Crain's Cleveland Business

VOL. 39, NO. 51

DECEMBER 17 - 23, 2018

CLEVELAND BUSINESS

SPECIAL REPORT | PAGES 12-23

NEWSMAKERS OF THE YEAR

2018 has been a transition year for Northeast Ohio. As some legacy industries contracted, shuttering plants and letting go workers, others expanded, broadening their reach and impact. New leaders emerged, hammering together the first scaffolding for potential new industries to rise here, and helping a venerable sports team and its fans rediscover what it’s like to win. But the region also received pointed reminders that more leaders need to step up and a boatload of work remains before we can congratulate ourselves on a genuine renaissance.

Entire contents © 2018 by Crain Communications Inc.

Illustration by Daniel Zakroczemski for Crain’s

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CONTeNT

sPONsOReD By

News AND TReNDs FROm NORTheAsT OhiO’s TeChNOlOgy seCTOR

Tech MaTTers Industry-led InItIatIves delIver CreatIve skIlls gap solutIons

U

nderstanding the IT skills gap is like peeling an onion, according to Courtney DeOreo, director of the Regional Information Technology Engagement board (RITE). A lackluster supply of tech internships, for example, reflects a shortage of college students enrolling in IT tracts, which can be linked to the lack of qualifications among students to enter such programs. These issues all are tied to the persistent challenges of digital literacy and digital equality. After all, DeOreo explains, teens need an awareness of IT careers “to even think about getting the right skills.”

RITE is an employer-led organization that acts as a clearinghouse for initiatives to attract, prepare and place talent in the tech community, from high school coding boot camps and career fairs to skills-based recruiting initiatives. Following “a very intensive, collaborative strategic planning process” in 2016, DeOreo said RITE is in the process of building out new capabilities, such as an IT workforce dashboard.

“For example, if we know that more experience is desired on the part of our employers by graduates of higher education or workforce programs, then we need to have a better understanding of how we do now in terms of internships,” she said.

DeOreo said RITE also is advocating for digital literacy programming, acting as a catalyst for “shared awareness of what the strategic levers are” when it comes to cultivating an industry-responsive workforce.

The workforce development organization also is launching innovative programs for undecided college students to leverage its high school programs and is piloting a work-based learning experience for high school students enrolled in tech courses.

Creative strategies to narrow the skills gap are coming from other regional industry groups as well – most of whom partner with RITE. Along with sponsoring the TechCorps high school coding camp, SIM Cleveland provides scholarships to students in IT programs at several Northeast Ohio universities. Its members also frequently speak to local high school students about tech careers, according to president George Slogik.

Doug Wenger, executive-in-residence at OHTec, said that the organization recently collaborated with MCPc on BusinessTECH18,

Calendar of

eveNTs A PRODUCT OF

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PHOTO PROVIDED BY DEVIN LYNCH

the greater Cleveland partnership’s BusinessteCH18, presented by MCpc and oHtec, and sponsored in part by oeC, drew more than 1,000 attendees from the business community last october.

where more than 1,000 business and IT leaders came together to share best practices on a range of issues – not the least of which was talent development.

“In addition, we were very excited that several hundred high school students were able to Wenger join us at the event to meet and interact with the technology community,” he said.

OHTec also is in discussions about forming a regional CIO forum, Wenger said, that could include a portal for IT leaders to share applicant résumés and credentials with one another.

Meanwhile, comprehensive talent development strategies are underway in Summit and Cuyahoga counties, foretelling of continued progress in addressing the IT skills gap throughout the region. ConxusNEO, a nonprofit public-private partnership, is driving efforts to create an intentional workforce development system and to promote economic growth by focusing on three industry sector partnerships with high-demand, highwage careers: IT, manufacturing and health care.

Workforce Connect, a similar initiative in Cuyahoga County, in January will tackle developing workforce growth strategies in the aforementioned industries, beginning with manufacturing and following up with IT and health care.

The GeNeraTor ceMeNTs BoUNce INNovaTIoN hUB’s coMMITMeNT To INNovaTIoN

W

hen Bounce Innovation Hub’s newly remodeled first-floor — a space dubbed “the Generator” — opens in April, it will be the most visible signal of an internal transition that is more than one year in the making.

Bounce, the Rubber City’s center for innovation and entrepreneurship, evolved out of the Akron Global Business Accelerator. Housed in the former B.F. Goodrich plant on South Main Street, the city of Akron operated the incubator until August 2017, when it formed a board to oversee the organization on its behalf.

“Along with that came a new name, a new structure and new direction,” said Doug Weintraub, a serial entrepreneur tapped to lead Bounce through the transition.

Chief among the changes, according to Weintraub, was refocusing Bounce around the needs of startups. The idea is to support young businesses and help them flourish in a lease-free, resource-rich environment so that they can become thriving companies that

move out and pay rent elsewhere in Akron.

Weintraub and his team also tripled the number of “entrepreneurs in residence,” onsite professionals who help guide and counsel fledgling firms; recruited representation from established industry groups BioEnterprise and MAGNET, which each now have an office in the building; and added an accelerator program designed to help software startups market and sell their innovations.

Next up, Weintraub said, is finishing the 27,000-square-foot build-out of the Generator, which will include co-working space, a makerspace, a café and meeting area, conference rooms and a University of Akron esports lab.

“The result will be an open opportunity for anybody in the city, or anybody from anywhere, to come do what you do in a coworking space — rent a desk, rent an office, lease a conference room or event space and go to town as far as an entrepreneur is concerned,” he said.

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1 MILLION CUPS CLEVELAND: 8:30 a.m. to 10 a.m., LaunchHouse, 675 Alpha Drive, Suite K, Highland Heights. Recharge after the holidays with a cup (or cups) of joe and fellow local entrepreneurs.

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OHTEC SALES & MARKETING SPECIAL INTEREST GROUP MEETING: 5:30 p.m. to 8 p.m., Great Lakes Brewing Co., 2516 Market Ave., Cleveland. This re-energized group plans to offer periodic workshops focused on sales and marketing best practices, networking and relationship-building opportunities for tech company professionals. gcpartnership. com/Find%20an%20Event/Upcoming%20Events

HIRING THE NEXT GENERATION OF TALENT: 8:30 a.m. to 11:30 a.m., JumpStart Inc., 6701 Carnegie Ave., Cleveland. JumpStart Emerging Talent Network will host a workshop that offers tools and strategies for building strong work relationships with Gen Z. jumpstartinc.org/events/ hiring-the-next-generation-of-talent-2/

CRAIN CONTENT STUDIO C l eve l a n d

This advertising-supported feature is produced by Crain Content Studio-Cleveland, the marketing storytelling arm of Crain’s Cleveland Business. The Crain’s Cleveland Business newsroom is not involved in creating Crain Content Studio content.

12/14/18 9:18 AM

CRAIN’S CLEVELAND BUSINESS

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Hopkins plan could be rough on ride services

By JAY MILLER jmiller@crain.com @millerjh

Come the new year, air travelers who use commercial services to get to Cleveland Hopkins International Airport will find themselves dropped off farther away from their airline gates. Only passengers dropped off or picked up by family or friends will have curbside service on arrival or departure.

Passengers who use limousines, taxis and ride-share drivers will do a little more walking, and the services they use, as well as hotel and off-site parking lot operators, will start paying higher fees to the airport.

Airport officials say the moves are designed to ease congestion on the terminal’s upper (dropoff ) and lower (pickup) roadways as the volume of passenger traffic has risen in recent years. The city believes the increase for shuttle and limousine services, which will rise about $1.8 million, puts those fees in line with what's charged in other cities.

In a telephone interview, airports director Robert Kennedy said passenger traffic has steadily increased at Cleveland Hopkins and, as a result, he expects the roadways to be handling 3.1 million more people this year than it did five years ago.

“Our roadway system hasn’t changed since then, so that’s creating some congestion,” he said. “Commercial vehicles have a longer dwell time than personal vehicles.”

Earlier this year, Kennedy told city council that widening the existing roadways would be too costly because it would require moving existing underground utilities.

The ride-sharing services and limousines will no longer drop off their passengers at the curb near the various airline entrances on the upper level. On Jan. 1, those vehicles will shift to what has been a special roadway used by taxis for dropoffs at the south end of the terminal.

The dropoff point is near the escalator on the baggage claim level that takes passengers up to the entrance to Terminal C, which is used by Air Canada, JetBlue, Southwest and United airlines.

“It’s not like curbside (dropoff and pickup) like it had been in the past,” Kennedy said. “We’re going to have wheelchair service, the airlines have talked about having luggage service, though we’re not sure what they’ve decided yet.”

The plan expands use of what the airport calls its Ground Transportation Center (GTC), located east of the existing roadways, near what the airport calls its Smart Parking Garage.

The GTC is now used by hotel and off-airport parking lot shuttles for pickup and dropoff and for pickups by ridesharing services like Uber or Lyft. Taxi and limousine passengers will now use the center when they leave the airport.

The city will spend $3 million for upgrades to the GTC to handle the higher volume of traffic.

About the increase in fees, Kennedy said people who are not using the ground transportation services are subsidizing people who do.

Right now, Uber and Lyft drivers and taxis pay $4 for each trip in or out of the airport. Shuttles operated by off-airport parking lots, hotels and limousines pay $550 a year for each vehicle they use to pick up and drop off passengers, regardless of how many trips are made. Come the first

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of the year, they will pay the same $4-per-trip fee.

The fee would not be assessed to any company after its 100,000th pickup or dropoff at the airport.

Steve Qua, owner of Company Car & Limousine in Cleveland, is frustrated by the fee hike and especially the move to the GTC. “Our customers use us because they know we’re going to be where we’re supposed to be when we’re supposed to be there” said Qua, whose company operates 29 limousines. “But if they get to the airport and then have to walk 400 yards to get to their ticket counter or walk 400 yards to get to their chauffeured vehicles to go home, they are going to stop doing it.”

Nina Parson, director of sales and

marketing at Company Car and sitting in on the phone interview with Qua, agreed that people will switch to friends or family to pick them up or drop them off.

“A large concern of ours is not just us, but on a citywide level,” said Parson. “We become less attractive and less marketable to conventions and other events by having the first and last impression of our city be an inconvenience and a hassle.”

Qua said his company surveyed 42 other city airports and found that Cleveland is the only one that doesn’t drop off at the curb.

“As Cleveland continues to grow as a destination city, with more residents and visitors flying into and out of Cleveland Hopkins, change is necessary,” Destination Cleveland com-

munications specialist Kristen Jantonio said in an emailed statement.

“Destination Cleveland will continue to work with the airport and transportation providers to enhance the visitor experience.”

Mark Zannoni, a Cleveland resident and heavy airport user, leads the worldwide transportation program at International Data Corp., a global research and advisory firm headquartered in Framingham, Mass. He said in an email that he believes one of the reasons for the higher volume of commercial vehicle traffic at Cleveland Hopkins is a shortage of on-airport parking and a rise in the cost of that parking. He noted that the airport lost 1,600 parking spaces when the 40-yearold, 2,600-space parking garage was

razed in 2013. That site is now home to a 1,000-space surface lot.

That pushes more travelers to the off-airport lots, which shuttle passengers to the airport. Parking rates on airport grounds are now between $11 a day and $20 a day, though the lower-cost lots are often filled to capacity.

The rates were most recently raised in April by $2 a day. Off-airport lots cost between $10 and $12 a day.

Kennedy said he has no plans for any other fees and that any changes would have to approved by Cleveland City Council.

“We’ve had our engineers look at this, we’ve had planners look at this,” he said. “We’re going to constantly monitor it after it goes into effect to see what cause and effect it has on the different parts of the airport.”

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Federal legalization could pave way for hemp market

By JEREMY NOBILE jnobile@crain.com @JeremyNobile

On his nearly 5,000-acre family farm in Marion, Chip Kepford would probably start swapping out all the corn, soybeans and wheat for hemp tomorrow if he could and there were buyers in line for it.

There isn’t an established market yet in Ohio for hemp products since hemp has spent decades classified as a Schedule I substance alongside its THC-dense cousin marijuana and drugs like heroin. There’s also no real supply chain for it, particularly in Ohio, because of the same state and federal prohibitions.

Many farmers like Kepford face increasingly tight margins with cash crops in recent years, a situation exacerbated by retaliatory tariffs from China and other countries that have set back demand for crops like soybeans. Their hope is that a hemp market will soon come together if President Donald Trump signs the highly anticipated, hemp-legalizing 2018 Farm Bill into law.

“I just need a legit buyer before I plant. It’s easy to grow out in the field. And I’ve got the equipment to plant it, harvest it and fertilize it right now,” Kepford said. “I’d plan everything to it if it showed a peracre net income over and above the alternative crops, which right now is corn, soybeans and wheat in Ohio. There’s just no infrastructure yet.”

Establishing that is key to creating a hemp industry here. But it’s unclear how that market and an infrastructure to support it might materialize.

It's also too early to say exactly what the value of hemp could be in a national, legal market.

The Farm Bill removes hemp's Schedule I status and enables farmers to pursue federal growing permits while also giving states the ability to regulate the industry within their own borders. If states decline to establish some kind of hemp program, federal regulators can then step in through the Department of Agriculture.

Kepford, who applied for one of Ohio’s Level I medical marijuana cul-

Senate Majority Leader Mitch McConnell has led the efforts to give farmers a chance to cash in on a hemp market that, if the Farm Bill becomes law, could soar to $22 billion by 2022. (Bill Clark/CQ Roll Call)

“I just need a legit buyer before I plant.

It’s easy to grow out in the field. And I’ve got the equipment to plant it, harvest it and fertilize it right now.”

— Chip Kepford, Marion farmer

tivation licenses and is still in the process of appealing his frustrating rejection, said he has “zero faith” in the state, which may end up licensing hemp farmers as well. Based on his experience, he’s skeptical a state-run licensing system for hemp would support farms like his.

But despite the uncertainty surrounding how a hemp market could shape up, Kepford isn’t any less optimistic about the potential the crop could present for his family’s Kepford Farms.

“I’m waiting to see what happens at the state to get this going,” he said.

“There’s a lot of things that need to be in place before this is a viable industry anywhere.”

Exploding interest in hemp Estimates vary, but according to a September report by Chicago market researcher Brightfield Group, the hemp-derived CBD market is expected to hit $591 million this year and could balloon to $22 billion by 2022 in the wake of the 2018 Farm Bill.

Comparatively, New Frontier Data has estimated that legal marijuana sales nationwide could exceed $24 billion by 2025 (without federal legalization).

Allowing farmers to cash in on the hemp market has been a driving motivation for Senate Majority Leader Mitch McConnell in leading hemp legalization efforts, particularly in his home state of Kentucky, where farmers are reeling from the tanking value of tobacco crops. McConnell pushed for provisions in the 2014 Farm Bill allowing some states to create limited hemp pilot programs exclusively for research purposes (Ohio never adopted one, but 40 other states did), as well as those federally legalizing hemp in the 2018 bill.

There are probably 25,000 acres across the U.S. dedicated to hemp farming today, said Pat Haggerty and Tom Haren, who are both with Frantz Ward’s cannabis law and policy group.

SEE HEMP, PAGE 26

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Crain Communications has announced key appointments of veteran executives at its city/regional publications in Cleveland, Chicago, Detroit and New York.

KC Crain, 39, a member of the third-generation of family ownership of Crain Communications, has been named publisher of Crain’s Detroit Business. He will continue to serve as president of the parent company.

Lisa Rudy, 55, director of sales for Crain’s Detroit Business and Crain’s Cleveland Business, has been named associate publisher for both titles.

Frank Sennett, 50, director of custom publishing and digital strategy for Crain’s Chicago Business, has been named director of digital products and strategy for all four city titles.

And Kristin Bull, 45, custom publishing director for Crain’s Detroit Business, will assume additional responsibility for content strategy for

Crain

Rudy

Crain events in Detroit in 2019.

Mary Kramer remains group publisher overseeing the four Crain city titles.

“Mary is doing a great job managing our four regions, and these changes will help us improve our communication across the brands,” Crain said. “Our role in each city has never been more important, and we’ll continue to serve these audiences with great content.”

Rudy joined Crain’s in 2016 with a deep background in media adver-

tising sales in radio, digital and print. She was previously general sales manager at WWJ 950 AM in Detroit and spent five years as publisher of Metro Bull Times, Detroit’s alternative weekly.

Sennett joined Crain’s Chicago Business in 2014 as head of digital strategy and added responsibility for custom media created specifically for its business clients a year later.

Before joining Crain’s, Sennett was president and editor-in-chief of Time Out Chicago. After its sale in 2013, he was interim chief operating officer of RogerEbert.com.

Crain owns four city/regional brands in Chicago, Cleveland, Detroit and New York.

12/14/18 3:17 PM

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More colleges using ‘hybrid search’ model

By RACHEL ABBEY McCAFFERTY rmccafferty@crain.com @ramccafferty

The University of Akron has decided that, this time around, it wanted to keep the candidates in its presidential search confidential. At the same time, it wanted to include more people in the search process.

It’s not alone in this approach.

In fact, it’s similar to the one taken

by Cleveland State University in its search that led to Harlan Sands being named president earlier this year.

The university held open forums for staff, students and faculty and conducted meetings around the community with leaders of area institutions such as hospitals and nonprofits. It also created three groups on campus — representing faculty, students and staff — who were tasked with creating priorities for the next president to refer to once he or she was selected, said Rob Spademan, chief marketing officer and interim vice president for enrollment services. And it put together a 24-person search committee made up of faculty, students and community members.

Cleveland State decided to keep its candidates confidential but involve the community as much as it could.

The search committee had been smaller when Ronald M. Berkman was hired almost a decade ago.

Spademan appreciated the broader approach the university took this time around.

“If I had to do it again, I would do it the same way,” Spademan said. “Because we got the community activated around it, and talking not only about the university but where we’d be headed. And then, obviously, what kind of leader do you need to go to the next level was what was foremost on our minds.”

The criticism of closed searches is that not enough people are making a decision, said Doreen Riley, vice president for university advancement at John Carroll University. And open searches limit who will apply.

So more and more schools have been opting for what Riley called a “hybrid search” that keeps the search confidential but adds more community representation to the group screening the candidates.

And that’s the approach University Heights-based John Carroll took when searching for its newest president, Michael D. Johnson, who took office in July. The university actively sought out feedback from the university community, hosting meetings and offering surveys. It even expanded its search committee partway through the process, adding more representation from constituent groups like faculty, Riley said.

The University of Akron’s last president, Matthew J. Wilson, came from an internal search after the short tenure of Scott L. Scarborough. Wilson’s tenure ended this summer, and the university’s interim president, John C. Green, has said he’s not interested in being a candidate for the permanent position.

In the past, the university would hold public forums and seek input from the community, but people were commenting on the process instead of participating in it, said Wayne Hill, vice president and chief communication and marketing officer. And under the previous policy, the search committee was composed

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only of board members. This time, an expanded search committee will include faculty, students and staff. The university also will be working with a search firm, though the firm hadn’t been finalized as of publication.

Joseph M. Gingo, chairman of the board of trustees, thinks this will be a better process than the university has used in the past.

“I have a lot of confidence that these faculty members, these representatives of the various constituencies, they’re going to do a better job than me of narrowing the field,” Gingo said. “They live in this environment every day.”

Gingo is adamant about keeping the candidates confidential. He thinks an open search could “hinder the pool.” Gingo, who has decades of experience in the business world at companies including A. Schulman Inc., knows people don’t often tell their bosses when they’re job-hunting.

“And the reason they don’t do that is it jeopardizes their position in the company they’re in,” Gingo said. “It does. It clouds it.”

The University of Akron isn’t the only local university searching for a new leader, but Kent State University and Walsh University in North Canton have so far offered limited insight into how their searches will be conducted.

At Walsh University, longtime president Richard Jusseaume announced his retirement plans in early December. Jusseaume took on the role of president in 2001.

In a statement, Walsh board chair Sara Lioi said the university would conduct a national search for Jusseaume’s successor, and that the university hoped to have someone in that role by summer 2019. Jusseaume will serve as president until then and will serve as a consultant afterward. The university declined to comment further about the plans.

At Kent State, Beverly J. Warren announced plans to step down as president in October. She’ll stay in that role through June.

The university’s board of trustees officially established a national search for her replacement in early December. The search will be led by the board’s vice chair, Shawn Riley, who will serve as chair of the presidential search committee. Riley is a Kent State graduate and the president of McDonald Hopkins in Cleveland. The university will also be working with executive search firm Russell Reynolds Associates, according to a news release.

The search committee is made up of 15 members, in addition to Riley.

There are faculty members, including one from a regional campus, board members, administrators, a graduate student and an undergraduate student.

In an email, Eric Mansfield, executive director of university media relations, noted that the search will be inclusive and that the committee will seek input from all constituents.

But he could not offer specifics. He did not answer questions about how the committee was selected or whether it was more or less inclusive than previous search committees. He also did not answer a question asking if the board had decided whether candidates would be kept confidential.

The university’s search website lists ways for the community to get involved, such as participating in an online survey or attending an open forum.

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At the Table

Edwins debuts butcher shop, hopes it’s a catalyst for more For more than 50 years, Cleveland’s historic Buckeye neighborhood has suffered a volley of punches: poverty and crime, abandoned properties, Joe unemployment Crea and structural deterioration. For many, even the urban heroes who crave any kind of renaissance for the once-thriving corner of the city, it’s a community that has been all but written off.

But not by everyone. One already successful enterprise, minutes away from the intersection of Buckeye Road and South Moreland Boulevard, is backing a sophisticated new retail store in the beleaguered area: Edwins Butcher Shop.

The 3,300-square-foot shop and food preparation facilities, which quietly opened Dec. 13, combine a full-service meat market with a small but well-stocked grocery store. Refrigerated cases are packed with a combination of moderately priced and more upscale cuts of beef and pork, sausages and charcuterie, house-cured meats and harder-to-find specialty items popular in the area.

Shoppers can walk in and find recipes for an array of dishes, then turn around and find all the necessary ingredients to prepare a meal at home.

There’s also a “vegetable butcher” on hand — not as weird as it sounds — who will take the produce a patron purchases and peel, chop or otherwise cut the veggies to order.

The professional kitchen behind the counter is fully equipped, from grills and ovens to smokers, a rotisserie, deep fryers — the works. Walk-in coolers display a panoply of cuts, including a dedicated dry-aging room.

Not interested in cooking tonight?

Hot prepared foods are on the menu, too. A daily bill of fare offers a modest selection of favorites such as a twopiece fried chicken dinner, smoked brisket, ribs or half of a roasted chicken with sides. Soups and a wide selection of side dishes are available.

“Thing is, a shopper can come in with $10 and put together a meal to cook at home — pasta and sauce and some meat — or they can buy bourbon barrel-aged maple syrup, heirloom beans and exotic spices,” said Brandon Chrostowski, founder, president and CEO of Edwins Leadership and Restaurant at Shaker Square. “Or they buy some of our prepared foods and sit at one of the tables and eat here.”

Anyone who knows Chrostowski recognizes that the lanky restaurateur has a decidedly different take on the places and people society is far too ready to leave behind.

“Poverty is a bitch,” he said, simply and directly. “And this isn’t something that’s solvable. But you have to look it in the eye and hold strong.”

He’s talking about a central and inescapable reality of launching a fairly daring new mission in an all-but-decimated area well-known for violent crime. A cynical question for sure: How does he grapple with the physical risks that might easily plague or destroy such a venture?

That’s a challenge Chrostowski and his backers and associates tackle every day since creating Edwins more than 11 years ago. Edwins is an

The leadership of Edwins Butcher Shop gathers in the kitchen. From left are assistant manager Holly Davenport, Edwins founder and CEO Brandon Chrostowski, assistant butcher Joe Dawson, head butcher Travis Gunter and director of culinary instruction Gerry Grim. (Gretchen Crea)

“If this shop drives profits the way I hope they’ll drive, it will help us to fund and sustain the whole Edwins program.”

— Brandon Chrostowski, founder, president and CEO of Edwins Leadership and Restaurant

educational workplace for recently incarcerated women and men seeking a new chance at life. Chrostowski and his supporters envisioned a highly structured environment in which individuals could find not only training and employment but a nurturing infrastructure. Former prison inmates accepted into the program also are eligible for housing, counseling and other forms of care.

Those services are part of the Edwins campus that adjoins the new butcher shop. Dorms in the complex currently accommodate 17 residents.

Facilities include a library, fitness center, test kitchen and a thrift store.

Since the idea’s inception more than three years ago, when Chrostowski first talked about the next phase of the Edwins concept, he saw a butcher shop and retail market as serving a dual purpose. Outlets for fresh and wholesome ingredients are few and far between in many urban neighborhoods — often places driven by foot traffic, where many residents lack reliable transportation.

A dedicated butcher shop also could be an opportunity for Edwins’ students to expand their skill base.

“The vision all along was to build a strong culinary school,” Chrostowski said. “It doesn’t take a brain surgeon to figure out how people view the people who seek a second chance at Edwins. We have to be twice as good

in order to be equal. So whatever has to happen (in this program) has to be better than anything else like it.”

By offering training that goes beyond the usual cooking and service programs, Edwins' leadership sees empowerment and “a deeper skill set,” Chrostowski said.

“Now, here, we’re able to teach the cuisine from the ground up,” he added. “Then (participants) will feel more confident in how they approach food and feel more in control of their talents. Teach the cuisine from the ground up and we shape individuals who can then teach others.”

An in-house butcher shop also has a very practical benefit. By purchasing primal and subprimal cuts — whole animals or quarters and halves, and then breaking them down to familiar steaks, chops, loins and other cuts — cost savings can be passed along to Edwins Restaurant.

“If this shop drives profits the way I hope they’ll drive, it will help us to fund and sustain the whole Edwins program,” Chrostowski said.

Returning to the gamble this latest chapter of the Edwins story faces, Chrostowski reflected on where the road has led him. Now in his late 30s and despite his failed run in the 2017 Cleveland mayoral race, Chrostowski finds himself a respected visionary.

During the past year alone, he has been invited to speak in more than 30 cities across the country. He was honored as a CNN Hero for social and professional leadership. A film about the Edwins project, “Knife Skills,” was a nominee at the 2018 Academy Awards.

“My wife and I live three blocks up the road,” he said. “We believe in this neighborhood and respect it.

“Now I can’t control someone who doesn’t have the mindset or willingness to control their impulses. That can happen anywhere. But we didn’t get this far by being satisfied by one or two accomplishments. I don’t say, ‘Hey, look, we’ve done a great job.’ I look at the mountain and think, ‘Oh hell, look how far we’ve yet to go.’

“But I know this much: You have to take chances, calculated risks. And you don’t surrender to fear. You just can’t.”

Edwins Butcher Shop is located at 13024 Buckeye Road, Cleveland. Call 216-417-1100, or learn more about Edwins Leadership and Restaurant, and the Butcher Shop online at edwinsrestaurant.org.

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Team NEO: Skilled workers needed to fill looming job gaps

By JAY MILLER jmiller@crain.com @millerjh

While the 18-county Northeast Ohio region will experience only very modest employment growth over the next five years — about 20,700 new jobs — it nonetheless will need to fill hundreds of thousands of job openings due to retirement and normal employee turnover, a new report from Team Northeast Ohio says.

Filling those jobs is critical to economic growth. But it won’t be easy and the region is only beginning to come to terms with a plan to fill them.

The organization’s latest quarterly economic review projects that the region’s employed workforce will grow by only 1.1%, from 1.927 million to 1.948 million workers, between now and 2023. But retirements and normal turnover will mean finding workers for thousands of jobs that in many cases require increasingly specialized skills and proficiencies because of emerging technologies.

The report estimates the region will have 8,500 new job openings in health care fields by 2023, as well as a need for 77,700 replacement workers. The region will also see 2,500 additional jobs in the computer and mathematical sector and need 15,000 replacement workers.

The greatest number of hires, mostly replacement hires, will be in food preparation and serving, followed by office and administrative support positions, with each needing about 160,000 GSB_LoanAd_Craines_4x6.indd 1

workers. Other sectors gaining jobs will be construction and engineering (2,300 jobs), personal care and service (4,600 jobs) and management (2,800).

The region also will need more than 100,000 production workers. Though the number of shop-floor hires over that five-year period is substantial, it actually represents an overall decline in manufacturing jobs.

The Team NEO report, based on data analyzed by Emsi, a Moscow, Idaho, labor market analyst, reports that the region will lose more than 6,600 production jobs between now and 2023, dropping from 187,600 jobs to 181,000. The positions that will remain likely will require manufacturing workers with more education and training than the retiring generation.

“Future jobs will involve specialized skills and proficiency in emerging technology such as smart manufacturing and blockchain,” the report said.

“According to a prominent local smart manufacturer, ‘Workers proficient in MES (manufacturing execution system) hardware, software analytics, application expertise and customer relations are worth their weight in gold.’ ” Team NEO focused on jobs and job training in its quarterly report because it believes it’s important to ensure that the region has candidates with the necessary skills to qualify for the jobs of the future.

Earlier this year, in a report titled “Aligning Opportunities in Northeast Ohio,” the organization found that the region isn’t keeping up with the demand for entry-level job candidates in

the fields that will have the greatest need for new workers between now and 2020. In addition to manufacturing, those fields were information technology and high-level health care.

“We know, from talking to firms, parents and students, that we don’t really have a pipeline for those workers, so what do we need to do?” Duritsky said.

“In those three sectors alone, there was a shortage of 39,000 workers.”

In its recent report, “The Two Tomorrows,” The Fund for Our Economic Future said that failing to find workers to fill those jobs will limit the region’s growth.

In a telephone interview, Bethia Burke, the Fund’s vice president, agreed with Duritsky that the region needs to do a better job of helping support and train unskilled job seekers and helping entry-level workers advance to in-demand skilled positions. In addition, employers need to do a better job of engaging with existing workforce programs and agencies to encourage people to invest in training for skilled jobs.

“We’re seeing evidence that (meeting the demand) is possible,” she said.

“When people are in more entry-level positions, they are thinking about how those jobs are serving as on-ramps to long-term careers that lead to opportunities with better pay and benefits.”

But making that leap can be difficult, said Jill Rizika, executive director of Towards Employment, a nonprofit that assists people hit by a company downsizing, who have criminal records or are recovering from drug problems.

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THANK YOU

Crain’s Cleveland Business held its second annual C-Suite Awards on Dec. 6 at the Westin Cleveland Downtown. The event honored 15 C-suite executives not only for their contributions to their particular enterprises, but also their commitment to Northeast Ohio. Barbara R. Snyder, president of Case Western Reserve University, received additional recognition as the 2018 Champion Award Winner.

The evening would not have been possible without the support of our sponsors and our emcee, Sara Shookman, journalist for WKYC.

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Opinion

Oct.

From the pen of Crain’s cartoonist Rich Williams

The only thing funny about 2018 was ...

Jan. 1

July 9

Nov

April 23

July 30

Dec

May 7

Oct. 1

Dec

Publisher and Editor: Elizabeth McIntyre (emcintyre@crain.com)

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Managing Editor:

Scott Suttell (ssuttell@crain.com)

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Write us: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited. Send letters to Crain’s Cleveland Business, 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113, or by emailing ClevEdit@crain.com. Please include your complete name and city from which you are writing, and a telephone number for fact-checking purposes.

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NEWSMAKERS OF THE YEAR

Sen. Sherrod Brown

By RACHEL ABBEY McCAFFERTY rmccafferty@crain.com @ramccafferty

As Ohio’s status as a swing state was being questioned, Sen. Sherrod Brown stood out.

The state’s midterm election leaned significantly to the right, as Republicans won all the major races in the state for governor, attorney general, auditor, secretary of state and treasurer. But Brown, a staunch Democrat, managed to win re-election for his Senate seat.

And lately, Brown has been making headlines for what he might do in the future: run for president.

Cleveland.com reported on Nov. 12, 2018, that Brown had heard from an “overwhelming” number of people encouraging him to think about a presidential run. Brown had previously stated such a move wasn’t in his plans. Now, he’s said he plans to discuss it with family and give it serious thought.

Though the senator is painted as a strong opponent to President Donald Trump, there is one issue on which they’ve often aligned this year: trade.

Brown’s always been known as a supporter of manufacturers, unions and the working class. (His office promotes that he wears locally made suits and sports a pin of a canary in a birdcage, given to him by a steelworker.)

That focus on workers has made him a somewhat unexpected ally to Trump on measures like tariffs on imported steel.

In February, Brown and Sen. Rob Portman met with Trump, thanking him for placing tariffs on washing machines and encouraging him to take similar measures on steel. After the president did so in March, signing new steel tariffs, Brown praised him.

“For far too long, Chinese cheating has shuttered steel plants across our state and put Ohioans out of work. Today’s action finally sends a clear message to our trading partners that we aren’t going to allow them to cheat Americans out of their jobs and infect global markets. By

standing up for steel jobs today, we’re also protecting American jobs up the supply chain from becoming the next victims of Chinese cheating,” Brown said in a statement.

He went a step further in June and blocked an amendment that would have ended the president’s steel tariffs in China and restricted the president’s ability to implement similar tariffs in the future.

But tariffs and a strong economy couldn’t save all of the region’s manufacturing jobs, and Brown has been vocal when companies cut

back. He notably called out General Motors in June when the company decided to build the new Chevrolet Blazer in Mexico, a decision announced the same day the second shift ended at the company’s Lordstown plant. In November, GM announced plans to stop production of the Chevrolet Cruze, effectively ending production at the Lordstown plant in March 2019.

“The workers at Lordstown are the best at what they do, and it’s clear once again that GM doesn’t respect them. Ohio taxpayers rescued GM, and it’s shameful that the company is now abandoning the Mahoning Valley and laying off workers right before the holidays. Even worse, the company reaped a massive tax break from last year’s GOP tax bill and failed to invest that money in American jobs, choosing to build its Blazer in Mexico,” Brown said in a strongly worded statement. “GM owes the community answers on how the rest of the supply chain will be impacted and what consequences its disastrous decision will have on the Mahoning Valley and our state. My office stands ready to do everything we can to help these workers. This decision is corporate greed at its worst.”

Brown and Portman are still working to convince GM to save the Lordstown plant.

Aside from manufacturing, Brown helped create a bipartisan House and Senate joint select committee on pensions. The committee was tasked with holding public meetings and creating a bill to address impending pension shortfalls, a mission it has pledged to continue despite missing its November goal.

And he’s been active in legislation focused on addressing the opioid epidemic. He introduced the Caring Recovery for Infants and Babies Act with Portman and Sen. Shelley Moore Capito of West Virginia, which was signed into law in October as part of a sweeping opioid package. The legislation was designed, in part, to help newborns with a withdrawal condition called neonatal abstinence syndrome.

“There isn’t a community in Ohio that hasn’t been touched by the addiction epidemic, and we are doing all we can to fight it,” Brown said in a statement.

Tricia Griffith

By SCOTT SUTTELL ssuttell@crain.com @ssuttell

At this rate, Flo might lose her title as the most famous woman at Progressive Corp.

On the strength of leading the Mayfield Village-based insurance giant to some notable financial milestones, Progressive CEO Tricia Griffith, 54, in November was named Fortune magazine’s 2018 Businessperson of the Year.

She beat out some heavy hitters for the honor; among the executives who placed in Fortune’s top 20 were Kohl’s CEO Michelle Gass, at No. 4; JPMorgan Chase CEO Jamie Dimon, at No. 11; and Amazon CEO Jeff Bezos, at No. 14.

This wasn’t a popularity contest for the Fortune honor. As the magazine pointed out in its profile of Griffith, she is “pulling off the remarkable evolution of a company in a relatively staid, stable industry. Progressive’s one-year and annualized three-year sales growth (at 20.2% and 11.4%, respectively) top both Apple’s and Microsoft’s. The insurer’s stock is up nearly 50% over the past 12 months, and profits have more than doubled. In 2017, Progressive vaulted past Allstate to become the nation’s third-largest auto insurer, behind Geico and State Farm. And perhaps most impressively, at the end of the third quarter, the ... company hit $30 billion in net premiums after reaching $20 billion just three years earlier.”

That’s a pretty significant growth rate for a company that was founded in 1937.

Griffith became CEO of Progressive in July 2016, when Glenn Renwick retired from the job after 15 years. She’s a 30-year company veteran who began her career at Progressive as a claims

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representative in Indianapolis. In 2008, Griffith became president of the claims unit. She’s now one of 24 women serving as CEO of a Fortune 500 company. Earlier in 2018, Griffith ranked No. 13 on Fortune’s 2018 list of the most powerful women in business, up two spots from 2017, when she was No. 15.

The company in May reached another important marker of executive diversity when it announced that its board of directors had

elected Lawton W. Fitt, a retired partner and managing director of Goldman Sachs, as chair.

Fitt joined Progressive’s board in 2009 and had served as lead independent director for the past two years. The elevation of Fitt made Progressive the only Fortune 500 company with two women in its top leadership roles, as CEO and chair.

Simultaneously, the company published a report outlining its diversity and inclusion efforts.

That report included the results of a companywide pay equity analysis, which stated that for Progressive employees with similar performance, experience and job responsibilities, “women earn at least $1 for every $1 earned by men and people of color earn at least $1 for every $1 earned by their white coworkers.”

Progressive has more than 30,000 employees nationwide, but it’s looking to a much smaller group to help it plan for the future.

On Nov. 1, the company announced it’s forming a 40-person team, led by chief strategy officer Andrew Quigg, to find profitable growth opportunities. That group will not be based in Progressive’s sprawling east suburban campus.

Instead, the company has leased about 9,000 square feet at The Worthington Building, 800824 W. St. Clair Ave. in downtown Cleveland, to serve as the group’s home. The plan is for the group to occupy the new suite in April or May. Similarly, with an eye on the future, Progressive was one of the sponsors of the recent Blockland Solutions Conference, organized by the new Blockland Cleveland to explore ways Cleveland could become a player in blockchain technology. Progressive in June also became the first insurance company to join the Cleveland outpost of the Plug and Play business accelerator.

Jon Pinney

F

By JAY MILLER

By S

jmiller@crain.com @millerjh

sbul @Cr

Jon Pinney played an important but quiet role in the decade-long effort to bring the Republican National Convention (RNC) to Cleveland in 2016.

The managing partner of Kohrman Jackson & Krantz (KJK), Pinney was a member of the local RNC committee’s board and its general counsel and treasurer. He was also the principal author of the 345-page bid that won the RNC for Cleveland. Leading up to the convention, he wrote a lot of contracts and signed a lot checks.

He was a team player.

He still considers himself a team player. But after being asked in 2017 to write a positive column for Smart Business magazine about what some have called the “Cleveland Renaissance,” he reviewed data on jobs and discovered that the idea of a renaissance wasn’t supported by the numbers. He found, he told a business luncheon in Hudson recently, “the jobs data suggest, and the population data suggest, we have a lot of work to do to recover from the Great Recession and actually start competing with our peer cities.”

So he went very public in a speech at the City Club of Cleveland on June 8.

“We’re getting our butts kicked. We’re dead last or near the bottom in most economic metrics,” he told his audience. “Our population continues to decline at an alarming rate (and) our economy has not evolved into an innovation economy quickly enough.”

He pulled no punches, saying the region’s economy relies too heavily on manufacturing, has a disorganized system of economic development and no one is measuring economic activity by a common set of metrics. If they looked at the numbers, he told the audience, they would see that the region’s population is declining while the country is growing, the region’s unemployment is above average and there is a significant misalignment between the jobs employers are seeking to fill and the skills of existing job seekers.

One thing the region needed to successfully recover, he added, is a shakeup of the current civic leadership team to make it younger and more diverse. A month after the speech, Pinney wrote in a Crain’s Personal View column that he had received 2,000 emails with thoughts and ideas for rebuilding the region.

Pinney credits spending 2017 in Leadership Cleveland, the civic leadership organization, with motivating him to speak out. In his City Club speech, he recalled a trip the Leadership Cleveland group took to Philadelphia to see how that city had recovered. “It was a powerful three days and a great trip,” he said. “Philadelphia transformed its economy and downtown over the last 15 years and emerged as one of the fastest-growing cities in our country.”

More recently, Pinney signed on to play a major role in Blockland Cleveland, the concept proposed by auto dealer and technology entrepreneur Bernie Moreno to make Cleveland a center for the emerging blockchain digital technology. Pinney is leading the Blockland committee looking for a location for a planned $150 million blockchain tech incubator in or near downtown Cleveland. A site announcement is expected early in 2019.

If not exactly a reluctant leader, Pinney prefers to see himself as just one member of a team. He’s still uncomfortable with the burdens that come from making himself the face of a movement to improve the region’s economy.

A Youngstown native, Pinney went to college at John Carroll University and graduated Cleveland-Marshall College of Law in 2000.

He joined KJK in December 2004 and became a partner in July 2006.

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NEWSMAKERS OF THE YEAR

Frank Sinito

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Frank Sinito has set himself a busy to-do list for 2019 after closing major deals in 2018 in downtown Cleveland’s office market as well as out of town in his core business, owning and managing apartments.

First, the CEO and founder of Millennia Cos. in 2018 set the table for more property plays by completing the preening of his last big downtown deal, renovating the lobbies of Key Tower and the Marriott Downtown Cleveland at Key Center.

The improvements are worth noting because they show the kind of creativity and zip Sinito’s crew brings to things. The staid, museum quality of the 57-floor skyscraper became a softer, friendlier setting with new food stations and curated art. The east side of the building’s patio became a lush, flowered public space, both steps bringing the structure into this millennium.

Meantime, Millennia’s first hotel got a rejiggered lobby, the chef-inspired Il Venetian restaurant and a new event center in the former dining room of The Club, among other enhancements. Musicians even began making regular appearances in the skyscraper’s lobby as part of the move to make it a contemporary, people-oriented place.

The embellishments followed the purchase of the tallest skyscraper between New York and Chicago, a $275 million transaction Millennia closed in 2016. Where others might have paused to focus on such steps, Sinito promptly piled on more and bigger

tails on the planned adaptive reuse of the landmark, once home to the city’s business elite.

Also pending is another multimillion-dollar rehabilitation project.

Millennia has landed an allocation of highly competitive state historic tax credits for the early 19th-century building on the north side of Public Square.

In both cases, time is not Millen-

++

uiet Reto

FABRIC DISPLAYS THAT GET RESULTS!

+

+

sbullard@crain.com @CrainRltyWriter

projects construction-wise.

Early in the year, a Millennia affiliate purchased the The Statler Arms at East 12th Street and Euclid Avenue for $40 million. By year’s end, a multimillion-dollar renovation of the building’s 20-year-old apartments was underway, along with upgrading parts of the onetime hotel, such as its ballroom.

Just a few months later, another Millennia affiliate shelled out another $40 million for the structure forming the west bookend of the same block, the former Huntington Bank Building at East Ninth Street and Euclid. But this presents an even bigger task. The largely empty building needs to be substantially renovated to function as a contemporary building and meet federal standards for historic preservation. It will take about $270 million from a yet-to-be finalized financing package to set construction workers loose on one of the grande dames of Cleveland buildings.

General plans shared so far include putting apartments in the old office space, along with renovated offices, retail and a fresh use of the massive banking lobby as another event center and food venue. For the first time in decades, there was talk of putting retailers back into the building’s Euclid and East Ninth storefronts last November as Millennia announced the selection of leasing teams from CBRE Group Inc. for retail and office space in the property, as well as at its other historic properties, The Garfield and the 75 Public Square office buildings.

Millennia also gave the millionsquare-foot property a name of its own choosing: The Centennial. The company has said it expects to announce in the coming year more de-

nia’s friend. The Centennial, which has a $25 million state historic tax credit available to it, means both projects cannot wait long without the risk of losing vital state aid. Moreover, increasing interest rates add immensely to debt costs on such mega-projects.

Sinito, who does the first-blush analysis of the company’s pending acquisitions, also expanded Millen-

++ ++ +

++

By STAN BULLARD

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y

+

nia’s core apartment business out of state, acquiring more than 700 low-income suites in Jacksonville, Fla., in October.

Early in 2018, the trade magazine Apartment Finance Today ranked Millennia as the nation’s third-largest owner of affordable apartments, with about 23,000 suites. The firm climbed a notch from fourth the prior year because it reported buying 4,000 suites in 2017. Sinito’s company states on its website that it has 30,000 units, which indicates a portfolio of several thousand market-rate apartments.

Millennia is also engaged in restaurant operations led by his wife, Malisse, which expanded operations from its highly rated Lockkeepers restaurant to the Marble Room steakhouse on the first floor of its Garfield Apartments, 1965 E. Sixth St., Sinito’s first office-to-apartment conversion downtown. The Marble Room has become a go-to lunch and dinner destination. The building this month also landed a Shake Shack as a tenant.

Sinito cuts a different profile downtown from other property owners. He’s around. It’s a regular thing to see him meeting people at Marble Room for lunch on weekdays. He regularly tweets on his own account, although he’s usually retweeting uplifting messages from one of his property owners or news from Millennia’s regular Twitter feed.

Walk by the Marriott’s valet station on a weekday and you may see his car, a dark-colored Mercedes Maybach with the vanity plate FTS1 parked under the canopy.

That’s a perk of ownership and a sign that Sinito’s a busy guy.

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NEWSMAKERS OF THE YEAR

Jenniffer Deckard

By MICHAEL VON GLAHN mvonglahn@crain.com

Jenniffer Deckard has had big years before but probably none bigger than 2018, which saw her craft a merger between Fairmount Santrol and Unimin Corp. that resulted in a combined company with about $2 billion in annual revenue. Oh, and while she was at it, she also led the push to keep the combined company’s headquarters — and its jobs — in Northeast Ohio.

In 1994, Deckard joined Fairmount Minerals Ltd., at the time one of the largest U.S. producers of high-performance sand and sand-based products used by oil and gas exploration and production companies. She became its CFO in 1999. Then, five years later, she helped engineer a buyout of the privately held company by its top management and several investors, afterward playing a key role in the company's international expansion as it opened new operations in China and Mexico.

Deckard was named president of Fairmount in 2011, subsequently adding the title chief executive officer in 2013. In October 2014, she and the company’s leadership team led what had become Fairmount Santrol to its initial public offering on the New York Stock Exchange.

This past spring, Fairmont Santrol combined with New Canaan, Conn.based Unimin, a wholly owned subsidiary of Belgium’s SCR-Sibelco NV, in a tax-free, cash and stock transaction to form Covia Holdings Corp.

The merger aimed to generate opportunities for benefits and growth for the new entity greater than either company could achieve on its own.

A joint statement issued prior to the deal’s approval declared a target of “$150 million of identified annual operational synergies, resulting in more than $1 billion in value creation.”

The robust, diversified cash flow from the merger should allow Covia to rapidly pay down its debt.

“Together, we will serve our customers more efficiently and effectively with a broader and more diverse product offering, greater technical exper-

tise, improved scale and geographic diversity and an expanded logistics platform,” Deckard said in the statement.

With 45 million tons of annual sand and mineral processing capacity, 3 million tons of annual coating capacity and more than 1.3 billion tons of combined reserves, Covia is now the largest provider of proppant solutions to the energy industry and of industrial materials solutions in North America, serving not only oil and gas, but also the glass, ceramics, coatings, polymers, construction and foundry markets.

In addition, it now operates a logistics network across North America comprising 96 distribution terminals, including 18 unit-train-capable terminals, with access to all major railways serving major oil and gas basins.

Fairmount shareholders own 35% of the combined company, with Sibelco owning the remaining 65%.

Cities in Texas, Connecticut and North Carolina, where the two firms have operations, were all considered for Covia’s headquarters. However, Deckard, as president and CEO of the new company, successfully led a push to base it in Cleveland.

Public money helped seal the deal, with a $3.4 million incentive package of loans and grants put together by state, county and city officials covering about 90% of the $3.7 million cost of the move. According to a county development department project summary, the package included a $1.46 million Job Creation Tax Credit from the state and a $500,000 Relocation and Job Creation Grant from the city of Independence. The landlord, Summit Cleveland Realty LP, put up $900,000 for tenant improvements.

The move transferred about 50 jobs to Cuyahoga County from Fairmount Santrol's former Geauga County location and brought about 30 additional jobs from out of state.

Adding a $2 billion company to their roster of corporate headquarters is also a substantial boost for both the county and the region.

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Karis Doll Collection found its footing thanks to a supportive entrepreneurial ecosystem incubator — which offers space for startups to grow When India Gill, MPH, first moved to Cleveland, — and a more structured, growth-oriented accelerator she didn’t know many people, but was welcomed with program. “We understand where you are in your open arms by a family with three small children she entrepreneurial journey, and then we help you go met via her church. Unfortunately, the family’s father through cycles of directing your critical assumptions,” — an elder in the church who was generously helping Cornuke says. “Basically the guesses you’re making her transition to living here — died as a result of that are most important to your success.” pancreatic cancer soon after.

He adds that they try to help entrepreneurs go “Their resilience really inspired me to think about through this process “as quickly how I could potentially help any and as efficiently as possible. So an children dealing with the loss of entrepreneur can come to us with a parent,” Gill says. She landed on “Using our an idea on a napkin — or they can the idea of a doll that comes with program, come to us after having spent years an accompanying story “that talks we can help developing their product — and about some of these really tough challenges with family transitions,” (entrepreneurs) get using our program we can help find where they are, and get them she says. “And a doll is something traction using an traction using an iteration process.” that would make it a little bit easier For Gill specifically, iteration process.” to maybe lighten the mood a little MAGNET’s approach helped bit when talking about such tough — Brandon Cornuke, her formalize thinking around transitions. A doll is almost like MAGNET’s vice president developing a supply chain and your best friend.” of startup services finding suppliers. Through this Several years ago, Gill — who’s process, Gill was able to find a also working on her Ph.D. in toy designer to put together a epidemiology and biostatistics at prototype doll, which she then was able to Case Western Reserve University School of Medicine send to a manufacturer to reproduce. MAGNET — decided to launch the Karis Doll Collection, which also helped her develop a financial model, which now includes a cloth 18-inch doll named Kayla, helped her price the dolls so they weren’t too who stars in an illustrated storybook about what expensive, but would let her break even, and also it’s like after a divorce and one of your parents gets develop and execute a digital marketing strategy. remarried. Getting to the point where Kayla and Gill has designs on expanding the Karis Doll her backstory became a physical reality was a much Collection and manufacturing two other doll characters tougher road, and involved support from numerous that are dealing with divorce or grief. On an even more regional entrepreneurial service organizations, heartening note, she’s also receiving requests from including MAGNET. customers for other types of stories they’d love to see “At the time, India had a lot of questions about, ‘How do I make these dolls? How do I create content to told. However, right now Gill is taking her time and focusing her efforts on promoting Kayla. support the doll’s story? Where do I source these dolls?

“I wanted to test the market to see how people How much do they cost?’” says Brandon Cornuke, MAGNET’s vice president of startup services. “And the really enjoy it,” she says. “I love it, and I want to make sure that everyone else loves it too.” bigger questions then were, ‘Is anybody interested in MAGNET’s Iterator offers Northeast Ohio this? What kind of problems are we solving?’” entrepreneurs resources to take an idea from the beginning Luckily, Gill found her answers because she was specifically connected to MAGNET’s Iterator program. stages to reality. Visit https://www.manufacturingsuccess. org/manufacturing-solutions-and-expertise/magnetLocated both in Cleveland and at Akron’s Bounce incubation for more info.

Innovation Hub, the program is a mix between an

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216.635.4289 audris@brooklynohio.gov P015_CL_20181217.indd 15

This advertising-supported feature is produced by Crain Content StudioCleveland, the marketing storytelling arm of Crain’s Cleveland Business.

The Crain’s Cleveland Business newsroom is not involved in creating Crain Content Studio-Cleveland content.

12/13/18 1:02 PM

PA G E 16

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CRAIN’S CLEVELAND BUSINESS

NEWSMAKERS OF THE YEAR

John Dorsey

B

By KEVIN KLEPS

By J

kkleps@crain.com @KevinKleps

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John Dorsey has a different Browns sweatshirt for every day of the week.

He showed up at the Big 12 championship game with a long coat — and khaki shorts.

The Browns general manager is a prolific gum-chewer who, during a moment made for social media, called Baker Mayfield “buddy boy” and asked if he wanted to be the No. 1 pick in the draft.

None of this would be as amusing, nor as likable, if Dorsey wasn’t good at his job. It turns out, unlike the majority of the decision-makers who have come before him, he is — and the Browns, finally, seem poised for a lengthy run of success.

It’s been a little more than a year since the Browns hired Dorsey, just hours after they fired vice president of football operations Sashi Brown. He said he wanted to “reawake this sleeping giant,” but by the time the 2017 season ended, the Browns were 0-16 11/19/18 AM in their last 35 games.

— and9:48 1-34 Dorsey wasted no time trying to change that historic run of futility.

The 58-year-old made 14 trades in 2018. The moves resulted in 13 players (10 the Browns dealt and three they acquired) and 26 draft picks (14 coming to Cleveland and 12 going to other teams) being exchanged.

By the time the season started, 31 of the 53 players on the roster hadn’t been with the club just a season before.

The most important has been Mayfield, who doesn’t have the size of a typical No. 1 overall draft choice, but brings seemingly everything else to the table.

Through 13 games, 10 of which Mayfield started, the rookie had thrown for 19 touchdowns and been intercepted 10 times. He was on pace to join Peyton Manning as the only rookies to throw for 3,500 yards and 25 scores.

In making an unconventional choice at the top of the draft, Dorsey took a huge gamble — and thus far, appears to have finally ended the Browns’ decades-long search for a franchise quarterback.

Cornerback Denzel Ward, selected three spots after Mayfield, has also excelled. The same goes for running back Nick Chubb, who was the third pick of the second round. Wide receiver Jarvis Landry, whom Dorsey acquired in a March trade, has been the team’s top playmaker, aside from maybe Chubb.

The season, as we’ve come to expect, hasn’t been without its drama.

“Hard Knocks,” an HBO series on NFL training camps that featured the Browns for the first time, exposed a potential rift between head coach Hue Jackson and offensive coordinator Todd Haley. By late October, both were fired, as the Browns had skidded to a 2-5-1 record at the halfway point of the season.

Dorsey didn’t hire Jackson, and ownership didn’t want him to fire the coach after the Browns joined the Detroit Lions as the only clubs to finish a season 0-16.

But the GM is in charge of the team’s latest coaching search, which is especially critical because of the development of Mayfield. The decision has been complicated by the team’s play under interim coach Gregg Williams, who, with a big assist from offensive coordinator Freddie Kitchens, matched Jackson’s 40game win total during a 3-1 stretch

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that was capped by a win over the Carolina Panthers on Dec. 9.

Dorsey has also watched as the Kansas City Chiefs, for whom he’d spent the previous four years as GM, have become the league’s most prolific offense, led by Patrick Mahomes, a QB Dorsey drafted 10th overall in 2017.

The Browns’ second-half success likely won’t be enough for their first playoff berth in 16 years, but Dorsey’s flurry of acquisitions, combined with more than $85 million in projected salary-cap space, has the team poised to become a contender in the coming seasons.

“It makes life a lot simpler,” Dorsey told NFL Network about the lack of variety in his sweatshirt-heavy wardrobe.

The same can be said for an NFL team that has found its quarterback.

Dorsey has done that.

Next up is solving another longterm problem: head coach.

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CRAIN’S CLEVELAND BUSINESS

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PA G E 17

NEWSMAKERS OF THE YEAR

Bernie Moreno

By JEREMY NOBILE jnobile@crain.com @JeremyNobile

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After seemingly bankrupting as many investors as millionaires it created, the wildly swinging value of Bitcoin and the drama surrounding it have pushed cryptocurrency and the underlying technology, blockchain, into the global vernacular.

But it’s high-profile luxury car dealer, tech entrepreneur and influential civic leader Bernie Moreno who’s played the biggest role in bringing blockchain to prominence in Northeast Ohio, through an initiative that culminated in the inaugural Blockland Solutions Conference this winter.

You’ve probably heard by now what blockchain is: decentralized, distributed ledger technology in which records of transactions are stored and validated digitally via blocks of data chained together.

In unscientific terms, the technology allows cryptocurrencies to exist independently of banks by validating that some digital value exists, effectively allowing and then recording transactions of it. Banks serve these functions in monetary transactions with cards and checks by being not just the keepers of something of value but also facilitators and recorders of its movement. In the cryptocurrency dynamic, the blockchain ledger replaces banks.

So far, blockchain is most widely applied to the enigmatic world of cryptocurrencies. However, anywhere there’s a need for trustworthy recordkeeping — consider the storing and transferring of auto titles, for instance, which is something Moreno is interested in, for obvious reasons — there’s potential to apply the industry-agnostic blockchain technology to a possibly infinite set of uses. There’s a feeling in the business world that blockchain is immensely important, that it could have an impact as economically and culturally significant as the internet.

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But how do we go from big ideas to a new, tech-centered economy, particularly at a more local and regional level?

That’s where Moreno’s Blockland comes in.

As city leaders bemoaned the state of Cleveland’s economy and how we’re “getting our butts kicked,” a metaphorical door swung open, inviting someone, anyone, to enter with a solution.

With a brimming smile and inspirational sales pitch at the ready, Moreno stepped through that door with his Blockland initiative.

Indeed, Moreno appears to have spent much of 2018 not slinging high-end cars, but pitching stakeholders on a vision for economic prosperity, one built on dreams of an innovative tech hub with a blockchain foundation.

That can be a particularly hard sell for a region like this. Here, old money, much of it earned in the region’s manufacturing heyday, is more commonly recycled into relatively safe, traditional investments in manufacturing and real estate, not risky new business ventures.

Tech startups here often lament a dearth of support, financial or otherwise, and a shallow talent pool. And big ideas tend to fizzle in the absence of strong local leadership.

The overarching goal of the Blockland initiative, Moreno has said, is to simultaneously lure in and foster startups, tech talent, capital and all the support and infrastructure required to turn Northeast Ohio into a bustling tech hub at the forefront of today’s blockchain movement.

Doing so could jolt the local economy, reshape the workforce and reframe Cleveland’s lingering Rust Belt identity — all while fattening some pockets of those willing to get on the ride.

That’s the hope at least.

But with the ecosystem that’s currently in place, the apparent lack of existing resources to develop a tech hub rivaling those on the coasts and a cadre of skeptics who’ve seen plenty of lip service paid to big ideas over the years, Moreno is leading a steep uphill battle.

Despite all the positive momentum behind Blockland, a cloud of uncertainty still looms

as observers question whether the initiative will become a reality. Moreno himself has repeatedly said he feels that cynics and naysayers are the single biggest obstacle to his project.

With much to Moreno’s credit on the blockchain front, it’s important to point out that the concept of blockchain has been around for quite some time. Bitcoin, after all, was created in 2009. It’s just taken several years for the technology underneath to gain recognition and legitimacy.

Several entrepreneurs, tech firms, investors and forward-thinking businesses in this region were engaged with blockchain and cryptocurrencies at different levels well before Moreno became the region’s de facto blockchain messiah.

There’s Cleveland startup Votem Corp., which is building an innovative, blockchain-powered mobile voting platform. Cleveland-based BakerHostetler is exploring how it can apply blockchain to its own business — not just as a practice area, but as a part of the actual business. Other initiatives are in the works at area universities and business accelerators.

But the fact remains those groups have largely been working in their own silos or tight networks. If Blockland has achieved anything so far, it’s the banding together of those disparate groups not just in Ohio, but across the country, uniting them under a banner that says Cleveland cares about blockchain, that it wants to be an innovator and there’s a commitment to making that happen.

Since the debut Blockland Solutions Conference, another event has already been set for 2019. Some tech funds, like JumpStart and Flashstarts, have committed to making $100 million available to early stage blockchain firms. And the city itself is garnering national attention.

Blockland will be Moreno’s hardest pitch yet.

And while Cleveland isn’t the epicenter of the blockchain world, if Moreno’s vision comes to fruition, it eventually could be.

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the Panel steVe dYKe Managing Partner Align Capital Partners

Roundtable discussion

The MARKeT FOR BUYeRS AND SeLLeRS sPonsoRed content

A co-founder of the firm, Steve Dyke is responsible for all aspects of Align Capital Partner’s activity along with his partners, Rob Langley and Chris Jones. He also serves on Align Capital Partner’s investment committee. Prior to founding Align, Steve was a partner at The Riverside Co. Prior to Riverside, he was a banker at a Denverbased sell-side investment banking boutique firm. Dyke’s interest and expertise in small business was developed over years in commercial lending, owning a computer peripheral manufacturer, and serving as CEO of a medical device manufacturer. Dyke has a bachelor’s degree in accounting from Colorado State University and an MBA from Vanderbilt University’s Owen Graduate School of Management.

aMY c. held Senior Vice President, Corporate Strategy, M&A and International The J.M. Smucker Co.

As a member of Smucker’s executive leadership team, Amy manages The J.M. Smucker Co.’s operations outside of the U.S., as well as facilitating the development of Smucker’s corporate strategy. Amy also manages the company’s acquisition and divestiture processes. She previously was the managing principal of the Cincinnati office of Willis Towers Watson (formerly Towers Watson). Prior to that role, Amy was a certified public accountant with Coopers & Lybrand (now PwC) and Grant Thornton. Amy has a bachelor’s degree in business administration from the University of Notre Dame and an MBA from the University of Chicago Booth School of Business.

MiKe McMahon Group Head and Managing Director KeyBanc Capital Markets

Putting together the pieces for a successful deal outcome

t

he new federal tax law, tariffs, wage inflation and rising interest rates are just some of the economic nuances keeping dealmakers on their toes. Savvy buyers and sellers, however, know that developing a smart, proactive and nimble business acquisition or sale strategy is key to achieving their desired results at the finish line. Private equity firms and banks are at the ready, with financing and uninvested capital available to deploy and lend. While M&A markets are dynamic and evolving, the current economic environment foretells of continued robust dealmaking activity in 2019, according to the roundtable panelists featured in this Crain Content Studio —Cleveland discussion on buying and selling strategies.

The panelists, whose experience spans private equity, corporate, M&A and business law, share their thoughts on M&A market expectations in 2019 and ways to optimize established, emerging and planned deals.

Mike McMahon is the group head and managing director in the Mergers & Acquisitions Group at KeyBanc Capital Markets. McMahon has 20 years of financial advisory experience, primarily focused on advising clients on mergers and acquisitions.

He has extensive experience working with industrial and energy businesses. Prior to joining KeyBanc Capital Markets, McMahon was a senior associate at Harris Williams & Co., a mergers and acquisitions advisory firm, and a corporate finance analyst at Duff & Phelps LLC, where he advised clients in sell-side transactions, ESOP fairness opinions and corporate valuations. McMahon has a bachelor’s degree of business administration in accountancy from the University of Notre Dame and an MBA from the Kellogg School of Management at Northwestern University. He is a certified public accountant and a member of the American Institute of Certified Public Accountants.

He was the board chair and continues to serve on the board of directors for United Cerebral Palsy of Greater Cleveland.

MeGan l. MehalKo Co-Chair, Corporate & Securities Practice Group Benesch

Megan L. Mehalko is co-chair of Benesch’s Corporate & Securities Practice Group and a member of the firm’s executive committee, professional development committee and finance committee. She advises companies and private equity funds on corporate governance, securities law issues and strategic transactions. She has extensive experience with mergers, acquisitions, divestitures, domestic and cross-border strategic alliances and joint ventures, as well as general business counseling and distressed/insolvent company acquisitions and restructurings. Mehalko has represented companies in the manufacturing, plastics, rubber, metal forging, chemicals, health care devices and consumer products industries. She also is actively involved with the firm’s public company practice, private equity group and polymer industry team. Mehalko received a bachelor’s degree in economics and political science from Bucknell University and a J.D. from Case Western Reserve University. Mehalko serves on the boards of Laurel School, College Now and Business Volunteers Unlimited.

This advertising-supported section is produced by Crain Content Studio-Cleveland, the marketing storytelling arm of Crain’s Cleveland Business. The Crain’s Cleveland Business newsroom is not involved in creating Crain Content Studio-Cleveland content.

P018_P021_CL_20181217.indd 18

12/13/18 10:20 AM

SPONSORED CONTENT

Q&A How does a seller best position itself for a successful sale today? How does a buyer best position itself for a successful acquisition today?

AMY HELD: The definition of success is likely different depending on your side of the table, or on the underlying rationale of each transaction.

Regardless, buyers and sellers each will be more successful if they begin the process with a crystallized articulation of what a successful deal is and is not for them. Is it just about getting the highest or lowest price? Or finding a partner with similar values who will represent the right “home” for the business?

Know what matters most to you and why.

Another key step for either side is crafting the “story” — this is not necessarily a 100-page deck of facts and figures — but a true narrative reflecting the heart and soul of why you are the right choice to buy (or be bought). Knowing, and when appropriate, sharing your “why” behind the transaction will increase the chance of a successful deal.

MIKE MCMAHON: Experienced sellers analyze, critique and refine management’s strategic plan. They understand the correlation between effectively supporting and articulating the growth strategy with garnering premium valuations.

Before going to market, the best sellers invest significant time and effort in preparing the company for a sale process. Momentum and responsiveness during a process are critical and are impossible to achieve without adequate preparation upfront.

Buyers that stick close to their acquisition strategies are more likely to invest time on the right targets that will be accretive to their companies.

They know what they want and have the ability to move quickly and often can justify more attractive valuations.

MEGAN MEHALKO: We are seeing buyers being very aggressive on timelines to distinguish their bids.

While sellers are being aggressive on deal terms and indemnity exposure, buyers are willing to move fast, identifying areas of risk and focusing on those areas in due diligence.

Representation and Warranty Insurance is increasingly being used as a tool to allow sellers to walk away from a transaction with very limited post-closing exposure. Buyers are getting more and more comfortable with RWI. In addition, technology and Artificial Intelligence are being used to streamline the due diligence process. AI for document

P018_P021_CL_20181217.indd 19

ROuNDTAbLE DISCuSSION

‘‘

We believe winning bidders act with unquestionable integrity at every step, convey a genuine passion for the target business and can articulate a compelling vision for the future grounded in meaningful market insights.”

— AMY C. HELD, Senior Vice President, Corporate Strategy, M&A and International, the J.M. Smucker co.

review, particularly on larger transactions with lots of documents, will be more common as this resource becomes more available and understood.

STEVE DYKE: It’s always helpful to have a well-organized seller who has thought through their business in advance of an exit and made the investments necessary for a solid foundation. Buyers discount businesses that need significant infrastructure investments.

Incomplete management teams, inadequate IT systems or production processes running at maximum capacity all factor into valuation or in some cases can cause buyers to pass on the opportunity altogether.

In addition, having a thorough and well-organized data room compiled before launching a process helps speed things along and can greatly reduce stress on a management team.

Sellers can get diligence request lists from their legal counsel and/or intermediaries to help their business and management teams be wellprepared for a sale process.

Buyers improve their chances for success by understanding a seller’s objectives for the transaction and then creating a deal structure to meet those needs. Many sellers and their management teams also place great value in their legacy and their employees’ future. A buyer who has relevant industry experience can lessen that concern, along with access to a

network of technical resources. Finding tangible ways to be a value-added partner post-closing is often worth more than the last dollar of the purchase price.

How do you see the current administration’s policies and rising interest rates impacting the deal markets?

STEVE DYKE: We’re already seeing margin pressure due to tariffs creeping into processes. At a minimum, it’s something that we’re asking about on every deal we look at these days. Sellers should get ahead of the situation and analyze the potential impact from tariffs and evaluate alternative suppliers and/or materials that could mitigate or eliminate the issue. We’re starting to see wage inflation for the first time in years, and sellers should be prepared to address the impact this will have on their business.

Interest rates are on the rise at the same time that the new tax plan is limiting the deductibility of interest expense. These factors will increase borrowing costs and potentially reduce debt levels used by private equity, which in turn could impact purchase price multiples paid for companies.

However, private equity still has a lot of dry powder. Public equities remain richly valued, and lenders are still motivated to lend, so there’s

m&A

plenty of “currency” still available to do deals. As a result, we don’t see M&A activity slowing down in any meaningful or prolonged way.

MEGAN MEHALKO: Uncertainty about trade wars and imposition of tariffs are causing some buyers to be particularly cautious. For companies that are impacted, due diligence is focused on determining the impact on costs and profitability going forward. The uncertainty is negatively impacting value to the sellers in these cases.

With respect to rising interest rates, we haven’t seen a discernable impact yet.

However, we do see buyers, who are still flush with cash, putting more equity into deals. There seems to be more restraint on over-leveraging balance sheets.

MIKE MCMAHON: Though rising interest rates increase the cost of capital, we are still enjoying belowaverage interest rate levels and will continue to do so for some time.

More importantly, the availability of debt financing and equity dry powder continues to drive valuations.

Depending on whether a company is on the selling or purchasing end of tariff-impacted materials, management teams are flexing daily operating decisions, and earnings are being impacted in the near-term.

Has the competitive environment changed your approach to M&A, and if so, how?

MEGAN MEHALKO: As lawyers, we are responding to our clients’ needs as we approach M&A transactions.

Increasingly, we are turning review of purchase agreements in limited time and performing due diligence on an expedited basis to allow our clients to react with the speed required to be a successful bidder in a competitive environment.

December 17, 2018 S2

STEVE DYKE: We’re very disciplined about only participating in processes where we have a high degree of conviction about the opportunity due to prior industry experience, unique outside resources or another distinctive angle. Without these things, it’s difficult to distinguish yourself to a seller outside of just paying the highest price, which can cause significant headwinds for the investment down the road.

AMY HELD: Large-scale acquisitions — like the acquisition of Folgers or our entry into the pet food category — have played a transformative role in Smucker’s growth. What is different for us today is that growth in our industry is predominantly coming from small, emerging food and beverage startups. Since making smart choices about “where to play” is a central tenet of our portfolio management strategy, the new competitive environment required us to refine and refocus our M&A playbook, particularly in early deal phases like target identification.

Specifically, we needed to cultivate stronger relationships with the startup and venture capital communities, broadening the M&A ecosystem in which we traditionally operated. We’re excited to launch a new partnership model reflecting this vision in the first half of 2019.

How much and what type of preparation should go into developing a sellers’ growth plan and projections?

MIKE MCMAHON: The seller’s growth plan is the most critical value driver for a business. Achieving a growth multiple is predicated on a business’ growth trajectory and the ability to underpin its financial projections.

Typically, the seller will work closely with its M&A advisor to pressure test the forecast to ensure it incorporates management’s growth strategies and any capital investment required to execute its plan. The projections in the model must be achievable and credible. Missing forecast during the process almost always results in value degradation.

STEVE DYKE: Sellers should prepare projections well in advance of selling their business. A highquality strategic growth plan should be credible and defensible.

Buyers will spend a lot time dissecting it to pressure test the various assumptions that went into building the projections. It’s important that the growth plan is management’s own forecast, and not the intermediary’s. continued on next page

12/13/18 10:20 AM

S3 December 17, 2018

Continued from Previous PAge

Nothing is worse than being told, “Those aren’t our numbers. Our bankers put those projections together.”

However, a good intermediary can help create the plan and present it in a standardized format that is easily understood by buyers.

m&A

ROuNDTABLE DISCuSSION

‘‘

Many companies now have a venture or incubator team to partner and nurture startup businesses in lieu of acquiring. Are you participating in this way and if so, what benefits have you seen or observed?

Finding tangible ways to be a value-added partner post-closing is often worth more than the last dollar of the purchase price.”

— STEVE DYKE, Managing Partner, Align Capital Partners

What debt multiples are you seeing? Do you think this will continue?

MIKE MCMAHON: The debt financing markets continue to be robust and very competitive in terms of leverage multiples, pricing and terms. Given the availability of capital, we have been in a period of rising debt multiples for some time, which continue to remain significantly higher than historical averages.

In addition, given the level of competition, pricing and terms are very favorable to companies and equity investors. As we look to 2019, the economy continues to keep pace, and the availability of capital will likely offset any movements by the Fed, which should keep debt multiples at strong levels in the near-term.

Beyond just price, what are the top three ways private equity firms can differentiate themselves in a process?

STEVE DYKE: First and foremost, buyers need to take the time to understand ownership’s and management’s objectives for selling the business and then develop a deal structure and growth plan for achieving those goals.

Examples may include tailoring equity incentive plans to drive outsized growth; expanding the shareholder base to create wealth generation opportunities for key employees who otherwise wouldn’t have the opportunity; or helping plan and execute a buy-and-build strategy.

It’s difficult to prevail in a process if you’re only bringing money to the table, as valuation is rarely a sellers only consideration. Sometimes, it’s not even the top priority.

Another differentiator is providing access to a toolkit of operating resources that can help management teams achieve their growth plans by accelerating investments in sales, marketing, operations or technology. Also, firms that can provide incremental capital and expertise to identify and close add-on acquisitions can help teams dramatically scale their businesses.

In the case of Align, our goal is to double or triple the size of our companies, while being a valueadded partner. Therefore, we make sure our management teams have the resources they need to accomplish that level of growth.

MIKE MCMAHON: In addition to valuation, certainty of close is a top

P018_P021_CL_20181217.indd 20

MEGAN MEHALKO: We have clients that have benefited from this approach.

In one case, our client was raising capital to finalize development of its product and obtain FDA clearance.

We identified a strategic partner and approached its development company.

The development company made a minority investment. The product was finished, received FDA approval, and because the initial investment by the development company gave the strategic partner more knowledge and comfort with the technology, product and team, that buyer was the successful acquirer in the end. This approach can create a partnership that benefits both parties.

priority for any seller. Processes are disruptive to any organization. The risk of conducting a process and going down the path with a single buyer and then ultimately not closing is unacceptable.

To increase certainty of close, private equity buyers can front-run more diligence earlier in the process, proceed without a financing contingency and minimize time to close.

Who should be brought into the seller’s inner circle, and what is the appropriate timing of disclosure?

MIKE MCMAHON: Irrespective of ownership structure, private or public, a seller is always challenged with determining the size of the inner circle within the organization and the timing of bringing individuals into the transaction process. Minimizing confidentiality leaks and disruption within the organization is a high priority. The seller also must balance these concerns by having a team in place that can gather the pertinent information required for marketing materials and buyer diligence, while building and articulating a compelling investment thesis for buyers to evaluate.

Sellers typically work closely with their M&A advisor to determine the scope of the group, including the rationale for inclusion, as well as the staging of bringing individuals into the inner circle.

At a minimum, the CEO/president and CFO-types are involved at the outset to kick off the preparation and data compilation phase of the process.

However, in many cases, sales and operations leaders are brought in to offer more substance and details pertaining to the growth strategy

and the key success factors that differentiate a business amongst its peers. As the process unfolds and qualified buyers enter into more substantive diligence, the CEO, CFO, vice president of marketing and vice president of operations represent the senior leadership that will execute on the strategic plan going forward.

STEVE DYKE: This is a very sellerspecific issue and depends on the culture of the business. Some sellers are very proactive and talk to employees in advance of launching a sale process. As a buyer, we like that as it demonstrates an open, collaborative culture.

Others prefer to keep things close to the vest and only tell a couple of people in the organization. While sometimes this can make sense, employees, customers and suppliers often find out anyway, so it’s typically better to control the message by informing interested parties up front.

If you don’t, the team will likely find out anyway. They often fear the worst-case scenario, which typically creates more angst than if the seller were upfront about the expected sale process from the beginning.

‘‘

What are the pros and cons of conducting a broad auction process versus a targeted process?

STEVE DYKE: A broad auction exposes the company to significantly more buyers, which might end up identifying a less obvious buyer.

However, broad auctions can be more burdensome for management teams, as there are more buyers to meet, questions to answer and information requests to fulfill. A broad process also places sensitive information in the hands of many more potential buyers, which may increase the chances of news about the contemplated sale reaching the marketplace sooner than the owners prefer.

MEGAN MEHALKO: A broad auction process can be very taxing on management, who are still trying to run a company during a sale process. If a broad auction is being run, it is important that advisors, management and stakeholders agree to very clear process parameters and responsibilities up front.

The burden should be on advisors to run interference, vet proposals and bidders, and distill the results of

We are seeing buyers being very aggressive on timelines to distinguish their bids.

While sellers are being aggressive on deal terms and indemnity exposure, buyers are willing to move fast, identifying areas of risk and focusing on those areas in due diligence.”

— MEGAN L. MEHALKO, Co-Chair, Corporate & Securities Practice Group, Benesch

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the process so that stakeholders can determine the best alternatives. A broad auction process can bring value in the nature of bidders that were not identified at the outset. Additional competition can also drive up values in an auction process.

MIKE MCMAHON: When contemplating a sale process, sellers must weigh the pros and cons of going out to a broad group of parties relative to conducting a more targeted approach.

Targeted processes are typically considered if there are identified parties with certain strategic angles that are motivated to aggressively pursue the business. Relative to a broad process, approaching a targeted group will reduce confidentiality leaks, minimize inefficiencies around educating non-strategic parties that are getting up the curve and can potentially streamline the timing to completing a transaction. Lastly, in a frothy M&A market, certain strategic buyers that have the ability to pay synergistic valuations are more likely to engage in a targeted process versus a broad, prescribed auction process.

Though broad processes increase sensitivity concerns and could take longer to reach a conclusion, the seller gains additional comfort that the process did not overlook any buyers and, in the end, maximized alternatives and ultimately valuation.

Selling shareholders, such as private equity groups, with external fiduciary obligations to investors often gravitate toward a controlled, broad auction process to ensure every stone was turned over to maximize the outcome.

What is the most critical piece of advice you share with management teams in advance of buyer visits?

MIKE MCMAHON: Though management teams are experts in their fields and have a deep understanding of their respective businesses, making a formal presentation to an interested party is often unnatural for them.

Often, their humility can prevent them from showcasing what they have done as a team to take the franchise from good to great.

Advisors spend significant time with teams in management presentation dress rehearsals to ensure the team’s passion and conviction in their business models and that strategic growth plans are conveyed to visiting buyers. It is perfectly appropriate to be proud of what you have accomplished and even more so to demonstrate enthusiasm about what lies ahead.

Management team commitment and conviction is a top selling point in any process. No matter how attractive a strategic plan looks on paper, the team has to demonstrate a commitment and ability to execute it.

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How does a buyer best position itself with the target’s key stakeholders?

AMY HELD: It is important to focus on the larger, strategic picture and not just getting the right price. We believe winning bidders act with unquestionable integrity at every step, convey a genuine passion for the target business and can articulate a compelling vision for the future grounded in meaningful market insights. It’s not always just about who can wire the most proceeds. For many sellers, it matters just as much — and sometimes more — to find the right home for their business, brands/products and employees.

MIKE MCMAHON: Every seller appreciates a buyer that is fully engaged during the process. From the first call from the investment banker describing

m&A

ROuNDTAbLE DISCuSSION

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‘‘

Management team commitment and conviction is a top selling point in any process. No matter how attractive a strategic plan looks on paper, the team has to demonstrate a commitment and ability to execute it.”

— MIKE MCMAHON, Group Head and Managing Director, KeyBanc Capital markets

the opportunity to later stage diligence, the level of engagement must continue to rise. The best buyers typically demonstrate engagement through hours of substantive independent preparation to understand the target’s business.

Sellers are always evaluating a particular buyer’s line of questioning, whether they understand what drives the business and lastly, but most importantly, the interest level of the decision-maker on the buyer’s team.

If a decision-maker is absent or

disengaged in a process, sellers can feel slighted and lose confidence in the buyer’s ability to consummate a transaction.

Moreover, it sends a signal as to their business’ importance to a financial portfolio or broader organization going forward. By demonstrating a commitment to working diligently and thoughtfully through their evaluation process, effective buyers not only can differentiate themselves in the short term, but they are

more likely to establish a longstanding bond with the management team.

MEGAN MEHALKO: The nature of the stakeholders heavily influences how a buyer should position itself. A family owned business, interested in protecting its legacy and its employees, will have very different priorities from a seller interested in maximizing value and walking away. A buyer must understand the drivers of the seller’s decision and adjust its approach accordingly.

Sometimes, it requires months, even years, to build a relationship and trust with the stakeholders to position yourself as the right buyer for the company. In others, where the seller has decided to sell in a competitive auction process, it means the buyer needs to show up with the best bid, differentiated based on the priorities articulated by the seller, whether that bid reflects value, elimination of post-closing exposure or continued involvement of current management.

December 17, 2018 S4

How do you expect deal flow to change over the next year? What are you doing to address any anticipated changes?

STEVE DYKE: We don’t expect deal flow to change materially in 2019.

It’s still a really good time to sell a business due to the strong economy, lending environment and amount of capital needing to be deployed by private equity firms. Align will continue to focus on buying familyowned specialty manufacturing, distribution and business services companies and bringing a high degree of conviction and certainty of close to the processes where we have an angle and actively engage. If we do our job right, we expect to deploy as much capital in 2019 as we have in previous years.

Managing editor, custom and special projects: Amy Ann Stoessel, astoessel@crain.com Project editor: Kathy Ames Carr Graphic designer: Lisa Griffis For more information about custom publishing opportunities, please contact Amy Ann Stoessel.

I’m a Chief

Legal

Advisor.

You’re the one making executive decisions, I counsel executive decision makers.

You drive strategy and set goals.

I drive execution and protect your business interests in local, national and overseas arenas.

I’m a resource for creative solutions and the voice of reason in heated moments.

I advise companies in buying and selling, merging and divesting.

In exploring ventures together or breaking new ground on their own.

Whatever your critical issue or strategic goal, I put the resources you need in front of you, and strong advocates behind you.

I’m MEGAN MEHALKO. I’m on your team.

MY BENESCH MY TEAM > Co-Chair, Corporate & Securities Practice Group; Private Equity Practice Group; China Practice Group > Representing U.S.-based domestic and multinational corporations in plastics, rubber, specialty chemical, metals, industrial and manufacturing businesses. > Legal Services as Outside General Counsel and Projects Involving: Mergers and Acquisitions; Divestitures; Strategic Alliances; Distressed/Insolvent Acquisitions and Restructurings; and Corporate Governance Issues and Securities Law. > 216.363.4487 | mmehalko@beneschlaw.com

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PA G E 2 3

NEWSMAKERS OF THE YEAR

Mayor Dan Horrigan

Dr. Akram Boutros

By DAN SHINGLER dshingler@crain.com @DanShingler

It might seem as if Akron and Mayor Dan Horrigan spent a year figuring out how to tie up the city’s downtown traffic with construction, but don’t worry — for the most part, there hasn’t been enough downtown traffic to sustain a jam in recent years.

However, the city’s advocates say that 2018 has done a lot to change that, and the work going on in the city center today is proof of progress. Downtown, especially along Main Street, is bustling with projects meant to attract new residents, private employees and visitors to new amenities who just might want to hang out long enough to see the place on foot.

The city got an early boost to its efforts in March, when Horrigan announced Akron was being awarded an $8 million Transportation Investment Generating Economic Recovery grant from the U.S. Department of Transportation. That was on top of a similar $5 million grant the city received in 2016.

That money has largely been paying for the street work downtown over the past two years, including the Main Street Corridor project.

The core of today’s activity is a historic stretch of the street that's being redone with new streetscaping, bikeways and walkways, lighting and transit facilities. That corridor, stretching from East Mill Street south to East Cedar Street, runs past other places where Akron saw big progress this year, as well as existing attractions like Canal Park.

It passes the Civic Theater, which had a banner year itself. The 89-year-old downtown gothic edifice of entertainment received $5 million in new funding from area foundations this fall. That will be enough to not only complete its own ongoing renovations, but to build a new box office, an outdoor simulcast space and to convert an empty neighboring building into a new 250-person concert space.

Next door to the Civic is the city’s current

By LYDIA COUTRÉ lcoutre@crain.com @LydiaCoutre

main act, in terms of development: the Bowery Project, a stretch of six buildings along Main Street that were in danger of being torn down.

Throughout much of 2018, Dan DeHoff and other developers leading the project wrung their hands as they sought financing for the $42 million project — winning, losing and winning tax credits again along the way.

In November, the project announced it had the necessary financing to develop its approximately 100 apartments, nearly 50,000 square feet of mixed-use space and outdoor features meant to tie it to the Lock3 entertainment space while the Bowery further develops the Lock 4 site along the Ohio-Erie Canal.

New Jersey developer Tom Rybak announced in May that he had purchased the 210,000-square-foot, 11-story Law Building across the street from Bowery and the Civic. He said he’ll spend about $26 million converting it from office space into around 100 luxury apartments with mixed-use and retail space on the ground floor.

In June, the former ExxonMobil Advanced Elastomer Systems building, just south of Canal Park on Main Street, gained new life when

the Development Finance Authority of Summit County announced it would loan $580,000 to enable building owner and developer David Schipper to renovate its space for two new tenants: CommuniCare Health Services and OHM Advisors.

There’s more to come, as well.

Developer Tony Troppe is still converting the old United Building into a 71-room hotel, the BLU-Tique, on Main Street. He’s behind schedule, but work is ongoing.

And developer Joel Testa is also busy on a hotel project, converting a former 19-story Holiday Inn on Mill Street, just off Main, into more than 100 apartments he’s said will be on the market in 2019.

Not all of the city’s progress in 2018 was announcements or tiny gold shovels either — it also completed some major projects.

For one, Akron Children’s Hospital completed its Considine Building, marking the culmination of an $82 million investment.

Akron had a great year in 2018. If investors are right and the work downtown pays off as hoped, it could reap the rewards for decades to come.

FirstEnergy/Charles Jones

By SUE WALTON swalton@crain.com @SueWalton_Bolts

FirstEnergy Corp. celebrated what it called “its transition to a fully regulated utility” on Dec. 4, by having some of its executives ring the closing bell at the New York Stock Exchange.

While that might be a simple way to try to send a message, the Akron-based energy giant had a far from simple year.

After spending most of 2017 unsuccessfully trying to convince lawmakers and regulators that it needed subsidies to keep the struggling nuclear and coal plants of its FirstEnergy Solutions (FES) subsidiary operating, parent FirstEnergy in 2018 saw everything from a $2.5 billion investment infusion to the bankruptcy of nonregulated FES and the announced closing of its nuclear plants.

All the while, though, hope for a bailout hung in the air — and still does.

The year started quickly for FirstEnergy. In January, Elliott Management, a $34 billion New York hedge fund known for its unsubtle steering of its portfolio companies, bought into FirstEnergy, the company receiving a $2.5 million investment from Elliott and others.

What wasn’t disclosed is whether FirstEnergy invited Elliott or Elliott invited itself. But FirstEnergy knew it needed capital to address pending debts, and Elliott’s investment helped the company clean up its balance sheets.

What happened next wasn’t a surprise. With new capital in hand, FirstEnergy worked to move away from its struggling power-generation assets. In March, FES, its subsidiaries and FirstEnergy Nuclear Operating Co. filed for

P023_CL_20181217.indd 23

Chapter 11 bankruptcy.

“The Chapter 11 filing represents our best path forward as we continue to pursue opportunities for restructuring, asset sales and legislative and regulatory relief,” said Donald R. Schneider, president of FirstEnergy Solutions, in a statement at the time of the filing.

Just days before, FES informed the Nuclear Regulatory Commission it intended to close its three nuclear power plants — Davis-Besse near

Toledo, Perry in Lake County and Beaver Valley Station in Shippingport, Pa. — within three years, affecting 2,300 employees.

Yet in the same announcement, FES continued its plea for help.

“We call on elected officials in Ohio and Pennsylvania to consider policy solutions that would recognize the importance of these facilities to the employees and local economies in which they operate, and the unique role they play in providing reliable, zero-emission electric power for consumers in both states,” Don Moul, president of FES Generation Cos. and chief nuclear officer, said in a statement.

After a summer that saw about 500 employees accept buyouts from FirstEnergy in another cost-cutting move, a U.S. bankruptcy court judge approved a settlement between the parent company and FES, a move that will allow the court to start working on a reorganization plan for FES. Yet troubles loom as FES maneuvers through the sale of its retail business.

So, what’s next? FirstEnergy, led by CEO Charles Jones, is in the midst of a multiyear, multibillion-dollar investment in its distribution system — a smarter, more reliable grid will help generate guaranteed profits for the company. Now that it’s a regulated utility, the company gets a guaranteed return on all the money it spends on such investments, provided they are approved by state regulators such as the Public Utilities Commission of Ohio.

FES has said it will close its last coal plants in Ohio and Pennsylvania and has set closure dates for its three nuclear plants. Shutting down such facilities takes months, so as the company continues to beseech lawmakers and regulators for help, the clock is ticking.

2019 will certainly be anything but dull.

In a dramatic presentation in June, MetroHealth president and CEO Dr. Akram Boutros unveiled the design for the system’s new hospital: a sleek, modern, 11-story building surrounded by acres of green space.

It will be the centerpiece of an ambitious, nearly $1 billion transformation plan, using funds the system borrowed on its own credit.

“We could have built a good hospital, but good is not enough,” Boutros said in June. “Instead, we present to you a new Cleveland landmark that represents more than the future of hospital design. It represents the future of care for the great people who come to us. It is an iconic building that honors our community, our neighborhood, our neigbors. This is their future, too.”

As the leader of a public health system marching boldly into the future, Boutros consistently made the news throughout the year.

MetroHealth started out the year by opening small community hospitals in Cleveland Heights and Parma to treat patients with less complex conditions that require shorter stays.

Also early in the year, MetroHealth reported that new facilities, higher patient volumes and expanded access helped to propel the system’s finances in 2017 to unprecedented levels, continuing a trend of strong financial performances since Boutros joined the system. In the past five years, MetroHealth increased its operating revenue by 44.5% and its employees by 21%.

In March, the system announced a fiveyear campaign, “For All of Us,” with a goal of raising at least $100 million in philanthropic support for core aspects of its campus transformation. About a month later, it announced a “substantial leadership gift” of an undisclosed amount from Drs. Alfred F. Connors Jr. and Mildred Lam. In November, the Bank of America Charitable Foundation became the first lead corporate partner of the campaign with a $1 million anchor grant.

Toward the end of summer, a new law went into effect that enabled MetroHealth to open hospital facilities in eight counties outside of Cuyahoga. At the time, Boutros said the system was considering seven potential locations.

In October, MetroHealth acquired Recovery Resources, a community-based outpatient behavioral health services organization, in a move that leaders of both entities said would enable collaboration on behavioral health and addiction services.

It was the latest in MetroHealth’s relentless battle against the opioid epidemic. This year alone, the system pursued litigation against opioid drug manufacturers and marketers, launched a podcast on the topic and announced it had curbed opioid prescribing among its providers by 3 million pills over an 18-month period.

MetroHealth also opened a health center on the campus of Urban Community School, launched a clinic to use “food as medicine” and became the first health system in the nation to adopt the Open Table model in which volunteers commit to help families for a year.

MetroHealth will break ground on its new hospital early next year.

“The new hospital and its $1 billion investment will spark the revitalization of our West Side neighborhood,” Boutros said in June. “It will create work for thousands. And it will shepherd in a new era of state-of-the art care at our 181-year-old public hospital.”

12/13/18 11:13 AM

SPONSORED CONTENT

December 17, 2018

aSk ThE PROfESSiONal

Minimizing exposure to business fraud

Insights from a professional experienced in tax, valuation and forensic accounting

f

raud is an unfortunate reality in numerous companies and organizations. The instances are seemingly endless, from a bookkeeper’s swindling of cash, payment of personal expenses, bogus retail refunds and financial reporting fraud, to misuse of corporate funds for an executive’s financial gain. Causing significant financial losses to the company, investors and the economy, corporate fraud continues to be one of the FBI’s highest criminal priorities.

Bob Nemeth, principal of business valuation and tax at Apple Growth Partners, has spent the last two decades with the accounting and business advisory firm, providing tax, valuation and forensic services, a trifecta of offerings he says is unusual in the industry. As a forensic accountant and neutral financial intermediary, Nemeth helps privately-held companies in Northeast Ohio and beyond investigate possible fraud, quantify damages and recommend internal controls.

“It’s important for a business owner to work with someone who has a diversified skill set,” Nemeth says. “Fraud is often detected through tax and accounting records. We have been able to help many clients avoid litigation as a result of serving as a financial neutral in their dispute.”

While it is impossible to prevent all fraud, there are some ways to reduce exposure. Nemeth shares with Crain Content Studio — Cleveland his thoughts on how companies can safeguard their operations against a breach.

What are some of the red flags or main drivers of fraud?

A common warning sign is that a longtime employee insists on doing everything accounting- or bookkeepingrelated. This person rarely takes a vacation and refuses any help with the bookkeeping. What seems like a dedicated employee is actually someone who is trying to keep others from discovering a theft. The financial documents are often unorganized or missing.

It’s not uncommon for these people to be living beyond their means or have some significant outside stress, such as divorce, foreclosure, gambling debts, or drug or alcohol addiction. The employee steals to fund these problems.

Watch out for sudden, unexplained signs of wealth that don’t seem to match the employee’s income. Other times, the driving force may simply be an employee who feels they are not compensated fairly. Also, pay close

attention to employees who have unusually close relationships with certain vendors or customers.

Which types of businesses are especially susceptible to fraud?

Small businesses are especially vulnerable. The typical median loss for all businesses is about $130,000 per theft. For a small business, this number is closer to $200,000. A loss of this size can put many small companies out of business. These types of businesses generally have few employees handling the day-to-day financial activities of the company. By having only one or two employees responsible for the financial activities, it is much easier to hide a theft. In fact, most thefts go on for more than 16 months before being detected.

Lack of oversight by the owners who are usually busy dealing with

sales or production doesn’t help. Cash businesses are also easy targets.

concerned with the fair presentation of the financial statements.

What are some of the common elements of fraud schemes and typical behaviors of fraudsters?

have there been any state or federal tax law changes that have impacted a company’s exposure to fraud, and if so, how?

There are three elements of most fraud schemes: pressure, opportunity and rationalization. These are known as the fraud triangle.

Most fraudsters have some sort of external pressure that causes them stress and the need for cash. Living beyond one’s means and stacking up piles of credit card debt is a common situation.

The fraudster also needs the opportunity to commit the fraud. An office with a sole bookkeeper and no oversight is a recipe for disaster since stolen funds can be easily covered up.

The last element of rationalization is very important. Most people don’t get up each day with the intent on committing fraud. Many times, people rationalize a fraudulent act by telling themselves they deserve the money since they aren’t paid enough for their work. They tell themselves the theft is only a “loan” to get by this month.

They believe they will repay the money.

Rarely does that happen.

One area of the tax law that has changed relates to entertainment expenses. At one time, you could take a tax deduction for the cost of sporting events. Now, any expense related to entertainment, amusement or recreation is not deductible.

Golf and country club dues are not deductible. Companies now run the risk that employees will try to disguise these entertainment expenses as other types of legitimate expenses so that they can be reimbursed for the business expense or have the company claim a false tax deduction. Companies should update their accounting systems now to account for these changes so that they are not

reviewing hundreds, or even thousands, of receipts after the end of the year to see what is deductible or not.

how does your firm help clients determine if fraud has occurred within their organization, and how do you help address the breach?

At Apple Growth Partners, we have professionals trained in fraud and forensics. We are often brought in to review transactions when a company suspects fraud has occurred. We are able to quantify the suspected damages and prepare reports for litigation purposes, including testifying in court if needed.

We also help review current internal controls of the company’s accounting systems to help prevent fraud in the first place. This is known as our Fraud Risk Assessment. We can help make recommendations for improvement and help with implementation of additional internal controls.

What are some of the ways in which a company can minimize instances of fraud?

The company has to set the tone that fraud or theft, no matter how small, will not be tolerated. I have been involved in cases where the company did not want to prosecute the fraudster due to fear of bad publicity. Most often, the former employee will commit a similar fraud at another business.

Even if the next employer calls for a reference, the former company may not reveal what happened for fear of being sued by the former employee.

Unfortunately, I have been involved in many cases where companies simply don’t pay attention to what is going on. Increasing internal controls is one of the best ways to minimize fraud.

Many businesses do not emphasize this enough.

Other ways to reduce fraud include establishing reporting hot lines, conducting thorough background checks of employees and conducting surprise internal audits. Most businesses think that if they have an annual financial statement audit conducted by their CPA firm that they are protected. The financial statement audit is not designed to find fraud. Auditors are more

ARE YOUR EMPLOYEES

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Bob Nemeth, CPA/ABV, CVA, CDFA, CFE Principal Certified Fraud Examiner

fraud@applegrowth.com applegrowth.com/fraud AKRON | CANTON | CLEVELAND | KENT

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This advertising-supported section is produced by Crain Content Studio-Cleveland, the marketing storytelling arm of Crain’s Cleveland Business. The Crain’s Cleveland Business newsroom is not involved in creating Crain Content Studio-Cleveland content.

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CRAIN’S CLEVELAND BUSINESS

SOURCE LUNCH

Kirk J. Stonebrook

Director of strategic growth, K-J Fasteners Inc. Lately, most of Kirk J. Stonebrook’s time is spent at K-J Fasteners in Eastlake, a small fastener distributor and machine shop that was started by Stonebrook’s father in the mid-1970s. ¶ He’s back at the family owned company after a break that saw him working in advancement for Lake Catholic High School. Stonebrook stays busy, as he’s also executive director of the Lake County Development Council and project coordinator for the Lake County YMCA Dream House program, which raffles off a house every year. ¶ His current goal at K-J Fasteners is helping the company grow. It’s diversified over time from a focus on capital equipment to serve medical, defense and more. ¶ “So we’ve put 6-inch-by-10-foot-long bolts into bridges, we’ve put tiny little screws into the head of torpedoes, and everything in between,” Stonebrook said.

— Rachel Abbey McCafferty

Five things Usual picks at the Cabin Any of the risottos and the salmon

Favorite Northeast Ohio spots L’Albatros and Brewnuts

Memorable local theater “The Lion King” and “Once”

What inspires him The entrepreneurial spirit

Concerts to remember Springsteen and Soul Coughing

Lunch spot The Cabin of Willowick 28810 Lakeshore Blvd., Willowick 440-943-5195

The meal One roasted beet salad and one mixed greens salad, both with water

The vibe The Cabin of Willowick lives up to its name with a rustic decor, but don’t expect the food to be old-fashioned.

Options include sushi and plenty of vegan, vegetarian and gluten-free choices.

The bill $16.12, plus tip

HEMP

CONTINUED FROM PAGE 4

The 2018 Farm Bill means hemp will “explode into huge amounts of interest,” Haggerty said.

“Those 25,000 acres will go into hundreds of thousands, if not millions,” he said.

But like Kepford, Haggerty points out that excitement about cashing in on hemp — which has a laundry list of uses ranging from CBD extracts to cosmetics, construction materials, paper and clothing — is balanced against a cloud of uncertainty.

Haggerty and Haren are working with state lawmakers to draft statutes for a state-regulated hemp industry.

That’s something even more legally complicated in the Buckeye State, where medical marijuana is tightly controlled via a rigorous licensing process for growers, processors, testers and retailers. The state has been

P026_CL_20181217.indd 26

It sounds like the company has evolved a lot in the years since it’s been founded.

You have to.

Why is that important to manufacturers in particular?

Well, I think to be a little bit more recession-proof. Any time you think you’re good at something, you want to share it with more people. And I think we were wise in looking for increased applications. Then, you start reaching beyond your 100-mile radius that you send a salesman out to, so we started doing more national marketing. ... We’re doing less and less standard fasteners.

They’re a down-and-dirty commodity that is strictly price-driven. We’re looking for opportunities where we can add more value, problem-solve: application-driven opportunities.

Tell me about all the other things you do.

Well, I’m executive director for the Lake County Development Council, which is a small nonprofit made up of really engaged, impactful, local stakeholders. ... I’m a board member, past chair of the Lake County YMCA board of directors. They asked me, because of my flipping experience, if I would consider being the Dream House project coordinator.

Tell me about the Dream House.

Last year was our 25th house. We build them all over Lake County. We build amazing — it’s sort of like St. Jude, only ours tends to be more decorated inside. So it’s all designer-driven. It’s meant to be a lookie-see, take-pictures, get-ideas, go-to-HomeGoods-and-do-a-simplerversion-of-it kind of thing. We had

applying federal rules to hemp, classifying it as marijuana.

That makes hemp effectively illegal to grow and sell under current state laws, which don’t automatically change along with federal legalization.

Even hemp-derived CBD is only allowed to be sold legally in Ohio through licensed dispensaries that are opening in the coming weeks (the state hasn’t really devoted resources to enforcing that, creating additional confusion in the public about which retailers are allowed to sell CBD products).

“It’s not clear yet how that conflict between a federal hemp program, where the Department of Agriculture can step in and license folks themselves, works in a state with no hemp program,” Haren noted.

“All this cries out for Ohio to have its own legislation,” Haggerty added.

“But there is real momentum in the general assembly to enact legislation that will legalize and regulate hemp at the state level,” Haren said.

50,000 people come through the house this past year. We sold a million-two in tickets.

Sold $1.2 million in tickets?

Yeah. $1.2 million in tickets. So that’s kind of a cool thing that I get to do. I get paid for it, but really the most impactful thing that I can do for the Y that I believe in. We netted $400,000 for scholarships, community-based programs that help all age groups, all races, all socio-economic demographics. So that takes up about a third of my time. Maybe 10% of my time with the LCDC. And more than half now with the family business. And that’s the part that’s going to grow, frankly.

How do you decide what you want to dedicate some of your time to?

You’ve gotten the chance to do a lot of interesting things, it sounds like.

Well, I’ve been offered things. I guess that’s nice. The same time I was offered the LCDC and the YMCA job, Learning about Business, which is a Lake County nonprofit that scholarships high school students to spend a week at Lake Erie College — and that’s an intense business boot camp, frankly — I was the executive director for that. And that was 20 hours a week and it was all aspects, from running the camp to getting funding and everything.

And so I really loved that gig, but when I decided to come back to the family business, something had to give.

Now like you said, these are paid — it’s not like you’re volunteering, necessarily. But there’s an

“And I’m really hopeful that sometime next year we will have a committed hemp program in Ohio.”

Many hope those laws could be in place in time for a spring planting season.

“We want consistency between state and federal laws because confusion is bad for business,” Haren said.

‘Nothing as big as this’ Growing hemp for CBD products probably is the most lucrative endeavor right now.

However, hemp legalization stands to create a slew of new industries and support a variety of business sectors.

Just as with the medical marijuana program, in addition to hemp growers, there will also need to be testers, processors and distributors. The industry should even create new demand for all the products and machinery used along a hemp supply chain.

“This is absolutely a big deal,” said

element of giving back to these.

Why is that important to you? ... I feel like volunteering is a way of life. You can’t just turn it off and on like a switch, you know? It was usually faith-based, only because it’s the normal things you do: It’s your church, it’s your kid’s school. So everything from starting an advisory board at my kid’s grade school to simply calling bingo and everything in between. My wife and I have always been that kind of people. ... Because of my experience at Lake Catholic, I really took it upon myself to change the culture of philanthropy at the Y. It was still a little archaic. And so, just to get a little more sophisticated in how we identify and engage donors. And so that involved mostly the annual fund, and I helped them start the capital campaign that we’re currently in the middle of, because I had to do one of those at Lake Catholic. So it was a really good fit for me. It was maybe corny, but it was family, fitness and faith. So the Y kind of met my passions in life. And the other things were all same thing.

Even though they were paid jobs, I really studied how many people are they affecting. Obviously, that Learning about Business thing was so cool to wrap up my work in a school, all my years as a coach and as a businessman, to be able to do that for high school kids, and they amazed me with their aptitude for consuming business knowledge and stuff. I got to pick and choose a little bit. I did some filtering in the last three years — some things I left behind and some things I’m still doing. But they also fall into my passions. Some people might be in a bowling league. I do the Y Dream House.

“We want consistency between state and federal laws because confusion is bad for business.”

— Tom Haren, Frantz Ward’s cannabis law and policy group

Austin Briggs, founder and CEO of the Cleveland School of Cannabis in Independence, one of just two state-approved cannabis career schools in the country. “There’s nothing as big as this that’s happened yet in the cannabis industry.”

Briggs’ school, which is adding a branch in Columbus, has been training workers for the medical marijuana industry, but it teaches about cannabis across the board, which obviously includes marijuana and hemp. The school could see a spike in enrollment as a hemp industry comes together.

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That could also help it garner national accreditation, something that’s been out of the school’s reach because of cannabis’ federal prohibition. Doing so could open up the school for federal workforce grants for which it isn’t eligible today.

“The Farm Bill should negate all of that because industrial hemp is cannabis, too,” Briggs asserted.

Nixing federal prohibitions could open up the hemp industry for large corporations to funnel capital toward hemp.

Those corporations most likely will do just that, to position themselves in expectation that federal legalization of hemp could foreshadow federal legalization of marijuana.

While hemp legalization feels like a step in that direction, marijuana legalization is still likely a few years away.

“I do think this is a huge step forward,” Haggerty said, “but I wouldn’t see the federal government taking another big step in, say, the next two years.”

12/14/18 3:18 PM

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