Crain's Cleveland Business by Crain's Cleveland Business

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Vol. 31, No. 3

INSIDE Kent has big plans Both the city and Kent State University plan to transform into more attractive and user-friendly places through renovation and redevelopment. Read Shannon Mortland’s story on Page 3.

$1.50/JANUARY 18 - 24, 2010

Manufacturers still skeptical Nationwide, industry conditions favorable for improvement, but struggle remains for locals By DAN SHINGLER dshingler@crain.com

For the United States, various economic indicators point to a rebounding industrial sector in which factory orders are on the rise and companies are becoming more optimistic about their futures. But here on the ground in Northeast Ohio, there is no such consensus.

“There are a lot of positives for manufacturing. I can see at a national level the industrial production indicators turning positive,” said economist Ken Mayland, president of ClearView Economics in Pepper Pike. “What I cannot say is that I’ve got an indication here in Northeast Ohio that (the rebound) is being felt. I just don’t have that anecdotal information.”

SENDING A MESSAGE Local agencies expect higher demand for their mobile marketing services as device use proliferates By KATHY AMES CARR kcarr@crain.com

Dr. Mayland is a favorite of many local manufacturers who pay for his prognostications. He relies on them for anecdotal evidence of what is happening at a micro level and below the radar of national indicators. He spoke to Crain’s just days after the U.S. Department of Commerce reported factory orders were up more than 1% in November, and the Institute for Supply Management reported a fifth straight month of improvement in the manufacturing sector’s sentiments and prospects for growth. Both reports came out in early January.

Those numbers support Dr. Mayland’s belief that the conditions are in place for manufacturing to improve, even though that’s not yet what he’s hearing from manufacturers. Many local manufacturers say they are seeing continued slow sales that leave them questioning whether the national numbers are telling a true tale of what’s happening in their sector. “Listening to the economist I subscribe to, I (should) expect an increase in business this year over last. See OUTLOOK Page 7

Private equity firms anticipate a modest recovery Tight credit still affects deal flow By ARIELLE KASS akass@crain.com

lease excuse Jason Therrien if he’s itching for 2010 to move along. As Blackberries, iPhones and other mobile devices become more ubiquitous, local marketing and advertising shops such as Mr. Therrien’s thunder::tech expect clients to tap increasingly into their mobile marketing services. “Mobile marketing will continue on a good growth base, but will really pop for us by mid-year,” said Mr. Therrien, president of the Cleveland-based marketing firm. From smart phone apps to text messages, mobile is emerging quickly as a channel through which marketers can relay more targeted messages to a growing user base.

Marginally better still isn’t good, but it is an improvement over what private equity firms saw in 2009, a year when deal flow was tight and financing was sometimes impossible to line up. In 2010, Northeast Ohio’s private equity firms don’t expect a quick turnaround. However, they do see signs that their businesses are moving in the right direction, allowing them opportunities to make investments or divest of their holdings. David Given, managing partner of Blue Point Capital Partners, said he already is seeing more activity than in 2009, which he described as “an abysmal year.” “I don’t think it’s substantially better,” he said. But, he added, “In general, you get the feeling things have bottomed out.” The anticipation that the bottom has been reached fuels optimism, Mr. Given said, and pushes people to believe that they will get better value for their companies — either buying or selling — than they would have when the economy was still on its way down. “Credit in our mind is still very tight, but it’s available,” said John Mueller, CEO of CapitalWorks LLC. “It’s still going to be a difficult year to get things done. Good companies without a compelling reason to make a transaction will stay off the market.” Mr. Mueller and others said tight credit means private equity firms aren’t able to borrow as much money for their deals, and instead must put more of their own equity into the mix. For Blue Point, that means some deals don’t get done because the firm can’t pencil out an acceptable return, Mr. Given said.

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CRAIN’S CLEVELAND BUSINESS

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THE EMPLOYMENT CRYSTAL BALL It’s still awfully rough out there, but the U.S. Bureau of Labor Statistics assures us the job market eventually will grow, and when it does, two broad categories — professional and business services, and health care and social assistance — will see the bulk of the activity. Employment projections for major industries, 2008-2018

Industry

2008-2018 change

Professional and business services

4,189,900

Health care and social assistance

3,996,900

State and local government

1,591,500

Construction

1,337,100

Manufacturing

-1,206,000

CORRECTION In a Jan. 11 Letter to the Editor, Kevin Jacques is the BaldwinWallace College finance professor

referred to by the letter writer. Dr. Jacques is the Boynton D. Murch chair in finance at B-W.

JANUARY 18-24, 2010

CRAIN’S FAMILY BUSINESS Crain’s is introducing a new recognition section in 2010. Family Business, slated for our April 5 issue, will profile three family businesses in each of three categories — second-generation businesses, third-generation businesses and businesses in families for four generations or more. We’re looking for well-run, financially stable businesses that are regarded as good employers and have earned the respect of their peers. Factors such as growth and a company’s involvement in its

community also will be considered. The deadline for nominations is today, Jan. 18. An online nomination form can be found on our web site, CrainsCleveland .com/familybiz. You also may send an e-mail nomination to editor Mark Dodosh that should include the company’s name, how many generations it has been in business, and an explanation of no more than a single page as to why it should be recognized. E-mails to mdodosh@crain.com should say “Family Business” in the subject line.

700 W. St. Clair Ave., Suite 310, Cleveland, OH 44113-1230 Phone: (216) 522-1383 Fax: (216) 694-4264 www.crainscleveland.com Publisher/editorial director: Brian D. Tucker (btucker@crain.com) Editor: Mark Dodosh (mdodosh@crain.com) Managing editor: Scott Suttell (ssuttell@crain.com) Sections editor: Amy Ann Stoessel (astoessel@crain.com) Senior reporter: Stan Bullard (sbullard@crain.com) Reporters: Shannon Mortland (smortland@crain.com) Jay MIller (jmiller@crain.com) Chuck Soder (csoder@crain.com) Dan Shingler (dshingler@crain.com) Arielle Kass (akass@crain.com) Designers/reporters: Joel Hammond (jmhammond@crain.com) Kathy Carr (kcarr@crain.com) Research editor: Deborah W. Hillyer (dhillyer@crain.com) Cartoonist/illustrator: Rich Williams Marketing/Events manager: Christian Hendricks (chendricks@crain.com) Marketing coordinator: Laura Franks (lfranks@crain.com) Advertising sales director: Mike Malley (mmalley@crain.com) Account executives: Adam Mandell (amandell@crain.com) Dirk Kruger (dkruger@crain.com) Nicole Nolan (nnolan@crain.com) Dawn Donegan (ddonegan@crain.com) Business development manager & classified advertising: Genny Donley (gdonley@crain.com) Office coordinator: Toni Coleman (tcoleman@crain.com) Production manager: Craig L. Mackey (cmackey@crain.com) Production assistant/video editor: Steven Bennett (sbennett@crain.com) Graphic designer: Kristen Wilson (klwilson@crain.com) Billing: Susan Jaranowski, 313-446-6024 (sjaranowski@crain.com) Credit: Todd Masura, 313-446-6097 (tmasura@crain.com) Circulation manager: Erin Miller (emiller@crain.com) Customer service manager: Brenda Johnson-Brantley (bjohnson-brantley@ crain.com)

Crain Communications Inc. Keith E. Crain: Chairman Rance Crain: President Merrilee Crain: Secretary Mary Kay Crain: Treasurer William A. Morrow: Executive vice president/operations Brian D. Tucker: Vice president Robert C. Adams: Group vice president technology, circulation, manufacturing Paul Dalpiaz: Chief Information Officer Dave Kamis: Vice president/production & manufacturing Kathy Henry: Corporate circulation/audience development director G.D. Crain Jr. Founder (1885-1973) Mrs. G.D. Crain Jr. Chairman (1911-1996) Subscriptions: In Ohio: 1 year, $59; 2 years, $102. Outside of Ohio: 1 year, $102; 2 years, $180. Single copy, $1.50. Allow 4 weeks for change of address. Send all subscription correspondence to Circulation Department, Crain’s Cleveland Business, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-888-909-9111 or FAX (313) 446-6777. Reprints: Call 1-800-290-5460 Ext. 136 Audit Bureau of Circulation

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JANUARY 18-24, 2010

CRAIN’S CLEVELAND BUSINESS

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IT outfit Rosetta zeroes in on old Nat City building

‘TRANSFORMATIONAL MAKEOVER’ IN KENT

Firm eschews others for Euclid Avenue location By STAN BULLARD sbullard@crain.com

RENDERING PROVIDED

Fairmount Properties plans to spend $40 million to redevelop downtown Kent in an effort that includes 162,000 square feet of retail, office and residential space. Meanwhile, Kent State University is planning a renovation initiative estimated to cost $200 million to $250 million.

Rosetta, an information technology company in the midst of a muchwatched search for a downtown Cleveland office to replace three suburban offices, is pursuing three floors of empty office space in the building housing the Holiday Inn Express Hotel & Suites, 629 Euclid Ave. Three sources familiar with the situation said the New Jersey-based company that acquired the former

Brulant Inc., which had Beachwood offices Rosetta inherited, has narrowed its search to the building known as the old National City Bank Building. The sources said Rosetta is pursuing an incentives package from the city of Cleveland before inking a deal with MRN Inc., best known as the developer of the East Fourth Street entertainment and residential district. “(Rosetta executives) love East Fourth and what MRN has done See ROSETTA Page 10

HEART OF THE CITY By SHANNON MORTLAND smortland@crain.com

t will take five years and $300 million or more, but Kent State University and the city of Kent plan to transform themselves into more attrac- Lefton tive and user-friendly places. The public university soon will sell up to $200 million in bonds to fund a campus construction and renovation program that is projected to cost $200 million to $250 million, said Lester Lefton, Kent State’s president. It also plans to raise money through private donations to help fund the projects, he said. At the same time, numerous stakeholders plan to invest about $100 million to redevelop and enliven the city of Kent’s downtown area. “This is transformational, a really

extraordinary makeover of the city,” Dr. Lefton said. Included in the city’s redevelopment plans are new retail, office and residential space, a new hotel and conference center, and a transportation hub that would include a bus depot, parking garage and a tie-in to a bicycle path to the Ohio Erie Canal towpath trails. A new, $15 million Portage County courthouse also is under consideration, but it has not yet been decided if it would be built in Kent. Kent State is narrowing its long wish list of construction projects, which include new buildings for its art and architecture programs, updated labs, the relocation of administrative services from many buildings in the central part of the See KENT Page 30

MEANWHILE, ON CAMPUS ... While a developer has eyes for a downtown Kent upgrade, Kent State University also is planning a major construction and renovation program. Highlights of the $200 million to $250 million plan:

■ new buildings for art and architecture programs;

■ moving administrative services out of the center of campus; and

■ replacing a long corridor of concrete with grass and trees for the campus;

■ renovating old and outdated buildings by making them handicap-accessible and replacing drafty, single-pane windows

■ updated labs;

STAN BULLARD

Kent State planning major campuswide upgrade, while other stakeholders focus on downtown revitalization efforts

THE WEEK IN QUOTES “Everybody let their inventories go lower than they would ordinarily. ... But now they need to replenish and enough are doing it at the same time.”

“It’s a conversation we have almost daily with clients. About half ... are talking mobile, and the other half, we’re trying to enlighten.”

— Charlie Kerr, owner, Kerr-Lakeside. Page One

— Jason Therrien, president, thunder::tech. Page One

“This GI Bill is better than any GI bill since World War II.”

“There are no solutions to health reform that don’t include a substantial public health presence.”

— Joshua Rider, assistant director, Kent State University’s Center for Adult and Veteran Services. Page 11

— Dr. Scott Frank, program director, Case Western Reserve University’s Division of Public Health. Page 13

INSIGHT

In Team NEO report, reasons for optimism: more educated, diverse work force By JAY MILLER jmiller@crain.com

Amid the bleak economic news of the last 18 months, Team NEO has found at least a couple things it believes the region can puff its chest over. The business attraction nonprofit in its year-end quarterly report examines how the Northeast Ohio economy has changed since

the severe recession of the 1980s. Among what might be considered its more surprising findings: ■ Despite legitimate frustration that the regional economy isn’t growing, Team NEO points out that since that earlier, harsh recession, the economy has grown 65% in real dollars, despite the lack of population growth in the region. ■ Also in this recession, the report argues, the Northeast Ohio

INSIDE: Team NEO data on the region’s shift away from manufacturing. Page 4 economy is not as far off the pace of the national economy as it was during the earlier downturn. That difference, Team NEO says, is a result of a diversification of the local economy away from manufacturing and an improvement in the education level of the regional

work force. The flip side of those arguments, though, is that the region’s economy still lags the nation’s as a whole. “We’re performing more similarly to the U.S. than in 1981,” said Team NEO president Tom Waltermire. People with higher education levels, he said, “are making Northeast Ohio closer to the U.S. in work force.” Team NEO publishes this infor-

mation in a quarterly economic review that is the only source of consolidated economic information on the 16-county region the organization serves. Its region stretches as far west and south as Lorain and Richland counties and east to Ashtabula and Columbiana counties. Team NEO sends this economic review to site selectors, who represent businesses looking for new See OPTIMISM Page 4

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JANUARY 18-24, 2010

A SHIFT AWAY FROM MANUFACTURING According to Team NEO data based on employment figures in a number of categories, Northeast Ohio’s economy has dramatically shifted away from manufacturing since 1980. Employment as percent of NEO economy: 1980 vs. 2007 Health care and social assistance 1980

Management of companies and enterprises

2007

Professional, scientific and technical services Finance, insurance and real estate Trade Manufacturing All other 0%

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Optimism: Comparison to ’80s may be imprecise continued from PAGE 3

office and factory sites. It’s designed to overcome the negative stereotypes associated with the Rust Belt. In a briefing with Crain’s editorial staff last Tuesday, Mr. Waltermire and Team NEO staff members laid out their case that the regional economy is doing better than conventional thinking would suggest and that the economy here is more closely matching the national economy. Team NEO research manager Jacob Duritsky said that while many people believe the region has stagnated, information on the regional economy provided to Team NEO by Moody’s economy.com, a leading economic consulting firm based in West Chester, Pa., indicates otherwise.

It beats going backward The economy.com data show that between the middle of 1981 and the end of 2007, the regional economy

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“(The regional economy is) not as good as anyone would like, but it’s better than what many people think.” – Tom Waltermire, president, Team NEO expanded 65% in inflation-adjusted dollars, to $165 billion from $100 billion, an average growth rate of 2.5% a year. “It’s not as good as anyone would like, but it’s better than what many people think,” Mr. Waltermire said. The centerpiece of the quarterly economic review, however, is the comparison of how the region is faring during the current recession versus the 1981-1982 recession. According to the report, seven quarters into the 1980s recession, the number of people working nationwide was off 2.5% from the start of the recession, while the decline in Northeast Ohio was 8.5%, a major difference of six percentage points. This time around, however, the report indicates that the gap between national and Northeast Ohio employment levels has shrunk significantly. The data indicate the number of people working nationwide was down 4.2% in the second quarter of 2009 from the start of the current recession; that compared with a decline in Northeast Ohio of 5.8% over the same period, for a gap of 1.6 percentage points. Likewise, the production gap between the regional and national economies, as measured by comparing Gross Domestic Product with the comparable Gross Region Product for Northeast Ohio, declined from seven percentage points seven quarters into the earlier recession to 3.5 percentage points at the same point in the current downturn. Team NEO attributes the closing of those gaps to a diversification of the regional economy away from old-line manufacturing and to a work force that is becoming better educated. The report shows that manufacturing employment, which had been nearly 30% of total regional employment in 1981, now accounts for only about 12% of the region’s work force. At the same time, employment has grown in other sectors, notably what Team NEO’s report calls health care and social assistance.

Misery gets company While this economic data give Team NEO selling points when it tries to woo businesses to the region, other economic data suggests the region is still struggling. The December 2009 MetroMonitor, a report from the Metropolitan Policy Program of the Brookings Institution, groups the performance of the economies of the three metropolitan areas in the Team NEO 16-county footprint — Akron, Cleveland and Youngstown — in the bottom half of its assessment of 100 regional economies. Brookings is a Washington, D.C., think tank. And economists don’t universally embrace all the comparisons between the 1980s recession and the current one. Mark Schweitzer, a senior vice president and director of research at the Federal Reserve Bank of Cleveland, agrees that the Northeast Ohio economy gradually has come to more closely mirror the national economy. But he believes an important reason the region has closed the gap is that this time around other areas have been hurt badly by a decline in the housing sector, a part of the economy that has not grown significantly here. William Polley, an associate professor of economics at Western Illinois University, first compared the similarity of the job loss pattern in the two recessions in his blog a year ago. But he qualified that assessment in an e-mail to Crain’s last Thursday. “In terms of job losses, I would say that the current recession is more similar to the early ’80s than it is to many other past recessions,” he wrote. “But I readily admit that is a little like saying that an orange is more similar to a grapefruit than it is to a pineapple. It’s true in some important ways, but not terribly precise.” Mr. Polley notes the 1980s recession was focused on manufacturing while the current dip affects “not only manufacturing, but finance, real estate, services and other sectors.” ■

Volume 31, Number 3 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly, except for com-

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CRAIN’S CLEVELAND BUSINESS

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JANUARY 18-24, 2010

Solon military supplier seeks expansion HDT eyes corporate office near home, but has option near D.C. By STAN BULLARD sbullard@crain.com

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Seeking economies of scale after a string of defense industry acquisitions with another pending, HDT Engineered Technologies plans to centralize corporate back-office work in a move that may add as many as 70 jobs near its longtime Solon home. “We’re looking to expand in some office space to establish a corporate home office,” said Doug Childress, HDT executive vice president and chief financial officer. “It’s a typical roll-up situation,” he said. “We’ve made a number of acquisitions over the last five years. We want to have human resources, accounting, information technologies and other functions in one office rather than five. There is (also) no reason to have full infrastructure at each of the plants.” The company’s military-oriented products range from developing robotic technology for prosthetic limbs to producing air filtration systems, power generators and movable enclosures for barracks and other military needs. Mr. Childress said HDT has agreed to lease 17,000 square feet at Solon Business Park, an office/warehouse complex across the street from its original Hunter Manufacturing Co. plant at 30525 Aurora Road. However, even with an agreement in place, Mr. Childress said HDT still

is negotiating several points with the prospective landlord, Chelm Properties of Solon. He said the company would not pursue the back-office consolidation if it is not satisfied with the outcome of its talks or if it does not receive incentives such as corporate income tax credits from the state of Ohio. “We’ve been in Solon a long time,” he said. “We want to help Northeast Ohio and be here if at all possible.” Vince Nardy, the longtime CEO of HDT and its predecessor company Hunter, already is based in Solon. At the same time, Mr. Childress said, HDT has more employees in incometax-free Virginia than here and could pursue a back-office operation in the Fredericksburg area. Such a location, he noted, would be closer to Washington, D.C., an important consideration for a defense contractor. The local incentive for the consolidation here already is in place. The city of Solon has approved a 10-year,

job-creation grant that would offset 40% of the city income taxes paid by additional employees hired by the company with payments to HDT the following year. The measure would save HDT an estimated $320,000 over 10 years. The city would gain an additional $480,000 in tax revenue over that time, said Peggy Dorfman, Solon economic development coordinator. “It’s a great project for the city,” Mrs. Dorfman said. “We’re happy to see a longtime Solon company expand like that, and hopefully do it here. But it’s not a done deal yet.” An Ohio Department of Development spokesman said it could provide no information on HDT’s request. As far as the landlord’s side goes, Joseph Greenberg, Chelm’s broker, issued an indirect no-comment: “All I’ll say is have a Happy New Year and a great 2010.” HDT Engineered, owned by private equity firm Metalmark Capital Partners of New York City, became the new name of Hunter Defense Technologies Group last summer as it realigned companies operating under the Hunter name in a single brand. “Once you rebrand the company,” Mr. Childress said, “it makes sense to make changes from an operations standpoint.” Mr. Childress said about 20 jobs would be moved from the current Hunter office across the street to the new office and are not included in the estimated 70 jobs the company agreed to create to satisfy the city agreement. The 70 additional jobs, Mr. Childress said, will come from a mix of transfers and new hires. The company also plans to maintain its current work force of 160 in Solon. ■

Japanese firm buys Timken arm, bets on autos By DAN SHINGLER dshingler@crain.com

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Someone believes in making long-term investments in the U.S. domestic auto market — and that someone is Japanese. The Japanese manufacturer JTEKT Corp. has bought Timken Co.’s needle roller bearing division in Canton for $330 million and made it part of its Westlake-based subsidiary, Koyo Corp. of USA. The deal, announced last summer, was completed Dec. 31. The move is aimed directly at gaining a bigger piece of the U.S. and European auto markets, said Ken Hopkins, president of the unit, now known as Koyo Bearings USA. Mr. Hopkins, who ran the unit for Timken and is transferring with the sale, said 75% of the new company’s revenues come from the automotive market, where it primarily sells either directly to automakers or to their Tier 1 suppliers. As Timken is getting out of auto, JTEKT is getting further in, both companies said — but for different reasons. Timken is seeking to diversify its business so that it will rely less on automotive and more on industrial markets such as wind turbines and aerospace, where its business units earn a greater return, said Timken chief financial officer Glenn Eisenberg. JTEKT, meanwhile, is seeking a dominant position among the world’s auto suppliers, including in North America, where it believes the market will make a long and

strong comeback after two years of low production and dismal sales. “It’s going to come back,” Mr. Hopkins said. “We’re predicting a fairly robust return from the trough in 2009. We predict about a 10% compound (annual) growth rate between now and 2015 in North America.” As a unit of Timken, the needle bearings division lost $30.8 million in the third quarter of 2009, according to Timken’s most recent financial filings. The last time the unit was “marginally profitable” for Timken was 2007, before the U.S. auto market fully crashed, Mr. Eisenberg said.

Singing a brighter tune Much of Northeast Ohio would be happy to see the auto market come back the way JTEKT predicts, and other auto-related manufacturers say they believe and are planning around similar projections. “We think that’s very reasonable; absolutely, I couldn’t agree more” with the 10% annual growth projection, said Kevin Cleary, president of Cleveland-based Soundwich, a company that sells heat- and soundshielding materials and parts to automakers. Mr. Cleary said a 10% growth rate is in line with forecasts he’s using to plan the company’s future. Economist Ken Mayland, president of ClearView Economics in Pepper Pike, said the entire region stands to benefit as auto production climbs in the United States. Domestic car makers are currently producing vehicles at a pace

of about 11.2 million vehicles a year, he said. That’s far less than the nearly 17 million vehicles that were sold in the United States at the industry’s peak in 2005, but substantially more than the approximately 10.4 million vehicles sold last year. A pickup in production “should be important for Northeast Ohio,” Dr. Mayland said.

The whole enchilada JTEKT wants a bigger slice of what it expects to be a growing pie, and its acquisition of Timken’s needle bearing division gives it instant access to the North American and European auto markets that it did not have before, said its president, Mr. Hopkins. “They come in and get the whole deal, lock, stock and barrel — the customer relationships, the inventory, the patents and the people that make it happen,” he said. To that end, Mr. Hopkins said the company has no plans to lay off or consolidate any of its approximately 3,400 new employees. That includes its 75 mostly white-collar employees at the Canton headquarters, more than 100 at a technical center in South Carolina and about 3,200 employees spread across five plants in the United States, one in Canada, one in China and five in Europe. Life will be little different for Mr. Hopkins, as he’ll be working with and managing the same people he did before the transaction. “My biggest difference is I’ll be making a visit to Asia once a quarter,” he said. ■

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Outlook: Manufacturers still running conservatively continued from PAGE 1

(But) I do not expect a return to a normal growth pattern, as in returning to 2008 levels,” said Morgan McIntosh, CEO of AMFM Inc., a small manufacturer in Willoughby that supplies metal hose makers. “I am planning for a year that is busier than 2009, but not by a great deal,” Mr. McIntosh said. “My customers and those I speak to in my industry seem no more sure than I. In fact, some are more skeptical that I am.” Roger Sustar, owner and president of contract machining shop Fredon Corp. in Mentor, might be counted among those skeptics. “Our sales for the last six months are down 22%, and orders are down 30%,”Mr. Sustar said. “I still have not seen any rebound.” Mr. Sustar generally has reported faring better than most throughout most of the recession. His business is largely geared toward defense contracts and medical devices — sectors that held up better throughout 2009 than did automotive or consumer appliances. But even he and others selling into what are often thought of as “recession-proof” markets say they’ve been feeling the pinch. “I’ve not seen any significant pickup, and we do aerospace and high-end commercial work,” said Brendan Slabe, owner of Slabe Machine Products in Willoughby, another contract machining company.

Double dip feared Indeed, some manufacturers are

“Business started picking up late second quarter 2009. The uptick is from new customers, existing customers and ... from our special tool transfer program.” – Matt Hlavin, CEO, Thogus Products reporting that rather than picking up, business appears to be slowing again. Mr. McIntosh, for one, said his business was improving in 2009 until the end of the year. “That uptick lasted into and peaked in October and continued into November,” Mr. McIntosh said. “December was a slower month again for us. It is a little early to tell for January, (but) the first week of the year has been off to a slow start.” Such reports raise the specter of an economic recovery with no staying power — the dreaded “double-dip” recession. Dr. Mayland said, however, he’s not yet worried about a double dip, because there are too many factors pushing the economy to grow. For one, automotive sales have rebounded from their low levels of 2009. Light vehicles were selling at a pace of 11.2 million units per year in December, Dr. Mayland noted, which is up from a rate of 10.9 million vehicles per year in November and above the 10.9 million vehicles sold in all of 2009. It’s an even better improvement, considering the pace of sales for much of 2009 was

running well below 10 million vehicles per year before receiving a boost last summer from the government’s Cash for Clunkers program. Inventories still are at extremely low levels at retailers, distributors and throughout the production chain. Those low inventories are bound to give the economy some bounce, while probably stressing manufacturers’ supply chains at the same time, Dr. Mayland said. “No one’s taking any speculative position” by restocking their inventories, Dr. Mayland said. “They’re just living hand to mouth. All that means is that the rubber band is stretched even further, which means it’s just going to snap back faster when it does. … At some point, someone has to put in an order and something new has to be manufactured.”

Signs of hope To be sure, there are businesses that are reporting increasing sales. Those increases sometimes are due to inventories being restocked or rising demand, and sometimes

because they are taking business away from failed competitors. “We see some upward movement, but we have a long way to go before I will say we are getting busy,” said Charlie Kerr, owner of Kerr-Lakeside, which makes precision socket screws in Cleveland for various industries. “I think part of what is happening is everybody let their inventories go lower than they would ordinarily, which prolonged the sluggishness,” Mr. Kerr said. “But now they need to replenish and enough are doing it at the same time to cause the index to move up.” In Avon Lake, plastic molder Thogus Products spent a good portion of 2009 taking in new molds to make plastic parts for new customers. In the plastic molding industry, customers often own their own molds, or tooling, which they then lend to their suppliers of plastic parts to use. In 2009, a lot of automakers and other big customers took their tooling away from struggling suppliers they feared might fail. They transferred that tooling to other, more stable companies, such as Thogus, allowing them to gain market share in the down economy. “Business started picking up late second quarter 2009,” said Thogus CEO Matt Hlavin. The 60-year-old private company does not disclose its revenues, but Mr. Hlavin said the fourth quarter “was Thogus’ best in history,” with

NEW ORDERS The U.S. Department of Commerce reports that new orders for manufacturers have increased in the last three months for which data are available.

Month

Value % change

November

$365.3B

1.1%

October

361.4

0.8

September

358.4

1.6

August

352.8

-0.8

July

355.7

1.4

June

350.9

n/a

sales up 16% from a year ago. “The uptick is from new customers, existing customers and specifically from our special tool transfer program,” Mr. Hlavin said, referring to his efforts to get more molds transferred to his shop for production. No doubt, most local manufacturers are not expecting to see record revenues in 2010. But, going forward, more should see their businesses improve. It might take some time to convince all the skeptics, but there is an actual recovery afoot and business will improve generally, promises Dr. Mayland. “Nobody’s talking about it yet, but I’ve got to believe it will,” Dr. Mayland said. “The question becomes, is it a real recovery or a flash in the pan?” he asked, adding, “It’s a real recovery.” ■

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JANUARY 18-24, 2010

PUBLISHER/EDITORIAL DIRECTOR:

Brian D. Tucker (btucker@crain.com) EDITOR:

Mark Dodosh (mdodosh@crain.com) MANAGING EDITOR:

Scott Suttell (ssuttell@crain.com)

OPINION

Tax case

othing is certain in life except death and taxes, or so the old saying goes. However, there is a way to lighten some of your inevitable tax load, and that’s by moving to a place where taxes aren’t as high. The people of suburban Brooklyn apparently didn’t consider the latter possibility when they voted last spring to raise the city’s income tax to 2.5% from 2%. Now, they face the potential loss of American Greetings Corp., the city’s largest employer, which cited the increased income tax burden on its employees as a key reason for kicking off a search for a new corporate headquarters site. Only officials at American Greetings know for sure just how much the tax issue played in their decision to look around for a new place to locate the company’s 2,000 or so headquarters workers. With the real estate market as battered as it is, landlords salivate for big tenants such as American Greetings and would be willing to offer sweet deals to ink the greeting card giant. Brooklyn’s mayor, Richard Balbier, also says the company has a substantial amount of unused space at its current, 1 millionsquare-foot building, an indication that it may want to downsize through a move. However, we have reason to believe American Greetings spokeswoman Patricia Sadd when she says the tax hike brought the headquarters issue to a head. In an economy where raises aren’t easy to come by, paying higher income taxes effectively means a pay cut for workers. And that makes for unhappy employees. The practice of people and companies voting with their feet to escape high taxes isn’t new. Cuyahoga County has seen an outflow of both for years as taxpayers head to adjacent counties where property and sales taxes are significantly lower. Like many government bodies, the city of Brooklyn saw its budget tightening and decided to address the problem by proposing a tax increase to raise more revenue. As an unintended consequence, it may lose a huge chunk of money should its No. 1 employer head for the exits. It’s a tradeoff that other government leaders should be mindful of as they consider how to deal with their own budget issues.

Lights out

ur town got a black eye from the blackout that idled Cleveland Hopkins International Airport for several hours early last week. However, it’s hard to fault the city of Cleveland, which owns the airport, or the airlines that support it for their decisions not to invest the millions that would be required to keep the whole airport humming when the power goes down. As airport consultant Roy Williams observed last week, it’s a tough call to spend tons of money for a backup power system that might be needed only once in a decade, if then. That decision becomes even harder in tough times such as these. While we sympathize with the inconvenienced travelers, we also see the flip side.

FROM THE PUBLISHER

County exec race offers excitement

measure that passed in a landslide, hese first weeks of the new year winning in every corner of the county. have signaled the start of the Before the passage of Issue 6, Mayor transition of the governance of FitzGerald wanted to run for county Ohio’s most important county, auditor, an office that is among those to as two men have announced their be eliminated but for now is occupied by campaigns for the new post of county Frank Russo, a central figure in the ongoing executive. public corruption probe here. Well, that Their approach will be wildly different. job’s gone, so it’s on to an And they likely will have more election for what has been company soon. BRIAN described as arguably the secondIn one corner, we have Ed TUCKER most powerful elected position FitzGerald, a youngish onein the state. term mayor and former city Others, including Republican council member in Lakewood state Rep. Matt Dolan, reportwhose political ambitions seem edly are planning a campaign to run in disparate directions. as well. However, last week’s Still in just his first term as mayor, announcement by businessman the former FBI agent opposed Ken Lanci must have gotten the Issue 6, the sweeping government attention of all the potential reform measure that created the candidates for county executive. powerful, $175,000 job that he now covets. You see, Mr. Lanci, if elected, says he’ll It seems that Mayor FitzGerald, a loyal do the job for $1 a year. That’s right — Democrat, stood with many of the other one, single, solitary dollar. officeholders who felt threatened by the And he vowed to take no campaign prospect of doing away with several contribution of more than $250. county elected positions and replacing And if elected, Mr. Lanci promised them with an elected council and elected that he would accept no campaign concounty executive. He opposed Issue 6, a

tributions from any county employee. And he’s running as an independent. Obviously, Mr. Lanci knows those themes are sure to strike a chord with the folks in this county who are sick of hearing about county officeholders who have used their offices as hiring halls, shaking down their employees for campaign contributions while loading up government with unqualified employees. Mr. Lanci’s political experience has been as a Northfield village council member in the 1970s, so his opponents doubtless will hammer away at his lack of political experience. Just as certain, Mr. Lanci will counter with a proven 40-year career starting and growing businesses. If published reports are accurate that Mr. Dolan, a respected member while in the General Assembly, has moved into the county, this is already shaping up as a fascinating race. And you can bet that with this kind of power at stake, others will be joining the fray. Cuyahoga County will indeed be a far different place in 2011. And for political junkies, an exciting place to be in 2010. ■

PERSONAL VIEW

Tax on ‘Cadillac’ health plans misguided By KEITH ASHMUS

major component of the Senate version of health insurance reform is an excise tax of 40% on “Cadillac” health care plans, defined as plans that cost more than a certain amount. (The Senate’s decision to use the term as shorthand for “wastefully extravagant” is perhaps not the best brand management for the new owner of General Motors.) This tax has come under increasing fire for good reasons, although it started out as a sensible way to level the playing field and avoid market distortions. Our tax system exempts employerprovided health insurance from both income tax and payroll tax. This encourages substitution of tax-exempt health

Mr. Ashmus is a founding partner of Frantz Ward LLP. He serves as the 2009-2010 chairman of the National Small Business Association. insurance for taxable wages. In addition, the exclusion from taxation only for employer-provided health insurance means that the self-employed and those who buy coverage in the individual market do not share the exclusion. Several years ago, Congress partially addressed this disparity by giving an income tax deduction, but did not correct the discrimination in payroll tax treatment. Accordingly, in the early stages of the health reform debate, several groups, including the National Small Business Association, urged that the tax treatment be made consistent, and that the exclu-

sion be limited to the cost of a basic benefit plan. Thus, there would be an exclusion for everyone, but it would not be unlimited. Purchasing more insurance would entail more tax, so that insurance would be treated the same as wages and other benefits. People could then make rational choices on a tax-neutral basis among health insurance and wages. Some congressional analysts embraced this concept. When resistance developed — chiefly from unions concerned about taxes for their members on their rich benefit plans, which have often required diversion of wages to those plans — the idea of taxing expensive plans survived, but the concept of making the tax direct and transparent did not. The tax was turned on its head. It See VIEW Page 9

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THE BIG ISSUE Do you think the federal government should get involved in capping compensation for banks and Wall Streeters at bailed-out firms? MARCIE PHILLIPS

DAVID FANKHUSER

ADAM KLEIN

BEA WILFERT

Cleveland

Chagrin Falls

I personally believe in as little government involvement as possible … but considering how involved they’ve already gotten, that might be a good plan of action.

Yes and no. As long as the banks owe the government, at least on the higher rung, the executives should not be getting bonuses. … Bonuses should be pro-rated to the amount of time they were getting federal money.

I believe the executive compensation packages should be withheld on the bonuses while they still owe money to the government. … But they should be able to collect bonuses on the revenue postbailout repayment.

I disagree with capping compensation at successful banks. As far as the bailed-out firms, those people weren’t doing their jobs. If the government caps compensation, they have to cap it for everyone and it’s not fair.

View: Insurers forced to build possible costs into employers’ plans continued from PAGE 8

became an excise tax, to be paid not by those who make the choices of what plans to purchase, but by the insurers. The discrimination against the self-employed and individual policy purchasers remained intact. What is left is just about the worst situation imaginable, whether viewed from a revenue-raising, administrative burden or economic incentive perspective. Here are just some of the problems with this tax. First, it is not a tax determined just on the health insurance policy. It is calculated upon the total value of all the healthrelated programs. This includes the basic health insurance plan, and also any vision plan, dental plan, flexible spending account, heath reimbursement account, health savings account, and supplemental coverage, such as for special services. National Small Business Association surveys indicate that even small employers have between four and seven plans that would have to be included in the calculation. Neither the insurers, the employer nor the employees will know for certain if their portion of the plan will be subject to the tax until they hear whether the total cost of all the benefits exceeds the cap. Second, administration is a huge burden. Who is supposed to figure out the tax? The employer.

The distortion of a good concept into the Cadillac plan excise tax is a lesson in legislation gone bad. Already struggling with regulatory burdens, the employer will have to calculate the amounts for each of its plans for each category of its employees, add them all up, and allocate the 40% tax among all the programs in correct proportions. If any policy in the employer’s insurance plan renews in the middle of the year, multiple calculations will be needed. Third, the tax will continue to rise due to inflation, catching more and more modest plans. The exemption amounts for the tax are set to increase in the amount of base inflation plus 1%. However, insurance costs rise along with medical inflation, which historically has been twice as high as inflation generally. This difference alone is estimated by the Congressional Budget Office to increase the tax by 10% to 15% a year from 2019 to 2029. In addition, there is no allowance for the initial “shock” impact of the current reform bills on premium costs. Daniel V. Gardner, a lobbyist for the International Brotherhood of Electrical Workers, a supporter of the Senate reforms, recently assessed the impact of just three elements of the reform bills (elimi-

nation of annual and lifetime limits and requiring longer coverage of adult children). He said, “Together, these requirements will drive up costs an additional $1,000 per member every year.” Again, that is not a business lobbyist or insurance company making extreme statements in an attempt to defeat the bill — he is a spokesman for a union that supports the bill. Fourth, the excise tax will have no helpful impact on consumer decisions because it is impossible to know for sure at the time the purchasing decisions are made whether there will be a tax assessed on that program or not. An insurer who sells a modestly priced plan to one employer who has no other

health benefits might not face any excise tax, while if it sells the same plan to a more generous employer, it will be taxed. Once it prices a policy, it can’t go back and collect more from either employer. It therefore has to assess an amount to every employer to cover the potential tax liability or risk having to “eat” the tax when reports trickle in from its customers. The employers will not be able to avoid these taxes being built into the cost of every plan. This is yet another source of increased premium cost

associated with the Senate’s health insurance reform effort. The news that the House and Senate are planning to skip the usual conference committee procedures in an effort to avoid delays inherent in a more deliberative process may make comments to legislators irrelevant, but employers, especially small employers, owe it to themselves to make their voices heard on this issue. The distortion of a good concept into the Cadillac plan excise tax is a lesson in legislation gone bad. At the very least, we must make sure that our legislators who vote for this tax as part of the final bill cannot claim ignorance of its deficiencies. ■

WRITE TO US Send your letters to: Mark Dodosh, editor, Crain’s Cleveland Business, 700 W. St. Clair Ave., Suite 310, Cleveland, OH 44113-1230 e-mail: mdodosh@crain.com

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Rosetta: Expansion at current site impossible continued from PAGE 3

there,” one of the sources said, noting the old National City Bank building is “vanilla, and they really want to dress it up.” Another source said Rosetta has not signed a lease but has suspended other negotiations to focus on the old National City Bank Building. However, Rosetta is keeping its plans for its 400 employees in the region to itself — for now. Curt Holstein, who runs Rosetta’s operations here and carries the title of “executive,” said the company hopes to announce its plans for Cleveland soon. He said the company is continuing to weigh options. He declined to comment on whether the old National City Bank Building is of particular interest. If Rosetta winds up at the building, it would occupy space that was not on the market when the company launched its site search more than a year ago. It since has reviewed, and passed on leasing, space at The Plain Dealer building, 1801 Superior Ave., and in the former Ameritrust Corp. headquarters complex, which is owned by Cuyahoga County but had been the centerpiece of a now-abandoned makeover plan by developer K&D Group.

“We’d love for them to stay, and would like to see them expanding in the region.” – Jonathan Berns, principal, real estate owner and developer ORG Rosetta is focused on about 60,000 square feet formerly occupied by units of PNC Financial Services Group Inc. that recently were moved to offices the bank leases in the adjoining National City-East Sixth Street Building and National City Center. All three buildings connect; together, they formed the headquarters heart of the troubled National City Corp., which Pittsburgh-based PNC acquired at the end of 2008. Terry Coyne, director of Grubb & Ellis Co.’s industrial unit and Rosetta’s broker in its search, declined to comment. PNC spokesman Fred Solomon would not confirm the moves that open up the space for Rosetta. Ari Maron, spokesman for familyowned MRN, did not return three e-mails requesting comment. The largest of Rosetta’s current Cleveland-area offices is 33,000 square feet of the former Brulant space at 37000 Park East Drive, the former headquarters building of defunct trucking company Leaseway Corp. that now is owned by

ORG of Beachwood. Jonathan Berns, a principal of ORG, which converted the headquarters to a multitenant building with Brulant as an anchor, said he does not know Rosetta’s plans. Mr. Berns said ORG was unable to accommodate Rosetta’s expansion needs. However, the Park East Drive building highlights one big hurdle to Rosetta moving downtown: Mr. Berns said Rosetta has a long-term lease in his building. “We’d love for them to stay, and would like to see them expanding in the region so long as they honor their obligations,” Mr. Berns said. However, he declined to specify how much rent Rosetta owes or the remaining term on its lease there. Rosetta also occupies space at another Beachwood office and in Independence that it would consolidate into one location with the move. The sources asked not to be identified because they are familiar with the deal but not authorized by Rosetta or other principals in the transaction to discuss it. ■

JANUARY 18-24, 2010

GOING PLACES JOB CHANGES ARCHITECTURE KACZMAR ARCHITECTS INC.: Christopher J. Kaczmar to president; Kevin A. Oliver to director of design. URS CORP.: Ashley Arvin to regional director for energy/sustainability services.

Arvin

Bertman

Baker

EDUCATION CLEVELAND METROPOLITAN SCHOOL DISTRICT: Linda Neiheiser to manager, psychological services. NORTHEASTERN OHIO UNIVERSITIES COLLEGES OF MEDICINE AND PHARMACY: Cristine Boyd to director of public relations and marketing.

MacDougall Weiler

Sabroff

FINANCE

to shareholders.

CHARTER ONE: Richard Bertman to mortgage loan officer.

DAY KETTERER LTD.: Jude Belden Streb to equity member.

FINANCIAL SERVICE

HAHN LOESER & PARKS LLP: Rocco I. Debitetto, Michael J. Gleason and Amanda H. Wilcox to partners.

BRUNER-COX LLP: Melissa A. Bentley to general services supervisor; Jennifer Grossman and Michelle L. Thompson to general services senior associates; Lisa M. Hilling to general services senior manager; Navneet K. Kaur to tax supervisor; Crystal Brincat to senior associate; Nicole M. Hemmert to tax associate. ZINNER & CO. FINANCIAL SERVICES: Courtney Ockenden and Colleen Hall to accounting and tax services seniors; Christopher Valponi to audit senior; Patty Garven to accounting and tax services manager.

HEALTH CARE AKRON CHILDREN’S HOSPITAL: Rebecca Dean to injury prevention educator. CLEVELAND CLINIC CHILDREN’S HOSPITAL: Aletta Sinoff to director, Center for Autism.

HOSPITALITY INTERCONTINENTAL HOTELS CLEVELAND: Todd Thompson to assistant director of food and beverage. TABLE 45: Mary Margaret Grothe to restaurant manager.

INSURANCE DAWSON INSURANCE INC.: Kyp L. Ross to president; Mark N. Coleman to chief operating officer; David A. Voight Jr. to president, Sandusky division.

LEGAL BAKER & HOSTETLER LLP: Guenther Karl Fanter, Eric R. Goodman and Lora M. Reece to partners; Adam L. Fletcher, Gillian Gray Lindsay, Chad W. Makuch, Conor T. McCarthy, S. Colin G. Petry and Sara L. Witt to associates. BONEZZI SWITZER MURPHY POLITO & HUPP CO. LPA: Steven J. Hupp to managing director; Joseph T. Ostrowski and Donald J. Richardson

JONES DAY: Tricia Eschbach-Hall, Joseph M. Sauer, Louis A. Chaiten and Dustin B. Rawlin to partners. MANSOUR, GAVIN, GERLACK & MANOS CO. LPA: Amy L. Kullik to partner and shareholder. TUCKER ELLIS & WEST LLP: Thomas W. Baker and Irene M. MacDougall to partners; Jeffry L. Weiler to counsel. ULMER & BERNE LLP: Thomas L. Anastos, Jason P. Conte, Jodi B. Rich and Jeffrey R. Schaefer to partners; Jeffrey S. Dunlap to management committee. WESTON HURD LLP: Matthew C. Miller and Melanie R. Shaerban to associates.

MANUFACTURING HORIZONS INC.: Bob Miller and Mike Rish to co-presidents.

NONPROFIT THE GREATER CLEVELAND NEIGHBORHOOD CENTERS ASSOCIATION: JoAnn C. Hirsh to director of business services and CFO. KENDAL AT OBERLIN: Christa Cervantes to director of nursing. NATIONAL ASSOCIATION OF COLLEGE STORES: Jeff Pavic to vice president, business development; Malcolm S. Karl to director of business development for associations/ nonprofits.

REAL ESTATE NAI DAUS: Westley Sabroff to associate. NORTHSTAR TITLE SERVICES LLC: Karin Topliff Williams to regional account manager. TRANSACTION REALTY: Jason Rose to sales associate.

Send information for Going Places to dhillyer@crain.com.

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INSIDE

13 KENT STATE CREATES COLLEGE OF PUBLIC HEALTH.

HIGHER EDUCATION Changing times call for 3-year degrees Area universities entice students with fast-track programs By SHANNON MORTLAND smortland@crain.com

RUGGERO FATICA PHOTO

Nathan Lehota is a 25-year-old veteran attending Kent State University’s School of Journalism and Mass Communication. Mr. Lehota is among many local veterans taking advantage of the educational benefits offered through the Post-9/11 GI Bill.

A SALUTE TO SCHOOL Local colleges experience influx of veterans who are reaping educational benefits of Post-9/11 GI Bill By DAN SHINGLER dshingler@crain.com

oday’s soldiers are trained like none who came before them — in colleges and universities across the state and nation, thanks to perhaps the most generous education benefits ever bestowed upon veterans. With the Post-9/11 Veterans Educational Assistance Act of 2008 — more universally and affectionately known as the Post-9/11 GI Bill — soldiers are returning from places such as Iraq and Afghanistan to find that their service has paid for a college education, whether it’s their own or that of their children. Provisions of the new GI bill went into effect in August. See VETERANS Page 14

VETERANS BENEFIT FROM POST-9/11 GI BILL The new benefits under the Post9/11 Veterans Educational Assistance Act of 2008 came as a pleasant surprise to many veterans who signed up for service before the benefits were in effect. Nathan Lehota, for example, didn’t even think about education benefits when he joined the Navy straight out of Mantua High School in 2003. When he did begin thinking about going to school after the service, he assumed he’d get whatever benefits he was entitled to under the old system. The rules changed in 2008, a year before Mr. Lehota received his discharge. He had far more than the required 36 months of post9/11 service to reap the new bill’s benefits, and says he’s gotten more than he bargained for now that his

education and living expenses are paid for. So, at 25, Mr. Lehota does not have to worry about paying for his degree in broadcast journalism at Kent State, living expenses or books. “I get the full benefits for the zoned area of Akron, so I receive $1,007 a month,” he said. “ I’m getting the maximum (available amount) for books, so I get $687 for books” per semester. And there’s another benefit, at least in Mr. Lehota’s case. While he says he “was not a very good student” in high school, he said the military left him far more disciplined than he was at 19 — and better able to attend and succeed in those awful early morning classes . — Dan Shingler

t a time when tuition is soaring but bank accounts aren’t, more colleges are creating programs to enable students to earn a bachelor’s degree in only three years. Local institutions that have created three-year programs or are considering them include BaldwinWallace College, Hiram College, Lake Erie College, the University of Akron and Ursuline College — all of which hope to enable students to save time and money by entering the work force sooner. “Students are always asking: ‘How can I get credentials sooner? How can I get out in the working world sooner?’” said Alison Benders, dean of graduate and professional studies at Ursuline.

“Students are always asking: How can I get credentials sooner?” – Alison Benders dean of graduate and professional studies, Ursuline College Ursuline answered such calls by creating programs that will allow students to earn a bachelor’s degree in education or business in three years, starting next fall, she said. While there is no tuition break for the three-year programs, students are expected to save money on room and board by entering the working world a year ahead of their traditional classmates, she said. Under the new programs, students will go to school yearround and will take a very heavy course load for three years, Dr. Benders said. “It’s heavy, but if you think of it as a 16-credit-hour semester, it’s doable. That’s four or five classes” at a time, she said. Though the three-year programs primarily are aimed at adult learners who are going back to school, Dr. Benders said Ursuline would welcome high-caliber students into the program right after high school. Akron is recruiting such highachieving students for a new program it will launch next fall. Students in the See DEGREES Page 12

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HIGHER EDUCATION

Degrees: Programs still evolving Winning sports teams add bonus points to university profiles continued from PAGE 11

program can complete in three years a bachelor’s degree in natural sciences, with a concentration in polymer chemistry, before going on to earn a master’s degree in two years, said Mark Foster, associate dean for programs, policy and engagement in the College of Polymer Science and Polymer Engineering at Akron. Students in that program will receive a full tuition waiver while earning a bachelor’s degree, and a stipend while completing their graduate work, he said. Two similar programs in applied math and physics/chemical physics have been launched and, although students could choose to stop at a bachelor’s degree, they will be strongly urged to stay in school to obtain their master’s degree as well, he said. With its three-year bachelor’s degree in biomedical humanities, Hiram targets students who plan to spend many years in college to pursue careers in medicine, said Shawn Brown, a spokesman for the college. Four students graduated from the program last May and the program currently has nine students enrolled, he said. Students in the Hiram and Akron three-year programs attend school in the summers.

Doing their homework As those programs forge ahead, Baldwin-Wallace and Lake Erie are continuing to weigh the pros and cons of three-year bachelor’s degree programs. Though Baldwin-Wallace currently offers an accelerated

program in which students can earn a bachelor’s degree in three years in organizational leadership, it is not forming another group of students to graduate from that program, said George Richard, Baldwin-Wallace’s vice president of college relations. One group of students will graduate from the program this year and another in 2011, he said. Next month, the school’s board of trustees instead will further discuss the possibility of creating a true three-year program for yet-specified majors, meaning students still would have time off in the summers, he said. Though three-year programs slowly are catching on, only a few schools across the country are believed to have three-year programs that do not require summer attendance, said Tony Pals, a spokesman for the National Association of Independent Colleges and Universities in Washington, D.C. Though more students are expressing an interest in earning an undergraduate degree in three years, only 4.2% of all undergraduates generally earn their degrees in such a short time period, he said. “You have to go into college with a clear idea of what your major is going to be and to stick to it,” Mr. Pals said. Of course, there are drawbacks to such a fast-paced curriculum, and schools are being careful to consider the disadvantages. “Any time you have an accelerated program, you have to give something up,” Akron’s Dr. Foster said.

For instance, going to school yearround forces students to give up vacations, jobs and internships, said Robin McDermott, Lake Erie’s vice president for enrollment management and student affairs. Other activities, such as a semester abroad, also would be canceled as students attend classes and participate in research during what would have been their time off, added Dr. Foster. For those reasons, Lake Erie this year will begin surveying students to gauge their interest in three-year degree programs and their willingness to give up their summers off, Ms. McDermott said. Lake Erie also is examining whether students can afford to go to school year-round, Ms. McDermott said, because students would miss out on working in the summers to save money for tuition and living expenses. In addition, students only get a certain amount of financial aid each year, so there are questions as to whether the annual financial aid allotment would cover the entire year, she added.

Time for change Still, three-year degree programs could work in some instances and, with a higher education system that hasn’t been overhauled in more than a century, it’s an idea that is long overdue, B-W’s Mr. Richard said. “(In accelerated programs), students kill themselves for three years and they lose the rest of their college experience,” he said. “It’s really time for a strong differentiation, not just compression courses and accelerated courses.” ■

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By JOEL HAMMOND jmhammond@crain.com

its television exposure also relatively obscure, to suggest that a noticeable effect on applications t may be basketball season, would be observable would be in but the University of Akron my view a bit too optimistic and and its athletics department probably unrealistic.” still are basking in the success Take, for instance, the University and nationwide exposure its men’s of California, Santa Barbara, soccer program earned this fall. another athletically under-the-radar The Zips on Dec. 13 came within school that has made its mark in one goal of beating the University men’s soccer: The Gauchos lost in of Virginia in the College Cup final, the College Cup final in 2004, beat the culmination of a steady rise for UCLA in 2006 to win the champithe program. UA spent the first onship and average about 4,000 11 weeks atop the National Soccer fans per game, said Diane O’Brien, Coaches Association of America/ an assistant athletic director. adidas poll, the final eight unaniIt’s a nice boost for the school and mously; it finished No. 2 after the the athletic department, but the uniloss to Virginia. versity as a whole has other things Since 2000, the Zips have won driving enrollment — the Pacific 141 games (68.8%), six Mid-American Ocean and perfect weather, to name Conference two — and, withregular-season out a football championships team, it needs the “Any time you have a and five MAC school’s basketnational program in tournament titles, ball teams to and the team has athletics, it’s a wonderful drive revenue thing for the entire made seven within the athletic appearances in department. university.” the NCAA tourna“As a nonrev– Tom Wistrcill ment. enue sport, (socathletic director, University of Akron That success cer) definitely ofhas been a boon fers a boost,” Ms. for the Zips’ athletic department: O’Brien said. “But it’s not someTypically considered a nonrevenue thing the university uses to attract sport, UA men’s soccer averaged more students to the school, and 2,137 in attendance for 13 home for the athletic department, the dates, more than double the average gate still isn’t what you get from from 2008, when the team went basketball.” 17-2-4. Six times this year the Zips No such thing as bad PR broke the previous attendance record at Lee Jackson Field. The Others say any exposure is good, previous high was 2,319 in 2005, but no matter the sport. the Zips this season drew crowds of Cleveland State University’s 2,443, 2,473, 2,439, 2,700, 2,806 and men’s basketball team earned the 4,254. school plenty of time in the spot“Any time you have a national light in March, when it won the program in athletics, it’s a wonderful Horizon League tournament over thing for the entire university,” highly ranked Butler and then, as a said Akron athletic director Tom No. 13 seed, upset No. 4 seed Wake Wistrcill. “It provides an incredible Forest of the powerful Atlantic amount of recognition nationwide: Coast Conference in the first round ‘Akron’ is on the ticker for days, of the NCAA tournament. and it really exposes a lot of people The returns have been plentiful, from outside the community to the said assistant vice president for University of Akron.” marketing and admissions Rob Spademan. The school, though Mr. Short of the goal Spademan couldn’t quantify it, Opinions differ on the impact received a bump in giving and that success in traditionally underheard from many new students the-radar sports has on schools. that the basketball team was part Success in football and men’s of their decisions to attend CSU. basketball likely make more of an And while the Vikings’ success impact on the entire university, was in the ultra-popular “March said Mark Rosentraub, a former Madness,” any success is good, Mr. Cleveland State professor and now Spademan said. the endowed chair of the depart“Successful athletics or athletic ment of sport management at the teams bring good things to the University of Michigan. university,” Mr. Spademan said. Akron’s football team had a Akron media relations director surprising MAC championship Laura Massie said while she couldn’t game win over Northern Illinois and specifically connect any enrollment Motor City Bowl appearance in 2005. uptick based on the Zips’ soccer The basketball team has played in a success, she said UA admissions postseason tournament in three of counselors frequently cite the team’s the past four years, including last national profile in talking with season’s NCAA tournament. prospective students. Mid-American “Soccer is still a niche sport; its Conference commissioner Jon effects on student applications Steinbrecher, too, said the men’s would have to be considered quite soccer exposure is a great benefit. marginal and nothing compared to “For (Akron), it’s a tremendous football and men’s basketball,” Mr. accomplishment that brought signifiRosentraub said. “With attendance cant visibility to the soccer program, at college soccer relatively low and and to the school itself,” he said. ■

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HIGHER EDUCATION

Kent State addresses demand for public health sector needs University joins other state counterparts in offering program to help sustain growing field By CHUCK SODER csoder@crain.com

f the experts are right and there really does turn out to be a national shortage of public health professionals by 2020, don’t go blaming Ohio’s colleges for ignoring the problem. Today there are a total of seven colleges or groups of colleges in Ohio that offer degrees in public health — up from zero at the start of the 1990s. The newest of the group is Kent State University’s College of Public Health, which in July became the first college of public health in Northeast Ohio and only the second in the state. Kent State’s college will accept its first students this fall. Ohio State University, which was the state’s first college of public health, began offering public health degrees in 1992. Since then, schools across the state have shown much more interest in training students to treat the population, not just the patient. That’s because the need for public health professionals — who monitor health statistics, work in health care administration, study the impact of the environment on health, shape community emergency medical response plans and otherwise work to ensure that the population at large remains healthy — is becoming more apparent, according to officials from several educational institutions. Over the past decade, concerns over terrorist attacks, natural disasters such as Hurricane Katrina and the spread of swine flu and other illnesses have helped fuel interest in the field. Plus, concerns over lifestyle-related health problems such as obesity will continue to keep public health issues in the spotlight, said Dr. Scott Frank, program director for Case Western Reserve University’s Division of Public Health. “There are no solutions to health

reform that don’t include a substantial public health presence,” Dr. Frank said. Because of rising demand and a pending wave of retirements in the field, the United States is on pace to need an additional 250,000 public health professionals by 2020, according to a February 2008 study by the Washington, D.C.based Association of Schools of Public Health. To avoid such a shortage, colleges would have to triple their output of public health students, the report stated.

Healthy growth Ohio schools, however, are working on the problem. Not only has Kent State formed its College of Public Health to offer multiple degrees in the field, but master’s programs offered by CWRU and a consortium of eastern Ohio schools have grown in recent years. Plus, since 1992, other public health degree programs have been created by Wright State University, the University of Cincinnati and a partnership between Bowling Green State University and the University of Toledo. Dr. Frank, for one, has watched CWRU’s public health program grow from nine students 10 years ago to 110 today. “There clearly was a pent-up demand in the city of Cleveland for public health education,” he said. The program has reached maximum capacity for the time being, said Dr. Frank, who also is director of the Shaker Heights Health Department. The school is, however, growing its involvement in public health by applying for federal stimulus money to further develop its health informatics program, which includes elements of public health. Plus, earlier this month, CWRU, the Northeastern Ohio Universities Colleges of Medicine and Pharmacy and the Mahoning County District

IN GOOD HEALTH While most public health programs offer master’s degrees, the new Kent State University College of Public Health offers an 18-credit hour certification in public health as well as the state’s only bachelor’s degree in the field. It also has proposals before the Ohio Board of Regents to offer master’s and doctoral degrees. The university expects to admit 75 to 100 new bachelor’s students for its first class this fall, and it aims to bring in 75 graduate students each year once those degrees are approved, said Ken Slenkovich, assistant dean of the College of Public Health. He noted that 46 students have expressed interest in the school’s graduate programs, even though they have yet to be finalized. “We’ve already got folks who have said, ‘As soon as you get these degrees approved, we want to apply for it,’” Mr. Slenkovich said. Kent State created its own college after spending several years as part of the Consortium of Eastern Ohio

Board of Health received a $90,000 grant from the Robert Wood Johnson Foundation that they will use to build a network among public health agencies throughout the state. The network will work together to study the best ways to deliver and finance public health services. The Consortium of Eastern Ohio Master of Public Health program — a collaboration that today

involves NEOUCOM, Cleveland State University, the University of Akron, Youngstown State University and Ohio University — also is building on its 10-year-old program, said program director Dr. Amy Lee. The group of colleges, which teaches 100 public health master’s students, has been considering offering more dual degrees, given that public health courses can be

tion

Ac n i E C EN

EXCE

Master of Public Health program, a collaboration that today involves the Northeastern Ohio Universities Colleges of Medicine and Pharmacy, Cleveland State University, the University of Akron, Youngstown State University and Ohio University. Kent State president Lester Lefton and provost Robert Frank wanted to create the college because of their focus on preparing graduates for the work force while also expanding the university’s research capacity, Mr. Slenkovich said. Being a full college of public health means the university not only will offer a variety of public health degrees, but it also will conduct more research in the field. “It’s a draw for bringing faculty, research dollars and subsequently students,” he said. The growing demand for public health skills also should generate student interest, Mr. Slenkovich said. “They’re rewarding careers. They’re high-paying jobs,” he added. — Chuck Soder

useful in careers ranging from hospital administration to law to scientific research. The group also is making it easier for students to sign up by offering more online courses and working with hospitals to make it easier for resident physicians to fit classes into their busy schedules. The consortium’s students have had little difficulty finding jobs, but Dr. Lee noted that some government public health agencies have had to lay off employees recently because of constrained budgets. “The economy has made it very tough,” she said.

Supply vs. demand The economy isn’t the only problem, said Michael Bisesi, associate dean of academic affairs for the College of Public Health at Ohio State. Public health for many years has been underfunded, so some of the increased need for professionals in the field has gone unmet, said Dr. Bisesi, who sits on two committees for the Association of Schools of Public Health. Schools, however, are doing what’s necessary to meet future demand, he said. Today, there are 43 accredited colleges of public health in the United States, which is about 10 more than there were five years ago, he said. Other regions may still need more educational capacity, but Ohio at this point has plenty, at least when it comes to master’s programs. “In my opinion the state of Ohio has reached a comfortable threshold,” he said. ■

dent a very stu

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Akron foundation invests in citizen journalism Akron is about to ON THE WEB Story from nating news. It is become a major test www.CrainsCleveland.com taking hold as center for the future traditional media of citizen journalism. wither due to forces including the The Akron Community Foundation rise of the Internet and collapse of said it plans to launch a digital the advertising market. media academy that “will train comThe academy “will equip citizens munity members to become citizen with the tools and training they need journalists.” The John S. and James to tell their stories through videos, L. Knight Foundation will support the news reports, blogs and visual deproject with a $350,000 grant, “with sign projects,” the foundation said. the ultimate goal of connecting resiTina Boyes, vice president of comdents at the neighborhood level while munications for the foundation, said promoting digital literacy throughout there’s not yet a timetable for launchgreater Akron,” according to the ing the academy. Four local journalAkron Community Foundation. ism and technology professionals The Akron Community Foundation who helped develop the concept — has committed to the project writer, editor and web publisher $100,000 of its own funds, which Chris Miller; video producer Chris will be combined with the Knight “Blue” Green; new media specialist Foundation grant for a total of Todd Volkmer; and multimedia com$450,000. munications specialist Joanne Green Citizen journalism is the concept — are working on the curriculum of members of the public taking an with partners that include The Akron Beacon Journal. — Scott Suttell active role in collecting and dissemi-

as nursing, architecture, fashion, biomedical sciences, the arts, music, education, journalism – and more. That’s excellence in action. It’s happening every day at Kent State University.

www.kent.edu Kent State University, Kent State and KSU are registered trademarks and may not be used without permission. Kent State University, an equal opportunity, afﬁrmative action employer, is committed to attaining excellence through the recruitment and retention of a diverse work force. 09-2480

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HIGHER EDUCATION

Veterans: New GI bill offers more benefits, choices continued from PAGE 11

“It’s fantastic,” said Joshua Rider, assistant director for Kent State University’s Center for Adult and Veteran Services. “This GI bill is better than any GI bill since World War II.” It may, indeed, be better. “I had one student switch from the old GI bill to the new one, and now he doesn’t have to take out loans anymore; he was living on loans before,” said Rebecca Dinnen, director of transfer and international admission at John Carroll University in University Heights. The pre-9/11 GI bill, expanded into the Montgomery GI Bill in 1985, has been a boon to soldiers since World War II. It’s still in use and provides veterans with monthly

payments of about $1,300 to be used for tuition and other general education expenses. For certain situations, such as veterans with other scholarships, the old GI bill still is available and is sometimes the best choice, say Mr. Rider and others. But the new GI bill is far more generous for most veterans: It pays 100% of tuition and fees at public universities, such as Kent State and the University of Akron. In addition, it provides a monthly living stipend and $500 per semester for books. Little wonder Kent State now has about 900 students using GI benefits to attend classes. That’s still a small portion of the 38,000 students who attend classes in

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“It’s an exciting time. We’ve been so busy — it’s wild.” – Terri Dietz veterans affairs coordinator, Lakeland Community College Kent or at its seven satellite campuses, but it’s up sharply from recent years. It’s especially high on the satellite campuses, which is understandable because many veterans are caring for families and those campuses serve more commuter students than the main campus in Kent, Mr. Rider said. But even on the main campus, the number of veterans attending classes on GI benefits, of all types, has risen to about 450 students, out of a total of about 25,000 — and Mr. Rider attributes the increase to the new benefits. “That’s really high,” said Mr. Rider. “We have typically in the past had 280 to 300 (veterans at the main campus on GI benefits), so that’s just a huge spike.” At Lakeland Community College in Kirtland, veteran enrollment is up and rising, with 262 veterans enrolled in the spring semester that started Jan. 16, said Lakeland veterans affairs coordinator Terri Dietz. “It’s an exciting time. We’ve been so busy — it’s wild,” Ms. Dietz said. Of the 262 veteran students, 76 are receiving benefits under the new GI bill and the number of students using the new bill’s benefits is up 40% from the fall of 2009. Ms. Dietz expects that number to rise as more veterans become aware of the program and more are discharged with eligibility.

Tying a yellow ribbon The benefits under the new GI

bill are based on factors such as the local cost of living and the cost of public schools in the state where the veteran lives. But, unlike the previous GI bill, this one also has a provision that enables veterans to attend pricier, private schools, including John Carroll. Often, such schools were financially off limits to many veterans, said John Carroll’s Ms. Dinnen — until the military and private schools began working together in the Yellow Ribbon GI Education Enhancement Program. Yellow Ribbon uses a mix of contributions from the schools themselves with extra benefits from the U.S. government to close the gap between what GI benefits normally cover and what private schools actually cost. “We were just trying to find a scholarship for veterans, and then Yellow Ribbon popped up and we said, ‘Hey, this is even better,’” Ms. Dinnen said. Ms. Dinnen explained that, hypothetically, GI benefits might cover $15,000 in tuition expenses for a certain period based on what public schools cost in a given state. Tuition at John Carroll or another private school might cost more, though, say $30,000. If the school participates in Yellow Ribbon, it agrees to pay for 30% to 50% of the difference, and the government contributes a matching amount. In the case of John Carroll, the school pays 50% and the government pays the other 50%, completely paying for the student’s tuition, Ms. Dinnen said. Only four of John Carroll’s 3,000 students are receiving Yellow Ribbon support and GI benefits at the moment, but Ms. Dinnen said she’s seeing “more and more people who are interested in using it and are planning to come.” “Some are still on active duty,

though,” Ms. Dinnen said.

Win-win situation Seemingly everyone involved in working with the new GI benefits sings their praises. But they also say the benefits help more than just the veterans. Just as with the previous GI bill, the benefits can be transferred to a dependent — which means that a service member essentially can pay for a complete college education for one child, or split up the benefit among multiple children. But they say the schools also are benefiting. For one thing, they’re enrolling students who come complete with their own financing stream that represents money for the schools. But they also say they are getting good, mature students, often just a little older than the traditional college students, who are a great addition to campus. “Because of their experience, they add a little needed diversity to the classroom,” Ms. Dinnen said. “Especially with their experience — they’ve got some pretty worldly experience that most students just don’t have.” Those administering veterans’ services hope the new GI bill does pretty much what the first GI bill did in terms of educating the nation’s veterans. “The first GI bill, and the educational revolution it spawned, saw our veterans as point men in bringing to bear the vast infusion of federal dollars into higher education,” U.S. Veterans Affairs secretary Eric Shinseki said in a November 2009 speech at the University of South Florida. “For this latest generation of veterans, history is poised to repeat itself in the Post-9/11 GI Bill. It has every potential to have an equally resounding impact on our nation.” ■

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CORPORATE GROWTH M&A SPECIAL ADVERTISING SECTION

INSIDE PRESIDENT’S LETTER ACG Cleveland’s president reports that the organization continues to add members and host exciting events despite the tough economy. ● PAGE S-2

Local middle-market merger & acquisition experts anticipate a slow recovery in 2010. ● PAGE S-4

JANINE BENTIVEGNA

THE M&A LANDSCAPE

More than 600 registrants from around the country gathered at an ACG conference in September that included a reception at the Rock and Roll Hall of Fame.

CASH TRAP Access to capital will be a challenge for some businesses when the economy turns around. ● PAGE S-5

ADVICE FOR SELLERS Advanced preparation not only will make the seller’s business more marketable, but can increase the price paid for the business. ● PAGE S-6

long history BRIGHT FUTURE Cleveland rocks middle-market deal-making By Ann M. Gynn

SUCCESS STORIES Companies find Northeast Ohio a good place to grow their business. ● PAGE S-8

TURBULENT TIMES Company executives share their insight on navigating through tough times. ● PAGE S-10

he middle-market deal-making world knows Cleveland. Home to more than the Rock and Roll Hall of Fame and Museum and worldrenowned Cleveland Orchestra, Northeast Ohio boasts a middle-market deal-making sector that far surpasses most cities of comparable size. Proof of Cleveland’s prowess came last September when, in the depth of the recession, more than 600 registrants from across the country attended the firstever Great Lakes Capital Connection, a two-day confab of middle-market private equity firms, investment bankers, capital providers and transaction advisers. “It was a spectacular success,” says Dennis White, chairman of the board of ACG Global and senior counsel at McDermott, Will & Emery LLC in Boston, who was one of the 600 in attendance.

See BRIGHT on Page S-2

For two days in September, Cleveland was the center of the middle-market deal-making universe.

Crain’s Cleveland Business Custom Publishing

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S-2 January 18-24, 2010

Bright Continued from Page S-1 Private equity firm participation is the driver of attendance at most ACG events, and Cleveland starts with a solid base. “We just have a phenomenal group of private equity firms here in Cleveland,” says Tom Freeman,

transaction advisory services partner at Grant Thornton. “We’re blessed for the size of the city here.” Jim Marra, director of business development at the private equity firm Blue Point Capital Partners, agrees that it’s unusual for a city Cleveland’s size to be home to a dozen or more private equity firms. “In the footprint of the Great Lakes, you don’t see anywhere else with near as much private equity

concentrated as it is here in Cleveland,” he says.

Pioneers of PE Mr. Marra explains that the private equity industry began here before the term “private equity” even existed. “It started with Frank Linsalata, David Morgenthaler and those early private equity guys in the late ’70s

and early ‘80s who thought it made sense to buy companies on a leveraged basis,” he says. Cleveland always has had a strong industrial base, which makes it fertile ground for investment opportunities. In addition, Cleveland has had people with significant wealth who wanted to participate in such deals. “It was a confluence of the unique,” Mr. Marra says. “There were companies to buy, money willing to be devoted to acquisitions, and some pretty smart guys with a vision of what private equity could do.” One of those visionaries was David Morgenthaler, who founded the eponymous firm more than 40 years ago. Today the private equity and venture capital firm has $3 billion in funds under management and has funded 300 companies. “Private equity firms have been here a long time,” says Al Stanley, co-managing director of Morgenthaler ’s private equity practice. “Cleveland’s a strong player in the lower-to-middle segment of the private equity market.” Mr. Stanley says that the early beginnings of private equity happened here because Cleveland had both a strong industrial and a strong banking base. Other middlemarket transaction services spun off from this core of operators and financiers.

Powerhouse “Cleveland as a deal-making powerhouse is more than private equity,” Mr. Marra notes. “Private equity is the nucleus, but there

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Advertisement are many more components — other capital, senior and mezzanine debt, major banks who are experienced lenders in that market, and so on.” The presence of three big banks [National City Bank, now part of PNC; AmeriTrust and Society (now Key)] also supported private equity, Mr. Freeman says. In fact, he notes, Blue Point itself spun off from Key Equity Capital. Add into that mix about a dozen law firms with the necessary experience and capabilities plus Big 4 accounting firms and strong regional accounting firms that can audit portfolio companies and help in acquisitions. “All the services that buyers of businesses need have really grown up here in Cleveland,” Mr. Marra says. “When you have these components and can pull in others such as environmental and risk management consultants then you can rightly call yourself a deal-making powerhouse.” Stewart Kohl, co-CEO of The Riverside Company, says the professional community in Cleveland is remarkably developed and sophisticated. “We can bring all the specialists we need to complete a deal, including attorneys, accountants, insurance, environmental advisers and others,” Mr. Kohl explains. “Cleveland has broad and deep benches, much more so than in our peer cities. It’s an embarrassment of riches.” One advantage to operating in Cleveland is that there are a lot middle-market-type companies,

ACG Cleveland offers events, education and networking for dealmakers

t will not be news to any ACG Cleveland is one of the reader of Crain’s Cleveland largest and most vibrant chapters Business that 2009 was a in ACG, the Association for Corpotough year for dealmakers. rate Growth. With 12,000 members, The economy crashed, credit ACG is the world’s preeminent markets locked up, defaults organization for corporate developspiked, and erstwhile buyers ment and middle-market M&A focused on strengthening professionals. Chapter their existing businesses. membership includes acYou might have expectcess to the full suite of ACG ed a professional organizaGlobal benefits and services. tion whose members are ACG Cleveland devoted to corporate members work in public & growth and deal-making private companies, private to lose members and see equity, corporate & investattendance decline in such ment banking, finance, PATRICK an environment. But that accounting, law, and other did not happen. Reflecting GALLAGHER professional services. They ACG PRESIDENT the value that ACG Clevejoin ACG Cleveland for land provides, our two primary reasons: membership continued its upward 1) educational events that help trend, increasing slightly to 435 at them build value in their companies last count, and programs were well and for their clients; 2) the opporattended. tunity to network with a diverse Our January 2009 Deal Maker and influential community of Awards event was a sellout, and business people. the inaugural Great Lakes Capital If this sounds like an organizaConnection in September 2009 was tion for you, we encourage you to a smash. The event, a collaboration attend one of our events or apply of ACG chapters in Cincinnati, for membership. Visit us at Columbus, Detroit, Indianapolis www.acgcleveland.org or call me at and Pittsburgh, attracted 600 regis(216) 781-2400 and I’ll be happy to trants—the majority from outside talk with you. ■ the Cleveland area. We are already moving forward on the second Mr. Gallagher is president of ACG annual Great Lakes Capital Cleveland and senior vice president of Connection in September 2010. Edward Howard.

Crain’s Cleveland Business Custom Publishing

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Advertisement Mr. Freeman says. Prior to the most recent economic downturn, the biggest accounting firms didnâ&#x20AC;&#x2122;t pay much attention to the middle market, but other firms, such as Grant Thornton, were paying attention. About half of Grant Thorntonâ&#x20AC;&#x2122;s clients in Cleveland fall into the $50 million to $250 million range and are owned by private equity groups, he says. Grant Thornton finds more companies are switching the audit and tax work that they historically sent to Big 4 firms to regional firms with a national presence. â&#x20AC;&#x153;A company in California owned by a private equity firm in Cleveland can use our services. The private equity firm likes to have one point of contact that is local and this is one of our core strategies,â&#x20AC;? Mr. Freeman says.

Other Attractions Riverside, Morgenthaler and Clevelandâ&#x20AC;&#x2122;s other private equity firms have offices and deals outside the area, which means they travel a lot. Thus, having a Continental Airlines hub at Cleveland Hopkins International Airport is a big plus, both Mr. Kohl and Mr. Stanley say. Having a hub means our staff doesnâ&#x20AC;&#x2122;t have to change planes as frequently, Mr. Kohl says. Having content employees is critical for the firmsâ&#x20AC;&#x2122; success. Riverside finds Cleveland is a great location to attract sophisticated professional talent who appreciate the quality of life they can have in the area. â&#x20AC;&#x153;I love it when kids who grew up in Cleveland, spent time on the coasts and intentionally come back in their 30s because they want to raise a family here,â&#x20AC;? Mr. Kohl says. Mr. Stanley concurs. â&#x20AC;&#x153;Cleveland is a great city. Thereâ&#x20AC;&#x2122;s something about a Midwest reputation that is reassuring to sellers.â&#x20AC;? That regional reputation can help when Morgenthaler is doing deals too. Although the firm doesnâ&#x20AC;&#x2122;t intentionally promote its roots, sellers perceive the Midwest location as a signal the firm is down to earth and trustworthy. Thatâ&#x20AC;&#x2122;s especially appealing for family businesses deciding to sell, Mr. Stanley says. But that doesnâ&#x20AC;&#x2122;t mean Morgenthaler limits its investments to the Midwest. â&#x20AC;&#x153;Our portfolio goes from Maine to California. We look for deals everywhere,â&#x20AC;? Mr. Stanley says. Riverside invests globally too. As for Ohio-related deals, Riverside has a special place in its heart. â&#x20AC;&#x153;There are a lot of great entrepreneurs here,â&#x20AC;? Mr. Kohl says, adding he sees big growth potential locally in the healthcare sector, including medical services and biotech enterprises. Technology has allowed firms to grow globally and remain based in Cleveland. As Mr. Marra, who joined Blue Point in 1991, explains: â&#x20AC;&#x153;Twenty years ago, it was harder to buy a company that wasnâ&#x20AC;&#x2122;t in your footprint geographically. We looked at operations outside Ohio, but we werenâ&#x20AC;&#x2122;t looking far afield.â&#x20AC;? As private equity grew, it became obvious to Blue Point that it needed to expand its horizons if it were to have the best portfolio possible. Through technological advances such as videoconferencing, the

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CORPORATE GROWTH and M&A â&#x20AC;&#x153;I love it when kids who grew up in Cleveland ... come back ... because they want to raise a family here.â&#x20AC;? â&#x20AC;&#x201D; Stewart Kohl, Riverside

Internet, e-mail, and cell phones, Blue Point has been able to stay in Cleveland and do deals around the globe. â&#x20AC;&#x153;Ohio remains an important part of our portfolio as a deal source,â&#x20AC;? he says. â&#x20AC;&#x153;I doubt that will change because weâ&#x20AC;&#x2122;re in constant contact with a number of companies. Itâ&#x20AC;&#x2122;s still easier to keep in touch in town.â&#x20AC;?

Private Equity Evolution Another deal-making evolution has been the growth of intermediaries such as Brown Gibbons Lang and Western Reserve Partners, who serve as deal connectors between buyers and sellers. Twenty years ago, a $50 million company without a strategic (corporate) buyer didnâ&#x20AC;&#x2122;t have many

options, Mr. Marra says. It had to find the private equity firm and coax it into buying business. In the 1990s, buyers would sign letters of intent without the cash and then approach private equity firms. As private equity investments produced unusually large returns, new firms organized and the intermediary function grew. â&#x20AC;&#x153;Our world is a lot more competitive,â&#x20AC;? Mr. Marra says. Clevelandâ&#x20AC;&#x2122;s private equity firms have their own specialties so the community has an excellent breadth to tackle all types of mergers and acquisitions, Mr. Freeman says. Mr. Kohl says that Clevelandâ&#x20AC;&#x2122;s private equity community has held on well during the last downturn even when a significant number of firms disappeared. â&#x20AC;&#x153;Iâ&#x20AC;&#x2122;m

January 18-24, 2010

not aware of any in Cleveland closing,â&#x20AC;? he says. In fact, Mr. Freeman says, a Cleveland-based private equity firm was created in these challenging times. Supply Chain Equity Partners is the only private equity firm in the world that focuses exclusively on the distribution industry. â&#x20AC;&#x153;They have a great management team that really understands this space,â&#x20AC;? he says. Another Cleveland firm positioned itself well to tackle the downturn opportunities. Resilience Capital always has focused on underperforming companies. So now is a great time for the firm to play in a space that it already understood, Mr. Freeman says. â&#x20AC;&#x153;Theyâ&#x20AC;&#x2122;re pretty busy right now,â&#x20AC;? he adds. â&#x2013;

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Middle-market M&A looks for a slow recovery in 2010

ike the Indians’ and Browns’ seasons, the middle-market merger & acquisition (M&A) world suffered its woes in 2009, says Joseph Carson, managing director at Western Reserve Partners, a Cleveland-based investment banking firm. Year-to-date through September, he says, total transaction volume for the middle market (deal values between $25- $250 million) was down 55 percent year-over-year, and total transaction value was down 59 percent. And there was no pickup in the third quarter. Activity fell from second quarter levels as total transaction volume decreased 19 percent and total transaction value decreased 23 percent. “The new normal is a reduction in valuation multiples from the highs of 2007 and 2008,” says Mr. Andrew Petryk, managing director at Brown Gibbons Lang & Co., a Cleveland-based investment banking firm. Mr. Carson says, “Limited credit availability is one of the primary drivers of this decline.” Total

leverage for the middle market dropped from a high of 4.4 times EBITDA (earnings before interest taxes, depreciation and amortization) in 2007 to approximately 3 times today, he notes. Middle market loan issuance in the third quarter was down 46 percent year over year and 13 percent from second quarter levels. Significantly, he notes, of this amount, 80 percent was used for general corporate purposes rather than transaction financing. And credit spreads widened through September as lenders aligned return requirements with market conditions and higher costs of capital. Understandably, Mr. Carson says, the tightening credit market negatively affected EBITDA multiples. “Not surprisingly, when these depressed multiples are applied to deteriorated earnings, buyer and seller expectations diverge,” he says. “This has caused transactions to be delayed, canceled or completed at reduced purchase

“Not surprisingly, when these depressed multiples are applied to deteriorated earnings, buyer and seller expectations diverge.” — Joseph Carson, Western Reserve Partners

prices — in some cases, involuntarily.” To be sure, there are exceptions, adds Mr. Carson. Financially sound companies with compelling stories still attract well-capitalized strategic buyers and financial sponsors. In these cases, acquisitive interest has been robust, and some sellers have received premium valuations. In particular, says Mr. Carson, foreign strategic buyers have become increasingly active in the acquisition of U.S. companies, leveraging favorable exchange rates. Mr. Petryk says though international opportunities were limited late last year and in early 2009, the volume has appreciably increased thru year end. Brown

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Slow Improvement “A lot, though, is driven by the credit market. It’s still choppy,” cautions Jim Hill, partner and executive chairman of Benesch, the Cleveland-based law firm. However, he sees deal activity improving in 2010. Mr. Hill says lender consolidation and several non-regulated lenders pulling out of cash-flow lending have constricted the market for borrowers but that will change slowly, too, in 2010. However, compared with the recent more robust times, lenders will continue to be wary about to whom and how much they lend. Mr. Petryk adds that there is increased scrutiny from sellers who are concerned about buyers’ ability to actually finance a deal given the tough credit markets. Mike McMahon, managing director of M&A Advisory at KeyBanc Capital Markets, believes the quality of assets coming to market is improving. In addition, large publicly traded or privately owned companies are beginning to think strategically again. During the last 12 to 18 months, companies were making divestitures out of necessity to shore up over-levered balance sheets, he says. Now they are beginning to return to strategic divestitures to shed non-core assets, freeing up capital to make strategic acquisitions. “They have been deep in trenches focusing on survival – now they can look at strategy,” says Mr. McMahon. “There’s noth-

ing like a recession to encourage executives to increase their focus on their long-term strategy.”

Creative Solutions Mr. McMahon says he thinks financial buyers will be more active in 2010 even if they need to use creative solutions to get the transactions done, such as putting more equity into deals or investing in non-control situations. Mr. Carson concurs. “Despite the tight credit availability, financial sponsors who are flush with capital and hungry for good deals have shown their willingness to bridge financing gaps by contributing additional equity, turning to mezzanine financing, or structuring seller notes with a clear path to liquidity.” Mr. Hill also expects continued, creative financing structures by private equity firms in order to get deals done now. “The fund managers expect that as lending gets looser in the next couple years, they will refinance and get out some of that equity,” Mr. Hill explains. “When you look at history, the most successful acquisitions in terms of return on investment are bought during recessions.”

Peaks and Valleys Mr. Petryk advises that while the market cycles through peaks and valleys, he expects the valleys and peaks to be wider through the next cycle as the market turns more slowly. Though cautious, he sees a brighter future. “I’m a lot more optimistic today than I was six months ago,” he says. Mr. Hill points out that while markets cycle and the relative advantage between strategic buyers and financial sponsors fluctuates, the generational influence on selling is a constant. Time and tide wait for no man. Mr. Petryk concurs, noting that value multiples are obviously a key driver of deal activity, but other considerations are equally important such as business risk associated with the potential for a prolonged economic downturn or no-growth environment, anticipated increases in capital gains or just being the right time for the private equity firm or family. “Are you better selling today for

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Advertisement $75 million or waiting and maybe getting $100 million at some point in the future?â&#x20AC;? says Mr. Petryk. Some owners looking to cash out now are saying no to the wait, especially given the potential for higher tax rates on capital gains and dividends. â&#x20AC;&#x153;You would really have to significantly increase EBITDA (to still be ahead) if the capital gains tax rate goes to 25 percent or 28 percent,â&#x20AC;? as compared with 15 percent now, Mr. Hill says. â&#x20AC;&#x153;This will create significantly greater deal flow in the second half of 2010.â&#x20AC;?

Investors Gain Comfort â&#x20AC;&#x153;Despite the challenges, the overall market has shown signs of improvement and should gain momentum as we enter 2010,â&#x20AC;? says Western Reserve Partnersâ&#x20AC;&#x2122; Mr.

Carson. â&#x20AC;&#x153;Credit spreads have tightened as investors have gained comfort with the economy and earnings visibility. In the private market, high-quality credits (BBB public equivalent) are now issuing at less than 6 percent.â&#x20AC;? Mr. Carson also notes that the approximately $400 billion overhang of un-invested capital suggests the potential for an M&A rebound. â&#x20AC;&#x153;However, middle-market transaction activity will likely remain soft through the first quarter of 2010, while the credit markets and economy slowly recover,â&#x20AC;? he says. â&#x20AC;&#x153;Though multiples will recover, middle-market M&A participants should expect tempered attitudes. â&#x20AC;&#x153;As with the beginning of every new Indians and Browns season, hope springs eternal,â&#x20AC;? he says. â&#x20AC;&#x153;Letâ&#x20AC;&#x2122;s just hope the market fares better than our summer and fall sports teams have.â&#x20AC;? â&#x2013;

WHAT BUYERS AND SELLERS NEED TO KNOW Ron Stepanovic, national SELLERS should adjust their head of the private equity pracexpectations, be more flexible in tice at Cleveland-based Baker general and know: Hostetler, offers this perspective â&#x20AC;&#x201D;- Market uncertainty means a for buyers and sellers. buyer cannot take a chance by BUYERS SHOULD KNOW: paying an aggressive multiple on â&#x20AC;&#x201D;- Deals will take longer to the sellerâ&#x20AC;&#x2122;s forward-looking earnconsummate than in the recent ings estimate or even historic past. earnings. â&#x20AC;&#x201D;- Both lenders and â&#x20AC;&#x201D;- Deal multiples have seller will conduct more fallen, and sellers should due diligence, so buynot expect them to iners should have their crease in the near future. own house in order and â&#x20AC;&#x201D;- Deal terms have be ready for this addiswung in favor of the tional scrutiny before buyers. approaching sellers and â&#x20AC;&#x201D;- Indemnity periods lenders. are longer. Indemnity RON â&#x20AC;&#x201D;- Deal costs as a baskets are smaller. STEPANOVIC Indemnity caps are percentage of the purchase price will in all higher and indemnity likelihood increase as a result of escrows as a percentage of the additional due diligence and purchase price are greater. higher financing costs. â&#x20AC;&#x201D;- Buyers will seek to bridge â&#x20AC;&#x201D;- Buyers cannot rely on the valuation gap by asking sellers significant level of leverage that to finance a portion of purchase was available before the new price or accept an earn-out. â&#x20AC;&#x153;normal.â&#x20AC;? Deals will require more â&#x20AC;&#x201D;- Buyer and buyerâ&#x20AC;&#x2122;s lenders equity. will conduct enhanced due diliâ&#x20AC;&#x201D;- Yields for buyers will congence and scrutiny because tract unless they squeeze addithey want assurance that the tional yield from the seller in the earnings stream is for real and form of a reduced purchase that cost-containment measures price. are in place.

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January 18-24, 2010

S-5

The coming cash trap

s sales volumes tapered and profits declined or disappeared over the past 18 months, companies responded in two ways, says Lloyd Bell, director, with the Clevelandbased accounting firm Meaden & Moore. First, they cut back on expenses. Existing inventory was used to fill new orders. In addition accounts receivable from past sales were being collected, albeit a little more slowly than before, but at a rate that exceeded new sales. This resulted in positive cash flow, but lower accounts receivable levels. So companies were funding themselves from the cash trapped in the balance sheet in the form of inventory and accounts receivable rather than profits. â&#x20AC;&#x153;You can only squeeze the cash out of the balance sheet for so long,â&#x20AC;? says Mr. Bell. As companies find their underlying markets improving in 2010, they will see varied opportunities for growth, he says. â&#x20AC;&#x153;The problem for many of these

â&#x20AC;&#x153;I think the survivors are going to be the companies that ... can adapt to change quickly.â&#x20AC;? â&#x20AC;&#x201D; Lloyd Bell, Meaden & Moore

companies will be liquidity,â&#x20AC;? Mr. Bell explains. Cash needed to fund a build-up of working capital or to invest in new fixed assets will be unavailable without current access to capital. So financing will be the primary challenge for companies whose markets are improving just as it will be for those companies whose businesses are not rebounding. â&#x20AC;&#x153;I would expect limited assistance from banks in funding growth opportunities, much less

refinancing existing obligations,â&#x20AC;? he says. â&#x20AC;&#x153;Businesses will need to continue to use as few resources as possible to conserve available cash. Ensure credit facilities are in compliance. If they are not, communicate with the bank immediately. Find out which customers are truly profitable after all costs are considered. And see if price increases or softer credit terms are possible.â&#x20AC;? How companies manage the recovery will be as critical as how well they managed the downturn. Mr. Bell says. â&#x20AC;&#x153;I think the survivors are going to be the companies that are nimble and can adapt to change quickly. Companies need to work on developing shorter cash cycles, which will reduce the amount of capital required. Business owners need to recognize that equity has a cost too, and itâ&#x20AC;&#x2122;s higher than the cost of debt. Reducing the total amount of capital required and finding the right blend between debt and equity is paramount to maximizing shareholder returns.â&#x20AC;? â&#x2013;

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Grant Thornton refers to Grant Thornton LLP, the U.S. member ďŹ rm of Grant Thornton International Ltd, an organization of independently owned and managed accounting and consulting ďŹ rms.

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S-6 January 18-24, 2010

Better sale prices require planning and preparation

“While all businesses have weaknesses, latitude for seller missteps has become razor thin.” — Brian O’Neill, Ulmer & Bern e

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redit market reversals over the past 18 months halted one of the most favorable sellers’ markets in M&A history. Methodical conservatism now rules the day, with buyers calling the shots. A seller unable to withstand rigorous scrutiny need not apply. Once a company makes the decision to explore a sale or recapitalization, one of the first steps in this process: seller-side due diligence, advises Brian M. O’Neill, chair of the business/tax department at Cleveland-based Ulmer & Berne LLP. Seller-side due diligence is the process of a seller reviewing and shoring up its own financial, business and legal records in preparation for a buyer’s discerning eye. “While all businesses have weaknesses, latitude for seller missteps has become razor thin,” Mr. O’Neill says. “One unexpected obstacle or financial statement discrepancy can ruin a deal. Advanced due diligence allows a company to identify, and if possible eliminate, these types of problems before a buyer becomes involved. This in turn allows the parties to stay focused on the quality of earnings and other value drivers of the business. The key is to leverage the value drivers.” With M&A activity considerably slowed, most companies are choosing to delay taking themselves to market, says Tom Bechtel, director of the Transaction Services Group at the Clevelandbased CPA and consulting firm, Cohen & Company. “Now is time to get the house in order to prepare for a sale down the road,” he says. Ultimately these are things you should be doing, but now you may have the time to do them.” Mr. O’Neill explains that advanced preparation will not only make the seller’s business more marketable, but will help maximize the price paid for the business. Early investigation, including the use of third parties to perform financial and legal due diligence, gives the seller both credibility and the opportunity to clean up issues that could be used against it later in the process.

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“A potential buyer may be wary of even beginning the due diligence process knowing that the seller has never had the benefit of having the financial statements and other key elements of its business independently reviewed,” Mr. O’Neill says. “Any buyer willing to look past an unprepared and disorganized seller is sure to apply a discount to offset any (real or perceived) concerns.” Mr. Bechtel, who typically advises on the buy side, says buyers look for several key factors that focus on quality of earnings, quality of assets and human

Crain’s Cleveland Business Custom Publishing

capital. As to quality of earnings, buyers will want to identify the company’s profit sector by sector. He advises prospective sellers to do everything they can to control costs and manage away from unprofitable sectors. “As much as possible, get fixed costs to be variable,” Mr. Bechtel says. For example, a company should consider staffing alternatives such as using temporary help instead of rehiring full-time employees or implementing temporary furloughs to reduce costs. “It’s about controlling costs and managing the timing of expectations,” Mr. Bechtel says. “Ultimately the buyer will ask, ‘How did this company respond to difficult market conditions?’” Quality of assets is another area scrutinized by buyer, says Mr. Bechtel. Sellers should examine their inventory and move it rather than hold on in hope of higher prices in the future. Holding less inventory may also enable the company to cut the cost of storing inventory. As for human capital, the economic downturn means a lot of quality displaced people are in the job market, says Mr. Bechtel. “That key ‘A player’ you’ve always wanted may now be available,” he says.

House in Order Get all your documents in one place, says Mr. Bechtel. Set up a data site now so the company can just update it quickly when it’s ready to sell. Information to be loaded onto the site includes top customer, vendor and other pertinent data as well as updated key corporate agreements. “When an opportunity does become available, you’ll be more ready and responsive to buyer’s needs,” Mr. Bechtel says. Joe Juster, co-chair of the corporate practice group at the Cleveland-based law firm Calfee, Halter & Griswold, agrees. “Don’t scramble to set up a data site at the last minute,” he says. At that point in the process, management should be focused on responding to requests for details from prospects. Anticipating needs, not hurrying around, highlights the management team’s credibility, which can affect the price. “When you go in and everything is in disarray, it’s a big negative for the buyer,” Mr. Bechtel says. They ask, ‘What else don’t we know?’” Mr. Juster advises that owners should operate as if their business is for sale, seeking to consistently increase sales and earnings. “If you can show consistent sales and earnings growth, you’ll get a higher valuation,” he says. A major advantage for private companies over publicly traded companies is that they don’t have to respond to the quarter-to-

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Advertisement quarter volatility of the public markets. They can take a longerterm view, sometimes sacrificing margin to capture market share or making significant investments in the business. Companies should, however, be careful to document those investments as one-time events so EBITDA can be positively adjusted at sales time. Mr. Juster offers this example. A company purchased capital equipment in 2008 to improve its operations or enter a new market. The investment impacted its earnings for the year. However, proper documentation persuaded the buyer that some of the expense can be added back to the 2008 earnings on which the multiple is paid to determine a fair sales price.

ownership issues such as succession planning and buy-sell agreements. Once a sale opportunity arises, those issues can prevent a company’s owners from maximizing their investment, Mr. Bechtel says.

Uncle Sam’s Share

When it comes to maximizing the selling price of a business, “It’s not necessarily what you get, but what you keep,” Mr. Juster says. He, of course, is referring to Uncle Sam and the tax implications of the sale. After the sale is completed is not the time to determine how to minimize the tax impact. The type of entity – C corp., S corp. or LLC – and how a deal is structured – asset sales, stock sales, mergers – affects the net proceeds. Check That Agreement In addition, whether you receive “Business is about relationall-cash at closing, take a seller ships,” says Mr. Juster. “In every note or have an earn-out will relationship there is both opporhave an impact on present value. tunity and risk.” Owners should “There are tremendous oppordo a check-up involving all the tunities before the sale to do company’s key relationships. Do creative planning to avoid estate employees have non-compete taxes,” Mr. Juster says. Significant agreements? Do value can be saved key customers and transferred to and suppliers children, grandhave written a grantor A major advantage children, agreements that trust or a charitaspell out what ble foundation, for private happens in a thus reducing the dispute? Do companies ... is that estate tax impact. majority owners “You can do good they don’t have to and do well with have agreements with minority careful foresight.” respond to the ... shareholders to But advance take them along planning is volatility of the in the sale? critical. It allows As Cohen & company owners public markets. Company’s Mr. to bring in Bechtel says, appraisers to set a “Address your value for family company’s skeletons before a and charitable gifting purposes prospective buyer does.” These appraisals need to be done “It’s all about getting the well before a sale occurs. house in order and eliminating “Once you have a letter of obstacles” says Ulmer & Berne’s intent, it’s harder for an appraiser Mr. O’Neill. to come in and say it’s not Remember too, it’s not just worth that,” Mr. Juster says. the property, plant and equipDespite the considerable effort ment numbers that matter. required, the entire seller-side due “Now balance sheets are far diligence process is worth it, more nimble,” Mr. Juster says. Ulmer’s Mr. O’Neill says. “A well“It’s intellectual property that’s prepared seller can expect that the critically important to the buyer human capital and monetary in maximizing value.” costs incurred in this process will Privately owned companies be offset by the advantages it will also should pay attention to have in today’s market.” ■

January 18-24, 2010

HAVE THE RIGHT TEAM ON YOUR SIDE Brian O’Neill, partner at Ulmer & Berne LLP, says the optimal sellerside due diligence should include: ACCOUNTING TEAM: Accountants should review and verify the company’s financial information and prepare pro-forma interim and trailing 12month financial statements. Establishing the quality of financial information is crucial to maximizing the value of the company. The accounting team should analyze possible adjustments to EBITDA as a means to maximize the value of the company. LEGAL TEAM: Counsel should review the company’s records and contracts and clean up outstanding issues. The legal team should work with the seller to develop a strategy to deal with typical concerns of buyers such as third-party assignments and consents, regulatory and employee matters and environmental and tax issues.

INVESTMENT BANKER: For larger more sophisticated transactions, an investment banker is an integral part of the deal team and will take the lead to provide estimates of value, develop a marketing strategy, and eventually drive offers from prospective buyers. DEAL STRUCTURE AND TAX PLANNING: Preliminary deal structure and tax issues should be addressed by the legal, accounting and investment banking teams. As part of this process, the accounting and legal teams should also provide advice on possible estate planning strategies to create the most efficient tax structure for wealth transfer. DATA ROOM: Organizing due diligence information, including legal documents, financial statements and business reports in a secure online data room can speed up the due diligence process and lower both sides’ transaction costs.

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S-8 January 18-24, 2010

Companies find Northeast Ohio a good place to grow

few years ago, Bob Fritz considered selling his family business, Avtron Manufacturing Inc., a 56year old technology company. Independence-based Avtron designs and manufactures electrical control and test equipment for aerospace, industrial automation and other applications. As he was exploring his options, he found and came to rely on the Cleveland-based investment banking firm Western Reserve Partners to help him in the sales process. “You don’t just wing it — doing it right takes time,” Mr. Fritz says. He was amazed at the dealmaking resources to be found in Cleveland. “I’ve lived here all my life and didn’t realize the dealmaking infrastructure available,” he says. Ultimately, Mr. Fritz sold the company to the Morgenthaler, one of Cleveland’s long-standing private equity firms. He says he liked that the firm understood manufacturing and wasn’t just

Independence and Valley View. It does so with a global view. About 30 percent of its customer base is outside the United States. The company shipped to 78 countries in 2009. Avtron also has experienced sales records for five or six years through 2008 and expects to post an all-time profit record for 2009 even though sales dipped. “We’ve grown rapidly. As you grow, your culture and outlook change. Morgenthaler has helped us in that process,” Mr. Fritz says.

“New York financial guys.” Mr. Fritz’s experience illustrates one reason why Northeast Ohio is a good place for owners of small and mid-sized companies to grow their business and ultimately realize value from their investment. The region offers access to capital, professional services and a skilled workforce, along with a central location and the technical and scientific resources of leading colleges and universities.

Deal Structure Works Mr. Fritz was pleased to be able to structure the deal so management received stock options and he would stay on as CEO. “Before private equity that wasn’t possible,” he says. Weekly phone meetings and quarterly board meetings have become part of the routine, and a chief financial officer, Rich Garcia, was brought in to provide more strategic overview of the financial side of operations.

Contact Steve Kimpel at 614-246-2435 www.stonehengepartners.com

Concept Fills a Void

Avtron Manufacturing President Bob Fritz was amazed at the deal-making resources to be found in Cleveland when he decided a couple years ago to look for a buyer for the company.

“Properly handled and managed, private equity is a good thing for a company,” Mr. Fritz says. “We didn’t lose a single employee due to the acquisition.” Employees are a critical component at Avtron, which differentiates itself with the long-term support it provides to its customers. That wasn’t always the case. When Mr. Fritz joined the company in 1974, about 20 years after his family opened a small plant in Cleveland, turnover was higher. The workforce caliber has improved in part because employees are compensated well and receive excellent benefits,

your M&A advisor. your insurance advocate.

including profit sharing, what Mr. Fritz has been told is a “Cadillac” health plan.

Top Talent Required Avtron employs more than 400 people, many of whom are engineers and other professionals. Top talent is essential because Avtron produces highly engineered products that cannot be produced by unskilled people. “We now hire impact players,” Mr. Fritz says, noting one hire brought in $2 million in business and now has customers request him. “Avtron is able to grow year in, year out with low turnover, and we can find quality people when new hires are needed,” Mr. Fritz says. Even that success, though, doesn’t mean the employees would be willing to pick up and move if Avtron did. “If I walk in and say we’re going to move to Georgia, they probably would not go,” Mr. Fritz says, noting the company isn’t asking them to make that decision. Avtron will continue to operate from its five plants in

When Richfield-based Construction Labor Contractors had its first 40 people on the job, they popped the champagne cork. If they did that today, they would be popping corks more than 20 times a day. “On an average day we have 850 full-time workers on the job,” says Vice President Rob Reese. Construction Labor Contractors is another Northeast Ohio success story. The company provides skilled labor to construction contractors and industrial project managers. By leasing craftsmen, contractors can control their costs while delivering high quality construction work. Founder and CEO Tim Cherotti says the company was created to fill a void. Although non-union contractors comprise about 85 percent of the labor pool, they did not have a “union” hall where the jobs were distributed. “The non-union sector needed a better way to provide skilled labor to ‘merit’ construction contractors,” he says. Operating from 15 offices in nine states, Construction Labor built its own corporate headquarters in Richfield four years ago. In 2008, the company posted its most successful year with $40 million in revenue. That’s a long way from 1997 when Mr. Cherotti started the company with just $100 and an

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sagercompany.com

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The region offers access to capital, professional services and a skilled workforce, along with a central location and the technical and scientific resources of leading colleges and universities.

ACG CLEVELAND EVENTS All events at The Union Club unless otherwise specified

FEBRUARY 9

APRIL 29

SEPTEMBER 8-9

Dinner Sandy Cutler, CEO, Eaton Corp., (Joint meeting with FEI)

Afternoon Workshop Topic to be announced

ACG Great Lakes Capital Connection Renaissance Hotel

MAY 20

MARCH 17 office in his basement. He took the leap following four to five years of experience working for staffing and headhunting firms. “I decided I could do it on my own,” he says. I felt I understood the industry, had the experience, a bit of luck and the good hires to be successful.” Mr. Reese joined six months after his former fraternity brother at Kent State University started the company. “It worked out well,” Mr. Cherotti says. “Long tenure is part of our corporate philosophy. We treat employees as if they’re family.”

Longevity Rewarded The results speak for themselves. Over half the corporate staff has worked at the company at least five years. Mr. Reese says the Ohio office staff serves as an example for the entire company. The Akron manager has worked there 11 ½ years. The Columbus manager has been there nine years, and the Cincinnati manager has been there seven. Longevity is rewarded by Construction Labor, which pays 100 percent of health care costs after an employee has been with the company five years. Mr. Reese says Construction Labor is not really a temp agency because full-time employees have benefits, such as paid holidays and vacations, 401(k) participation. Employees would not find those opportunities working for a traditional temp agency or a small construction firm. A construction company with 20 employees can’t offer the same benefits package that a larger company like Construction Labor can. In 2008, Construction Labor sent about 2,000 W-2 forms. In addition, Construction Labor’s 5,000-plus clients mean employees won’t experience the layoffs they could working for a single employer who hits a down cycle and doesn’t have enough work. Both Mr. Reese and Mr. Cherotti say that the secret behind Construction Labor’s success is how it treats its employees and its clients. “A labor company is all about relationships,” they say. Without relationships, the company would be a commodity and pricing would be client’s only consideration. “The reason we’re so successful is because we create a pleasant work environment,” Mr. Cherotti says. “We put employees and clients first — it really promotes longevity and only adds to stability. It’s rare we lose an employee we didn’t want to lose.” Although 2009 brought disappointments due to the economy, Construction Labor already is

seeing an uptick for 2010. In fact, the recession has helped their clients recognize the full value the company offers. In a construction boom people turned to us when they needed more hands,” Mr. Reese says. “Now they realize Construction Labor Contractors can help them save money too.” ■

January 18-24, 2010

Breakfast Speaker to be announced

APRIL 22 Breakfast Tom Embrescia Second Generation Ltd. — The Embrescia Companies

Breakfast Chris Connor CEO, Sherwin-Williams

JUNE 15 Social and Networking Reception The Shoreby Club

OCTOBER 4 Annual Golf Outing Firestone Country Club

JANUARY 2011 Deal Maker Awards Dinner Marriott at Key Center

For more information, contact ACG Cleveland at (216) 696-8484 or www.acgcleveland.org

ACG Cleveland congratulates the winners of the 14th Annual Deal Maker Awards 2010 Award Recipients Cliffs Natural Resources Inc. Dealer Tire, LLC TransDigm Group Inc.

216-696-8484 • 216-696-2582 [fax] 1120 Chester Avenue, #470 • Cleveland OH 44114 www.acg.org/cleveland • admin@acgcleveland.org

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S-10 January 18-24, 2010

Turbulent times bring management challenges

uccessful businesses are founded and funded on the premise of growth and an optimistic view of the future. But a deep and enduring recession like this one turns those accepted notions on their head. Here are some views from those pitching in on the front lines.

DENNIS KEBRDLE PARTNER, CHIKOL EQUITIES INC., GRANGER, IND. “Our traditional practice of

‘valuate, turn around and help implement long-term changes’ has become one of ‘stabilize if possible and move them out.’ “Our greatest fear today is that there is not enough time being spent preserving enterprise value and that equity is looking at it all through 2008 glasses. Those days are over. “With that as a backdrop, we continue to believe that buyers can take advantage of the current situation to find bargains and build value. You can find a

What do You Value?

tuck-in company with balance sheet issues but good operations that can be added to an existing platform at a three to four multiple at the bottom of the cycle or for senior-secured debt values. The key to this opportunity is the relationship with secured lenders and the supporting cast of attorneys and consultants. “By working together to limit or reduce the lender’s loss or exposure, equity players can become welcome guests again in bank offices.”

Audit Business Solutions Corporate Finance Employee Beneﬁts Audits Investigative Accounting Management Development Tax Wealth Center

Creating Value.

To reach our Cleveland Ofﬁce call 216.241.3272 or visit www.meadenmoore.com

DAN D’AGOSTINO

invested personal sweat and equity into a deal. As deals drag PRINCIPAL/GENERAL out and fears rise that things may MANAGER, DEFINITY PARTNERS, go south, these key players are ever-more willing to leave invested CLEVELAND OFFICE time and money for less risky, lower return deals. “Despite the tremen“Now, some private dous pressures businesses equity groups are scramare under today, we still bling to retain human see too many leaders capital. The pot squandering precious sweeteners that persuade time and accepting a slugmanagement to stay are gish pace of progress in not always monetary. On their organization. They the flip side, we’ve been are waiting for employees DAN capturing fleeing talent D’AGOSTINO to ‘get it’ and rise to the and placing them occasion, or putting off with groups that are acting in the hopes that compatible.” things will improve on their own. “The reality is that JEFF SCHWAB moving quickly will M&A PRACTICE uncover the real problems in the organization. LEADER, OSWALD Problems in decisionCOMPANIES, making, sense of ownerMICHAEL ship, teamwork, accountCLEVELAND GERBASI ability and motivation will surface when the “Even though the organization is asked to economy is bad, the risks move quickly. themselves haven’t “When people invest changed. Exposure to risk, the time to make though, may actually be improvements and the greater because people results are not seen are looking for any deep quickly, people will be pocket. Some people go hesitant to prioritize through an acquisition JEFF improvements in the thinking they don’t need SCHWAB future. However, when a to worry about insurance change is made and the due diligence. Meanwhile, benefits are realized within days, claimants may be thinking about managers and employees will how to make money by filing claims. readjust priorities.” “Potential buyers should be aware of how targeted companies are operating their insurance MICHAEL GERBASI programs; professional due diliMANAGING PARTNER, SAGER gence would detail the choice and impact those programs. For COMPANY, CLEVELAND example, a cash-flow-basis insurance program may be a liability “For 25 years, my company has for the buyer if not explored served private-equity groups in thoroughly. In a cash-flow plan, recruiting top executives for manthe company pays a certain agement teams. Lucrative returns percentage of premiums and lured risk-inclined entrepreneurs prospective claims at the beginwho remained dedicated throughning of the year. If losses aren’t out a deal—even the tumultuous as great as expenses, the company ones. That was then. gets a refund. However, it’s a “Traditionally, private equity potential liability that the groups literally banked on the company will be paying more as loyalty of their key partners who

12 Deals in the Last12 Months When the M&A and Financing Markets get tough, the tough work harder.

Over 20 years of trusted corporate financial advisory services. s Mergers & Acquisitions s Debt & Equity Placements s Financial Restructurings s Valuations & Fairness Opinions

Crain’s Cleveland Business Custom Publishing staff Ad director: Mike Malley (mmalley@crain.com) Page designers: Kathy Carr (kcarr@crain.com) Joel Hammond (jmhammond@crain.com) Contributing writer: Ann Gynn, Wise Group

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January 18-24, 2010

S-11

ACG CLEVELAND 2009-2010 BOARD OF DIRECTORS PRESIDENT

PRESIDENT ELECT Theodore Wagner Libman, Goldstine, Kopperman & Wolf

VICE PRESIDENT — DEAL MAKER AWARDS

Timothy G. Healy Linsalata Capital Partners James M. Hill Benesch, Friedlander, Coplan & Aronoff James P. Marra Blue Point Capital Partners

EXECUTIVE VICE PRESIDENTS

Murad A. Beg Linsalata Capital Partners

Al Melchiorre MelCap Partners

VICE PRESIDENT — MEMBERSHIP

VICE PRESIDENT — TECHNOLOGY

Daniel P. Filippi R. R. Donnelley & Sons Martin S. Gates Calfee, Halter & Griswold Henry E. Seibert Porter, Wright, Morris & Arthur Peter J. Shipley Resources Global Professionals

David Hadley David Hadley Corporation

Patrick Gallagher Edward Howard

claims accrue in the year. “This is especially true today. We’re seeing employee making greater use of their health plans to maximize its value. The effect is annual insurance rate increases rising above 10 percent and greater use of plans. “As for property and casualty insurance costs, we see those as flat or even reduced in the coming year. However, financial coverages and directors & officers insurance is now typically more expensive thanks to the recent financial failures and scandals like Bernie Madoff, Stanford Investments, etc. “Don’t forget the role of surety bonds, which are especially necessary in a distressed environment. When buyers load up with debt, they must be mindful that they still want to be bondable and that is driven by the company’s financials.” ■

VICE PRESIDENTS — GREAT LAKES CAPITAL CONNECTION

Eric M. Kuhen Marsh Scott Seelbach Primus Capital Funds Karen Tuleta Morgenthaler

Randy Markey Capital Acceleration Partners James P. Marra Blue Point Capital Partners Al Melchiorre MelCap Partners

TREASURER Joseph F. Maslowski Roetzel & Andress

VICE PRESIDENT — PROGRAMS Sean McCauley PNC Business Credit

VICE PRESIDENTS — GOLF EVENT Rudy Bentlage Chase Business Credit Terry R. Lardakis Millisor & Nobil

VICE PRESIDENTS — GOVERNANCE Jeffrey Leonard First Communications Corp. ACG Cup Douglas K. Winget First Merit

VICE PRESIDENT — OUTREACH Moses R. Jhirad PNC Bank

VICE PRESIDENTS — SPECIAL PROGRAMS

VICE PRESIDENT — ECONOMIC DEVELOPMENT

Daniel G. Berick Squire, Sanders & Dempsey

Donald W. Majcher Ohio Aerospace Institute

VICE PRESIDENT — NOMINATIONS Mathew J. Hanson Emprise Partners

ASSISTANT TREASURER Scott R. Smiley Consultant

SECRETARY M. Joan McCarthy MJM Services

DIRECTORS AT LARGE Guy C. Fabe PricewaterhouseCoopers Tom Freeman Grant Thornton Wendy S. Neal Global M & A

Ulmer & Berne LLP Salutes the Association for Corporate Growth 2010 Deal Maker Award Winners. Brian M. O’Neill 216.583.7004 boneill@ulmer.com Peter A. Rome 216.583.7124 prome@ulmer.com

We congratulate our client Cliffs Natural Resources Inc. and all of the other ACG Award Winners on their achievement.

www.ulmer.com

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S-12 January 18-24, 2010

ACG Cleveland honors top deal makers

he capstone of the ACG Cleveland program season is the annual Deal Maker Awards dinner. Now in its 14th year, the event recognizes Northeast Ohio’s engines of corporate growth and deal-making. The 2010 awards program will honor three companies on Thursday night, January 21:

TransDigm This Cleveland-based global designer, producer and supplier of aircraft components has grown sales from $48 million at its for-

mation in 1993 to $762 million today. During that time TransDigm has acquired 27 businesses, including six in the last two years. In October 2009, TransDigm (NYSE: TDG) completed a successful $425 million notes offering as part of a capital restructuring that also included a onetime special cash dividend of $7.65 on each outstanding share of common stock. TransDigm was recognized recently by Fortune and Forbes magazines. Fortune ranked TransDigm No. 51 on its 2009 list of the 100 Fastest Growing Public Companies in

America, while Forbes ranked it No. 25 on its 2009 list of the Best Mid Cap Stocks in America.

Cliffs Natural Resources Cliffs Natural Resources (NYSE: CLF, Paris: CLF) is an international mining and natural resources company whose Cleveland roots go back to 1847. Following a series of strategic transactions beginning in 2002, Cliffs emerged as the largest producer of iron ore pellets in North America, a major

Congratulations to ACG Deal Maker Award winners and our clients

TransDigm Group Inc. Dealer Tire

supplier of iron ore out of Australia, and a significant producer of metallurgical coal. The company has continued to actively execute a strategy designed to achieve scale in the mining industry, focusing on serving the world’s largest and fastest-growing steel markets. Over the last two years this has included more than $1 billion in deals and an attempted $10 million merger with Alpha Natural Resources. Most recently, Cliffs announced a successful $240 million contested bid to acquire Canadian chromite explorer Freewest Resources Canada Inc. and the buyout of its three joint venture partners’ 73.2% interests in a Canadian iron ore mining operation.

Dealer Tire Dealer Tire stands as one of the most impressive corporate growth stories in Northeast Ohio over the past two decades. Formed in the early 1990s to address the tire needs of automotive dealer, Dealer Tire’s foundation rests on more than 80 years of success in tire retailing as Mueller Tire and Brake. In 2000, the Mueller family sold the retail stores to

Our attorneys work with deal makers to design and implement transaction structures, tax efficiencies, risk management measures and negotiating strategies. We bring together tax, antitrust, environmental, international, real estate, employee benefits, employment, executive compensation, intellectual property, technology and litigation lawyers to provide the necessary breadth and depth of representation.

Nominate your favorite Deal Maker Nominations for the 2011 ACG Cleveland Deal Maker Awards may be submitted to ACG at any time during the year. Each November, a selection committee reviews the nominations and selects the award winners. For a nomination form, contact ACG Cleveland at (216)-696-8484 or admin@acgcleveland.org.

focus on Dealer Tire. From 2004 to 2008, Dealer Tire grew 229 percent. Today it is the number one supplier of tires and wheels to U.S. automotive dealers and has programs in place with Mercedes-Benz, BMW, Lexus, Toyota, Kia, Chrysler and numerous other automakers. In 2009 Dealer Tire entered into a minority recapitalization of the company with the Boston-based private equity firm TA Associates. The transaction provided liquidity to previous institutional owners and management investors along with an expanded debt facility for future growth and acquisitions. ■

a division of

CHICAGO CINCINNATI CLEVELAND COLUMBUS COSTA MESA DENVER HOUSTON LOS ANGELES NEW YORK ORLANDO WASHINGTON, DC

has been acquired by

The undersigned acted as exclusive financial advisor to Cranel, Inc. in this transaction

For more information, please call (216) 589-0900 or visit www.wesrespartners.com

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WWW.CRAINSCLEVELAND.COM

CRAINâ&#x20AC;&#x2122;S CLEVELAND BUSINESS

LARGEST ARCHITECTURAL FIRMS RANKED BY LOCAL REGISTERED ARCHITECTS

Name of firm Address Rank Phone/Web site

Local registered architects 12-1-2009 12-1-2008

Total staff

Local office revenue (millions) 2009

2008

Major current projects

Top local executive Title

Westlake Reed Leskosky 925 Euclid Ave., Suite 1900, Cleveland 44115 (216) 522-1350/www.wrldesign.com

150

$24.0

$25.7

PlayhouseSquare Theatres; Cleveland Clinic Twinsburg Medical Campus and Hillcrest Hospital expansion; Oberlin College, Litoff Building; Parker Hannifin, European Headquarters, Switzerland

Paul E. Westlake Jr. managing principal

Herschman Architects Inc. 25001 Emery Road, Suite 400, Cleveland 44128 (216) 223-3200/www.herschmanarchitects.com

$7.0

$13.0

Retail projects: HH Gregg, Dick's Sporting Goods, Gold's Gym, Best Buy, Fred Meyer Jewelers. Shopping centers: Odessa, Texas, Hagerstown, Md., Solon. Shoreway renovation Cleveland; Vieng's Restaurant Westlake

Mike Crislip president

Middough Inc. 1901 E. 13th St., Cleveland 44114 (216) 367-6000/www.middough.com

725

$95.0

$110.0

The Ohio State University, central power plant water treatment; Wal-Mart Stores Inc., multi-level store, Grundy, Va.; V & M Star, administrative offices, Girard/ Youngstown; Bridgestone U.S.A., Smyrna, Tenn.

Charles L. Krzysiak vice president

ka 1468 W. Ninth St., Suite 600, Cleveland 44113 (216) 781-9144/www.kainc.com

$18.8

Westfield San Francisco Centre, Calif.; Icon in the Gulch, Tenn.; The Village at Gulfstream Park, Fla.; Annapolis Towne Centre, Parole, Md.; Avery Dennison Northeast Ohio facility

James B. Heller president

Bostwick Design Partnership 2729 Prospect Ave., Cleveland 44115 (216) 621-7900/www.bostwickdesign.com

$6.1

$7.3

Marymount Hospital, surgery expansion; Cleveland Clinic Las Vegas, development plan; The Ohio State University College of Medicine; Cleveland Public Library, Rice Branch

Robert L. Bostwick president, director of design

Braun & Steidl Architects Inc. 1041 W. Market St., Akron 44313 (330) 864-7755/www.bsa-net.com

$5.0

$8.4

Cleveland State University, new student center; Cuyahoga Community College, Career Center; Faith Family Church; Cuyahoga Valley Christian Academy; St. Columba Cathedral, restoration

Chas Schreckenberger president

Dorsky Hodgson Parrish Yue 23240 Chagrin Blvd., Suite 300, Cleveland 44122 (216) 464-8600/www.dorskyhodgson.com

Hasenstab Architects Inc. 190 N. Union St., Suite 400, Akron 44304 (330) 434-4464/www.hainc.cc

$5.3

$6.7

Richard L. Bowen + Associates Inc. 13000 Shaker Blvd., Cleveland 44120 (216) 491-9300/www.rlba.com

URS Corp.(1) 1375 Euclid Ave., Suite 600, Cleveland 44115 (216) 622-2400/www.urscorp.com

711

$105.4

$39.0

Bialosky + Partners Architects LLC 2775 S. Moreland Blvd., Cleveland 44120 (216) 752-8750/www.bialosky.com

Domokur Architects 4651 Medina Road, Akron 44321 (330) 666-7878/www.domokur.com

$3.3

$2.2

Perspectus Architecture 13212 Shaker Square, Suite 204, Cleveland 44120 (216) 752-1800/www.perspectusarch.com

TDA 4135 Erie St., Willoughby 44094 (440) 269-2266/www.thendesign.com

$4.4

Burt Hill 3700 Park East Drive, Suite 200, Beachwood 44122 (216) 454-2150/www.burthill.com

GPD Group 520 S. Main St., Suite 2531, Akron 44311 (800) 955-4731/www.gpdgroup.com

Vocon 3142 Prospect Ave., Cleveland 44115 (216) 588-0800/www.vocon.com

Robert P. Madison International Inc. 2930 Euclid Ave., Cleveland 44115 (216) 861-8195/www.rpmadison.com

The Promenade at Coconut Creek, mixed-use, retail, office, Coconut Creek, Fla.; William Dorsky, chairman The Plaza at Southpark, Strongsville; The Weils Rehab Pavilion, Bainbridge; Cornelia C. Hodgson, Overtown Transit Village, office buildings, garage, Miami, Fla. president ODMH - Northcoast Behavioral Hospital; The University of Akron, National Polymer Innovation Center; Akron Public Schools, National Inventor's Hall of Fame School; Akron Zoo, conservation carousel

Mark A. Ohlinger president

Mayfield Village, Police Station; CMHA, Outhwaite Building; RTA, Clifton Boulevard enhancement; Cuyahoga County College, Brunswick campus

Richard L. Bowen president

Cuyahoga Community College, Health Career and Technology Building, Highland Hills; Digestive Disease Consultants, medical building, Brunswick; ClevelandCuyahoga County Port Authority, marina/park relocation study

Gary R. Hribar, vice president, URS division; William Colt, sr. vice president

GCRTA, Brookpark Station; Mandel JCC; Tri-C, downtown culinary; Schofield Building; EnVision Apartments; One of a Kind Pet Rescue

Jack A. Bialosky Jr. senior principal

JM Smucker Co.; Kent State University; Bowling Green State University; Cleveland State University; FirstMerit

Michael Domokur owner

The Ohio State University Medical Center; Veterans Affairs Medical Center; The James Cancer Hospital & Solove Research Institute; Canterbury Golf Club; Cuyahoga Community College; John Carroll University

Lawrence Fischer William Ayars principals

$4.2

Bailey Building, restoration; Dalton Local School District, GaREAT Sports Complex phase 3; Garfield Heights City School District; Lake County MR/DD, renovations; Mayfield City School District; Perry Local School District

Robert A. Fiala managing partner

$5.1

$4.5

NASA Glenn Research Ctr., centralized office bldg.; Cuyahoga Community College, Westshore Campus phase 1; Nazareth College, lab building; BaldwinWallace College, Thomas Family Ctr. for Science and Innovation

Michael Reagan Michael R. Carter principals

$33.0

Dave Granger president

$14.0

$15.6

KeyBank, retail branches; Hospice House West; KeyBank, Cleveland Services Center; Cuyahoga County Juvenile Justice Center; Huntington Bank; Morgan Stanley; Willis; Cuyahoga Community College; Jones Day

Deborah V. Donley principal

$2.5

$3.0

Center for Creative Arts; Willson School; Anton Grdina; Mt. Zion Congregational Church; Kappa II Housing (HUD)

Robert P. Madison chairman, CEO

ADA Architects Inc. 17710 Detroit Ave., Lakewood 44107 (216) 521-5134/www.adaarchitects.cc

Robert Acciarri president

CBLH Design Inc. 7850 Freeway Circle, Cleveland 44130 (440) 243-2000/www.cblhdesign.com

$3.1

Mercy Medical Center; University of Akron; Ritter Library; Ohio State University Medical Center; Bowling Green State University; Cuyahoga Falls Library; Veterans Affairs Medical Center; Cleveland State University

Marc B. Bittinger, Timothy S. Hunsicker, Michael D. Liezert, principals

HWH Architects Engineers Planners Inc. 1300 E. Ninth St., Suite 900, Cleveland 44114 (216) 875-4000/www.hwhaep.com

General Electric Nela Park; Goodyear, Lawton Okla.; Cleveland MetroParks, headquarters; City of Cleveland, various projects; General Electric Energy, Greenville, S.C.

Peter P. Jancar chairman

The Austin Co. 6095 Parkland Blvd., Cleveland 44124 (440) 544-2600/www.theaustin.com

$44.6

$39.0

Hills Pet Nutrition, Emporia Kan.; Mitsubsihi Power, Savannah, Ga.; FedEx Ground, Kansas City, Mo.; Lance, Ashland; Bimbo Bakeries, Horsham, Pa.; Pfizer, Portage, Mich.

Patrick B. Flanagan president

Burgess & Niple 1300 E. Ninth St., Suite 612, Cleveland 44114 (216) 241- 9600/www.burgessniple.com

$10.3

General Instructional Building, Ft. Lewis, Washington; Hubbard Schools, K-12 Charles J. Zibbel campus, Hubbard, Ohio; Company Operations Facilities, Ft. Campbell, Kentucky; director, Child Development Center, Ft. Bliss, Texas Great Lakes region

Harris/Day Architecture 3722 Whipple Road, NW, Canton 44718 (330) 493-3722/www.harrisday.com

$2.5

$2.2

Wayne County Schools Career Center; Bridgestone Technical Center

R. Jeffrey Day president

Herman Gibans Fodor Inc.-Architects 1939 W. 25th St., Suite 300, Cleveland 44113 (216) 696-3460/www.hgfarchitects.com

$2.3

$2.5

Emerald Alliance V, 70-unit supportive housing building, Cleveland; Kendal at Oberlin, expansion and renovation; Squire Sanders, interior renovation; Mount Saint Joseph Home, 100-bed skilled nursing home, Euclid

James G. Herman president

Makovich Pusti Architects Inc. 111 Front St., Berea 44017 (440) 891-8910/www.mparc.com

Veterans Administration, surgery, surgical intensive care; Fairview Hospital, pediatric behaviorial health; Richmond Medical Center, behaviorial health, critical care, stepdown

Ronald J. Makovich president

Richard Fleischman + Partners Architects Inc. 1020 Huron Road, Suite 101, Cleveland 44115 (216) 771-0090/www.studiorfa.com

$1.7

$2.2

A.J. Celebrezze Federal Building; J.W. Peck Federal Building; MYCAP MahoningYoungstown Community Action Partnership; University Circle Methodist Church (Oil Can)

Richard Fleischman president

Sandvick Architects Inc. 1265 W. Sixth St., Cleveland 44113 (216) 621-8055/www.sandvickarchitects.com

$1.8

$3.2

Cleveland Institute of Art; Gospel Press

Jonathan Sandvick president

Array Healthcare Facilities Solutions 3201 Enterprise Parkway, Suite 495, Beachwood 44122 (216) 292-7950/www.arrayhfs.com

$2.9

$3.0

Community Health Partners, master plan and implementation, Lorain; UH Case Medical Center, parking facility, Cleveland; UH Rainbow Babies & Children's Hospital, master plan, Cleveland

Christopher Trotta vice president, managing principal

City Architecture Inc. 3634 Euclid Ave., Suite 100, Cleveland 44115 (216) 881-2444/www.cityarch.com

$4.1

$4.4

Collinwood, Recreation Center; Mayfield, RTA Station; University of Akron, Administrative Services Center; Garden Valley Apartments; Lakefront West

Paul J. Volpe president

Holzheimer Bolek + Meehan Architects 7227 Chagrin Road, Chagrin Falls 44023 (440) 247-9800/www.hbmarchitects.com

Amherst Pubic Library; Roanoke County Library, Va.; Wichita Central Library, Kan.; Newton Public Library, Kan.; Warren Civic Center & Library, Mich.; Pickaway County Library

Dan Meehan, David Holzheimer, Peter Bolek, partners

TC Architects Inc. 755 White Pond Drive, Suite 401, Akron 44320 (330) 867-1093/www.tcarchitects.com

NEOUCOM, campus research and academic expansion; Akron Metropolitan Housing Authority, Edgewood Homes Hope VI, elderly housing development corporation, numerous projects

Robert C. Chordar president

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) URS acquired Washington Group in 2007. The 2009 local office revenue includes the acquistion, the 2008 revenue is for URS only.

RESEARCHED BY Deborah W. Hillyer

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CRAIN’S CLEVELAND BUSINESS

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JANUARY 18-24, 2010

Mobile: Some clients wary of investing in technology continued from PAGE 1

“There’s a real shakeup in the industry,” said Mike Strauss, vice president of interactive at Marcus Thomas in Warrensville Heights. “I think in general, 2010 is going to be considered the year of mobile marketing.” According to online research firm eMarketer, U.S. mobile advertising spending — comprising display ads, search and messagebased advertising — will grow 85% to $593 million this year from $320 million in 2008, and it’s projected to hit $1.6 billion by 2013. Advertising falls under the umbrella of marketing, along with anything else from promotions and contests to interactive games. Likewise, the number of U.S. web visitors using a mobile device climbed 34% over a oneyear period, to 56.9 million visitors in July 2009 from 42.5 million in July 2008, according to The Nielsen Co. And those numbers are translating into more business for marketers whose clients are eager to ride the mobile wave. As an example, thunder::tech is working with the Winking Lizard restaurant chain, which is based in Bedford Heights,

to develop an iPhone app that allows users to rate and review the 200 beers Winking Lizard sells. It’s the restaurant’s first entry into mobile marketing. “If you spend a lot of time at our 14 locations, you’ll see people playing with their cell phones a lot,” said Jon Gross, Winking Lizard’s director of development. “It’s a way for us to interact with our customers.” Mr. Gross said the Winking Lizard has not advertised through traditional media, but sees the potential in expanding its mobile marketing beyond the app, which is expected to be rolled out in March. Cleveland-based DigiKnow also expects an influx of business, not only via smart phone apps but also from mobile web sites, text messaging and mobile advertisements, said Scott Chapin, director of consulting services. In anticipation of demand for its expertise, the marketing firm launched this month a new page on its web site for information on its mobile services. Similarly, thunder::tech this month is launching a mobile version of its desktop web site.

Narrowing the target Ray Davies, managing director of the Cleveland office of public relations and marketing agency j. simms, said mobile marketing is a valuable investment because it is measurable and “pennies on the dollar” compared with marketing through more traditional media. The San Diego-based j. simms works with clients to develop textmessaging campaigns, which are appealing to marketers because the recipients actually must sign up to receive the message. Mr. Davies estimates the text read-through rates at about 96%, while only about 25% to 30% of their clients read through e-mail. “Marketing has shifted from mass media to relevance media,” meaning the message is more targeted, Mr. Davies said. In December, for example, j. simms helped Painesville-based RDP Motorsport USA, which restores vehicles and upgrades their performance, launch a text-messaging campaign that allows RDP to send to its customers messages that include discounts, videos or special event invitations. Clients

signed up for the service through RDP’s Facebook, Twitter and LinkedIn pages. “We had 300 to 400 people register to receive our messages,” said RDP founder Steven Leerentveld. “We used social media to put out our message, but we didn’t really know who or how many people read it. Now we know exactly who is receiving our texts.”

Hurdles ahead Mobile marketing does not come without its challenges, however. For one, it can be difficult to retrofit an app to each smart phone — whether it’s the Android, iPhone or Blackberry, said DigiKnow’s Mr. Chapin. “I don’t believe marketing will sustain all these different smart phones,” he said. “Today, I would still recommend to clients on building an app for the iPhone. Six months from now, that answer may be different.” Agencies also say it can be difficult to convince marketers who are judicious about spending money to invest in a technology that is undergoing a daily metamorphosis. “It’s a conversation we have

almost daily with clients,” Mr. Therrien said. “About half of our clients are talking mobile, and the other half, we’re trying to enlighten. Mobile is becoming a mainstay.” Marketers also are concerned about return on investment, which social media, another marketing phenomenon, does not always yield — at least in dollar signs. “It depends on how the company measures success,” said Marcus Thomas’ Mr. Strauss. “Return on investment is not always revenue. The return could just mean that the company now has an app.” As marketing strategies adapt to incorporate mobile, and on a broader scale, digital marketing in general, investment in more traditional media, such as radio, TV and print, likely will be scaled back. Still, industry practitioners caution against a full-out foray into mobile at the expense of other media channels. “The challenge is making sure your target audience has the appropriate mobile habits,” Mr. Strauss said. “Not all folks with mobile phones use them to their full capacity. Mobile marketing has value, but it can’t stand on its own.” ■

Firms: Tax rules may change continued from PAGE 1

While Mr. Mueller said CapitalWorks likes to do about three deals a year, it didn’t do any in 2009. Still, he said he expects CapitalWorks to close its first deal of 2010 in the next 30 to 45 days, and to hit its goal of three deals for the year.

No sprinters in the field Stewart Kohl, co-CEO of The Riverside Co., also expects more companies to put themselves up for sale as they become confident that they can fetch a good price. Purchase prices and multiples will begin to “creep up,” he said, but not skyrocket. Likewise, investors are starting to inch back into the fray. “They’re sure not sprinting,” Mr. Kohl said. While Mr. Kohl said Riverside’s 70company portfolio did “surprisingly well” for the year, down just about 5% in sales and earnings for 2009, the firm completed about half as many deals in 2009 — a total of 14 — as it had in 2008, when it did 31. Mr. Kohl said he saw both 2008 and 2010 as bookends, though, and expects that just as 2008 started the year strongly then ended in turmoil, 2010 will finish with the year on an upswing after a slow beginning. “We went into 2009 with almost nothing in the pipeline,” he said. “In the second half, the pipeline began to rebuild. I think we’re going into 2010 with the world significantly better.” John Nestor, senior managing partner of Kirtland Capital Partners, said he is beginning to field calls from bankers who once again are interested in talking about the possibility of making loans for private equity transactions. Mr. Nestor said bankers pared down their portfolios to get rid of poor performers and now are looking for more opportunities. Linsalata Capital Partners senior managing director Eric Bacon said he’s looking for 2010 to be a “par” year, with two or three acquisitions, where 2008 and 2009 were both sub-par. Mr. Bacon said he expects

2010 to be a good year for private equity firms to clean up a backlog of distressed companies.

Cash needs will drive deals Steven Rosen, co-CEO of Resilience Capital Partners, said deal flow for his firm, which deals in turnaround companies, was up considerably last year. The pace will be even greater in 2010, Mr. Rosen expects, as companies continue to be interested in reinvesting in their business, but need to bring in new partners who have the money to do so. Mr. Rosen expects refinancing to drive some deals, but said it is likely sellers still will want to retain some stake in their businesses to take advantage of potential upsides as the economy improves. “When the economy recovers is the most difficult time for companies that don’t have access to capital,” he said. Private equity firms also see the possibility of regulatory and tax changes on the horizon. Mr. Mueller said a potential tax change could impact firms’ business models as they work to keep returns high. Now, Mr. Given said, general partners’ 20% take of profits in the funds are taxed as capital gains, at a 15% rate. A new proposal would tax the general partners’ share of profits as earned income, potentially more than doubling the tax rate for those earnings. Mr. Given said he doubted if funds would try to pass the increase on to investors, but Mr. Mueller said some funds might try to cut back in other ways to keep returns high. There also are proposed changes that would call for private equity funds to register themselves, though many fund CEOs and managing partners said either that they hadn’t yet started paying attention to the proposals or that the necessity would have little impact on them, as either they have registered voluntarily or have dealt with increased regulation for various reasons in the past. ■

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JANUARY 18-24, 2010

Kent: Transit center to accommodate expected uptick in downtown traffic continued from PAGE 3

house art programs also is a high priority because those programs currently are spread throughout six locations on campus. The Kent State campus also will receive an updated and friendlier look by replacing a long corridor of concrete with grass and trees, Dr. Lefton said. The transformation will give students an outdoor place to relax, interact and study.

campus to its outer ring, and renovation of some old and outdated buildings, Dr. Lefton said. Space freed up by administrative offices will be renovated and used as academic space, he noted. University leaders have been meeting with architects and designers to determine what projects are most needed and feasible and what will top the priority list. Remodeling buildings to be handicap-accessible and replacing drafty, single-pane windows is a necessity, Dr. Lefton said. “We have a lot of buildings that were built in the ’50s, ’60s and ’70s, when nobody worried about people in wheelchairs,” Dr. Lefton said. “We’ve got a lot of buildings that just haven’t been given the attention they should have over the years.” Though a modern, glass-enclosed building totaling 50,000 square feet is planned as the new entryway to the school’s science buildings, Dr. Lefton said architects have been told to take a more classical approach when planning other new buildings. Among the first projects likely to be constructed is a new building for the architecture program, which is one of Kent State’s centers of excellence, Dr. Lefton said. A building to

Contact: Phone: Fax: E-mail:

Throwing a Haymaker If students and employees want to leave campus to patronize shops and services in downtown Kent, they’ll soon be able to cross the busy Haymaker Parkway on an “esplanade,” or walkway, that will connect the campus and the Main Street business district, Dr. Lefton said. The multilane Haymaker Parkway now encourages people to drive the short distance between the campus and downtown, said Randy Ruttenberg, a principal at Cleveland’s Fairmount Properties, a developer that plans to spend $40 million to redevelop downtown Kent. “Given that Haymaker Parkway was built in a way that really creates a barrier between downtown and Kent State, this esplanade will go a

long way,” he said. Mr. Ruttenberg said three planned buildings totaling 162,400 square feet will add new space for retail, office and residential units to downtown Kent. He currently is in talks with tenants to fill each of the three-story buildings, but he said seven tenants either have signed letters of intent or are in advanced discussions to locate in the refurbished downtown Kent. Mr. Ruttenberg would not disclose possible tenants, but he said he is in talks with four restaurants, a microbrewery, two clothing shops, a 10,000-square-foot bookstore and a store relating to outdoor sports. His firm also is in the final negotiating stages with two office tenants. A project that is ready to move forward is a long talked-about hotel and conference center in Kent. Its developer is Pizzuti, a Columbus-based development firm whose owner, Ron Pizzuti, is a Kent State graduate. Expected to cost in the range of $12 million to $14 million, the 115-room hotel is planned for the intersection of Haymaker Parkway and Depeyster Street, said Shannon Hamons, director of special projects

at Pizzuti. The conference center will be built across Depeyster Street but will be connected to the hotel, most likely via a covered walkway, he added. The conference center will feature 8,000 to 12,000 square feet of meeting space in the form of medium-size rooms, which currently are not offered in Kent, Mr. Hamons said. The hotel will provide a place to stay for visitors such as parents of students and guest speakers, who currently must stay as far away as Hudson or Stow. Kent State has committed to providing up to $3 million for the construction of the hotel and conference center, but Dr. Lefton said those details have not yet been ironed out. Noted Mr. Hamons, “The university will be partnering with us in some fashion, whether that’s as an investor or as a partner.”

A different downtown For its part, the city has designed the $21 million Kent Central Gateway Transit Center to accommodate the additional traffic that is expected downtown when construction is completed, said Daniel Smith, economic development director for

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the city of Kent. The three-story site will include a 300- to 400-space parking garage, a bus depot for people taking buses into Akron and Cleveland, retail and office space, and a connection to the bike path, he said. The city has applied for a $21 million federal grant to fund the center, and Mr. Smith said the city should know whether it will receive the money by Feb. 17. Ground would be broken in late summer or early fall, he said. If the federal money does not come through, the city would try to fund the project through other transportation grants, which would delay the ground breaking by six to eight months, he said. Kent’s downtown area has been on a slow decline for probably the last 30 years as shopping habits changed and mainstays such as banks and a drugstore closed, Mr. Smith said. However, university towns are hot right now, and they’re faring better than others, he said. “We weren’t able to attract a lot of renovation and new innovation for probably three decades,” he said. “But I really think we’re going to get it done in 2010.” ■

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THEINSIDER

THEWEEK JANUARY 11 - 17 The big story: Cleveland public relations firm Edward Howard & Co. soon will be on its own no more. Directors of Columbus-based Fahlgren Inc., one of the nation’s largest marketing communications companies, and majority shareholders of Edward Howard announced that Fahlgren plans to acquire Edward Howard. The acquisition is expected to close during the first quarter of 2010, “although integration and coordinated new business and marketing efforts will begin immediately,” according to a news release issued jointly by the two companies. Fahlgren operates Fahlgren Mortine Public Relations, and it’s those two businesses that will be combined, though both brand names will remain.

Cap’n pay: The next president of the Cleveland-Cuyahoga County Port Authority will make less money than the last port boss. A Port Authority committee effectively has pegged the top salary for the new chief at slightly less than $220,000. The agency had been paying Adam Wasserman $283,000 until his departure last November. The Port Authority’s transition committee is recommending to the port board that it hire Boyden Global Executive Search of New York to find the best candidate for the job. Boyden’s fee will be a maximum of $65,000, based on 30% of the new president’s first-year salary. That fee was set because the Port Authority is expecting to pay the new president no more than $220,000.

Recycler recycled: The sale of compounder and recycler Michael Day Enterprises Inc. to Italian plastics maker Radici Group was approved by a U.S. Bankruptcy Court judge in Akron. Radici was the stalking horse bidder in the deal and will pay $5.7 million for the assets of Wadsworth-based Michael Day. Michael Day filed for Chapter 11 bankruptcy protection last Nov. 10, citing assets and liabilities each valued at between $10 million and $50 million. To their wealth: Dawson Wealth Management of Rocky River merged with Rehmann, an integrated accounting, business consulting and wealth management firm based in Michigan, to create a company with more than $1.3 billion in assets under management. The new entity will remain in Rocky River and operate under the Rehmann name. Dawson Wealth Management, formerly a unit of Dawson Cos., has served clients in Northeast Ohio and across the state for nearly two decades. The government, here to help: With the aid of a federal program created as part of the government’s stimulus plan, the MetroHealth System sold $75 million in bonds, the proceeds of which it will use for capital projects throughout the system. While MetroHealth will have access to the $75 million raised through the bond sale, it also will receive from the U.S. Treasury a portion of the interest that it pays on the bonds under the Build America Bond program. Under the program, state and local government bodies that issue bonds receive a direct federal subsidy payment for a portion of their borrowing costs equal to 35% of the total interest paid to investors.

This and that: CBiz Inc. acquired National Benefit Alliance, an employee benefits firm in Midvale, Utah. National Benefit has 16 associates and recorded about $2 million in revenue during the past 12 months. … Ferro Corp. said its Ferro Electronic Materials unit, a supplier of materials for producing photovoltaic solar cells, was awarded $1 million by the Ohio Department of Development to develop advanced durability sealing systems for solar cells. To keep up with local business news as it happens, visit www.CrainsCleveland.com

REPORTERS’ NOTEBOOK BEHIND THE NEWS WITH CRAIN’S WRITERS

Fleischman’s firm gets the point ■ Richard Fleischman + Partners Architects Inc. recently clicked on the lights at its new offices in the Osborn Building, the structure shaped like a slice of pie at the intersection of Huron Road, Prospect Avenue and East Ninth Street near Progressive Field in downtown Cleveland. Known for namesake architect Richard Fleischman’s modernist designs, the firm just moved into a triangular office at the point of the building. It occupies space that has remained dark since the 1898-vintage Osborn Building became apartments in the mid-2000s. Mr. Fleischman pooh-poohs the design contrast between the spaces his firm creates and the one it now calls home. He said the European modernist architects he studied before launching his firm in 1961 often located in old buildings in Italy and Germany. “We’re all about openness and light,” Mr. Fleischman said, and the first-floor former retail space offers both in abundance. Still visible from his worktable is the firm’s former home, a building at 1025 Huron Road that it converted to a studio in 1988 and sold in 2007. Mr. Fleischman said he could not come to terms with his buyerturned-landlord, so he found less expensive space at the Osborn Building. He would not disclose the rent. Despite a recession that has been deadly for architects, the firm remains busy; current jobs range from a $27 million updating of a University of Cincinnati dormitory complex to a redo of the landmark Epworth-Euclid

WHAT’S NEW

STAN BULLARD

Architect Richard Fleischman in his company’s Osborn building space in downtown Cleveland United Methodist Church at University Circle. The firm occupies the same amount of space as before, about 5,400 square feet, but has added two registered architects this past year, giving the firm eight in a staff of 26. Mr. Fleischman said business cycles are part of the design life. “Architects have been at work for thousands of years,” he said. “We’ll be here.” — Stan Bullard

Mr. Whipple (not that one) would love to hear from you ■ Cleveland State University students who are preparing for a research trip to London next spring are looking for five local businesses to partner with beforehand. A group of 15 students from CSU’s Nance College of Business Administration in May will go to London as part of an international marketing and business research class. However, they’re hunting for local businesses to begin working with to design research

Where there’s a Will, there’s an argument

This is not your grandfather’s turntable. The AT-LP120-USB includes a direct-drive turntable, PC- and Mac-compatible software, a USB cable and other accessories. AudioTechnica says it’s “rugged and durable to meet the demands of professional use, and provides consumers with the flexibility to enjoy topquality vinyl playback and easily transfer records to digital media files and CDs.” “With the continuing popularity of enjoying records and dubbing them to digital media, we recognized the time was right to introduce a true high-performance USB turntable system that combines exceptional record playback performance and sound quality with total ease of use,” says Crystal Griffith, AudioTechnica’s consumer marketing manager. The turntable features a high-torque, direct-drive motor for quick startups with both forward and reverse “back-cueing” play capability, the company says. It’s available online or through AudioTechnica authorized retailers at a suggested retail price of $429. For more, visit www.audio-technica.com. Send new product information to managing editor Scott Suttell at ssuttell@crain.com.

Circling the carcass for opportunity ■ Office buildings and parking lots aren’t the only properties that people watching the bankruptcy of AmTrust Financial Corp. are keeping an eye on. The former holding company of AmTrust Bank also owns a piece of vacant land in Arizona, about 50 or 60 miles from Phoenix. Robert Goldberg, a director of the company, said in a meeting with creditors that the company had owned the land for two or three years with the intent of using it for solar energy. The company also owns a Euclid Avenue parking garage and office buildings on Chagrin Boulevard and in Rocky River. — Arielle Kass

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COMPANY: Audio-Technica U.S. Inc., Stow PRODUCT: AT-LP120-USB DirectDrive Turntable System

projects based on issues facing Northeast Ohio companies. While in London, the students will visit business libraries, contact businesses and conduct interviews to gather marketing information that will benefit those Northeast Ohio companies. Last year’s class analyzed the competition and market for steel tube and bar products for Timken Steel, assessed the potential for a new product from Snap-On Business Solutions, and surveyed the off-site fabrication business for PCX Corp., which makes prefabricated electrical centers. Companies interested should contact Thomas Whipple, chairman and professor of marketing at the Nance College, at 216687-4770. — Shannon Mortland

■ Forest City Enterprises CEO Charles Ratner upbraided columnist George F. Will for a recent Washington Post column that attacked the company’s controversial Atlantic Yards project in Brooklyn, N.Y. In a Jan. 12 letter to The Post, Mr. Ratner complained that Mr. Will “never contacted the developer — my Ratner company — or supporters of the project, who include the governor, the mayor and the Brooklyn borough president,” and that the columnist misrepresented the use of eminent domain in the project. (Mr. Will said eminent domain “has become elastic in the service of avarice.”) “At the start of this project, my company announced that it would try to avoid the use of eminent domain,” Mr. Ratner wrote. “To that end, we bought properties in the footprint, many of which were abandoned warehouses and empty lots. A group of holdouts announced early on that they were opposed to the development and pledged to sue often. They kept their word — but lost every battle.” Now Mr. Ratner has something in common with environmental advocates who say Mr. Will consistently misrepresents things in columns on climate change.

Greener pastures in reach for Cleveland initiative ■ The Economist lauded the efforts of the Evergreen Cooperatives of Cleveland to

“create 10 green, for-profit businesses that local residents will own and operate.” The magazine spoke with Mienyon Smith, a 31-year-old mother of five who works at Evergreen Cooperative Laundry and for the first time in her life is making more than minimum wage. After eight years with the company, Ms. Smith could own a stake worth $65,000.

A little bit of this, A little bit of that ■ Here’s a staggering statistic, according to an analysis by The Associated Press: Of 128 manufacturing plants in North America closed since 1980 by the Detroit Three automakers and their largest suppliers, three of every five now sit idle. Those 128 plants had a payroll of 196,000 workers at the time they closed, the AP reported. “Today, only 36,500 people work at those sites that have been redeveloped, and at only three of the revived plants does the number of employees match or exceed the number in their carmaking past,” according to the AP. ■ The world is getting a little bigger for Cleveland’s Great Lakes Brewing Co. The Washington Post reported that a bar called The Big Hunt has become the first establishment to offer Great Lakes’ award-winning beers on draft in D.C. Credit here goes to Big Hunt general manager Dave Coleman, a Cleveland native. Now you know where to go for a taste of home the next time you’re in the nation’s capital. ■ A Wall Street Journal piece on the history of the “Gatorade shower” called the Cleveland Browns’ Jan. 3 celebration for head coach Eric Mangini “one of the most questionable decisions in dousing history.” Hey, if fans and players can’t get excited about four consecutive Browns wins, when are we ever going to do so?

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