pledged of its $7,500 target; and a
West Side Market vendor, which
sought $10,000 to expand its line of
organic dough balls, but fell short of
that goal by about $7,900.
The crowdfunding sites’ pipeline
of successfully financed projects —
5.5 million people on Kickstarter
alone have pledged $943 million
since the site’s 2009 launch — suggest continued industry development.
Mr. Peppard, who has worked on
behalf of some Ulmer clients to
draft federal legislation to allow for
crowdfunding — which is permitted under the 2012 Jump-start Our
Business Startups, or JOBS, Act —
said these online social fundraising
sites likely will proliferate.
Once the Securities and Exchange Commission, Financial Industry Regulatory Authority (FINRA) and state regulatory bodies
determine parameters that guide
equity- and debt-based crowdfunding models, more portals will crop
up allowing for minority investors
to profit on startups, he said.
“There’s a lot they will need to
iron out, such as how do you create
liquidity when you have a bunch of
minority investors,” Mr. Peppard
said.
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1/24/2014
3:25 PM
Page 1
5
INSIGHT
Credit union puts chips on fraud protection
Firefighters Community is among first financial institutions
in NE Ohio to issue more secure EMV cards to its customers
By MICHELLE PARK LAZETTE
[email protected]
When Firefighters Community
Credit Union in Cleveland distributes 5,400 new credit cards to
members early this year, it will become one of the first financial institutions based in Northeast Ohio —
if not the first — to introduce a type
of card to consumers that industry
insiders say will proliferate this year
and next in the United States.
It is called the EMV chip card.
The slow adoption in the United
States of the cards, which contain
embedded microprocessors that
provide security features not possible with traditional magnetic
stripe cards, has been criticized
following the Target breach, when
criminals gained access to tens of
millions of credit and debit card
accounts between Nov. 27 and
Dec. 15.
That high-profile incident aside,
there is another big motivation for
card issuers and merchants to
adopt EMV, which stands for its
founders, Europay, MasterCard and
Visa.
Come October 2015, policy
changes by MasterCard, American
Express and Visa will protect from
certain liability whichever party has
the more secure EMV technology in
a transaction where a card is used
physically and fraud occurs.
See CHIPS Page 7
REBECCA R. MARKOVITZ
Injury
reporting
could be
stressful
ON THE WEB: For a video interview with Mark Leahy,
read the online version of this story at: www.crainscleveland.com
OSHA proposal is
drawing ire of some
local businesses
By RACHEL ABBEY McCAFFERTY
[email protected]
MCKINLEY WILEY
New general manager Mark Leahy says the Cleveland Convention Center has booked 204 events over the next six years.
MAKING ROOM FOR MORE
New GM of Cleveland Convention Center has high
hopes for facility; 170,000 guests are lined up for ’14
By JAY MILLER
[email protected]
N
early 400,000 people are expected
to come to 204 events already
booked at the new Cleveland Convention Center over the next six
years, with 170,000 of the guests set for 2014.
Those convention-goers, meeting attendees
and even wedding guests are projected to
book at least 205,000 hotel room nights in
area hotels.
Those are the latest booking numbers
from SMG, the Philadelphia-area company
that in November took over operation of the
convention center and the adjacent Global
Center for Health Innovation.
While the Global Center gives Mark Leahy,
general manager of both facilities, an edge
when he tries to attract medical and health
care meetings to the convention center, his
firm’s marketing efforts have been wide-ranging. Bookings for 2014 include Safeguard
Properties’ 2014 Vendor Conference at the end
“I haven’t peeked in all the
closets yet, but it’s extremely
well-designed from an
operational standpoint (and)
from a marketing standpoint.”
– Mark Leahy, general manager,
Cleveland Convention Center
of June, followed in July by the National Model Railroad Association and then the National
Association of Biology Teachers in November.
In February 2015, the Ohio Music Educators Associations makes the first of three
planned trips to Cleveland.
See ROOM Page 42
A proposal by the Occupational
Safety and Health Administration to
make injury reports more accessible
to the agency and, eventually, the
public, is drawing concerns that people could misconstrue the data, the
privacy of injured employees could be
at risk, and OSHA personnel could use
the information to trigger inspections.
The government late in 2013 proposed a rule that would require companies with at least 250 employees to
submit information from all their injury and illness records electronically, and on a quarterly basis, to OSHA.
The proposal would expand the
scope of present reporting requirements because records of reportable
injuries — anything that requires
more than basic first aid, from a cut
to contact dermatitis to a broken
bone — are kept by the employer but
are not submitted regularly to OSHA.
Reports of fatalities and incidents
that lead to hospitalizations must be
submitted to OSHA within eight hours.
Under the proposal, companies
with 20 or more employees in specific industries, including manufacturing and construction, would be required to submit a summary of all
illness and injury records annually.
See OSHA Page 9
CORRECTIONS
■ A Jan. 20, page 15 profile of
Case Western Reserve University’s
Brian Grimberg misstated the year in
which he received his PhD. He earned it
in 2004.
■ Jamie Stanos took over in 2008
as chief operating officer for the
Centers for Dialysis Care. A Jan. 20,
page 16 story on Mr. Stanos included
an incorrect title.
6
1/24/2014
1:54 PM
Page 1
Tax: Costs can’t be shared by other counties
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Cuyahoga County Council is expected to vote as soon as this Tuesday, Jan. 28, to send the issue to the
voters. Neil deMause, author of the
book, “Field of Schemes: How the
Great Stadium Swindle Turns Public
Money into Private Profit,” and a frequent critic of public financing of
sports facilities on his blog, FieldofSchemes.com, said he sees the responsibility for some public money
here. However, he wonders if the tax
as it exists isn’t more than the Cleveland community should support.
“If I were a voter, I would feel a lot
more comfortable with a third of
that much money,” he said.
But rejecting the tax would be a
risk, Mr. deMause said, because teams
may bolt if their needs aren’t met. He
referred specifically to a current situation in St. Louis, where the Rams
football team is mulling its plans after
local officials refused to approve $700
million in improvements to the
team’s home, the Edward Jones
Dome. The team can break its lease
after the 2014 season if certain improvements aren’t made.
‘For better or worse’
STAY CONNECTED! Follow us today!
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Briefly, at a public hearing on the
sin tax’s renewal last Tuesday, Jan. 21,
mention was made of alternatives to
the tax. Among them: spreading the
tax to residents of surrounding counties, because people in those towns
value the sports teams as much as residents of Cuyahoga County, or asking
the teams to pay for the improvements themselves.
Joe Roman, president and CEO of
the Greater Cleveland Partnership, the
city’s chamber of commerce group
that will lead the push for the sin tax,
responded to a question from County
Councilman Dan Brady by saying the
mechanism does not exist in state law
to create a multicounty tax.
Mark Rosentraub, a professor of
sports management at the University of Michigan, was a member of
the Gateway Economic Development Corp., which oversaw development of the arena and ballpark,
from 2004 to 2009, when he was a
dean at Cleveland State University.
He said last week in an interview
that the history of the deal supports
the obligation to continue the public spending on the sports facilities.
“For better or worse, the leases
that were originally negotiated were
extraordinarily advantageous for
the teams,” said Dr. Rosentraub,
who has written several books on
sports teams and their relationships
with their home cities.
Dr. Rosentraub said those leases
were renegotiated in 2005 after Dan
Gilbert bought the Cleveland Cavaliers and the Dolan family bought the
Cleveland Indians. Dr. Rosentraub,
who was a part of those negotiations,
said the new owners agreed to spend
$1 million or $2 million a year in expenses that until then had been
Gateway’s responsibility.
In exchange, the teams gained
naming rights to the exterior of the
buildings.
Timothy Offtermatt, an investment
banker with Stifel Financial Corp.’s
Cleveland office who is chairman of
the Gateway board, declined in an interview to speculate on what might
happen if the capital investments on
the teams’ wish lists aren’t made.
Mr. Offtermatt said specific expenditures and the timing of those
expenditures will be negotiated between Gateway and the teams. He
doesn’t expect any substantive conversations to begin until after the
tax renewal vote.
GCP’s Mr. Roman said none of the
Cleveland teams have threatened to
leave if the public spending doesn’t
happen, but he noted that other cities
— Houston, Montreal and Seattle
among them — have lost pro sports
teams in similar circumstances.
‘Silly’ requests?
Under terms of the leases of the Indians and Cavaliers, any capital investment of more than $500,000 is the
responsibility of their landlord. That’s
technically the Gateway nonprofit.
Len Komoroski, CEO of the Cavaliers and Quicken Loans Arena, told
Cuyahoga County Council during
last Tuesday’s public hearing that the
building likely would need a capital
investment of between $55 million
and $65 million over the next decade.
The Indians’ executive vice president, Dennis Lehman, said the
baseball team foresees a similar
amount for Progressive Field.
The Browns’ situation is somewhat different because FirstEnergy
Stadium is newer and is owned by
the city of Cleveland, not Gateway.
But future improvements there are
expected to come in part out of the
sin tax if it is renewed.
In addition to scoreboards, the
Cavaliers and Indians are expected
to ask Gateway over the next decade
or longer to replace building roofs,
components of heating and air conditioning systems and sound systems and to make major concrete
repairs and replacements.
Opponents of the tax believe the
operators of the sports teams
should pay the cost of the buildings
they occupy, not smokers and
drinkers, many of them low-income
people. They particularly object to
the plan to use public money to
bring new, high-definition scoreboards to the buildings, which is
high on the teams’ to-do lists.
“You are now taking a silly step and
jeopardizing the economic standing
of many people with this regressive
tax,” said Roldo Bartimole, a columnist for the Cleveland Leader and Cool
Cleveland websites and a longtime
opponent of subsidies to sports
teams, at the County Council hearing.
“I hope there are enough members with the sense to realize what
you are doing,” Mr. Bartimole said.
Mr. Bartimole recalled failed
promises made by Gateway proponents when the six tax first was presented to voters in 1990. He offered
to council members a copy of an ad
used to sell the 1990 ballot issue that
said the Gateway complex would
create 28,000 jobs and millions in
new property taxes.
Job creation fell far short of that
claim, which tax supporters do not dispute. Mr. Bartimole also noted that before the complex opened, the Legislature exempted Gateway from paying
property taxes on the new buildings.
It then fell to Mr. Roman to defend a yes vote in May on the tax,
which expires in 2015.
“We obviously have a lot of educating to do and we plan to do it,”
he said. “These are facilities you
own; that means we own them as
Cuyahoga County residents. We’ve
made investments. Let’s keep them
competitive and let’s do it in a way
other cities are envious of.”
■
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1/23/2014
4:25 PM
Page 1
Chips: Banks adopt new card
technology as liability shifts
“Save 10 times the cost of the class in
reduction of scrap, downtime, returns,
and rework.”
decide to reissue its cards with EMV
So, if an institution such as Firechips to beat its far-larger competifighters Community issues EMV
tors to the punch. Instead, it was
cards (which also have the tradimotivated more by a desire to modtional magnetic stripe on the back),
ernize its outdated credit card probut a merchant’s terminals do not
gram, Mr. Laurendeau said. And,
allow the use of the EMV technology,
given the liability shift on the horithe merchant would face the liabilzon, implementing EMV technoloity in the event of fraud.
gy now made sense, he said.
“Today, 100% of that liability is
The difference in the cost of issuing
on the card issuer” for in-person
EMV cards — at $4 additional per
transactions, said Ben Laurendeau,
card — will total $21,600 in added
president and CEO of Firefighters
expense, Mr. Laurendeau said.
Community. “This shift in liability,
Not all card issuers will pay $4
I predict, is going to compel most
more per card, however, as the cost
merchants to move to EMV-enabled
depends heavily on the volume
terminals because they don’t want
ordered, said the EMV Migration
to hold that liability.”
Forum’s Mr. Vanderhoof. He estiOthers agree the shift in liability
mates EMV cards cost most issuers
will be the impetus for widespread
roughly $1 more apiece than cards
change in the United States, which
with the magnetic stripe only.
is one of the last countries to switch
Chipping away at fraud
to EMV, according to the EMV ConEMV cards carry on their chips
nection, a website maintained by
security credentials that are imperthe Smart Card Alliance in Princevious to access by unauthorized
ton Junction, N.J.
parties, helping to prevent data
At the end of 2012, a few million
skimming and card cloning, accordEMV cards had been issued in the
ing to the EMV Connection. EMV
United States, and by the end of
transactions also create unique
2013, roughly 10 million to 15 miltransaction data, so any captured
lion were in circulation, said Randy
data cannot be used to create counVanderhoof, executive director of
terfeit cards.
the Smart Card Al“We think that
liance and director THEY SAID IT
the reduction in
of the EMV Migra“This shift in liability ... is card fraud losses
tion Forum. The
will come close to
latter group is an
going to compel most
offsetting our addiindependent, crossmerchants to move to
tional expenses,”
industry body creEMV-enabled terminals.” said Mr. Laurenated in 2012 with a
deau of Firefighters
focus on introduc– Ben Laurendeau, president
and CEO of Firefighters Commu- Community. “It
ing EMV to the
nity Credit Union
essentially elimiUnited States.
nates the opporThat estimate
tunity for counrepresents a sliver
“This is the biggest
of the 1.62 billion
fundamental shift in the terfeit cards.”
However, EMV
EMV cards that
payment landscape in
cards don’t prewere in use across
the U.S. that has hapvent fraud in onthe globe in the
line transactions.
fourth quarter of
pened in a long time.”
And Mr. Lauren2012, according to
– Diane Jackson, VP of strategic
deau said the chip
data from EMVCo,
marketing, CPI Card Group
cards only can
a global technical
bring down the volume of in-person
body that manages and develops
fraudulent transactions to the extent
EMV specifications and related testthat merchants have EMV-enabled
ing processes.
terminals.
“One of the reasons why the U.S.
Roughly 10%, or 1 million, pointhas been so slow to make this adopof-sale terminals in the United
tion happen when other countries
States have been upgraded to or rehave moved ahead … is that the U.S.
placed by EMV-capable equipment,
is such a large, complex and diverMr. Vanderhoof said. The terminals
sified market,” Mr. Vanderhoof said.
are different in that they have card
Still, Mr. Vanderhoof said, the list
reader slots.
of U.S. institutions that have issued
Among the larger retailers that
EMV cards “is growing every day.”
have made the change are Home
“Those numbers are expected to
Depot, Best Buy and CVS.
be ramping up significantly in 2014,”
“In most other countries that
he said.
have gone through this migration,
Change slow to come
the cards have reached critical mass
before the terminals and merchants
An informal poll indicates no other
have,” Mr. Vanderhoof said. “The
banks or credit unions based in
merchants tend to wait until the last
Northeast Ohio have issued EMV
possible moment to make that
chip cards to consumers, though
changeover.”
Cincinnati-based Fifth Third Bank
Other changes to accommodate
introduced them for commercial
EMV cards are on the way. They inclients in August 2012.
clude upgrades to automated teller
A spokeswoman for Third Federal
machines and automated fuel
Savings & Loan wrote in an email:
dispensers, industry insiders said.
“We are currently reviewing the
The fraud liability shift for fuel
EMV standards and plan to reissue
dispensers isn’t slated until October
EMV debit and equity cards to our
2017.
customers by early next year.”
“The reason why the liability shift
KeyBank executives “have followed
dates are spread out … is because of
the EMV solution for years and are
the complexity,” said Diane Jackcollaborating with MasterCard, but
son, vice president of strategic
we do not have a specific, near-term
marketing for CPI Card Group, a
timetable” for issuing the cards,
Littleton, Colo.-based card manuaccording to a spokeswoman there.
facturer. “This is the biggest fundaHuntington Bank has “no plans at
mental shift in the payment landthis time” to issue the cards, a
scape in the U.S. that has happened
spokesman said.
in a long time.”
■
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8
1/23/2014
4:11 PM
Page 1
PUBLISHER/EDITORIAL DIRECTOR:
John Campanelli ([email protected])
EDITOR:
Mark Dodosh ([email protected])
MANAGING EDITOR:
Scott Suttell ([email protected])
OPINION
Still carping
A
s a friend recently suggested, maybe we
should find as many recipes as we can for
ways to prepare Asian carp. He thinks it’s
inevitable that the big fish will invade the
Great Lakes — if it isn’t cruising them already —
and will become the dominant species in the waters
of Lake Erie.
We’d like to believe our friend is wrong, but a Jan. 6
report by the U.S. Army Corps of Engineers isn’t giving us much confidence that the federal government
will act quickly enough to stop the voracious species
from entering the world’s largest body of fresh water.
The Great Lakes and Mississippi River Interbasin
Study that the Corps submitted to Congress isn’t a
definitive plan of action for addressing the threat
posed by Asian carp and 12 other “aquatic nuisance
species,” as they’re known in government speak.
Rather, it reads like a menu from a Chinese restaurant in presenting multiple options for preventing
the nuisance fish from working their way from the
Mississippi River basin into the lakes.
However, instead of stopping at giving readers a
choice from Columns A, B and C, the report presents eight —as in 8 — alternatives for heading off
the fish that don’t belong in the Great Lakes.
Jo-Ellen Darcy, assistant secretary of the Army, said
in a news release that the study will “provide valuable
information for decision-makers” on the options
available for controlling the invasive species. However, if the goal is to develop a “consensus toward a collaborative path forward,” as stated in the same release by Brig. Gen. Margaret W. Burcham,
commander of the Corps’ Great Lakes and Ohio River
Division, then the Corps is guilty of providing decision-makers with TMI — too much information — by
failing to narrow the options to the best available.
Achieving consensus with eight horses in the race
stands to be a grueling, time-consuming process.
And federal officials already have wasted enough
time dragging their feet as an ecological disaster in
the Great Lakes awaits.
Senators and governors of President Obama’s
own party begged him as early as four years ago to
stop ASAP the potential invasion of Asian carp into
the Great Lakes via the waterways in and around
Chicago, the president’s hometown. Two years ago
this week, the Great Lakes Commission and the
Great Lakes and St. Lawrence Cities Initiative issued
their report, “Restoring the Natural Divide.” It
showed the physical separation of the Great Lakes
from the Mississippi River basin, where the carp
lurk, “is the best long-term solution for preventing
the movement of Asian carp and other aquatic invasive species” into the lakes.
And yet, as we approach the middle of the decade,
the threat of the 100-pound carp destroying the
habitat of native species such as walleye and perch
is greater than ever.
The inaction is maddening. The already-lengthy
process also is why we find frightening the prospect
of seeing several more years pass before serious
headway is made toward ending the threat.
Elected officials from throughout the Great Lakes
region must settle on a plan and apply pressure on
the Obama administration to move it forward. Otherwise, we all might need to acquire a taste for carp.
FROM THE PUBLISHER
It’s Mr. Campanelli, for the last time
On second reference, which “Mr. T”
or as long as anyone can rememwould we talking about?
ber, we’ve used courtesy titles in
Another problem: How do we treat
our articles at Crain’s Cleveland
horrible people? I never want to see “Mr.
Business. That means if we write
bin Laden” in print. (Our pola story about, say, Dan Gilbert,
icy is to drop the title for conwe call him “Mr. Gilbert” on JOHN
victed felons.)
second reference.
And what about historical
(Only a few newspapers still CAMPANELLI
figures? Does Attila the Hun
use Mr., Mrs., Miss and Ms. in
become “Mr. Hun”? Do we
front of last names, most nowrite “Mr. Socrates,” “Ms. Of
tably The New York Times and
Arc” or “Mr. Christ”?
The Wall Street Journal. Most
Then there’s the problem of
papers abandoned the pracwhether to use “Mrs.” “Ms.” or
tice decades ago.)
“Miss.” We try to use the title
Using them creates a few
the woman prefers, which
problems.
means our reporters actually
First, how do you deal with
must ask that question during
unusual names? Let’s say the
an interview.
Cavaliers trade for the player formerly
I understand why courtesy titles are
known as Ron Artest. Do we call Metta
used. It’s a gesture of politeness, civility
World Peace “Mr. Peace” or “Mr. World
and respect. Some people might say that
Peace”? If we write an article on Meat
adding a Mr. or Mrs. to an article elevates
Loaf playing a show in town, do we call
the tone. That’s kinda sweet.
him “Mr. Loaf”? Can we say “Ms. Gaga”
But I’m not buying it.
is coming to The Q in May or is “Lady”
Courtesy titles are outdated and stuffy.
already a courtesy title?
They trip up otherwise smooth writing,
And what if Ice-T opened a restaurant
create an extra layer of work for our rein town, partnering with the mohawked
porters and leave the air with a whiff of
star of the 1980s show “The A-Team”?
F
pretention. They were made for two
types of people: your father’s friends and
the people who schedule polo matches.
So beginning next issue, you will see
no more misters and missuses (missuses? — is that even a word?) in Crain’s
Cleveland Business. We will be switching
over to Associated Press style: no courtesy titles. We will, however, continue to
use “Dr.” or “the Rev.” or military ranks
when they are relevant to an article.
We’ll use common sense and keep
courtesy titles in special circumstances,
like when we write about Mister Brisket,
Miss America or Ms. Pac Man.
Kidding aside, I don’t make this
change lightly because it’s an adjustment to the voice of our publication. But
the truth is, that voice needs to loosen its
collar a bit and show some personality.
The business news will keep coming, but
we’ll try to be more conversational.
Also, know that this is not a concession
to our ever-slouching culture, which has
given us such innovations as twerking, sexting and jeans at church. This is about us
writing for you, not down to you.
So until next week, I say, thank you,
Mr. and Mrs. Reader.
■
LETTER
Diversity has to be a year-round thing
A
s a small business owner, I am a
new subscriber to Crain’s and
thoroughly enjoy it. It keeps me
up to date with the business
community and the major happenings
in our wonderful city.
A couple years ago, I was approached to
submit my name because Crain’s wanted
to be more diverse with minority and female business enterprises. I thoroughly applauded your efforts. I also remember your
participation with the President’s Council
and how the recipients of the Brian Hall
Entrepreneur of the Year Award, later
named the John Bustamante Entrepreneur
of the Year, were always highlighted in an
issue. As a matter of fact, I was the winner
of this prestigious award two years ago.
My problem is your Jan. 6 section on
predictions for 2014. As a business owner, I find predictions about the economy
quite interesting. But I did notice that
not one of the regional leaders polled
was a person of color (maybe one
Hispanic) and that only two were female.
Again, while I applaud you for being on
your diversity list, I want to be more than
just on your list. I can think of many people in this community who are minorities
and woman who would have had great input and predictions for this section. I was
thoroughly dismayed, and honestly at first
considered cancelling my subscription,
but decided to reach out instead.
I always find it amazing that when major corporations highlight any person of
color that the article is based specifically on their capabilities as a businessperson or leader of color, and not their talents or contributions in our community
in general. Diversity and inclusion efforts
are great, but without adding the component of equality and being aware of
cultural sensitivity, it means nothing.
As we celebrate Martin Luther King’s
birthday and think about his famous
speech, “I Have a Dream,” it is necessary
that we be reminded that we cannot
continue to default on the promissory
note of equality. It is imperative that
Crain’s not only highlight those of color
during Black History Month or MLK Day,
but realize that there are wonderful and
great leaders in our community who
have the ability to share opinions on predictions that affect our community.
In closing, in 2010 I had the opportunity
to sit with President Obama at his “Winning the Future” forum and was asked
about some of the obstacles about being a
small business owner — not a black business owner, but simply a business owner. I
hope you get the gist of what I am saying
and that cultural awareness and sensitivity
becomes a forefront when writing articles
such as this. Reach out to us on our capabilities — we have a lot to offer. Our crystal
balls are the same. We just need to make
sure we are all looking at it the same way.
Ariane B. Kirkpatrick
The AKA Team
Cleveland
1/23/2014
3:52 PM
Page 1
OSHA: ‘Everything’ will be ‘fair game’
OSHA has said in public documents that the changes would allow
for increased identification and
elimination of workplace hazards.
But not everyone who deals with
the agency buys that rationale.
Mike Hanna, a partner at the
Squire Sanders law firm in Cleveland who has been following health
and safety issues throughout his 33year career, said the information in
the injury reports “doesn’t tell the
full story.” The reports, viewed in
isolation, could present a misleading picture of the relative safety of a
company’s work environment, according to Mr. Hanna. The information also could be used against a
company by a competitor, he said.
Mr. Hanna and Vincent Norwillo,
a labor relations attorney and partner at Gonzalez Saggio & Harlan in
Cleveland, also say the bulked-up
reporting of minor incidents could
trigger more site visits by government inspectors.
“Once OSHA’s on site, everything’s fair game,” Mr. Norwillo
said.
Mr. Norwillo also raised concerns
about the proposal’s implications for
employee privacy, noting that people familiar with certain situations
could piece information together
even if specific details are redacted.
Employers are in favor of OSHA
working to improve safety, he said,
but they don’t see how this proposal would help.
What price safety?
Mike Porter, director of global environmental health and safety for
Goodyear Tire & Rubber Co., said in
an email that the tire maker “supports
OSHA’s goal of increasing workplace
safety through its development of an
electronic record-keeping system.”
But Mr. Porter said Goodyear also is
concerned about possible “misuse
and interpretation of the data” and
the potential for worker confidentiality to be compromised.
Manufacturing groups that include the National Association of
Manufacturing and Brecksvillebased Precision Machined Products
Association express similar worries.
Miles Free, director of industry
research and technology at the Precision Machined Products Association, said he doesn’t think the proposal would improve worker safety,
and he fears the data submitted
wouldn’t reflect a company’s overall safety culture. He also raised
concerns about the amount of time
it could take for small businesses to
implement the new system.
Mr. Free traveled to Washington,
D.C., earlier this month to take part
in a public meeting on the proposal. OSHA is seeking comments on
the electronic recordkeeping proposal through March 8. An implementation date, if the proposal gets
that far, has not been set.
Still, not all business people are
sounding an alarm about the potential change.
Jay Finegan, compliance services
leader at Dakota Software in Cleveland, said there are some legitimate
concerns about OSHA’s electronic
recordkeeping proposal, but none
that are insurmountable. Dakota
Software offers tools to companies to
help them track and comply with environmental and health and safety
regulations, like those from OSHA.
Mr. Finegan sees the debate as a
repeat of the Environmental Protection Agency’s toxic release inventory in the 1980s. The agency required big polluters to submit data
about their emissions on a regular
basis. When the information was
made public, people started identifying the companies that were pol-
luting, and the companies, in turn,
started looking for ways to reduce
their emissions and get off the list.
“That’s actually a good thing,”
Mr. Finegan said.
9
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Peter Anselmi, environmental
health and safety manager for American Spring Wire Corp. in Bedford
Heights, said he doesn’t think the proposal would make a big difference in
the short term, though the threat of
bad press and negative attention from
the public “has the potential to make
a big difference” in the long term.
Mr. Anselmi is in favor of the
transparency, and he thinks people
have the right to know about a company before they decide to work for
it. American Spring Wire only has
about 230 employees and would fall
under the annual reporting requirements, if the proposal is passed as is.
Parma-based GrafTech International, a maker of graphite electrodes,
already tracks its employees’ injuries
and near-injuries electronically, said
Tom Jacques, vice president of
health, safety and environmental
protection and security. He said
GrafTech’s safety experts see the proposal as a possible improvement, assuming the system isn’t cumbersome
to use. The company has close to
1,300 employees in the United States.
Mr. Jacques said the proposal
could help OSHA better collect data
and improve its analysis of trends,
much like GrafTech does already.
GrafTech can analyze the data by
site and identify areas that need
more attention.
For instance, if the company is
looking into back injuries, it can see
where they’re happening and
whether that work area can be improved. Mr. Jacques said GrafTech
is looking for “risks that you can
eliminate.”
■
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Selling a family-held
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Houston Los Angeles New York Orlando Philadelphia Seattle Washington, DC
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Are privileged communications
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Crain’s Cleveland Business Custom Publishing
GLOBAL MANAGEMENT
Exploring Africa as a land
of deal opportunity. S-15
PORTFOLIO
MANAGEMENT
Equity incentives for management of portfolio companies.
S-18
BEST PRACTICES
Hiring counsel with good
judgment. S-19
20140127-NEWS--13-NAT-CCI-CL_--
1/22/2014
2:12 PM
Page 1
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S-3
BUYERS
The deal
structure
continuum
Borrower friendly
environment expected
to continue in 2014
BY JACQUELINE HOPKINS
AND JOSEPH KWASNY
:
hen considering an
acquisition, choosing
the best structure
for capitalizing your
plans is paramount. The good
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tors point to a positive outlook for
borrowers in 2014.
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ing capital assets,
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approach could be
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ABL transactions
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pany to keep its
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met. A company
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pursue growth strategies rather
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alternative for businesses that are
Best practices in due diligence
BY MARK BOBER
A
quality of earnings
due diligence
engagement is
all about risk
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are a myriad of areas and
procedures that can be
applied in diligence, they
should all be tailored
to the target company’s
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operations, financial
position, and industry. Buyers
need to understand the QRUPDO
ized performance and financial
position of the target as a basis
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tions, validation of price,
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acquisition planning.
Best practices include the
following:
Q Assessment of manDJH
ment team and scalability
of team to handle growth
Q Customer and vendor
analysis
•Assess customer and
vendor concentrations
•Margins and trends
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earnings
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changes in revenue and EBITDA
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ability of the revenue and earnings
stream
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items
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ments
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derlying assumptions
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support revenue, margin, and
operating expense assumptions
See DILIGENCE Page S-16
Your Deal
Starts Here.
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It was a good time to
be a borrower in 2013
and borrower-friendly
conditions should
continue in 2014.
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less frequent monitoring than an
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tions, lenders look for businesses
with sustainable levels of EBITDA
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depreciation and amortization) and
healthy margins (typically 10% or
greater). These loans are governed
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availability, and lenders expect to
see loan repayment via scheduled
amortization.
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“asset stretch” solution that uses
the ABL structure and provides
credit beyond standard advance
ratios to “stretch” availability.
Lenders prefer to retire the stretch
portion of the debt quickly, usually
within two years, and price this
part of the loan between the cash
See STRUCTURE Page S-16
Michael J. Meaney
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Learn more here.
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mcdonaldhopkins.com
Carl J. Grassi, 1SFTJEFOU Shawn M. Riley, Cleveland Managing Member $IBSMFT#;FMMNFS$IBJS#VTJOFTT%FQBSUNFOU
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20140127-NEWS--14-NAT-CCI-CL_--
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1/22/2014
2:12 PM
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TRENDS
Trends in representations and
warranties insurance usage
BY JEFF PHILLIPS
3LUKLYILULÄ[Z
Another recent trend is the growarket awareness and
ing acknowledgment by lenders
use of transaction inRIWKHEHQHÀWVRIWKHLUERUURZHUV
surance has increased
using R&W Insurance in acquisisignificantly in the
tions and divestitures. R&W InsurUnited States over the last five
ance can ease a lender’s concerns
years. The most common form of
about a buying borrower’s
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ranties (R&W) Insurance,
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package via a buyers-side
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or assets given by sellers
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in transaction documents.
value of assets purchased
PHILLIPS
Users of R&W Insurance
by a borrower that are also
have found the final,
being pledged as collatfully negotiated policy terms to
eral for the lender. Conversely, it
be equal, and often superior, to
can protect the value of a selling
the indemnity terms customarily
borrower’s proceeds when the bornegotiated between buyers and
rower is disposing of a portion of
sellers.
Use in smaller deals
One recent trend is the use of
R&W Insurance in smaller deals.
Increased competition among
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the process have resulted in attractive terms for insuring deals below
$10 million in purchase price. In
November, one insurer in the R&W
space went so far as to introduce
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for smaller deals.
its assets (i.e. the lender’s existing
collateral). Additionally, where
appropriate, assignment/payment
rights can be provided to lenders
under R&W Insurance policies,
similar to loss-payee status.
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tax exposure when the application
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example is where an investor is
concerned about losing tax credit
status in a real estate investment.
This coverage can enhance a develRSHURUV\QGLFDWRU·VULVNSURÀOHDQG
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tax credit market with reduced
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tax credits. Tax Liability coverage
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in some cases, be the impetus for
closing a deal. Since these policies
are, by their nature, custom tailored to the transaction at issue, it
requires knowledgeable parties negotiating the terms of coverage to
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ensure the right outcome.
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A third trend is the expanding
acceptance of Tax Liability coverage. This type of policy can work
to reduce or eliminate contingent
Policy premiums typically range
from 1.5% to 4% of the policy
amount, and who pays the prehe issue of post-closing
mium is a matter of negotiation.
liability of private equity
The retention or deductible is
sellers is always one that
negotiable — although insurers
garners the most attenlike to see both the buyer
tion in sale transactions.
and seller responsible for
Because of the very nature
a portion of the retention
of private equity funds,
so the insurer knows each
private equity sellers seek
party has some “skin” in
to limit to the greatest
the game and negotiated
extent possible any postthe purchase agreement at
closing liability from sales
arms’ length. The coverage
transactions.
has limitations and the
Historically, private
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parties must review the
equity sellers have used
policy carefully to ensure
escrows and fought tooth
they understand the exclusions. In
and nail on the scope and duraparticular, most policies carveWLRQRISRVWFORVLQJLQGHPQLÀFD
out from coverage fraud, willful
tion obligations in order to limit
misrepresentations and items
exposure to post-closing liabilities.
known to the buyer’s deal team.
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value and be the impetus for closing a deal.
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cation obligations for breaches of
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of private equity buyers are using
such insurance policies as a way
to set themselves apart in auction
transactions. As more U.S. insurers
enter the market and transaction
participants become more familiar
with the coverage offered by representations and warranties policies,
such policies will become a more
valuable device used in structuring
M&A transactions.
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Policies can be structured as
either seller or buyer policies.
penalties, punitive damages and
consequential damages or damages
based on a multiplier. Underwriters are willing to negotiate the
exclusions to coverage, but any
change to the exclusions may impact the pricing of the policy.
Properly structured, representations and warranties policies
can give private equity sellers the
peace of mind they are seeking in
sales transactions and can give
buyers a leg up in auction transacQ
tions.
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Meaden & Moore’s
Transaction Advisory
Services include:
Acquisitions and
Divestitures
What do
You Value?
Our Transaction Advisory Service professionals
deliver quality, accuracy and speed in a complex
Due Diligence
Business Valuations
Ownership Transition
Tax Consulting
and Structuring
STANDING OUT.
Jones Day congratulates our clients, American Greetings,
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by the Association for Corporate Growth as Northeast
Ohio’s top deal makers.
mergers and acquisition market.
To reach our Cleveland Office call 216.241.3272 or visit www.meadenmoore.com
2400 lawyers throughout the world. www.jonesday.com
20140127-NEWS--15-NAT-CCI-CL_--
1/22/2014
2:13 PM
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S-5
TRENDS
Will 2014 bring a wave of going private transactions?
BY PAUL SCHNEIR AND
ANDREW VOLLMER
E
quity markets are scoring
record highs and the Dow
is stronger than ever.
Conventional wisdom
suggests that when the stock
market is up, fewer companies
JRSULYDWH%XWLQWKHÀUVWWKUHH
quarters of 2013, there were 20
percent more transactions taking
companies private, compared to
the same time in 2012. With a
strong stock market, why are so
many companies choosing privatization?
The short answer is that some
FRPSDQLHVDUHQRWEHQHÀWLQJDV
much as their
peers or their
industry sector
from the strength
in the equity
markets. Smaller
companies, and
those needing to
adjust their business model and
SCHNEIR
long-term growth
strategies, are not
all experiencing
valuation multiples that match
their potential. In
many cases, these
companies lack
adequate equity
research support
and subsequently
VOLLMER
institutional investor interest. In
those cases, going private can create immediate shareholder value
while facilitating the long-term
growth potential of the company.
But leaving the public markets
is not the best choice for every
company. For privatization to
make sense, private equity buyers
generally focus on three criteria:
strong debt capital markets, a reasonable valuation, and a promise
of hidden value. Currently, debt
capital such as institutional term
loans and high yield bonds is readily available to experienced buyers.
This availability has created strong
interest from private equity in going private transactions. Therefore,
privatization viability comes down
to valuation and determining if a
company has a compelling story
that just isn’t being heard by public
market investors.
Firms seeking to take a company
private typically must offer a sigQLÀFDQWSUHPLXPRYHUWKHFXUUHQW
share price. And while M&A valuations may be lofty compared to the
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given the hard lessons recently
learned, are less likely to offer the
enormous share premiums and
valuations that were typical in going private transactions before the
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candidates for privatization – even
in a robust stock market environment.
We’re seeing an increase in
privatizations among small-cap
industrial and consumer companies due to their tendency toward
slow-but-steady growth. The
frequency of going private transacWLRQVUHÁHFWVWKLVWUHQG,QWKHÀUVW
three quarters of 2013, activity
grew by 28 percent for companies
with valuations less than $1 billion
compared to 21 percent for the
market overall for the same time
period in 2012.
When assessing whether a company is a candidate for privatization, consider the following:
•Is the stock well-researched
and actively traded?
•Is the company fairly valued
vis-à-vis its peers?
•Does the company have a compelling long-term growth story that
does not translate well to predict-
able quarterly performance in the
medium term?
•Could privatization support
investment in a more comprehensive growth story, such as major
business model realignments, strategic acquisitions or international
expansion?
Given that many small and midcap public companies share one or
more of these attributes, and forecasts for a continued slow-growth
economic climate, we expect many
will strongly consider going private
Q
in 2014.
Paul Schneir is Head of M&A, KeyBanc Capital Markets, Inc. Contact
him at (216) 689-4005 or pschneir@
key.com. Andy Vollmer is Managing
Director and Group Head, Consumer
& Retail Group / Financial Sponsors, KeyBanc Capital Markets, Inc.
Contact him at (216) 689-4556 or
[email protected].
KeyBanc Capital Markets is a trade name under
which corporate and investment banking products
and services of KeyCorp and its subsidiaries, KeyBanc Capital Markets Inc., Member NYSE/FINRA/
SIPC, and KeyBank National Association (“KeyBank
N.A.”), are marketed.
has acquired
has acquired
The Weiss Family
$4,300,000,000
$870,000,000
has sold a majority stake to
$240,000,000
Non-Voting Preferred Stock
Sell-Side Advisor
Buy-Side Advisor
Placement Agent
has acquired
Buy-Side Advisor
has sold
Sell-Side Advisor
Sell-Side Advisor
Buy-Side Advisor
Sell-Side Advisor
to
Members of Management
and
Sell-Side Advisor
Sell-Side Advisor
Unlock opportunity
We know that successful, long-term business relationships
depend upon delivering results for our clients.
At KeyBanc Capital Markets,® more than 600 professionals
leverage extensive industry knowledge, equity and debt capital
markets expertise, and a leading merger and acquisition advisory
practice, to deliver strategic solutions that help our clients
capitalize on opportunities.
To learn more:
Contact Paul Schneir
Managing Director and Group Head
at 216-689-4005 or [email protected].
Visit key.com/mergers
KeyBanc Capital Markets is a trade name under which corporate and investment banking products and services of KeyCorp and its subsidiaries, KeyBanc Capital Markets Inc.,
Member NYSE/FINRA/SIPC, and KeyBank National Association (“KeyBank N.A.”), are marketed. Securities products and services are offered by KeyBanc Capital Markets Inc.
and its licensed securities representatives, who may also be employees of KeyBank N.A. Banking products and services are offered by KeyBank N.A.
Key.com is a federally registered service mark of KeyCorp. ©2014 KeyCorp ADL6856
20140127-NEWS--16-NAT-CCI-CL_--
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GLOBAL MANAGEMENT
7UXO\LQWHUQDWLRQDOÀUPV
FDSWXUHEHVWRSSRUWXQLWLHV
BY STEWART KOHL
T
he world isn’t small and
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of instantaneous communication, minimal
language barriers, common
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logistics. Globalism is as
real and paradigm shifting
as the telegraph and railroad that knitted together
the United States in the
19th century. As a private
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Company embraces this
new reality because it’s great for
us, our investors, and our portfolio
companies.
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1989, we knew some exceptional
expansion opportunities were
beyond our borders. The Iron Curtain had just fallen, and Eastern
Europe presented a fertile growth
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take a risk.
Since then, we’ve raised four
funds in Europe and two in the
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our busy investment pace in North
America, growing and succeeding
along the way. As a ClevelandEDVHGÀUPZH·UHQRWDORQHLQRXU
global approach. Most private
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important international work on
some level for compelling
reasons.
Today, everything we
do is interconnected, and
our global presence boosts
results for our entire
portfolio. That’s because
being international today
means much more than
KDYLQJRIÀFHVDQGPDNLQJ
investments around the
world. Several years ago, Riverside
formalized our global effort under
the “One Riverside” banner, which
compels deal teams to cooperate
with one another, share origination and operating resources and
knowledge, and open new markets
for companies regardless of where
they are headquartered. That cooperation drives powerful results.
In 2013, Riverside enjoyed a successful exit from Capol, a German
manufacturer of polishing, antisticking and release agents used
by pharmaceutical and confectionary companies. Riverside used its
global resources to acquire Capol’s
North American distributor in a
deal that further strengthened an
outstanding investment. Crosspollination between our various
regions is a regular occurrence.
Additionally, Riverside’s Hong
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PDQ\RIWKHÀUP·VLQYHVWPHQWV
Hong Kong houses our Asia
Sourcing team, which adds value
through every phase of the investment. From evaluating potential
investments’ production facilities
to helping portfolio companies access Asian customers and everyWKLQJLQEHWZHHQWKLVRIÀFHSOD\VD
vital role.
The world has never been more
interconnected, and the best
SULYDWHHTXLW\ÀUPVKDYHIROORZHG
suit, which is rewarding and exciting to see. It’s no longer enough to
have a presence and commitment
to local markets around the world.
7KRVHRIÀFHVPXVWZRUNWRJHWKHU
IRUÀUPVWRWKULYH
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Stewart Kohl is co-CEO of The
Riverside Co., a global private equity
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LU[LYWYPZLZ]HS\LKH[\W[VTPS
SPVU*VU[HJ[OPTH[
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is proud to join ACG in recognizing our longstanding client
and the other 2014 Deal Maker Award Winners
We are honored to have been legal counsel to Evolution Capital Partners since its inception,
including the recent sales of The Accurate Group and American Eagle Mortgage and the recent acquisitions
of Lewellyn Technologies, Budco Financial Services and Axiom Sales Force Development.
Calfee’s Corporate/M&A Group: Helping deal makers get deals done for 110 years.
Calfee, Halter & Griswold LLP
The Calfee Building
1405 East Sixth Street
216.622.8200
Cleveland | Columbus | Cincinnati | Calfee.com
20140127-NEWS--17-NAT-CCI-CL_--
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SELLERS
Perfect storm for sellers
BY ANDREW K. PETRYK
T
he old adage “a rising
tide lifts all boats” certainly applies to the current elevated pricing environment, as a perfect storm of
SHQWXSGHPDQGFKHDSÀQDQFLQJ
and surplus capital is driving up
valuations, making today’s window particularly advantageous
for sellers contemplating exits.
Competitive dynamics suggest it
is a seller’s market, particularly
for high-quality businesses.
Investors have considerable buying power, with $1.2 trillion in cash
sitting on corporate balance sheets1
and $328 billion
in private equity’s
war chest2, and
are responding in
kind because they
need acquisitions
to meet growth
targets. Corporates will be
PETRYK
looking to M&A
over organic expansion in 2014, reported Thomson
Reuters in its Fifth Annual Survey
of Corporate Decision Makers, with
executives citing increased pressure to match acquisitive competitors, despite rising purchase prices.
Financial buyers are now bidding
at comparable levels to strategics,
as continued pressure to put dollars to work forces private equity
groups to be aggressive in auctions
and bid up purchase multiples for
the right assets.
The debt markets remain
aggressive as capital providers
FRPSHWHIRUÀQDQFLQJRSSRUWXQL
ties, with all indicators pointing to
higher leverage levels, lower pricing, and looser structures absent a
material increase in M&A activity.
In the low interest rate environment, buyers can afford to pay
more and are with higher leverage
(up a half to nearly a full turn of
EBITDA [earnings before interest,
tax, depreciation, and amortization] in 2013) pushing up purchase
price multiples.
The frothy market is fueling a
stair-step increase in valuation
multiples, equating to a full multiple of EBITDA or more depending
on asset quality. While the range
in purchase price multiples still
remains wide, dictated by industry,
ÀQDQFLDOSURÀOHDQGÀQDQFLQJ
structure, premium valuations
can be garnered irrespective of
company size, with growth being
rewarded across all industries. By
the numbers, private equity reVHDUFKÀUP3LWFK%RRNUHSRUWHGLQ
its 2H 2013 Middle Market Report
that the middle market median
enterprise value (EV) to EBITDA
multiple reached 10.5x in June
2013, supported by a median debt
multiple of 6.1x — both decade
highs. According to November data
UHSRUWHGE\6WDQGDUG3RRUV/HY
eraged Commentary & Data, purchase price multiples (EV/EBITDA)
IRUVWUDWHJLFDQGÀQDQFLDOEX\HUV
reached their highest level since
the market peak in 2007.3
In the M&A market, timing
is everything. Companies that
weren’t ready to go to market in
2013 because they needed another
year of seasoning may now be
primed to take advantage of favorable conditions. For certain cyclical
businesses, the current industrial
investment cycle points to a closing
window for peak valuation. Those
that are playing the waiting game
may lose some of their advantage if
the opening to today’s seller’s marQ
ket closes.
1S&P 500 cash and marketable securities
L_JS\KPUNÄUHUJPHSZHZVM:LW[LTILY
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TPSSPVUHUKTPSSPVU
Andrew K. Petryk is Managing
Director and Principal of Brown Gibbons Lang & Co. LLC, an investment
bank serving the middle market.
[email protected].
PREPARE. ANALYZE.
NEGOTIATE. SUCCEED.
R E C E N T
S E L E C T
T R A N S A C T I O N S :
An affiliate of
has merged with
has acquired
TRI-COUNTY
has acquired
Bank of America Field Services
MAINTENANCE
League Park acted as
financial advisor to Enovate
on the transaction
financial advisor to VanDeMark
on the transaction
financial advisor to Achill Partners
on the transaction
co-advisor to Safeguard Properties
on the transaction
®
has acquired
Strategic Advisory
Falls Church Laser
financial advisor to 360Fresh
on the transaction
financial advisor to Cardinal Fastener
on the transaction
financial advisor to ForTec Medical
on the transaction
League Park served as
financial advisor to Campbell in
connection with acquisition strategies
Whether your business is exploring the possibility
of a sale, acquisition or refinancing, League Park can help
you achieve the goal that best fits your unique situation.
Strategic Advisory
Strategic Advisory
financial advisor to Ferro in
connection with acquisition strategies
financial advisor to
PreEmptive Solutions
For more information, contact Sean Dorsey at
216.455.9990 or [email protected]
www.leaguepark.com
We cover all the bases.
S-7
20140127-NEWS--18-NAT-CCI-CL_--
S-8
1/22/2014
2:15 PM
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SELLERS
Advice for selling a family-held business
is located, and
documenting any
informal arrangements.
BY MICHAEL R. TUCCI,
JENNIFER E. HORN AND
DAVID W. HILDEBRANDT
W
hether you are preparing for retirement
or simply want to
explore other opportunities, the decision to sell
a family-held business is not
an easy one. What should you
consider before you travel down
the path of putting your company
up for sale?
QReview your ÄUHUJPHSYLJVYKZ
HUKLZ[HISPZO[OLJVTWHU`»ZJ\Y
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address the company’s valuation.
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discuss whether
HILDEBRANDT you would be
willing to sign a
non-compete agreement, and think
about when and how you will inform your employees of an impending sale. Another important factor
to address is whether the buyer
will want key employees to remain
with the company. Particularly in a
family-held business, family members who are no longer needed may
ÀQGWKLVGLIÀFXOWWRDFFHSW
HORN
some range in valuation based on
many factors, such as a multiple of
earnings valuation, current trends
in the market and other related
ÀQDQFLDOPRGHOV%HLQJDEOHWR
SUHVHQWDEX\HUZLWKVROLGÀQDQ
cial information not only increases
your credibility with the buyer,
but it also helps maximize what a
potential buyer is willing to pay for
your business.
Q(J[HZH\UP[ If multiple family members will be involved in the
sale, ensure that everyone is on
the same page as to the company’s
value, how decisions will be made
or what terms will be deal breakers. Allowing emotions or disagreements to affect negotiations will
Q(U[PJPWH[LX\LZ[PVUZ[OH[^PSS
JVTL\WPUK\LKPSPNLUJL All too
often, sellers are unprepared to
answer questions from a buyer that
PD\UHODWHWREXVLQHVVFRQWUDFWVÀ
nancial statements, or intellectual
property, to name a few. Work on
organizing your agreements, determining where relevant information
Because no two deals
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Negotiate with care to minimize potential
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BY CHRISTOPHER P. REUSCHER
AND SARAH BAKER
W
hen a buyer and seller
cannot agree on a purchase price in an M&A
deal, what happens?
If neither side is willing to walk
away, the parties might consider
an earn-out to “bridge the gap.” In
an earn-out structure, the buyer
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price up front, and then pay an
additional amount (the earn-out)
afterward if the acquired company
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benchmarks. Although an earn-out
can be a useful tool in getting the
deal closed, a poorly written earnout provision can cause nightmares (and a lot of hard feelings)
for the seller and the buyer.
Important factors to consider
when negotiating an earn-out are:
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©ZLWK´QDQFLQJSURYLGHGE\©
and
Earn-outs in M&A deals
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Q 7LYMVYTHUJLILUJOTHYRZ
The earn-out benchmark can be
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metrics, such as product development, customer growth (or retention), or obtaining special governmental licenses. In any event,
the benchmark must be precisely
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The seller will want to maintain
some oversight or control over the
company after closing to make sure
the buyer is maximizing efforts
toward reaching the benchmark.
On the other hand, the buyer’s
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employed) without cause, or a number of other triggering events. Such
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For 25 years,
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ED KENTY, President & CEO
Park Place Technologies
Growing at the rate of 24 to 28 percent
for six years running means business is
booming—and not without its challenges.
Serving bigger customers, expanding into
global markets and adding employees are
just a few by-products of success that have
made Park Place Technologies happy to rely
on Benesch. From corporate, transactional
and tax matters to private equity and
employment law, we help Ed and his team
take double-digit growth in stride.
PXVWEHFOHDUO\GHVFULEHGLQWKH
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Christopher P. Reuscher is a Partner
with Roetzel & Andress. Contact him
at (330) 762-7994 or creuscher@
ralaw.com. Sarah Baker is an associate with Roetzel & Andress. Contact
her at (330) 762-7985 or sbaker@
ralaw.com.
S-9
“Benesch has somebody who meets every single
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across—and we’ve come across many new
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able to handle.”
If neither side is
willing to walk away,
the parties might
consider an earn-out
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To learn more about our relationship
with Park Place Technologies, visit
beneschlaw.com/myteam
MY BENESCH MY TEAM
Cleveland • Columbus • Indianapolis • Philadelphia • Shanghai • White Plains • Wilmington • www.beneschlaw.com
Featured team (left to right)
IRA C. KAPLAN, MAYNARD (MIKE) A. BUCK, RICHARD F. TRACANNA, CARRIE A. BENEDICT, DONNA FULLER (paralegal),
ROBERT A. MARCHANT, JOSEPH G. TEGREENE, MICHAEL K. SWEARENGEN, HOWARD A. STEINDLER, JESSICA N. ANGNEY
© 2013 Benesch Friedlander Coplan & Aronoff LLP
20140127-NEWS--20-NAT-CCI-CL_--
S-10
1/22/2014
2:16 PM
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SELLERS
Are privileged
communications
protected?
5DPLÀFDWLRQVRI
WKH*UHDW+LOOFDVH
BY JENNIFER L. VERGILII
O
n Nov. 15, 2013, the
Delaware Court of
Chancery, in Great Hill
Equity Partners IV, LP
et. al. v. SIG Growth Equity Fund
I, LLLP et. al., held that unless a
merger agreement specifically
excludes premerger attorneyclient communications from
the assets that
transfer to the
surviving company, Section 259
VERGILII
of the Delaware
General Corporation Law includes them. In
this decision, the Delaware court
declined to follow a 1996 decision
of the New York Court of Appeals, Tekni-Plex, Inc. v. Meyner
& Landis, which held that the
selling party retains control of
pre-merger attorney-client privileged communications.
As a practical matter, what does
this mean? First, the choice of governing law for the merger agreement matters. For agreements
governed by Delaware law, this
means that if the merger agreement is silent on this issue, the
minute after closing, the surviving
corporation could request that all
emails and other communications
between the target, its owners and
to a malpractice claim if the issue
ZDVQRWVSHFLÀFDOO\DGGUHVVHGZLWK
the seller-client — after all, items
may have been discussed under the
presumption of continued attorneyclient privilege after the transaction.
This case involved a claim by
Great Hill Equity Partners IV,
LP that the defendants, including former shareholders and
representatives of Plimus, Inc.,
fraudulently induced the buyer to
acquire Plimus. Buyer’s claim was
based, in part, on information that
it collected from pre-transaction
communications between the sellers and Plimus’ then-legal counsel,
Perkins Coie, regarding the trans-
Be proactive,
cautious with IT
BY PAT BERRY
T
RIÀFHUVRQWKHRQHKDQGDQGLWV
counsel, on the other hand, be sent
to it (if not already in its possession). In other words, a buyer can
get access to all “skeletons in the
closet” that may or may not have
been disclosed in the schedules to
the merger agreement. At best, this
may provide a clear roadmap for
buyers to indemnity claims, and at
worst, a basis for potential claims
of fraud and bad faith. In addition,
counsel for seller may be subject
action. It was undisputed that the
merger agreement did not include
any provision expressly addressing
pre-merger attorney-client communications and Plimus had not
taken any steps to segregate these
communications before the merger
or to otherwise eliminate them
from the assets that were transferred to the buyer.
Section 259 of the Delaware
General Corporation Law provides
See PRIVILEGED Page S-19
Cleveland
600 Superior Ave. East
Suite 1600
Phone: 216.830.6830
Fax: 216.830.6807
Collective Experience.
Collaborative Culture.
Creative Solutions.
he ruling in Great Hill
Equity Partners IV, LP
v. Sig Growth Equity
Fund I, LLP provides
guidance to sellers regarding
the protection of pre-transaction
attorney-client communications stored on a computer
system that will be under
the control of a buyer after
the transaction.
The case involved a suit
by a buyer against the
former shareholders of
a company acquired in a
BERRY
merger transaction. After
the suit was brought, the
buyer discovered certain communications on the company’s computer
system between the seller and its
counsel regarding the transaction.
The seller apparently never took
any steps to segregate or otherwise
remove these communications from
the computer system before closing
or to retrieve these computer records after the closing. The merger
agreement did not address these
communications. Nonetheless,
the seller asserted attorney-client
privilege over these communications.
In its decision, the Court ruled
that, in this case, the privilege over
all pre-merger communications
passed to the surviving corporation
controlled by the buyer. The Court
noted that the Delaware merger
statute provides that all property,
rights and privileges of the merged
companies become the property of
the surviving corporation following
a merger. As a result of its ruling,
the Court never had to address a
question of whether any privilege
that may have been retained by
the seller was waived by not taking reasonable steps to ensure the
buyer did not have access to these
communications following the
merger.
An interesting aspect
of this ruling is that the
Court indicates that the
seller could have protected
these communications
from being transferred to
the buyer by negotiating a
provision into the merger
agreement carving out any
pre-merger attorney-client
communications from the
assets to be transferred to
the surviving corporation.
In an effort to protect its
pre-transaction attorney-client
communications, a seller should
(1) address ownership of these
communications in the acquisition contract and (2) take steps
(e.g., using home emails) to ensure
that these communications will
not reside on the computer system
that will be controlled by the buyer
following the transaction. Using
non-work emails may also prevent
the seller’s IT and other employees
from inadvertently learning about
the transaction before the seller is
prepared to announce the transaction to its employees.
Q
Pat Berry is Co-Chair of the Mergers
and Acquisitions Practice at
McDonald Hopkins LLC. Contact
him at (216) 348-5409 or
[email protected].
Beyond legal advice –
it’s about business solutions.
We understand our clients’ goals and challenges and recognize the
important details and nuances that influence business outcomes.
Corporate & Securities Practice Group
Q Corporate Counseling
Q Tax
Q M&A
Q Joint Ventures & Venture Capital
Q Securities
Q Environmental
Q Public Finance
Q Real Estate
Farmers National Banc Corp.
The undersigned initiated this transaction and
served as financial advisor to National Associates, Inc.
BRUML CAPITAL CORPORATION
For more information, contact Patricia A. Gajda at 216-830-6830 or [email protected]
Cleveland
Q
Akron
Q
Lorain County
Q
www.brouse.com
Investment Bankers
1801 East Ninth Street, Suite 1620, Cleveland, OH 44114
216.771.6660 www.brumlcapital.com
20140127-NEWS--21-NAT-CCI-CL_--
1/22/2014
2:16 PM
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Page 1
S-11
SELLERS
Use sell-side
and IT due
diligence to
your advantage
BY MARK BRANDT
S
ay the phrase “due
diligence,” and the buy
side comes to mind. Yet,
sell-side due diligence is
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What’s more, buyers who overcome their hesitancy to perform IT
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cant advantages.
Desired value and needed value don’t always match
BY ROSS VOZAR
A
s small business owners
near retirement
age, many start
looking to sell
their businesses. More
often than not, the owner
has a desired sale value
in the back of their mind.
This value could be based
on numerous factors …
VOZAR
perhaps what his neighbor or friend at the club
boasted about selling his business
for, or maybe it includes a large
intangible for emotional attachment to the business. Generally,
these factors are not indications of
the true market value of
a business. There should
be a separate discussion
about the “desired” versus
the “needed” value.
As a preliminary step to
proceeding with a sale process, we often recommend
a business owner obtain
ÀQDQFLDODGYLFHIURPERWK
his accountant and wealth
adviser to determine a needed
value, which is the value that
will support the business owner’s
post-sale lifestyle. This type of
analysis was seldom done in the
years leading up to the economic
downturn because business valuations generally were higher, sellers
generally were getting what they
wanted for their businesses, and,
if the offer was not high enough in
the seller’s eyes, they held out for
another offer.
As a result of several recent
reviews of different business owners’ assets and evaluations of their
future desired lifestyles, we have
VHHQVLJQLÀFDQWJDSVLQGHVLUHG
versus needed values of these
owners’ businesses. In some cases,
after including our wealth advisers
and tax structuring experts, we
have determined a business owner
needs far less from the proceeds of
See =(3<, Page S-19
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ZLSSZPKLK\L
KPSPNLUJL
Broken deals
have littered
the marketplace
in recent years
as buyers have
BRANDT
uncovered issues
with middlemarket companies during due diligence. Sellers’ investment bankers,
in turn, are pushing their clients
to perform due diligence to uncover
issues in advance to protect deals.
IT due diligence can
uncover issues that
delay buyers from
reaching their desired
return on investment.
Smart sellers have taken advantage of this trend.
“The amount of sell-side due
diligence we have performed
has increased nearly 60 percent
in 2013 over 2012,” says Andy
Jenkins, director of transaction
advisory services in the Cleveland
RIÀFHRI0F*ODGUH\//3´6HOOHUV
and investment bankers realize
that due diligence mitigates the
risk of a broken deal, unexpected
negotiations and potentially fewer
interested buyers.”
Sell-side diligence presents many
EHQHÀWV,GHQWLI\LQJLVVXHVXSIURQW
minimizes negotiations after the
letter of intent has been signed.
It gives sellers time to accurately
and realistically set terms, defer
or shorten exclusivity periods and
mitigate escrow enhancers and reWUDGLQJGXHWRLQFUHDVHGFRQÀGHQFH
DQGFUHGLELOLW\LQWKHÀQDQFLDOV
and investment thesis.
CONNECT with
500 local and 14,000 global
DEAL MAKERS
)LULÄ[ZVM0;K\LKPSPNLUJL
According to the McGladrey 2013
3ULYDWH(TXLW\6XUYH\QHDUO\KDOI
of respondents — all of whom are
recent buyers of companies — said
they “always or usually” encounter
issues with a purchased company’s
outdated business applications and
infrastructure limitations. Yet,
buyers still choose to forego IT due
diligence to minimize deal costs
or because they believe that they
already understand the target’s IT
environment.
“Never take a list of IT inventory
at face value,” says Mark Brandt,
a director in McGladrey’s CleveODQGRIÀFH´$OOKDUGDVVHWVVKRXOG
be visited to see exactly what is
®
Association for Corporate Growth
Driving Middle-Market Growth
www.ACGcleveland.com
See 0;+<,+030.,5*, Page S-20
20140127-NEWS--22-NAT-CCI-CL_--
S-12
1/22/2014
2:17 PM
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SELLERS
Does the new 3.8% Medicare tax
apply to the sale of my business?
BY NICHOLAS FANOUS
T
he ever-changing tax
landscape can provide
a challenge and add
additional expenses
when contemplating a transaction. Starting in 2013, the 3.8%
Medicare tax on
Net Investment
Income (NII) is
levied to the extent that a taxpayer’s modified
adjusted gross
income exceeds
certain threshFANOUS
olds ($250,000
in 2013 for joint
filers). NII is generally comprised
of portfolio income (interest, dividends, annuities, royalties and
rents), all income derived from
a passive trade or business and
capital gain unless the property
is held in a non-passive trade or
business.
8QGHUWKHÀQDOUHJXODWLRQVLV
sued November 2013), the sale of
interest in a partnership or S corporation would generate NII only
to the extent of the transferor’s
The Medicare tax rules are complex and
proper planning should be considered when
contemplating or in advance of a transaction.
share of gain/loss from the entity’s
passive activities held in an active
trade or business.
Sale of business interest
Since the tax generally applies
to NII from passive activities, the
gain from disposition of interests in
an active trade or business where
the partners or shareholders are
considered to be “material participants” should not generate NII.
However, partners or shareholders
who do not meet the participation
rules may generate NII on the gain
from a sale. The regulations use
the passive activity rules under
IRC Section 469 to determine
material participation in a trade
or business and inclusion of such
income as NII.
Planning opportunities limited
partners or minority shareholders
may consider prior to or during a
transaction include:
Q Arrange business activities
to meet the material participation
standard (e.g. 500 or more hours of
participation, material participation in 5 of past 10 years, etc.) and
document activities
Q Grouping of activities to meet
the material participation requirePHQWVWKHÀQDOUHJXODWLRQVRIIHU
a one-time “fresh start” to regroup
activities
Q Combine parts of a business
to allocate more of the value and
thus capital gain to the business
unit they materially participate in
Q Request a “gross-up” from the
buyer for Medicare taxes resulting
from the sale
7KHÀQDOUHJXODWLRQVDOVR
SURYLGHDVLPSOLÀHGPHWKRGWKDW
would generally allow taxpayers
to assign gain from a disposition
of a partnership or S corporation interest to NII in the same
See MEDICARE Page S-22
Don’t forget where
you hid the cash
Rid balance sheet of excess working capital
or non-essential assets before selling
BY LLOYD BELL
I
n a recent news story, a Connecticut man purchased a
desk on Craigslist for $150.
When he took the desk apart
WRPRYHLWLQWRKLVRIÀFHKHIRXQG
nearly $100,000 of cash inside,
which he then returned to the
seller.
All too often, owners sell their
businesses with the equivalent
of cash hidden in the desk in the
form of excess working capital or
non-essential assets on the balance
sheet. Unfortunately, the buyers
don’t tend to be as generous and
return the cash. Compounding the
situation, this excess working capital may be supported by short-term
debt which, in most situations, will
need to be paid off by the seller.
Last-minute changes between
the date of the letter of intent and
the closing of the transaction could
result in a working capital adjustment, therefore it is important to
right-size the balance sheet before
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20140127-NEWS--23-NAT-CCI-CL_--
1/22/2014
2:18 PM
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beginning the sale process.
How can you make sure that the
desk is emptied out before the sale?
QManage your accounts receivable. It’s common that a company will have a certain amount of
trade receivables that are extended
beyond the normal terms. If still
collectable, these receivables represent excess cash that will accrue
to the buyer if receivables are part
of the acquisition. In preparation of
a sale, you must
work to collect
as many of these
slow-paying
receivables as
possible and work
to keep current
sales collectable
BELL
within your normal credit terms.
QBe disciplined about
inventory. If a business carries
inventory, have as little as possible
going into a sale. Try to let the
buyer purchase as much of the
raw materials and/or produce the
ÀQLVKHGJRRGVIRUVDOHVWKDWWDNH
place after closing.
QMachinery and equipment.
It’s fairly common for manufacturers to own equipment that is
no longer being used to produce
inventory. If the equipment has
All too often,
owners sell their
businesses with
the equivalent of
cash hidden in the
desk in the form
of excess working
capital or nonessential assets on
the balance sheet.
a ready market, sell it before the
company is sold. If the equipment
LVREVROHWHLWPD\KDYHVLJQLÀFDQW
scrap value.
QTake advantage of trade
credit. Your vendors love you for
paying in two weeks, but their
credit terms likely give you four.
Extending your total payable
portfolio will increase the amount
of cash on hand that you will keep
in a sale.
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Lloyd W.W. Bell III is Director of the
Corporate Finance Group at Meaden
& Moore. He has over 20 years’
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S-13
20140127-NEWS--24-NAT-CCI-CL_--
S-14
1/22/2014
2:18 PM
Page 1
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SELLERS
2014 Events Calendar
1/30/14
18th Annual Deal Maker
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2/6/14
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2/11/14
Richard Noechel
Vice President and
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The Union Club
2/20/14
Rex Mason
President – Root Candle
Root Candle
3/11/14
Rick Fearon
CFO – Eaton
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The Union Club
4/10/14
Pam Hendrickson
COO – The Riverside
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The Union Club
4/28-30/14
InterGrowth
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Spring Panel Discussion
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Social at Shoreby
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9/29/14
10th Annual Golf Outing
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For more information and to register visit
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Banking & Lending
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Understanding
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BY JAMES M. HORKEY
W
hen selling a business, the transaction
price usually represents some multiple
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company. In exchange for this
consideration, the buyer expects to
receive three classes of assets:
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buyer calculates. Study historical
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Will a detailed analysis of your accounts receivables reveal bad-debt
issues? As the seller, you need to
put yourself in the buyer’s shoes
and anticipate possible objections. Q
James M. Horkey, CPA/ABV, CFF,
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20140127-NEWS--25-NAT-CCI-CL_--
1/22/2014
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S-15
GLOBAL MANAGEMENT
Africa: Doing successful deals in a new frontier
PwC describes the
factors providing
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investment
BY HARRY G. BROADMAN
D
espite a two-decade
record of strong growth
and increasing economic resiliency, the
continent of Africa remains an
enigma to many investors. In the
last several years, interest in
Africa has grown
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opportunities for
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in GDP of about
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terms since the
mid-1990s, a
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earlier decades.
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not be enough to
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nancial and economic crisis, taking
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However, most African policy makers, having implemented hard-won
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held the line despite intense political pressure.
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African countries have reached
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China and Russia at the end of the
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investment. Many African economies are still based on commodities, but there are now more with
industries that are climbing the
value chain, producing value-added
products and services and engag-
ing in new forms of international
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mental inventions are increasingly
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of doing business in Africa, as in
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Q
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deals in Africa and in other
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Broadman at (202) 756-1756 or
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domestically or abroad. Visit www.
pwc.com/US/deals to register
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a Delaware limited liability
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To learn more, contact:
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20140127-NEWS--26-NAT-CCI-CL_--
S-16
1/22/2014
2:19 PM
Page 1
Advertisement
TRENDS
Diligence is all about risk assessment
continued from Page S-3
•Assess reasonableness in light
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2013 marked by
slow volume of
deals as demand
outpaced supply
BY JONATHAN IVES
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Business Services Group. Contact
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Reason says:
M&A is the right
growth strategy.
Instinct says:
buying smart is the
right path to growth.
At Grant Thornton we specialize in helping
dynamic organizations execute transactions
successfully. We bring a real, competitive
advantage of a broad perspective, senior staff
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“Grant Thornton” refers to Grant Thornton LLP, the U.S. member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms
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obligate, one another and are not liable for one another’s acts or omissions. Please see GrantThornton.com for further details.
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multiples.
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2014.
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Vice President and Business
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20140127-NEWS--27-NAT-CCI-CL_--
1/22/2014
2:20 PM
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S-17
BEST PRACTICES
Accessing capital markets
for high-growth companies
BY SEAN DORSEY
T
he Northeast Ohio business environment is
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nology, are making an
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our local economy. These companies, as well as many lesser known
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high growth companies by accessing global capital sources. From
our vantage point, companies that
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interest from investors if other key
attributes are present.
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value. Articulating one’s value
proposition in these terms is
critical.
Experience. Communication.
Financial Insight.
Our team of experts strategically align
our services and relationships with your
transactional and integration needs.
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their business, whether in Silicon
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tributes will become as important
as EBITDA in business valuations.
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to pay close attention to these
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Sean Dorsey is the founder and CEO
of League Park Advisors. Contact
him at (216) 455-9990 or sdorsey@
leaguepark.com.
James M. Horkey, CPA/ABV, CFF, CM&AA
Principal & Director, HW M&A Group
[email protected] | 216.378.7214
Cleveland • Columbus • Mentor
Brandon R. Miller, CPA
Principal & Director, Business Development
[email protected] | 216.378.7224
TMA Ohio Chapter announces 2013 award winners!
We congratulate Harry Greenfield, partner at
Buckley King, winner of the 2013 Lifetime
Achievement Award.
We thank Harry for his leadership and
the contributions that he has made
both in the turnaround industry and in
our community.
We congratulate the winners of the first annual Turnaround/Transaction of the Year
Award (from left to right) Jeffrey Addison, Kenneth Latz, Charles Deutchman, Jay
Moroscak, Glenn Pollack, Patti Missal, and Steven Rosen (not pictured-Michael
Cavanaugh).
We are proud of the achievements of these members and celebrate
their specific accomplishments with this year’s awards. Thank you for
your contributions to the Turnaround Management Association.
20140127-NEWS--28-NAT-CCI-CL_--
S-18
1/22/2014
2:20 PM
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PORTFOLIO MANAGEMENT
Private equity funds may be responsible for withdrawal liabilities
Limiting ownership interest in portfolio companies can mitigate “controlled group” liability
BY SHAYLOR STEELE, PATRICK
EGAN AND PRISCILA ROCHA
T
he First Circuit Court of
Appeals recently held that
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panies. In Sun Capital Partners
III, LP v. New England Teamsters
& Trucking Indus. Pension Fund,
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could be a member of its portfolio
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erally, under the federal pension
law known as ERISA, all members
of a controlled group are jointly
and severally liable for the pension
liabilities incurred by any member
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ing withdrawal liability
related to multiemployer
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arrangements.
Sun Capital argued
that it was not part of
the portfolio company’s
controlled group because it
was a passive investment
STEELE
vehicle and not a “trade or
business,” which is one of
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of any controlled group. The court
rejected Sun Capital’s argument
because: (1) Sun Capital played an
active role in the management and
operation of the portfolio company;
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agement fees paid by the portfolio
company. The court acknowledged
that simply investing in a business
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cerned about the decision.
On its face, the decision
has laid the groundwork
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to be held liable for the
withdrawal liabilities of
their portfolio companies.
That alone is cause for
EGAN
ROCHA
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Sun Capital decision could
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be treated as a trade or business.
However, based upon the totality of ,ISULYDWHHTXLW\IXQGVFRXOGEH
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tal and the portfolio company, the
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court concluded that Sun Capital
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ing to be a passive investor.
may now be liable for each other’s
While the Sun Capital case is far
ERISA debts.
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ence more twists and turns, private
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trolled group liability by limiting
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dress ERISA liabilities at the time
of the sale. Careful planning can
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the landscape has changed.
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Shaylor Steele, Patrick Egan and
Priscila Rocha are attorneys with
Benesch, Friedlander, Coplan &
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at (216) 363-4495 or ssteele@
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Equity incentives for management of portfolio companies
BY MEGAN L. MEHALKO AND
IRA C. KAPLAN
M
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ers is a fundamental
premise of private
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aligns interests between owners
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nent of motivating management
to increase profitability, grow
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value — the primary focus of a
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tives continue to be important,
current practices, and the terms
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commonly see in today’s middle
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tions.
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Limited liability companies can be
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including allowing management
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contributing capital or recognizing
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ment recipient to receive capital
gains treatment in the event of a
sale of the company.
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of 10 to 15 percent are common.
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est allocation from these pools,
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ment and the CFO.
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and dependent on a particular
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vesting terms vary. Vesting can be
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most common, with vesting being
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return on invested capital (ROIC)
or a fund’s internal rate of return
(IRR), although industry and other
considerations may merit another
basis. Vesting is typically
See INCENTIVES Page S-19
Eliminate Surprises
SS&G’s transaction advisory services group includes a team of full-time, 100 percent TASdedicated professionals. Collectively, our TAS team has more than 75 years of transaction
experience, which ranges from single-owner business acquisitions to complex, multinational
mergers, with deal sizes from $1 million to more than $1 billion for both strategic and private
equity buyers and sellers. To learn more about our TAS practice please contact Scott McRill
at 440-394-6205 or [email protected].
Assurance
| Tax | Consulting | www.SSandG.com
Serving private equity groups nationwide, BMF Transaction
Advisory Services provides thorough due diligence and quality
of earnings assessments that help you better evaluate the value
of a target company so there are no surprises down the road.
Mark B. Bober, CPA/ABV, CFF, CVA
Partner, Practice Leader, Transaction Advisory Services
bobermarkey.com • 330.255.2425
20140127-NEWS--29-NAT-CCI-CL_--
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2:21 PM
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S-19
BEST PRACTICES
Hiring counsel with
good judgment is key
to dealmaking success
BY CHRISTOPHER J. HEWITT
A
client once asked me,
“How would you choose
transaction counsel?”
I responded that I
would hire someone with whom
I thought I would connect on a
personal level — someone I liked
and that I could trust. Let’s face
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and lawyers with the technical
skills to close a deal. Possessing
that core competency is the ante
to play the game. What sets one
attorney apart
from another
is the ability to
connect with the
client on both a
professional and
personal level.
When you spend
every waking
HEWITT
hour with your
attorney for days
or weeks on end to close a deal,
you want to work with someone
you like almost as much as your
family.
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criterion. If I were hiring M&A
counsel, I would also want someone
who understands my business,
knows my motivation for buying
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corporate strategy, and can discern
which issues are important—and
more importantly, which are not—
to close my deal. In short, someone
who demonstrates good judgment.
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ing counsel who, while technically
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documents, lose sight of the bigger
picture. These “checklist attorneys”
catalogue every possible issue that
may arise and/or every document
that may be needed to complete
a deal. Over time, this approach
leads them to believe that every
issue on the checklist needs to be
Privileged communications need parameters
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erty, rights, privileges, powers and
franchises, and all and every other
interest shall thereafter ... be the
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tion.” The sellers in the Great Hill
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statutory term “all ... privileges”
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tain property rights and that it did
not extend to privileges established
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cery Court disagreed and stated
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Value should be based
on need and not desire
addressed and/or every document
on the checklist needs to be used
in every deal. They tend to use the
same documents with the same
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less of whether that document or
that provision applies to the deal
at hand. This mentality leads to
ineffective transaction documents
and, more importantly, higher
legal fees.
In a deal we recently closed,
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vision that was inappropriate for
the business our client was selling.
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posing counsel said he didn’t need
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ness—he included this provision in
every transaction. When the issue
was escalated to his client, who did
understand our client’s business,
he immediately conceded the point.
This attorney’s unwillingness to
understand the business his client
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expensive negotiations.
I would hire counsel with better
Q
judgment.
Christopher J. Hewitt is a Partner
with Tucker Ellis LLP. Contact him
at (216) 696-2691 or christopher.
[email protected].
a sale than what was thought, and
anything above that needed value
is a bonus. In other instances,
we have determined the needed
value exceeds the desired value
and have, therefore, concluded the
timing may not be right for a sale.
This leads to a separate discussion
on how to achieve the needed value
over the next several years.
Once comfortable with a needed
value, a more mentally prepared
business owner can proceed with
the various other aspects of proper
preparation for a sales process. Q
Ross Vozar is Associate Director
of Transaction Advisory Services,
for SS&G. Contact him at SS&G’s
KVÛ[VÛ*SL]LSHUKVɉ
JLH[
325-1700 or [email protected].
ous” and that “all means all.”
For sellers and their counsel,
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the transaction document and
expressly exclude from the assets
being transferred in a merger
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DWWRUQH\FOLHQWSULYLOHJHGFRPPX
nications. In addition, make sure
parameters are set at the outset
of any transaction regarding how
communications are made so that
the privileged communications can
be removed from, or better yet, are
not part of, computers and email
accounts that are otherwise being
transferred to the buyer. Careful
drafting, good legal counsel and
practical implementation of steps
necessary to exclude privileged
assets will prevent the unintended
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Q
case.
Jennifer L. Vergilii is a Partner in
Calfee, Halter & Griswold LLP’s
4(WYHJ[PJLNYV\W*VU[HJ[OLY
216-622-8568 or jvergilii@calfee.
com.
Congratulations
KeyBanc Capital Markets® congratulates
Zev Weiss, the Weiss family and
American Greetings on receiving the
ACG Cleveland 2014 Deal Maker Award.
Thank you for your trust and the
opportunity to help you advance
your business goals.
To learn more:
Visit key.com/corporate
Incentives integral to success
accelerated in the event of a sale or
change of control of the company.
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ment also are negotiable, although
it is common for the company to
have a right to “call” or purchase
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ployment, especially in situations
where the employee is terminated
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forfeited, regardless of the reason
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ployee’s right to cause the company
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after termination of employment (a
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repurchase price is often tied to the
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good reason, the price might be the
lesser of cost or fair market value.
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ment of portfolio companies will
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sult an experienced advisor on how
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whether proposed incentives are in
line with what a manager should
expect.
Q
4LNHU34LOHSRVPZ*OHPYCorporate and Securities Practice Group.
Contact her at (216) 363-4487 or
[email protected]. Ira C.
2HWSHUPZ4HUHNPUN7HY[ULY*VU[HJ[
him at (216) 363-4567 or ikaplan@
beneschlaw.com
KeyBanc Capital Markets is a trade name under which corporate and investment banking products and services of
KeyCorp and its subsidiaries, KeyBanc Capital Markets Inc., Member NYSE/FINRA/SIPC, and KeyBank National Association
(“KeyBank N.A.”), are marketed. Key.com is a federally registered service mark of KeyCorp. ©2014 KeyCorp. ADL6867
20140127-NEWS--30-NAT-CCI-CL_--
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1/22/2014
2:21 PM
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Advertisement
TRENDS
Software-as-a-Service
(Saas) market is red hot
net monthly recurring revenue
BY CHRISTOPHER MCKENNA
(NMRR), cost to acquire a customer (CAC), and customer losses
he $20 billion Software(churn). One fundamental measure
as-a-Service (SaaS) busiof SaaS economics is how quickly
ness model is growing
there is a payback on a company’s
rapidly within
CAC. The payback pethe $300 billion global
riod can be calculated by
software market, and
dividing the CAC for the
public markets are reprior quarter by the NMRR
warding SaaS companies
added during that quarter.
with robust valuation
Ideally, this CAC payback
multiples.
is less than 12 months for
companies experiencing
QIn with the new. SaaS
modest churn, but can be
refers to a new model of
MCKENNA
longer for those with high
how software is delivered
customer retention and
in which the software and
upsell
opportunities.
These new
associated data is centrally hosted
metrics can help managers and
on the “cloud” instead of being
advisors understand if a company
resident on a user’s servers or comshould be adjusting strategies,
puters. Customers pay a monthly
such as increasing sales and
fee for use of the software, which
marketing spend if the payback is
for many customers is scalable,
favorable.
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nomical. Due to its single-instance
design, SaaS distributes major IT
costs over many clients and improves the vendor’s ability to seamlessly and rapidly deliver upgrades
and updates. In contrast, the old
installed software model requires
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operational expenditures to install,
support and update.
QKey performance indicators. New metrics to measure
current and future business value
are needed with SaaS, such as
QHeady SaaS saluations. SaaS
companies typically transact based
on revenue multiples (many public
SaaS companies traded between 5x
and 9x in 3Q13) since they experience volatile earnings due to scaleup spending. Investors award the
highest valuations to SaaS companies demonstrating strong revenue
growth and healthy gross margins.
One example includes fast-growing
Marketo, which trades at 15x revenue despite operating losses. Even
the well-established Salesforce.
com trades at 6x revenue. While
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Golf
Karen L. Tuleta
Morgenthaler Private Equity
Rudolf G. Bentlage
Chase Business Credit
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Linsalata Capital Partners
Timothy G. Healy
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Albert D. Melchiorre
MelCap Partners LLC
Sean P. McCauley
PNC Business Credit
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published multiples are useful
benchmarks, valuation depends on
SaaS metrics and such factors as
addressable market size, product
functionality, competitive position,
and team.
QLocal spotlight. The local
economy is alive with emerging
SaaS companies, such as COMS,
OnShift, SparkBase, DecisionDesk, SpearFysh, and StreamLink
Software, among others. National
investors are taking notice as evidenced by Summit Partners’ recent
$21 million investment in COMS
or Technology Crossover Ventures’
$66 million investment in TOA
Technologies.
Q
Christopher McKenna is Managing
Director for Carleton McKenna. Contact him at (216) 523-1962 or cjm@
carletonmckenna.com.
Brad W. Kostka
Roop & Co. Strategic
Integrated Communication
Programs
John M. Saada Jr.
Jones Day
Resources
Joseph F. Maslowski
Roetzel & Andress
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Joseph C. Adams
Plante Moran
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ACG Cup
Dale Vernon
Bernstein Global Wealth
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Theodore A. Wagner
Libman, Goldstine,
Kopperman & Wolf
Douglas K. Winget
FirstMerit Bank Business Credit
Akron Network
Trent Meteer
TriState Capital Bank
Nominations
Peter K. Shelton
Benesch LLP
Special Programs
David Dunstan
Western Reserve Partners
Sponsorship
Wendy S. Neal
Brown Gibbons Lang & Co.
Women in Transactions
Denise A. Carkhuff
Jones Day
Young ACG — President
Elizabeth A. Evans
Republic Steel
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Rebecca White
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Thomas P. Freeman
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MelCap Partners LLC
Raymond Lampner
BCG & Company
Scott W. Seelbach
Primus Capital
T H E AR T O F P R OBL EM S OL VI NG
Membership
Brian M. Kelly
PricewaterhouseCoopers
Economic Development
Thomas Zucker
EdgePoint Capital Advisors
Randolph D. Markey
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James P. Marra
Blue Point Capital Partners
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Benesch LLP
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IT due diligence has advantages
Cleveland | 216.781.1212 | walterhav.com
Acquiring & Divesting Services | Federal, State & Local
Tax Issues | Real Estate Matters | Securities, Filings &
Exemptions | Environmental Liability | Multi-tier Financing |
Employee & Labor Relations Issues | Employee Benefits |
Management Contracts
running the company. If IT investments are required, the buyer then
has leverage to negotiate a lower
purchase price.”
IT due diligence poses other advantages as well. Buyers can steer
clear of unexpected capital outlays
and negotiate to have issues
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close. It can identify reporting or
personnel weaknesses, as well as
upgrades and improvements that
may be suitable for the current
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VDOHEXVLQHVVSODQQLQJVLJQLÀFDQW
growth. Overall, IT due diligence
can uncover issues that delay
buyers from reaching their desired
return on investment.
Q
Mark Brandt is a Director in
4J.SHKYL`»Z*SL]LSHUK6ɉ
JL
[email protected]
20140127-NEWS--31-NAT-CCI-CL_--
1/22/2014
2:22 PM
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S-21
BEST PRACTICES
Noncorrelated investments: Ohio and Private Capital: By the Numbers
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Narwhal or Unicorn?
region and the United States as a whole. Take a look, by the numbers:
BY LINDA M. OLEJKO
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Ms. Olejko, CFP® is a Managing
Director of Glenmede. Please
contact her at (216) 514-7876 or
[email protected].
1,082
Number of completed
investments since 2003
$
60
billion
$
20.1
billion
Value of
those
investments
59
billion
$
Private equity
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the overwhelming
majority of those
investments
423
Number of deals
closed along the
3-C Corridor (Cleveland, Cincinnati and
Columbus) since
2003
51%
Percentage of all deals in
the B2B and Healthcare
industries since 2003
679
Number of
current PEbacked portfolio
companies
107
Number of in-state
private capital
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The amount of
funding private
investment groups
have invested in
B2B and Healthcare
industries since
2003
245
Number of local
investments those
PUZ[H[LÄYTZ
made over the last
decade
ACCESS
BEGINS WITH A CAPITAL “G”.
At Glenmede, we believe the best way to serve our clients is
to give them direct access to our experts and best thinking
— with no barriers or bureaucracy. Our low client-to-staff ratio
means you’ll always have our full attention.
Power comes from being understood.
SM
When you trust the advice you’re getting, you know your next move is the right move.
That’s what you can expect from McGladrey—a partner with the in-depth experience to help
private equity firms and strategic buyers optimize their portfolios. And one that can bring your
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To learn more, contact Mark Brandt at 216.522.1124
or visit www.mcgladrey.com.
www.glenmede.com
Glenmede’s services are best suited for those with $3 million or more to invest.
To learn more, please contact Linda Olejko at 216-514-7876 or [email protected]
CLEVELAND • MORRISTOWN • NEW YORK • PHILADELPHIA • PRINCETON • WILMINGTON
© 2012 McGladrey LLP. All Rights Reserved.
20140127-NEWS--32-NAT-CCI-CL_--
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1/22/2014
2:22 PM
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Advertisement
BEST PRACTICES
Managing fees in M&A
transactions
BY MARIE C. KUBAN AND
DOUGLAS K. SESNOWITZ
N
othing makes a deal
team happier than
when an M&A transaction closes on time and
on budget. Often easier said than
done, but after negotiating and
closing hundreds of transactions,
ZHKDYHLGHQWLÀHGWKHIROORZ
ing culprits that inevitably show
up when transaction fees have
skyrocketed.
KUBAN
SESNOWITZ
QNot hiring the right professionals. M&A is a specialty, just
like tax or ERISA, so having professionals in your corner that have
negotiated and closed, or provided
SURIHVVLRQDOVHUYLFHVIRUDVLJQLÀ
cant number of M&A transactions
is crucial. This is especially true
for the other side. If they have
engaged professionals who are illequipped to handle the transaction,
this can lead to delays, potentially
small issues turning into complicated issues, and your professional
team having to do
more of the work
(and your pocketbook
covering more of the
expenses). While fee
FDSVDQGÀ[HGIHH
arrangements can
help manage costs,
they sometimes get
triggered well before
the closing, which
can result in a party
incurring unexpected
responsibility and
expense.
QStructure changes. Changing
the structure of the transaction is
a killer when it comes to managing fees. The interests of buyers
and sellers are rarely aligned with
respect to the accounting and tax
treatment of a deal, so the party
that changes the structure should
do so with the expectation of picking up some (if not all) of the other
side’s additional costs.
QDisorganization. Disorganization can take many forms but inevitably leads to delay and increased
costs: not compiling, disseminating
or reviewing due diligence materiDOVLQDWLPHO\RUHIÀFLHQWPDQQHU
not engaging service professionDOVTXLFNO\QRWNHHSLQJWKHGHDO
team informed of what other team
members are doing or have uncovHUHGDQGQRWLGHQWLI\LQJPDWHULDO
lead-time items until late in the
transaction.
QUnreasonable deadlines.
Delays cost money,
but setting unreasonable deadlines
rarely results in
lower transaction
costs. Hurried
work product
results in multiple
revisions to get it
right. Throwing
more resources at
an issue to complete it faster does not come cheap.
And rather than take you more
seriously, people start to disengage
when they feel a deadline is arbitrary or unattainable.
While controlling M&A transaction costs may at times seem to
be more art than science, we have
found that when the parties go into
the process with the right professionals, have an organized game
plan, and have set reasonable
expectations, it is less likely that
WKHUHZLOOEHVLJQLÀFDQWVWLFNHU
Q
shock at the closing.
Marie C. Kuban, Esq., is a
Partner with Ulmer & Berne LLP.
Contact her at (216) 583-7434 or
[email protected]. Douglas K.
Sesnowitz is Partner and Chair of
[OLÄYT»Z4PK4HYRL[:LY]PJLZ
Group. Contact him at (216) 5837144 or [email protected].
Medicare rules need planning
proportion as their historic passthrough income. To qualify, the
gain recognized from the sale must
be less than $250,000 or less than
$5 million and separately stated
income, gain or loss from the business accounts for 5% or less of NII
in the year of the sale and the two
previous years.
The Medicare tax rules are complex and proper planning should be
considered when contemplating or
in advance of a transaction.
Q
Nicholas Fanous is Tax Manager,
4(;H_:LY]PJLZ.YV\WVM.YHU[
Thornton LLP. Contact him at (216)
858-3545 or [email protected].
About Us
Founded in 1954, ACG is a global organization with 56 chapters and
more than 14,500 members. ACG’s members are the investors, owners,
executives, lenders and advisers to the leading emerging growth
companies in the middle market. Learn more at www.acg.org. The
Greater Cleveland Chapter of ACG was founded in 1981, has nearly
TLTILYZHUKPZ[OLÄM[OSHYNLZ[(*.JOHW[LYPU[OL^VYSK
For more information, please visit
www.ACGcleveland.org
Disclaimer
The articles in this section were prepared by the respective contributors for general
PUMVYTH[PVUW\YWVZLZVUS`HUKHYLUV[PU[LUKLKHZSLNHS[H_HJJV\U[PUNVYÄUHUJPHS
advice. Under no circumstances should any information contained in any of these
HY[PJSLZIL\ZLKVYJVUZPKLYLKHZHUVɈLYVYHZVSPJP[H[PVUVMHUVɈLY[VWHY[PJPWH[LPU
any particular transaction or strategy. Any reliance upon any such information is solely
and exclusively at your own risk. Please consult your own counsel, accountant or other
HK]PZVYYLNHYKPUN`V\YZWLJPÄJZP[\H[PVU(U`]PL^ZL_WYLZZLKPU[OLHY[PJSLZHYL[OVZL
of the respective contributor and are subject to change without notice due to market
conditions and other factors.
RALAW.COM
ROETZEL & ANDRESS,
A LEGAL PROFESSIONAL ASSOCIATION
STRATEGY MATTERS
What are your business goals? How do you plan to accomplish them?
Your strategy for business growth matters, and the experienced corporate lawyers at
Roetzel will collaborate with you to develop and execute a customized plan designed to
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or international, organic or driven by acquisitions, our attorneys are here to propose
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Our team of talented lawyers guides clients to identify the
right deal opportunities, meticulously execute on complex
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ralaw.com/mergers_acquisitions.
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20140127-NEWS--33-NAT-CCI-CL_--
Advertisement
1/22/2014
2:23 PM
Page 1
S-23
TRENDS
Northeast Ohio’s top deal makers to be honored at
ACG Cleveland’s 18th annual Deal Maker Awards
A
CG Cleveland, Northeast Ohio’s preeminent
organization for merger
and acquisition and
corporate growth professionals,
will recognize the winners of
its 18th Annual ACG Cleveland
Deal Maker Awards on Thursday,
Jan. 30, 2014, at 5:30 p.m. at the
Cleveland Convention Center.
The Deal Maker Awards honor
Northeast Ohio’s top corporate deal
makers for demonstrated success
in using acquisitions, divestitures,
ÀQDQFLQJVDQGRWKHUWUDQVDFWLRQV
to fuel sustainable growth. The
2014 Deal Maker Awards winners
are:
The Riverside Company is one
of the largest and oldest global
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smaller end of the middle market,
investing in growing enterprises
valued at up to $250 million. The
ÀUP·VJOREDOSRUWIROLRLQFOXGHV
more than 75 companies. As The
Riverside Company marked its
25th anniversary in 2013, it has
grown to manage more than $4.2
billion in four fund families and
currently employs approximately
220 professionals worldwide. The
ÀUPKDVFRPSOHWHGGHDOV
throughout its history, including
56 acquisitions and 21 divestitures
during the past two years. Its
largest-ever fund was closed in
2013.
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specializes in helping entrepreneurial businesses transform and
scale their organization by providing capital, management, infrastructure and resources. Evolution
has provided excellent returns to
its limited partners through four
H[LWHYHQWVLQLWVÀUVWIXQGLQFOXG
ing the distribution of 3.1 times
capital as of September 30, 2013.
Within the past 15 months, Evolution has invested approximately 45
percent of its committed capital for
Fund II in three portfolio companies: Lewellyn Technology, Budco
Financial Services, and Axiom
Sales Force Development. It
has also exited two others: The
Accurate Group and American
Eagle Mortgage.
American Greetings Corporation
is one of the world’s largest creators, manufacturers and distributors of innovative social expression products generating annual
revenues of approximately $1.9
billion. In August 2013, the Weiss
Family completed its acquisition
of American Greetings for $19 per
VKDUH²DWUDQVDFWLRQYDOXHGDW
DSSUR[LPDWHO\PLOOLRQ²ZLWK
plans to return the company to its
roots as a family-owned business.
American Greetings continues to
be a leading player in the $6 billion
retail market for greeting cards,
holding an estimated 40- to 45-percent share of the U.S. greeting card
market.
Q
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FRXQWU\/HVVWKDQRQHSHUFHQWRIDOOODZÀUPVLQWKH86DUHUHFRJQL]HGZLWKWKLV
KRQRU$QGWKLV\HDUFRPSDQLHVOLVWHG9RU\VDVWKHLUÀUPRIFKRLFH
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PolyOne Corporation is a premier global provider of specialized
polymer materials, services and
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of $2.9 billion. During the past two
years, PolyOne has made three
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Spartech Corporation, which had
annual revenues of $1.1 billion,
and ColorMatrix, a leader in liquid
colorants and high performance
additive technologies. As the company has transformed from a focus
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20140127-NEWS--34-NAT-CCI-CL_--
S-24
1/22/2014
2:24 PM
Page 1
Advertisement
TRENDS
ACG board members weigh in with their 2014 forecasts
BY TOM FREEMAN, TOM
ZUCKER, JOHN M. SAADA JR.,
DAVID DUNSTAN AND
JAMES HILL
M
oney is burning a
hole in the pocket of
private equity firms,
waiting for sellers
to come to the table. Promising
economic numbers, an aging portfolio of businesses and favorable
market conditions all point to
the potential for a robust M&A
landscape in 2014, but there are
road bumps to watch for. ACG
board members have their fingers
on the pulse of the industry and
weigh in on how they see 2014
shaping up.
Reasons for optimism
heading into 2014
Corporations continue to sit on
record levels of cash, private equity
ÀUPVKDYHGU\SRZGHUDQGDQ[LRXV
investors, interest rates continue
to sit at historically low levels and
little-to-no GDP growth for the
ODVWKDOIGHFDGHKDVH[HFXWLYHV
searching for ways to show their
shareholders growth.
These factors all point to
a robust M&A market in
WKHQH[W\HDUJLYHQWKH
number of willing and
able buyers.
The question that
remains to be answered
is, will we see just as
FREEMAN
ZUCKER
SAADA
many sellers come to the
table? All the indicators
Higher business valuations
RXWOLQHGDERYHH[LVWHGLQ
are expected
but — whether it is an understandBusiness owners are approachable caution that was engrained
LQJZLWKLQFUHDVHGFRQÀGHQFH
in business owners’ minds during
resulting from several years of
the Great Recession or a desire to
demonstrate year-over-year growth VWURQJHUSURÀWVDQGDVWDEOHEXVL
QHVVHQYLURQPHQW7KHFRQÀGHQFH
to substantiate projections — it
is also evidencing itself in the
seems as though potential sellers
manufacturing industry with a
may still be hesitant to take their
JURZLQJSXUFKDVHPDQDJHU·VLQGH[
businesses to market. However,
for the seventh consecutive month,
given the number of potentially
and record order backlogs. These
interested investors and slow but
conditions are driving increased
steady improvement in economic
FRQÀGHQFHWKHUHLVHYHU\UHDVRQWR interest from business owners to
believe that sellers could be enticed evaluate selling their companies
in 2014.
this year, and 2014 could be the
The low interest rates and
most active M&A market in years.
reasonably low capital gains rates
continue to fuel a healthy M&A
Tom Freeman, 6ɉ
JL4HUHNPUN
market. Favorable rates, complePartner, Grant Thornton LLP
mented by an increasing aggres-
Success starts at home
right here
in Cleveland
And that’s why we’ve called Cleveland
home for over 20 years. To learn more
about Riverside’s strategies to grow
companies with $1 million - $30 million
in EBITDA, contact Cheryl Strom,
Origination, at +1 216 535 2238 or
[email protected].
DUNSTAN
HILL
sive lending marketplace, are
H[SHFWHGWRGULYHKLJKHUEXVLQHVV
valuations. Business buyers continue to outpace companies available
for sale by a growing margin. The
H[SHFWHGJURZWKLQEX\HUGHPDQG
in 2014 will be driven by the
VLJQLÀFDQWFRPPLWWHGFDSLWDOWKDW
remains unspent in private equity
funds, the growing acquisition
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WKHH[FHVVFDVKRQPLGGOHPDUNHW
corporate balance sheets.
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*HWP[HS(K]PZVYZ
Changing and challenging
legal landscape
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>LZ[LYU9LZLY]L7HY[ULYZ
While it should come as no surprise to most fund managers, 2014
promises more government oversight of (some would say interference with) private equity. Legislative, regulatory, rulemaking and
litigation-driven issues will impact
the management of private equity
IXQGV$VODLGRXWLQLWV\HDUO\
goals, the SEC plans to turn up
the heat on private equity fund
managers, which it has already
demonstrated by clamping down on
practices for marketing funds and
performance. In addition, private
equity controlled companies are
increasingly facing many of the
same corporate governance pitfalls
RQFHUHVHUYHGDOPRVWH[FOXVLYHO\
for public companies.
Fund managers will need to
be more focused than ever to
minimize risks to their funds. With
changes on multiple fronts in 2014,
fund managers need to consider at
least the following three aspects of
their business: marketing and selling fund securities in light of SEC
scrutiny; structuring their funds to
UHGXFHSRWHQWLDO(5,6$H[SRVXUH
and implementing and adhering
to effective compliance programs.
Firms that are unprepared risk
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WRXQH[SHFWHGOLDELOLWLHV
A glance at the private equity
landscape
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1VULZ+H`
Moving toward equilibrium
The Riverside Company
50 Public Square, 29th Floor
Te r m i n a l To w e r, C l e v e l a n d , O H 4 4 1 1 3
RIWKHPRUHWKDQ
private equity groups that
must be sold, and the access
WRLQH[SHQVLYHEDQNFDSLWDO
and aggressive private eqXLW\GROODUVZHH[SHFWWKH
supply side of the equation
WRUDPSXSVLJQLÀFDQWO\LQ
2014.
Whether you are considering a complete sale of
your business, a recapitalization or
a minority sale, there is a window
of opportunity that shouldn’t be
missed to generate historic valuations and favorable transaction
terms and conditions.
All signals point to a strong
M&A market for 2014. However,
despite more than 20 years of
providing M&A advice, if I could
accurately predict the behavior of
business owners, I would be on the
beach in the Caribbean rather than
LQP\RIÀFHZDLWLQJIRUWKHQH[W
´SRODUYRUWH[µWRKLWWKH0LGZHVW
There has been a dearth of quality companies for sale since the
rush to market in 2012 to beat the
FDSLWDOJDLQVLQFUHDVHRI$W
the same time, corporate and
ÀQDQFLDOEX\HUVDUHVLWWLQJRQUH
cord amounts of cash and uninvested capital, which they are eager
to deploy. This supply/demand
imbalance very much favors the
seller. My partners and I believe
that the market will move toward
equilibrium this year as more and
more sellers look to capitalize on
this imbalance.
Given the nearly 80 million baby
boomers nearing retirement and
GHVLULQJOLTXLGLW\DQGGLYHUVLÀFD
tion, the aging portfolio companies
QNorth American private equity funds raised $266 billion last
year, the best year since 2007, and
H[FHHGHGE\ELOOLRQ
QNorth American corporate
balance sheets are estimated to
KDYHRYHUWULOOLRQLQH[FHVV
cash.
QU.S. GDP is picking up a
bit, but the name of the game for
most businesses is acquisitive,
not organic growth.
QMany nonsponsored private
companies have had a bit of an
earnings uptick, and baby boomers are still selling into the market. A study by Bain found that
70% of the portfolio companies of
WKHSULYDWHHTXLW\ILUPVLQ
North America have been held for
over seven years and the limited
partners are putting pressure on
the fund principals to sell. Corporate carveouts, which slowed in
WKHILUVWKDOIRIKDYHTXLFN
ened. Buyers need to stay close to
the corporate development teams
in those corporations, as the
focus on core assets — not just
those that produce cash flow — is
back in vogue.
QThe capital markets are
highly efficient. Even $5 million EBITDA businesses have an
investment banker. Buyers will
have to work harder; keep close
to corporate development teams;
find compatible companies that
DUHQRWÍRUVDOHµEXWPLJKWEH
hire buy-side investment bankers; become more active in knowing the smaller investment banks
around the country; and network
hard in the industries in which
they focus.
QWe will see more activity in
EXWWKH´JRRGµWR´JUHDWµ
companies will be costly.
Q
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*VWSHU(YVUVMM337
20140127-NEWS--35-NAT-CCI-CL_--
1/23/2014
4:14 PM
Page 1
35
ALEX NABAUM
More than 250,000. That’s the total number of followers, subscribers, likes and
connections our featured social media-savvy stars had logged as of last week. Each
has found a way to shine in the universe of Facebook, Twitter, Instagram, LinkedIn
and YouTube and can serve as a beacon for those seeking best practices.
Go to www.CrainsCleveland.com/stars for links to some of the stars’ notable posts.
Follow us on Facebook, LinkedIn, Twitter or Instagram to join the conversation.
20140127-NEWS--36-NAT-CCI-CL_--
1/23/2014
3:34 PM
Page 1
SOCIAL MEDIA STARS
36 CRAIN’S CLEVELAND BUSINESS
TWITTER
Cleveland Clinic
CLE Clothing Co.
T
he owner and founder of
CLE Clothing Co. says his
company spreads Cleveland pride one T-shirt at a
time.
It also spreads that pride — plus
information about new items and
“secret” deals — one tweet at a
time to more than 19,000 Twitter
followers.
“It kind of came to me: If you’re
trying to gain more Twitter followers, people will catch on — ‘oh,
they give away secret deals,’” said
Mike Kubinski, owner and
founder.
His company sells Clevelandthemed apparel and gifts from its
downtown flagship shop and its
Native Cleveland store in the city’s
Collinwood neighborhood.
Usually, Mr. Kubinski sets time
constraints to exclusive offers,
such as the first five people to use
a code receive a certain discount.
He also will tie offers to something
happening around town — such as
a Browns game or a Cavaliers win
— and he purposefully keeps no
set schedule in announcing them.
“Then people would just wait …
for the sale,” he said. “It’s better
when they don’t know. It pays for
the person who’s actually watching our Twitter feed.”
Mr. Kubinski frequently shares
pictures through the company’s
page. In recent weeks, followers
could take a gander at a crewneck
fleece, the boxes of material CLE
Clothing Co. received for restocking
W
@CLECLOTHINGCO
■ 19,289 followers
■ Why it shines on Twitter:
Not only does the CLE Clothing
Co. use Twitter to communicate
with customers and post special
deals, it also consistently uses
the platform to retweet customers
wearing, using and promoting
the company’s Cleveland-centric
gear.
its downtown store and that location’s interior.
“A picture is (worth) a thousand
words,” Mr. Kubinski said. “People
will retweet pictures a lot more
than regular tweets.”
One key to the company’s
Twitter success, according to Mr.
Kubinski, is the quick interaction it
gives followers. Mr. Kubinski not
only “favorites” and “quote
tweets” when customers give positive feedback, but he engages, too,
with those whose feedback is critical. (Often, he will direct conversations of the latter kind to email to
handle them more privately.)
A Jan. 13 example:
@TenCentBeers tweeted to
@CLECLOTHINGCO: “Really
pumped I decided to drive downtown to go to the store only to find
it closed 20 minutes before the
time stated online.”
The company responded with
an apology, noted that it had
tweeted about closing for a staff
party at 5, and said, “We will make
up for it. Can we DM (direct
message) you?”
@TenCentBeers replied, “Sure
thing. Thanks for reaching out.”
Such outreach helps with
customer service, Mr. Kubinski
said, and perhaps gains the
company’s Twitter handle a few
more followers.
“Our customers are our advertisers,” he said. “If they’re retweeting our posts and … getting it out
to more people, then we gain more
potential customers.”
Other tips from Mr. Kubinski:
Follow the “tweet-like-you-eat”
rule, i.e., tweet at least three times
a day, but don’t tweet too much
because then your company’s
content “becomes like Twitter
spam.” Also, follow those who follow you. It’s a nice gesture and
shows “that someone real is there
and not just a bot or program.”
— Michelle Lazette Park
STAY CONNECTED
■ Crain’s on Twitter: @CrainsCleveland
■ Crain’s on Facebook: Facebook.com/CrainsCleveland
■ Crain’s on LinkedIn: linkedin.com/company/crain’s-cleveland-business
■ Crain’s on Instagram: instagram.com/crainscleveland
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101901-0008
ith locations all over
the country and even
Canada and the United
Arab Emirates, the
Cleveland Clinic’s physical footprint surely isn’t small. However,
its digital footprint, especially on
Twitter, might stretch even further.
As of last Wednesday, Jan. 22, the
Clinic’s Twitter account — @ClevelandClinic — boasted 173,262 followers from all over the globe, including accounts from Venezuela,
Istanbul and all over the United
States. The health system started
2013 with about 72,000 followers.
“We think it’s one of the key
channels,” said Joe Milicia, the
Clinic’s senior manager of public
relations and social media. “We
think Twitter has a lot of power to
reach people who may not be
aware of you already.”
Mr. Milicia characterized the
health system’s Twitter strategy as
two-fold. For one, the health system
wants to deepen the public’s understanding of the growing enterprise.
Secondly, the Clinic wants to dispatch timely health information.
For instance, during the peak of
the polar vortex in January, the
Clinic tweeted out ways to stay active without going outside, such as
jumping rope, hula hooping or
taking a trip to a local recreation
center to swim in a pool. In the
morning, the Clinic can be found
tweeting about healthy breakfasts.
Conversely, in the evening, the
health system often tweets about
the importance of sleep.
“A lot of our tweets are sharing
something you can use that day,”
Mr. Milicia said.
Mr. Milicia said providing timely,
@ClevelandClinic
The consistent and varied nature
of tweets from the Clinic keep the
institution and its mission of good
health top of mind without getting
stale.
relevant information is one of the
keys to a successful Twitter presence. After all, that’s the sort of information people tend to retweet to
their followers. Mr. Milicia noted
that the Clinic gets most of its new
followers through retweets.
The Clinic’s Twitter account is
operated by five people within the
health system’s corporate communications department.
“It takes a lot of effort and a lot
of care to make sure you’re keeping up with it,” Mr. Milicia said.
When asked whether he had any
advice for those looking to build
their Twitter presence, Mr. Milicia
noted that Twitter is becoming a
lot more visual because it displays
images prominently on people’s
timelines and it’s important to harness that capability.
Also, while the Clinic hasn’t had
this issue, it’s a good idea not to
have corporate and personal
Twitter accounts linked on the
same device. — Timothy Magaw
Vitamix
V
itamix’s social media strategy isn’t focused on sales,
said Charlee McDaniel,
director of digital marketing for the Northeast Ohio blender
manufacturer.
Instead, the company’s small
digital media team is focused on
serving “owners and advocates,”
Mrs. McDaniel said. The heart of
the social media strategy is the
same as that of the company.
“Our customers come first,”
Mrs. McDaniel said.
Spend any time on the company’s
Twitter feed — or its Facebook pages
for that matter — and it’s obvious
that isn’t just a pat slogan. Mrs. McDaniel said the company’s strategy is
to interact with customers by offering engaging content and responding to questions and concerns.
And it does. Recipes for soups,
smoothies and desserts are tweeted to the company’s 29,000-plus
followers — often complete with
photos — in between public troubleshooting with fans. Vitamix also
interacts with happy customers,
welcoming people to the Vitamix
“family,” talking to them about the
meals they’re blending up and
complimenting their creations.
The company has an internal digital media team of three that oversees
the social media accounts, said social media manager Brittany Senary.
Those employees work closely with
the customer service team and reach
out to them with issues on behalf of
concerned customers.
Vitamix started its Twitter account in April 2009, tallying up
more than 11,000 tweets in that
time, but the social media strategy
really evolved over the past year.
Mrs. McDaniel said the focus has
been on growth and engagement
this year, whereas before, the company was doing more traditional
@Vitamix
This Northeast Ohio maker of
premium blenders with an international following uses the right
recipe on Twitter to make connections with its customers and
provide customer service. (Not to
mention you can get a lot of tasty
smoothie recipes by being a
follower.)
editorial and public relations support on its social media channels.
In addition to interacting with
the brand, customers ask a lot of
questions and share recipes on
Twitter. (On Facebook, customers
tend to interact with each other,
Miss Senary said.)
Mrs. McDaniel noted that “leveraging” organic growth is important;
companies have to be committed if
they plan to enter the social media
sphere, and they need to stay true to
what customers want.
From 2012 to 2013, Vitamix saw
the number of users across all its
social platforms grow by 146%,
Mrs. McDaniel said.
— Rachel Abbey McCafferty
20140127-NEWS--37-NAT-CCI-CL_--
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3:33 PM
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SOCIAL MEDIA STARS
CRAIN’S CLEVELAND BUSINESS 37
INSTAGRAM
The Greenhouse Tavern
Yellowcake Shop
T
hat started as way a to document personal trips and capture
digital keepsakes without carrying a clunky camera has developed into the main marketing tool for Yellowcake Shop, the clothing company of
Cleveland-based designer Valerie Mayen.
Ms. Mayen said by the spring of 2012 —
only a month after starting to use the image-driven site — she had collected about
1,000 followers.
“From what I have been seeing on Instagram from small businesses and other companies is that they use it for their personal
use and also their
company so they
kind of create this
bridge of connection to their client
by showing them
their personal
lives,” she said.
“We try to mix it
up and do personal and business
posts on Yellowcake Instagram.”
As a harried small business owner, Ms.
Mayen said it’s difficult for her to be engaged in all social media platforms. “I like
Instagram because I can push things to
Facebook and Twitter at the same time
which lets me kill three birds with one stone
and I’m still able to reach the audience I
need to reach.”
Now Yellowcake has more than 2,400 followers and has posted more than 600 times,
including pictures and videos.
“People respond to photos much more
than they do to text,” she said. In her fashion posts, Ms. Mayen tries to show followers
how they can mix high-end and low-end
pieces, featuring something from her store
and an item from Target. “Also I am trying
he Greenhouse Tavern is no flash in
the camera user of Instagram. The
popular East Fourth Street restaurant
was an early adopter of the social
media platform, with an active account on
the image-is-everything site for two years.
In fact, Team Sawyer Culinary Coterie,
which encompasses Greenhouse and other
concepts by chef Jonathon Sawyer and his
wife, Amelia, juggles several different accounts, each with 5,000 to a couple thousand
followers. Greenhouse Tavern has more than
2,600 followers and more than 1,422 posts.
What are people following, you ask? The
visual story of The Greenhouse Tavern. Or
Noodlecat. Or Chef Jonathon Sawyer among
other things, says Amelia Sawyer, co-owner
of Team Sawyer restaurant group.
“We use it every day, multiple times a day,
and we post to market ourselves,” said Mrs.
Sawyer, who has driven the social media bus
at the company since pioneering her wellread Chef’s Widow blog in 2003.
The company does not advertise but it is
able to reach 35,000 people through its collective social media campaign. “We post to
show things that we are doing that are up
and coming. If we are doing something in
Cleveland that no one else is doing, we like to
highlight that on our accounts. We highlight
our chefs, our foods, our specials and we also
post microvideos. It’s an important part of
our business.”
Mrs. Sawyer said there is no question that
Instagram drives business to its restaurants.
“At Noodlecat, for example, people wait
daily to find out what the special is for lunch.
If we don’t put it up (on Instagram) they
email us,” she said.
Mrs. Sawyer said she’s a fan of Instagram
first because it’s instant as its name suggests.
“It’s very visual and I think food is not only
W
@thegreenhousetavern
■ 2,687 followers
■ Why it shines on Instagram: This
Jonathon Sawyer restaurant, along with his
team’s other concepts, uses the visual social
media platform as an authentic way to highlight chefs, food and specials. Often, that
means images of tasty dishes that could help
spark any appetite — and drive people to the
restaurant.
good to eat, it’s an art form. A big part of Instagram is finding beauty in everyday things
and I think that’s why it’s super great for the
restaurant business,” she said. “For me it’s
about being organic, authentic and not selling. It’s not buy this chicken or buy these
fries. It’s these fries are amazing because we
went to the farmer’s market yesterday and
we found two-pound potatoes and they were
crazy big so Chef Sawyer wanted to make
these fries and this is what they look like. It’s
telling our story.”
Her tip to newcomers to the site: Make
sure your photos are well lit and look pretty.
“Don’t post any food that is brown; that never looks pretty no matter what.”
— Chrissy Kadleck
@yellowcakeshop
■ 2,457 followers
■ Why it shines on Instagram:
Yellowcake Shop does a good job
promoting sales as well as personalizing
and putting a face on the small business
owned by designer Valerie Mayen.
to influence Clevelanders to get outside
their comfort zone and wear color, mix
prints and wear things that they think are
exciting, even if it’s uncomfortable. Just
wear it.”
Ms. Mayen, who
has learned that
two of the best
times to post are at
the lunch and dinner hours when
people are checking their social
media accounts, is
particular about
what she posts.
“Sometimes I don’t feel like inundating
my friends, my clients and my fans with
propaganda,” she said. “I try to only Instagram things that I think are ‘Instagram worthy’ so I ask myself is it going to get 100 or
more likes? If it doesn’t get 100 or more likes
than I don’t want to post it,” she said.
Her plan this year is to delegate the social
media tasks to someone who can focus on it
since it is Yellowcake’s only source of marketing right now.
“I always joke that Instagram is like
Nutella, it makes everything better,” she
said about the site’s filters. “It can make a
terrible picture OK and it can make a really
great picture really, really fantastic.”
— Chrissy Kadleck
20140127-NEWS--38-NAT-CCI-CL_--
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38 CRAIN’S CLEVELAND BUSINESS
YOUTUBE
Positively Cleveland
Positively Cleveland
B
Mike Polk Jr.
S
ome expertly delivered rants
and clever songs, packaged
smartly on YouTube, have
made comedian Mike Polk
Jr. Internet-famous.
Don’t recognize his name?
That’s possible. But if you spend
any time on YouTube, there’s a
good chance you’ve seen some of
his work, including two “Factory of
Sadness” screeds against his
beloved Cleveland Browns (about
1.5 million views for each); a couple “Hastily Made Cleveland
Tourism Videos” satirizing the
town (more than 6 million views
for each); and “Ooh Girl: An Honest R&B Song,” about a gentleman’s, umm, limitations in the
prospects for a romantic evening
with an attractive woman (more
than 9.6 million views).
Mr. Polk, a member of the Last
Call Cleveland comedy group and
the author of “Damn Right I’m
from Cleveland,” said the YouTube
videos have been “very helpful to
my career as far as connecting with
people and getting the word out
about shows and products.”
Despite the big YouTube fan
base, Mr. Polk said he suspects
he’s still “not utilizing (the platform) to its full potential,” and he
cops to being “late to the party,” in
some respects, when it comes to
his use of other social media, such
as Facebook and Twitter.
“I’m speaking on a BlackBerry
Bold, if that’s any indication,” Mr.
Polk said during a phone interview.
But on YouTube, Mr. Polk and
Last Call Cleveland have found the
ideal outlet to build their brand of
comedy.
“I primarily post things that I
find entertaining and I hope for
the best,” Mr. Polk said. “I’ve been
fortunate that people have found
some of it amusing and they tend
to pass things along, but I don’t re-
SOCIAL MEDIA STARS
Mike Polk Jr Show
■ 2,215 subscribers
■ Why he shines on
YouTube: Mike Polk Jr. has used
YouTube to create a personal
brand for himself — extending his
reach well beyond the confines of
Cleveland-area comedy clubs.
ally have a specific strategy.”
He does, though, know what gives
YouTube videos a better chance to
go viral. A clever title is important,
Mr. Polk said, as is a good image in
the thumbnail opposite the title.
Catchy — if “not necessarily good”
— music helps a lot. The best videos
tend to be brief (no more than a
couple minutes), topical and “come
from someplace real,” he said.
That’s the case with the “Factory
of Sadness” videos, in which Mr.
Polk yells at FirstEnergy Stadium
out of frustration with the agony
the Browns inflict on fans.
With the first Browns video, in
2011, “that honestly wasn’t me trying to get attention or followers or
subscribers or anything like that. It
was genuine frustration,” Mr. Polk
said. “And I think the candor of the
message and the simplicity of the
production made it relatable for
people. That was just me there alone
with my camera on a tripod, lit by
my car’s headlights. And it connected with people.”
Mr. Polk said he did “nothing to
help that video go viral. I recorded
and posted it the night of that
game, when I woke up in the
morning it had over 100,000
views.” — Scott Suttell
ecause of Positively Cleveland, another 1,500 people
know that Cleveland is “a
cultural, culinary and educational Mecca.”
That quote from the Cheapflights
Travel Blog was one of many plaudits that the organization crammed
into a two-minute-long video it
posted on YouTube in June 2013. In
between shots of East Fourth Street,
the Cleveland Orchestra and PlayhouseSquare, the camera pans
across the city’s skyline. Quotes float
in the air: Cleveland is one of “15
U.S. Cities with Emerging Downtowns” (Forbes), it’s among the
“best destinations for food lovers”
(Food Network Magazine) and it is
“equipped for large-scale conventions, intimate retreats, and everything in between (Meetings Focus).
Positively Cleveland, the region’s convention and visitors bureau, created the video for its 2013
annual meeting, but it also racked
up 1,500 views on YouTube with a
minimal amount of promotion on
other social media platforms.
That’s part of the organization’s
strategy: It uses one video for multiple purposes. They end up on
blogs, in electronic newsletters
and even on the TV in the organization’s lobby on Euclid Avenue.
For much of the past seven years,
Positively Cleveland has been one
of the region’s most prolific
YouTube users, creating 126 videos
that have attracted nearly 750,000
views. Granted, the organization
has been creating fewer videos
since 2012, when it lost its only employee with significant videography
expertise. But Positively Cleveland
continues to make new videos, often for specific projects, such as the
annual meeting, said Corinne Allie,
interactive media manager for Pos-
LINKEDIN
S
time, and often just below the entities that pay money to be at the
top of the page. Except Soluna
doesn’t pay, it’s just top of mind
and often searched for, and therefore the top of the list to boot.
She did it, Ms. Lambrix explains,
by fully engaging her LinkedIn audience, expanding her presence on
the social media outlet and leveraging her LinkedIn relationships into
other opportunities. That included,
she says, joining LinkedIn groups
dealing with aviation, travel and industries from which she gleans new
customers. Today, she’s got more
than 500 LinkedIn connections and
belongs to about 50 LinkedIn
groups that expose her to another
million or so people.
Her industry-specific contacts
soon led to opportunities to produce blogs and content for groups
on LinkedIn and elsewhere, which
fit with Ms. Lambrix’s natural inclination for writing. She’s careful
not to write about herself or her
company, but about topics that
will be useful to a broader audience. That way the blogs not only
Joel Libava
J
oel Libava did not name himself The Franchise King — a
friend dubbed him that at a
Beachwood Chamber of
Commerce meeting. However, he
embraced the moniker, trademarked it and uses it incessantly
on the Internet through LinkedIn,
Twitter, Google Plus and Facebook. His website, www.thefranchiseking.com, is the thread that
ties it all together.
Although Mr. Libava has published two ebooks on franchises and
frequently writes about franchising
for publications and websites, he
considers social networking vital to
his firm. The prolific onetime radio
disc jockey and restaurant veteran
followed in his late father’s footsteps
in the franchise sales trade and sold
franchises for years for various franchisors before becoming a franchise
consultant.
Without social media, he estimates his business would be 20% of
its current size. He also credits social media for allowing him to make
a crucial change in his business in
itively Cleveland.
Nowadays, Positively Cleveland
often hires professionals to make
its videos, Ms. Allie said. Doing so
can be expensive, but other organizations in that position should
think about hiring pros if they
want to produce cinematic videos.
The content itself should “paint
a picture and be useful” to the
viewer, Ms. Allie said. And so long
as it doesn’t include outdated images — i.e., LeBron James dunking
a basketball — it can be used multiple times, even years after it’s
created.
— Chuck Soder
Pat Lambrix
Pat Lambrix
mall wonder Pat Lambrix is
a star in the world of connectivity. The president of
Cleveland-based Soluna Air
Charter makes her living putting
together folks who need private air
transportation with carriers
around the world.
So the world of LinkedIn was a
natural fit — and it’s helped to
build her business immensely, she
now testifies.
“The way we talk about it is like
‘LinkedIn juice’ — it’s the juice
that gets you up there,” she says.
By “up there,” Ms. Lambrix is
talking about more than airplanes.
She’s mostly referring to her website, which was one of many and
well down the list of air charters that
came up in a typical Google search
— before she learned how to better
use LinkedIn to boost name recognition for both her and Soluna.
“I had this beautiful website, but
I was always way on the back
pages,” she says, recalling the situation nearly two years ago, when
she first opened Soluna.
Today, a Google search of “charter air service” brings up Soluna
on the very first page most of the
■ 821 subscribers
■ Why it shines on YouTube:
Positively Cleveland has created a
library of 126 videos that have
attracted 750,000 views featuring
the city’s attractions. Its strategy
has been to use single videos for
multiple promotional purposes.
■ 638 connections
■ Why she shines on
LinkedIn: Anyone can get a lot of
connections on LinkedIn, but the
president of Soluna Air Charter
has used the platform to help build
her business. She’s also active on
LinkedIn groups, which helps
increase her exposure within the
industry and beyond.
get read, but circulated and picked
up by others, she said.
She even got asked by a retiring
LinkedIn member to take over the
management of LinkedIn’s WorldClass Independent Air Charter Brokers industry group, which she now
runs. Ms. Lambrix uses other social
media as well, of course. She and
her company have pages on Facebook that she regularly uses, and
she also has nearly 400 followers on
Twitter. But she does believe in
moderation — otherwise, LinkedIn
and the other outlets would take up
too much of her attention.
“It can be a time drain and you
have to really watch it,” she said. “I
wake up in the morning, and I only
allow myself a half hour — and
that’s Twitter too,” she said.
— Dan Shingler
Joel Libava
2011: he dropped franchise brokerage for commission — the typical
franchise model — to become a
consultant paid on an hourly basis.
He also shed a Chagrin Boulevard
office to work as much as 10 hours a
day from his University Heights
home. He even does consulting assignments over Skype to eschew
time and travel expenses.
Mr. Libava uses each social media network differently: he said he
is more restrained and businesslike on LinkedIn, where he has
1,968 connections, than on Twitter, where he has more than 16,000
followers. On LinkedIn, Mr. Libava
said he changes his profile every
few months although he keeps intact his branding and keywords he
has identified for his business.
“Remember, when you update
your (LinkedIn) profile, it shows
up in your stream,” Mr. Libava
said. His approach to posts is sim-
■ 1,968 connections
■ Why he shines on
LinkedIn: The Franchise King
regularly updates his profile —
while keeping his branding — in
order to stay top of mind in the
streams of his connections, and
he uses the platform to stay in
touch with others in his industry.
ple: “Every time something new
has happened, change your copy.”
He said LinkedIn is valuable in
developing a “thought leadership
role” and he benefits from being in
groups associated with franchising. He said he enjoys LinkedIn for
“rubbing elbows in the same industry” with others and it can help
him find strategic partners.
Through all his media efforts
Mr. Libava tries to project his own
personality. He is gratified when
he has direct contact with people
he’s met through social networking who say, “I thought you’d be
like this.” — Stan Bullard
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SOCIAL MEDIA STARS
FACEBOOK
North Ridgeville
Police Department
Hermes Road Racing
W
hen Joe Neroni was
hired by Hermes
Sports & Events three
years ago, the Hermes
Road Racing Facebook page had
fewer than 1,000 likes.
Today, it has more than 8,100 —
and Mr. Neroni believes the reasons for the growth are simple.
The Cleveland race management company uses its Facebook
page as a “news communication
vehicle,” but makes sure it doesn’t
overwhelm its “fans” with posts.
“I think there was trial and error,” said Mr. Neroni, who is in
charge of Hermes’ public relations,
communications and sponsorship
sales. “We found out pretty quickly
what were some better practices.”
One is posting photos after all of
the races it hosts, a practice Mr.
Neroni said the participants really
enjoy.
Hermes uploaded 116 pictures
on Jan. 18, the day of its Garage
Sale 5K at Edgewater Park. On
back-to-back Saturdays last month
(Dec. 7 and 14), Hermes added 270
and 153 pictures for a pair of
Christmas-themed races — the
2013 Reindeer Run and the Santa
Shuffle Tremont, respectively.
Mr. Neroni said Hermes doesn’t
have a photographer on staff, but
the company hires a freelancer to
take pictures at every race. To get
photos on Facebook on the day of
the race, Mr. Neroni posts pictures
that he or some of his staff members and volunteers take.
“I think it’s a pretty important
news service, compared to what
other people use it for,” Mr. Neroni
said. “I don’t care if somebody is at
this restaurant or that restaurant,
or that type of stuff. We use it for
Hermes Road Racing
■ 8,134 likes
■ Why it shines on Facebook:
Hermes uses Facebook to stay
connected to and build a
community among participants.
Post-race photos are plentiful on
the site as well as information
about upcoming events.
news and information, and not
necessarily serious information.
We use it for the fun information
— more than the who, what, when,
where and how type of stuff.”
Mr. Neroni said Hermes rarely
gets any complaints, but when a
negative comment is posted, or a
participant has a question, the organization makes sure it responds
as soon as possible.
“Most people appreciate the fact
that we took time to get back to
them with an answer and not just
blow it off or delete it,” Mr. Neroni
said. “We’ve never deleted a post
from someone who didn’t like us.”
Hermes also has never posted,
in the words of Mr. Neroni, “a million times a day.”
“I think the big key for us is we
don’t overdo it,” he said. “Sometimes we underdo it, if that makes
sense. We’re still figuring out the
right balance. We’ve learned our
lessons.”
Hermes also uses its Facebook
page for race announcements and
information, thank you messages
to its volunteers and sponsors and
promotional items such as a new
T-shirt design, contests and
awards. — Kevin Kleps
Main Street Cupcakes
F
or Sarah Forrer, Facebook
is first and foremost a way
to connect with customers.
“We treat customers as
friends,” said Ms. Forrer, who is
co-owner of Main Street Cupcakes.
“Facebook has given us that
platform.”
Ms. Forrer largely credits its Facebook presence, started in 2009, with
helping to foster the growth of Main
Street Cupcakes, which she runs
with her sister Kimberly Martin.
The specialty cupcake business
opened its first store in 2007, and
today its locations include shops in
Rocky River, Hudson and one
that’s opening soon in Chagrin
Falls.
Ms. Forrer personally handles
the business’ social media activity,
with Facebook posts ranging from
the menus for the day to weekly
trivia questions, a particularly popular feature.
One trivia post in 2013 even garnered more than 80,000 views: A
photo including a number of boxes
challenged readers to guess how
many cupcakes were included in
the particularly large delivery. The
winning answer — which was
1,005 cupcakes and posted on
Main Street’s website — received
a free half-dozen cupcakes.
“I still don’t know what it was
about that picture,” said Ms. Forrer, who stressed that Facebook is
more than a free way to advertise.
It also can be a tool to glean information about customers and
what they are thinking, she said,
and a way to consistently communicate, regardless of store hours.
“Just because I didn’t do business
that day doesn’t mean I don’t have
CRAIN’S CLEVELAND BUSINESS 39
Main Street Cupcakes
■ 10,836 likes
The cupcake business is consistent in its postings, not only using
the platform to give information,
such as store menus, but also to
promote interaction with — and
among — its customers.
to touch my customers,” she said.
Indeed, during a recent holiday
shutdown period, Main Street’s
Facebook followers were still being
asked for input.
And they listened, adding more
than 140 comments to this post:
“Brrrr! Glad we are still on our
holiday shutdown! Just wish we
were somewhere warmer!! Who’s
reading this beachside? Comment
below with what you’re doing with
your Snow/feels below zero day today and at 5pm we’ll draw a name
to win a certificate for half a dozen
Margarita Main Street Cupcakes
on us! (Because we really wish we
were at our favorite Mexican resort
drinking margaritas beach side!)”
For business owners looking to
get started on social media, Ms. Forrer has this advice: “I would say just
get on board. … I feel strongly you
do business with people not just
places.” — Amy Ann Stoessel
North Ridgeville
Police Department
I
n early January, subzero temperatures caused a drop in gas
line pressure shutting down
furnaces and stoves in 2,000
homes in North Ridgeville, as well
as homes in other nearby communities.
While the news media could offer broad coverage of the emergency, residents of the Lorain
County city of 30,000 could turn to
the Facebook page of their police
department for more specific local
information instead of jamming
emergency phone lines.
The police department used the
page to guide residents through the
crisis — and then through a water
shortage that same week. (During
the water shortage, North
Ridgeville directed its followers to
the Avon Lake Municipal Utilities
page, which also gave consistently
updated and detailed information.)
A Jan. 7 post, for instance,
warned residents not to attempt to
restore gas service on their own
because of the risk of cracking
frozen pipes. An earlier post
warned residents to ask gas company employees for identification
before letting them in their homes.
In addition, more than 100 of the
people who followed the crisis on
the police department’s page contributed updates on the restoration
of service, sometimes block by
block. “I’m on Chestnut between
Waterbury and Hedgerow ... a crew
was here 20 min ago,” said one
poster at 6:47 p.m. on Jan. 7.
People also posted notes of
thanks to the workers who braved
the overnight cold.
The department logged on to
Facebook in February 2011. “It’s a
way of trying to get information out
to residents,” said Capt. Marti Garrow, who oversees the page. “I think
it’s been very successful; it’s nice to
see the response (from residents).”
The page also gives information
about road closures and detours
and the department peppers the
page with eye-catching graphics to
draw attention to traffic accidents
and, in November, a “Crime Alert”
about a wave of break-ins in one
city neighborhood. The page also
carries posts about upcoming
community events.
Capt. Garrow said an officer
took the initiative to create the
page and keeps it current daily.
“It’s something (the officer) is passionate about,” he said. A sergeant
■ 5,087 likes
The dreaded polar vortex and an
ensuing gas and water crisis
helped shine light on how a public
entity such as the North Ridgeville
Police Department can use social
media. Not only did the site give
relevant, timely information to
residents, it did so with a caring
and empathetic tone — and it
provided an outlet for residents
to share information.
also spends a little time supervising the page, as does Capt. Garrow, the department’s No. 2.
Updating the page is not too
time-consuming, but it is tended
to daily. “We let (residents) have a
flavor of what’s going on in the
city,” Capt. Garrow said. “They can
have a little more information and
maybe take steps to prevent them
from being a victim.”
He said the department also
uses the page to post surveillance
camera shots and asks residents to
help identify suspects. It also publishes monthly crime reports.
“We try to get the message to
them that we need their help solving crimes,” he said. “They are the
eyes and ears of the community.”
— Jay Miller
20140127-NEWS--40-NAT-CCI-CL_--
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1/24/2014
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GOING PLACES
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JOB CHANGES
ARCHITECTURE
✔
KA: Jim Clarke to shareholder.
✔ Double Plant Light Levels
VAN AUKEN AKINS ARCHITECTS
LLC: Justin G. Fliegel to project
manager; Edward T. Parker to
project architect; Michael J. Maglic
to architectural intern.
✔ 8-24 Month Payback
CONSULTING
✔
✔ FirstEnergy Rebates up to 35%
✔
✔
Clarke
Wilk
Monter
Milbry
Eisenberg
Wild
Serrani
Dobos
TOWERS WATSON: Marissa Wilk
to account director.
FINANCIAL SERVICE
BRUNER COX LLP: Michele M.
Monter to chief operating officer;
Daniele L. Caserta to assurance
services senior manager; Rachel L.
Brandt to assurance services manager; Robert M. Ryan to tax senior
manager; Tricia M. Vega to tax
manager; Matthew L. Douglas and
Nathan R. Remington to tax
supervisors; Kyle A. Bowers, Kyle J.
Hennis and Heather L. Linebarger
to assurance services senior associates; Jesse P. Kepple and Daniel R.
Schrader to tax senior associates.
Call Bob Taussig
ROI Energy
TODAY!
330-931-3905
www.ROI-Energy.com
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Graham to software trainers.
president, resource development.
MCMANUS, DOSEN & CO.:
Michelle L. McManus to member,
accounting and tax group.
WOMEN’S RECOVERY CENTER:
Beki Poitras to development associate.
SCHLABIG & ASSOCIATES:
David Milbry to associate.
REAL ESTATE
EDGEPOINT CAPITAL ADVISORS:
Paul Chameli to senior vice president.
EDGEWATER CAPITAL PARTNERS
LP: Cory Frye to associate.
LEGAL
SERVICE
BENESCH: Gregg Eisenberg to
associate managing partner; Jeffrey
J. Wild and Eric L. Zalud to
executive committee.
FREEDONIA GROUP: Brian
Clayson to senior research analyst.
BRENNAN, MANNA & DIAMOND:
Victoria Serrani to associate.
DIRECT CONSULTING
ASSOCIATES: Charles Aiken III
to executive recruiter.
HOWARD, WERSHBALE & CO.:
Kate Protsenko, Michael Shoffner
and George Timoteo Jr. to senior
managers; Dottie Hauman, Daniel
J. Kaminski, Russell E. Majkrzak
and Randy T. Wolan to managers;
Laura Bove, Christina Luangrath,
Shayna Raj, Andrew P. Somich,
Ben Stumpf and Ben Whalley to
senior accountants; Nicole M. Trimmer, Nicholas M. Kaplan, Miranda
Allen, Michelle E. McCon and Neal
J. Evers to staff accountants;
Kristine Kalinic to assistant controller; Gregory Garey and Leslie D.
ULMER & BERNE: Andrew G.
Fiorella, Paul R. Harris, Megan K.
Roberts and Melissa L. Zujkowski
to partners.
VORYS, SATER, SEYMOUR AND
PEASE: Rajeev K. Adlakha and
Laura A. Kulwicki to partners.
MUNICIPAL
CITY OF SHAKER HEIGHTS:
Matthew Rubino to finance director.
CONFLICT MINERALS
CONFERENCE
A DYNAMIC SEMINAR TO HELP YOUR ORGANIZATION COMPLY
WITH THE MAY 31, 2014 SEC REPORTING DEADLINE
FEBRUARY 19, 2014
8 A.M. - 2:30 P.M.
PRESENTERS AND PANELISTS:
QTANYA BOLDEN
BREAKFAST, LUNCH AND PARKING INCLUDED.
Program Manager, Corporate Social Responsibility, AIAG
CRN 33117 | $195 Per Person
Corporate College | Warrensville Heights
QDR. JOHN CALDWELL
Director of Economics, Edison Electric Institute
QJEFF THOMPSON
KEYNOTE SPEAKER:
QMAURICE CARNEY
Executive Director, Friends of the Congo
Understanding the New
Global Social Expectations
PRESENTED BY:
XCELIGENT INC.: Debra Kaplan to
director of client sales and service.
SS&G: Kevin Fechter to associate
director; Megan McElroy to
manager; Sara Stanford to
administrative assistant; Kyle McKinney, Tracy Taylor, Brian Schlabig and
Alex Slabaugh to associates.
Vice President, Supply Chain Americas, Eaton
BREAKOUT SESSIONS:
• Conflict Minerals Reporting Best Practices
• Developing a Conflict Minerals Supplier
Engagement Strategy
• Completing the SEC Report SD Form
NONPROFIT
IDEASTREAM: Mary Grace Herrington to chief development officer.
LEGAL AID SOCIETY OF CLEVELAND: Dennis Dobos and Hazel
Remesch to senior attorneys; Abigail Staudt to supervising attorney.
UNITED WAY OF GREATER
CLEVELAND: Simon Bisson to vice
MUSTARD SEED MARKET AND
CAFÉ: Jon Fiume to chief operating
officer.
STAFFING
DIRECT RECRUITERS INC.: Aaron
Kutz to project manager,
government and electronic security.
BOARDS
LEGAL AID SOCIETY OF CLEVELAND: Rick Petrulis to president;
Frank DeSantis, Vanetta Jamison
and Elizabeth Rader to vice
presidents; Ronald Johnson to
secretary/treasurer.
AWARDS
KIDNEY FOUNDATION OF OHIO
INC: Robert J. Heyka, M.D.,
(Cleveland Clinic) received the 2014
Person of the Year Award.
Send information for Going Places
to [email protected].
Remarkable Real Estate
Development
Flats
Columbus Rd.
Peninsula
Two sites
1.51 and 2.68 acres
respectively with
495+ feet of
Cuyahoga River
Frontage.
MAKE AN OFFER
CRM. INC.
TWO CONVENIENT WAYS TO REGISTER TODAY.
ONLINE: www.corporatecollege.com/conflictminerals | PHONE: 216-987-0233
RETAIL
216-299-2233
Larry Hunt
[email protected]
20140127-NEWS--41-NAT-CCI-CL_--
1/24/2014
11:16 AM
Page 1
41
LARGEST COMMERCIAL PROPERTY SALES 2013
(1)
RANKED BY PRICE
Building
Address
Rank City, Zip
Property type
Transaction price ($)
Square feet or # of Price per sq. ft. or #
units
of units
Buyer
Seller
11/15/2013
Starwood Capital
Westfield Group
$97
7/31/2013
Rock Gaming JV Caesars
Entertainment
Forest City Enterprises
638,004
$98
12/30/2013
Five Mile Capital
Duke Realty
56,000,000
949 units
$59,009
9/6/2013
The Suffolk Family Trust
K&D Group
Retail
42,200,000
348,697
$121
1/31/2013
Phillips Edison-ARC
WP Realty Inc.
The Marsol Apartments
6503 Marsol Road
Mayfield Heights, 44124
Apartment
41,000,000
986 units
$41,582
5/1/2013
Morgan Management
K&D Group
7
Newell Rubbermaid
3200 Gilchrist Road
Tallmadge, 44278
Industrial
34,900,000
812,000
$43
2/1/2013
ARC Trust IV
InSite Real Estate
8
22 Exchange
22 E. Exchange St.
Akron, 44308
Apartment
31,222,222
142 units
$219,875
4/16/2013
BH Op REIT II
Richland Communities
9
Campus Pointe
1841 Ashton Lane
Kent, 44240
Apartment
30,000,000
198 units
$151,515
10/17/2013
Campus Advantage
Richland Communities
9
Cleveland Technology Center
1425 Rockwell Ave.
Cleveland, 44114
Industrial
30,000,000
333,215
$90
6/3/2013
ByteGrid
Matrix Realty Group
11
Legacy Village
25001 Cedar Road
Lyndhurst, 44124
Retail
27,300,000
587,411
$100
10/29/2013
NA
JLL Income PT
12
Ameritrust Complex
900 Euclid Ave.
Cleveland, 44115
Office
27,000,000
800,000
$34
2/1/2013
Geis Cos.
Cuyahoga County
13
Cedar Center South
13908-13998 Cedar Road
University Heights, 44118
Retail
24,900,000
138,891
$179
10/10/2013
Inland Real Estate Corp JV
PGGM
The Coral Co.
14
Richmond Park Apartments
444 Richmond Road
Richmond Heights, 44143
Apartment
23,610,000
736 units
$32,079
5/20/2013
Tritex R&E Advisors
Cuyahoga County Sheriff
15
Sam's Club
10250 Brookpark Road
Cleveland, 44144
Retail
21,318,750
147,771
$144
6/20/2013
Agree Realty Corp.
Stark Enterprises
16
Cleveland Clinic Chestnut Commons
303 Chestnut Coimmons Drive
Elyria, 44035
Office
20,373,800
40,000
$509
8/16/2013
CNL Healthcare Trust
Montecito Medical JV Harrison
Street RE
17
North Olmsted Towne Center
24954 Brookpark Road
North Olmsted, 44070
Retail
17,790,000
95,446
$186
11/22/2013
McClean Properties
Carnegie Cos.
18
Diplomat Healthcare
9001 W. 130 St.
North Royalton, 44133
Senior housing
14,350,000
170 units
$84,412
5/16/2013
Aviv REIT
Diplomate Land Holdings LLC
19
Southgate USA
20990 Libby Road
Maple Heights, 44137
Retail
14,000,000
788,130
$18
12/17/2013
Carl Verstandig
GMAC Commercial Mortgage
20
Parkway Medical Center
3609 Park East Drive
Beachwood, 44122
Medical
13,700,000
88,000
$156
1/15/2013
Realty Income
AR Capital Trust
21
Oaks of Brecksville
8757 Brecksville Road
Brecksville, 44141
Senior housing
13,618,948
80 units
$170,237
8/19/2013
Mainstreet
Brecksville Healthcare Holdings
LLC
22
Liberty Residence I & II
250 Smokerise Drive
Wadsworth, 44281
Senior housing
12,000,000
136 units
$88,235
4/1/2013
Titan RE Investment Group
American Hospitality Group
23
Harbour Run
5890 Marine Parkway Drive
Mentor, 44060
Apartment
11,760,000
256 units
$45,938
10/29/2013
Burton Carol Management
Harbour Run Apartments LLC
24
Barrington Place Apartments
28600 Detroit Road
Westlake, 44145
Apartment
11,400,000
164 units
$69,512
3/18/2013
Barrington Gardens
Associates LLC
Harbor Group International
25
Hyland Software
28105 Clemens Road
Westlake, 44145
Development site
11,135,000
714,515
$16
3/26/2013
Hyland Software Inc.
Five Seasons Sports Club
26
Morning Star Tower
10600 Saint Clair Ave.
Cleveland, 44108
Apartment
9,230,000
201 units
$45,920
3/29/2013
Millennia
AES Management Corp.
27
12850 Darice Parkway
Strongsville, 44149
Industrial
9,218,070
170,550
$54
6/14/2013
Hackman Capital Partners
First Industrial JV CalSTRS
28
30301 Carter St.
Solon, 44139
Industrial
8,162,934
219,574
$37
6/14/2013
Hackman Capital Partners
First Industrial JV CalSTRS
29
Great Lakes Plaza
7900 Plaza Blvd.
Mentor, 44060
Retail
8,000,000
81,399
$98
11/22/2013
Devonshire REIT
Simon Property Group
29
Hess Print Solutions
3765 Sunnybrook Road
Kent, 44240
Industrial
8,000,000
580,693
$14
8/7/2013
Bang Printing Inc.
Angelo Gordon
1
Westfield Great Northern Mall
4954 Great Northern Blvd.
North Olmsted, 44070
Retail
196,600,000
1,184,733
$166
2
Higbee Building
100 Public Square
Cleveland, 44113
Office
79,000,000
815,000
3
Park Center/Corporate Plaza
6050-6150 Oak Tree Blvd.
Independence, 44131
Office
62,399,998
4
NorthPointe Apartments
26241 Lakeshore Blvd.
Euclid, 44132
Apartment
5
Fairlawn Town Centre
2855 W. Market St.
Akron, 44333
6
Date
Crain's Cleveland Business does not independently verify the information and there is no guarantee these listings are complete or accurate. We welcome all responses to our
lists and will include omitted information or clarifications in coming issues. Individual lists and The Book of Lists are available to purchase at www.crainscleveland.com.
(1) Source: Real Capital Analytics Inc., headquartered in NYC, is an independent data and analytics firm focused on the investment market for commercial real estate. RCA
offers comprehensive data on commercial property transactions that take place around the world. Visit www.rcanalytics.com. Partial interest transactions included at the prorated share of the 100% property value. Additional information from Alec Pacella, senior vice president, NAI Daus.
RESEARCHED BY Deborah W. Hillyer
20140127-NEWS--42-NAT-CCI-CL_--
42
1/24/2014
3:26 PM
Page 1
Room: Positively Cleveland VP says SMG’s clout is big for city
It will bring 3,000 music teachers
back in 2017 and 2019. Later in
2015, in November, the Association
of Iron and Steel Technology will
bring 6,000 people to the city.
The iron and steel group used to
come to Cleveland regularly, but it
moved to places such as Atlanta,
Indianapolis and St. Louis a decade
ago, when the old convention center went into decline.
So far, Mr. Leahy is pleased with
the building he’s working to fill.
“It’s a great convention space,”
he said in an interview in his office
in the Global Center. “I haven’t
peeked in all the closets yet, but it’s
extremely well-designed from an
operational standpoint (and) from
a marketing standpoint.”
Mr. Leahy said the prime spaces
are the 230,000-square-foot exhibit hall, which is divisible into three
smaller halls; the 32,000-squarefoot grand ballroom with a wall of
glass that looks out on the Rock and
Roll Hall of Fame and Museum and
FirstEnergy
Stadium;
and
the11,000-square-foot junior ballroom of the Global Center.
Savvy operator
SMG manages 69 convention
centers nationwide, including cen-
Contact:
Phone:
Fax:
E-mail:
ters in Columbus and Toledo. The
firm brings with it a national network of convention center marketers who can augment Mr.
Leahy’s staff of 25 in selling the
Cleveland complex.
Mr. Leahy said the various SMG
centers compete against each other for business.
“We’ll have marketing battles
with Columbus,” he predicted.
But when they aren’t competing,
the centers share information. The
company has an incentive program
that rewards sales people for helping funnel business to other SMG
locations.
Mr. Leahy said he can ask another SMG convention center manager about what a particular association focused on when it held a
convention and what the company’s experience was with that
group. He might ask for details
about labor and construction costs
for bringing in a show. That information can help Mr. Leahy sharpen his bid for a group’s business.
“It’s a wealth of information and
(gives you) a better way to serve the
client,” he said.
The clout of SMG is an advantage
in pursuing convention business,
said Michael Burns, senior vice
president for convention sales and
Denise Donaldson
(216) 522-1383
(216) 694-4264
[email protected]
services at Positively Cleveland, the
region’s convention and visitors’
bureau. Its staff collaborates with
the convention center staff to attract business to Cleveland.
“SMG has a lot of experience,”
Mr. Burns said. “They’re a great operator, and they understand the
business. It gives a lot of credibility
to what we’re doing.”
Mr. Burns added that the
breadth of SMG’s experience and
its knowledge base “helps make
sure our pricing is competitive.”
ten and stay a little longer.”
The Global Center already has
tenants that serve the health care
industry, and later it will have more
consumer-oriented spaces, such as
the “Home of the Future,” that will
give people a peek into what it
might take to stay at home as
health problems arise.
Mr. Leahy said he believes the region’s growing biomedical sector
will help attract meetings and conventions. And he expects to draw
statewide professional associations
that have bypassed Cleveland for
the last decade or more.
Hot commodities
Mr. Leahy has been in convention center management for 25
years and has specialized in opening convention centers. He has
done it in his hometown of Boston,
as well as in Savannah, Ga., and,
most recently, Pittsburgh.
A marketing advantage Mr.
Leahy sees for Cleveland is the
Global Center, which was included
in the complex specifically to serve
as a magnet for physicians and other health care professionals.
“The whole world wants medical
meetings because of their (continuing) education requirements,” he
said. “Physicians, in particular,
have more discretionary income.
They bring their spouses more of-
Ironing out wrinkles
Roger Hall, executive director of
the Ohio Music Educators Association, said his group will hold its annual convention in Columbus next
month but will come to Cleveland
in 2015, 2017 and 2019 after a
decade’s absence.
“We have a real strong membership base in Cuyahoga County and
that’s why we’ve wanted to come
back,” Mr. Hall said. “Our Cuyahoga County people have said,
‘When?’ because they’ve got to drive to Columbus or Cincinnati all
the time.”
The music educators’ convention will bring 3,000 teachers to
REAL ESTATE
town for three days as well as
10,000 students and their parents
coming in for performances. Mr.
Hall has booked a block of 2,800
hotel room nights for the event.
Mr. Hall checked out the building four times in October and was
impressed.
“The center is beautiful. It’s well
done, they’ve got a great product,”
he said. “But our biggest concern is
parking. They still have some wrinkles to work out.”
Parking is a known issue that has
dogged the convention center since
its inception. Short term, management has used valet parking, and in
July, the county said it would rent 300
spaces in the 1,000-space Huntington Garage to the convention center.
The center is garnering notice
beyond Ohio among meeting planners. Joe Clote, publisher of Missouri Meetings and Events magazine, said he hears the building is
attracting medical meeting planners’ interest.
“The uniqueness of that building
is still new enough and not very
well duplicated at all,” Mr. Clote
said. “A handful of other properties
around the country have tried to
mimic it, but I haven’t seen anything doing quite what they are doing. That building is still unique.” ■
Copy Deadline: Wednesdays @ 2:00 p.m.
All Ads Pre-Paid: Check or Credit Card
INDUSTRIAL SPACE
CHARTWELL AUCTIONS | FEB 27
SUMMIT COUNTY COMMERCIAL ASSETS &
WAYNE COUNTY PUD / ALL OFFERED ABSOLUTE!
RETIRING OWNER DIRECTS SALE
FORMER SCHERMESSER BLDG.
OHIO BREWING CO. RESTAURANT
ORDERED SOLD BY COURT
222 S. Main St., Akron, OH 44308
1446 S. Main St., Akron, OH 44301
OFFERED ABSOLUTE,
REGARDLESS OF PRICE!
Sugg. Opening Bid: $27,500
11,907 SF Former Schermesser Bldg. on
1.23 Acres. Opportunity for 2 rental apts.
Freight elevator and heated 6-car garage.
75+ car parking lot. Variety of possible
uses including funeral home, office, retail,
professional, restaurant, bank and more.
On-Site Inspections: Tuesdays, February
11, 18 & 25 from 1:00 PM to 2:30 PM. For
more info call: Mike Berland, 216.839.2032
or Mark Abood, 216.839.2027
OFFERED ABSOLUTE,
REGARDLESS OF PRICE,
Subject to US Bankruptcy Court Approval
Sugg. Opening Bid: $75,000
17,186 SF Retail/Restaurant Condo is the
former home of Ohio Brewing Co. Restaurant/
Bar/ Microbrewery and includes a 12,048 SF
first floor and a 5,138 SF mezzanine. 2 private
offices, 5 bathrooms, elevator, seating for
250+. Attached parking garage and 24-hour
security. Previous $3 Million Build-out w/ all
Furniture, Fixtures and Equipment Included.
Located in prestigious O’Neil’s Office Bldg.
On-Site Inspections: Tuesdays, February
11, 18 & 25 from 10:30 AM to 12:00 Noon.
For information on this property, contact: Mac
Biggar or Cameron Price at 216.360.0009
ESTATE ORDERS IMMEDIATE SALE!
Buddy Barton Auctions
AB$OLUTE AUCTION
OHIO METAL SPRAY & MACHINING
• 17000 SF Ind. Building w/2 Out Buildings.
• (2) 3BR/1BA Residential. Rentals
• Metal Machining & Grinding Equip, Trucks,
Trailers and Tooling
THURS., FEB. 6, 2014 10:00 AM
2519 Erie St., So., Massillon, OH 44646
Turning, Milling, O.D. Grinding & Drilling Mach., Saws, Welding
Equip., Tow Motors, Trucks, Trailers & Accessories & MORE!!!
www.bidrosen.com • www.buddybartonauctions.com
216-990-1831 • 1-877-BID-ROSEN
List your industrial,
Luxury Property,
commercial or
Retail Space Here!
Crain’s Cleveland Business’ classifieds will
help you fill that space.
Contact Denise Donaldson at
216.522-1383
CLASSIFIED
BUSINESS SERVICES
C. W. JENNINGS INDUSTRIAL EXCHANGE
Bramble Woods Phase II, Doylestown, Wayne Co., OH 44230
OFFERED ABSOLUTE, REGARDLESS OF PRICE!
Suggested Opening Bid: $35,000 (Less than $1,000 per lot!)
Seller of 36 fully-improved lots on 5.5+ Acres looking for successor to complete Phase II of Bramble Woods
Development in Doylestown, Ohio. Turn-key development opportunity with streets, curbs, lights, gas,
electric, phone, sewer and water in place. Located 1 miles from OH 585 and 3 miles from OH 21.Take Pine
Lane east off Portage Street to Thorn Way. Off-site Due Diligence Seminar: Tuesday, Feb. 18, 1:00 PM at
1446 S. Main St., Akron, OH. For more info call: Mike Berland, 216.839.2032 or Mark Abood, 216.839.2027
For Additional Information, Please Call:
ChartwellAuctions.com
216-360-0009
Hanna Chartwell / Chartwell Auctions, LLC
Michael Berland & Mac Biggar, OH Auctioneers
ARE YOU READING THIS?
This small ad space could bring BIG BUSINESS.
Contact Denise Donaldson at (216) 522-1383
Global Expansion Consulting
Construction • Acquisitions
Exporting • Financing
(855) 707-1944
FOR SALE
2014 MASTERS PACKAGE
2 badges for Masters final rounds, April 12th & 13th
Accommodations at a private house, April 11th-13th
House includes fully stocked bar, continental breakfast, snacks.
All local transportation provided, including RT airport transfers
Use of hospitality house.
Price: $10,000
Contact Robert
[email protected]
440-220-0314
Used CNC Machines
Mori Seiki MN – 40 Fanuc
HAAS VF-4 (2000) 20 ATC – 425
HAAS VF-4 (2000) – 395
HAAS VF-4 (1998) – 32.5
WYSONG 100-ton CC Press Brake – 29
Lathe – ROMI 32x12 ft Center, late 90s,
DRO – 35K
YALE 5000# LP, PNM, Oldie good - $4500
Stys Inc. since 1962
216-641-7897
Are you selling any Mazaks?
We have buyers.
FLYNN
ENVIRONMENTAL
BUSINESSES
FOR SALE
B-to-B Service Business in Stark County
Highly-automated.
Profit $275,000. Ask $850K.
Nutritional Supplements
High-end retail stores. Sales
$525,000. Profit for owner-mgr.,
$140,000. Ask $279.9K.
Seller financing available.
Also available:
Signs & Printing:
Sales > $800,000.
Owner-Mgr. earns $230,000.
Don Dreisig, Owner
For Assessments
Fuller & Associates, Inc.
(serving No. Ohio for 33 years)
(800) 690-9409
[email protected]
www.flynnenvironmental.com
330-492-6294
20140127-NEWS--43-NAT-CCI-CL_--
1/24/2014
4:05 PM
Page 1
43
THEINSIDER
THEWEEK
JANUARY 20 - 26
The big story:
Dots LLC, the Glenwillowbased women’s apparel and accessories retailer
that employs 3,500 people and operates a chain
of about 400 stores in 28 states, filed for Chapter
11 bankruptcy protection, citing roughly $100
million in liabilities. The company said it made
the Jan. 20 filing with the aim of restructuring
and continuing its “new merchandising strategy
focused on re-engaging its core customer.” Salus
Capital, the company’s existing lender, is providing a $36 million debtor-in-possession financing facility to support ongoing operations
during reorganization. Dots will close 36 stores
that are not profitable.
Heavy Pettine:
The Cleveland Browns
named Mike Pettine as the 15th full-time head
coach in the team’s history — and the fifth coach
since 2008. He joins the Browns after spending
2013 as defensive coordinator for the Buffalo
Bills and the 2009-12 seasons in the same job for
the New York Jets. Mr. Pettine’s hiring brought
to an end a search that began when the Browns
in December fired Rob Chudzinski after one season.
A new voice: GrafTech International Ltd. in
Parma, which has been consolidating global operations in a drive to lower its costs, announced
a change at the top. The producer of graphite
electrodes and other carbon-based products
said Craig Shular, 61, retired as president and
CEO of the company after 11 years in the post
and 15 years with the company. He will continue as executive chairman through year’s end. Directors named Joel Hawthorne, 49, to the posts
of president and CEO and elected him to the
company’s board. Mr. Hawthorne had been
president of GrafTech’s Engineered Solutions
business.
The end is near: Sears Holdings Corp. plans
to close its Westlake Kmart store by late April.
Howard Riefs, spokesman for the Hoffman Estates,
Ill.-based retailer, said the company did not renew
its lease on the store at 30010 Detroit Ave. Closing
the West Bay Plaza store will eliminate 57 jobs, but
associates will receive severance and will be able to
apply for open positions at area Sears or Kmart
stores. Beachwood-based DDR Corp., which owns
the shopping center, said the store has 84,000
square feet of selling space.
Switch in plans: Eaton Corp. agreed to sell
its Aerospace Power Distribution Management
Solutions and Integrated Cockpit Solutions
business to French defense and aerospace contractor Safran for $270 million. The business employs 350 people at manufacturing operations in
Costa Mesa, Calif., and Sarasota, Fla. It produces
illuminated switches, cockpit panel assemblies,
pilot controls and passenger safety unit latches,
as well as circuit protection, power distribution,
and switch components and sub-systems, for
aerospace and industrial use.
Cut rate: Directors of FirstEnergy Corp.
slashed by more than one-third the quarterly
cash dividend on its common stock as it also
forecast lower operating earnings for all of 2014.
The Akron-based electric company cut the dividend 34.5%, to a new rate of 36 cents a share
from the rate of 55 cents FirstEnergy has paid
since 2008.
Planting a seed: Intellirod Spine, a spinal
implant company in Akron that is developing
implantable wireless sensor technology to aid in
the assessment of spine fusion, secured $1.6 million in debt financing from the Ohio Third Frontier’s Commercial Acceleration Loan Fund. Intellirod, formerly known as OrthoData, said the
money will accelerate its plan to commercialize
the Intellirod Sensor and related lumbar fusion
implants.
REPORTERS’ NOTEBOOK
BEHIND THE NEWS WITH CRAIN’S WRITERS
SparkBase pivots on
its plans for Paycloud
SparkBase CEO Doug Hardman knows
that it’s hard for entrepreneurs to swallow
their pride and make big changes when projects aren’t working out as planned. That’s
because he’s had to do it himself.
SparkBase has backed off on what had
been an aggressive plan to market Paycloud,
an app that allows consumers’ mobile devices to replace the gift and loyalty cards
they otherwise might carry around, Mr.
Hardman told an audience full of entrepreneurs and technophiles last week at the
TechPint networking event at Mahall’s in
Lakewood.
The Cleveland company’s core business
is processing gift and loyalty card transactions, but a few years ago it started developing the Paycloud app. Paycloud remains a
SparkBase product — some of the company’s merchants still accept payments
through the app. Plus, some of the software’s features inspired improvements
SparkBase made to its core payment processing system.
Over time, however, the company realized it was going to be hard to drive widespread adoption of Paycloud, Mr. Hardman
said to the crowd at TechPint.
Making big changes to a plan — or pivots,
as they’re called in the tech community — is
often necessary for entrepreneurs, but it isn’t easy, he told the crowd.
“It wasn’t a matter of being smart enough
to pivot,” he said. “It’s being brave enough
to pivot.” — Chuck Soder
Farmers dips more than
its toe in Rocky River
As of this month, consumers and businesses can bank with Farmers National
Bank in Cuyahoga County.
The Canfield-based bank gained a sister
company in Rocky River when its parent
company, Farmers National Banc Corp., last
June acquired National Associates Inc., an
independent third-party employee benefit
plan administrator.
Now, Farmers National is moving more
traditional banking services into that office
with the hires of a commercial loan officer
and a private banker. The bank also is seeking a mortgage banker and a financial adviser for the location, said Kevin Helmick, president and CEO of the parent company.
The company’s plan for the Rocky River
branch, at 20325 Center Ridge Road, is similar to one Farmers National has executed in
Canton, Mr. Helmick said. There, it created
Women in Manufacturing members mingle during a reception in 2012.
a wealth management and lending office
and has grown loans “much faster than we
have grown deposits,” he said.
The decision to grow Farmers National,
which counts 19 locations in Mahoning,
Columbiana, Trumbull and Stark counties,
as well as Cuyahoga County now, was driven
by opportunities the bank’s executives see
in Rocky River’s residential and commercial
rooftops, Mr. Helmick said.
“We are very intrigued by the small business opportunities that we see there,” he
said. “Though it is well-banked, we feel we
compete well.” —Michelle Park Lazette
It’s a slow start,
but it’s a start
A local networking group is trying to make
manufacturing go viral.
Women in Manufacturing, a subgroup of
the Independence-based Precision Metalforming Association, on Jan. 7 launched its
newest marketing campaign, #iMake. It’s off
to a quiet start so far, but program manager
Kristin Davis hopes members make it their
own.
The group, which began offering membership in summer 2012, is up to almost 400
members, according to Ms. Davis. The
group offers support to women in an industry typically dominated by men.
The new campaign, which can be found
on Women in Manufacturing’s website, its
blog and its Twitter page, is the group’s take
on member testimonials, Ms. Davis said. Instead of asking for input on the group,
Women in Manufacturing is asking its
members and Twitter followers to share
what they make in the form of photos and
hashtagged Tweets.
So far, the campaign has yet to completely take over the #iMake hashtag (plenty of
non-manufacturing Tweets can still be
found). But it has inspired a few women to
share what they make, such as paint and
barges, and Ms. Davis said the plan is to
keep the campaign going all year.
— Rachel Abbey McCafferty
Heart: Innovator blends research and development
Dr. Hazen and his team built upon the
research last spring with a study that centered on a compound known as carnitine
that is found in red meat and several popular energy drinks. Carnitine is metabolized in the digestive tract and drives up
TMAO levels in the blood.
The science has taken Dr. Hazen and the
Clinic far enough that they believe they can
develop consumer products — think food
or dietary supplements — that could reduce TMAO levels and impair the progression of heart disease.
The Clinic recently inked a deal with a
global consumer products company — the
name of which it wouldn’t disclose — to research and develop possible food additives.
Producing those sorts of products, as opposed to pharmaceutical drugs, would allow the developers to sidestep approval
from the U.S. Food and Drug Administration.
“I’ve stopped trying to predict what I’ll
be doing in three years,” Dr. Hazen said.
“We always just follow where the science
takes us.”
This isn’t the Clinic and Dr. Hazen’s first
commercial foray with the TMAO research.
The Clinic already licensed a test that can
detect TMAO levels to LipoScience, a diagnostic testing company in Raleigh, N.C. The
test is expected to be made available for
clinical use sometime this year.
Dr. Hazen said the next step would be to
determine whether there’s commercial interest from a pharmaceutical company to
develop drugs that could modify TMAO
levels.
“If you want to bring something to patient care, you have to protect it and partner with somebody,” Dr. Hazen said.
Research explorer
With more than 50 patents to his name,
Dr. Hazen is regarded as one of the Clinic’s
most prolific innovators. Several of his findings have been brought to market, and he
has been labeled by the Clinic as one of its
biggest deliverers of grant money.
“Most scientists think of research and
development as separate realms,” said Dr.
Thomas Graham, the Clinic’s chief innovation officer. “Stan is really the embodiment
of somebody who emphasizes both. His
ability to further his own work, lift all boats
around him and help all people is a result
of that thinking. That’s what makes him
special.”
Some of Dr. Hazen’s findings have contributed to the growth of Cleveland HeartLab. It’s a successful Clinic spinoff that now
employs 120 people and tests blood samples and other specimens to help doctors
determine whether patients are at risk of a
heart attack or other medical problems.
Health care observers say the latest work
of Dr. Hazen and his colleagues has the po-
tential to be as big, if not bigger, than the
TMAO discoveries. The latest study, which
was published online Sunday, Jan. 26, in
the journal Nature Medicine, suggests that
so-called “good cholesterol” could become
dysfunctional and promote the clogging or
hardening of the arteries.
Dr. Hazen and his colleagues discovered
an oxidization process in the human body
that takes the good cholesterol, or highdensity lipoprotein (HDL) as it’s technically known, and transforms it into a harmful
version that promotes the clogging of the
arteries. Dr. Hazen said that’s why drugs
that promote the development of good
cholesterol have failed to show marked improvements in cardiovascular health.
Dr. Hazen and Cleveland HeartLab are
working on a test that would measure levels of dysfunctional HDL in the bloodstream. He said he hopes the discovery
could lead to new drugs to stop the oxidization process, which could enable drugs that
promote good cholesterol to be more effective down the road.
While he still sees patients one day a
week, research tends to take up the bulk of
his time. When asked why he enjoys that
aspect of his job so much, Dr. Hazen simply said, “It’s freedom.”
“You get to do what you want,” he said.
“You get to study whatever you want, as
long as you’re productive. This is a great
job. You get to just explore.”
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