Harbor View's 2023 Annual Report - Building for the Future

Building for the Future

2023 Annual Report

A LETTER FROM OUR PARTNERS

BUY-SIDE ADVISORY SPOTLIGHT

VERTICAL SPOTLIGHT: B2B

TECHNOLOGY & SERVICES

THREE MEGA TRENDS

PEOPLE & EVENTS

WALL STREET IN THE 904

COMMUNITY SUPPORT

A Letter from Our Partners

The 2023 year was a quiet one in the M&A markets, as the macro environment stabilized following the disruptive changes of 2022.

After several years of significant growth and change at Harbor View, we too took a pause from that growth. We welcomed a new analyst to our investment banking team with the arrival of Andrew Moore. We also finalized our 2024 analyst class with three new additions from our stellar 2023 summer intern class.

In a quiet M&A market, access to deal flow is at a premium. As a result, our buy-side practice has experienced strong demand. Buy-side advisory has always been an important part of our service offering, so we have been pleased to partner with a number of new private equity and strategic partners, as we continue to grow that practice.

Our thought leadership content this year focused on some important megatrends that we highlight in the following pages, with a spotlight on sustainability and changing demographics.

We continue to be proud to play a role in supporting important community organizations, we are thrilled with the continued growth and development of our outstanding team, and we are gratified to be able to deliver excellent outcomes for our clients at critical moments in the life of their business.

As always, we thank our clients and friends for the continued support and partnership.

Carolyn Mathis, Partner

John Mathis, Partner

Michelle McCullough, Partner

Buy-side Advisory Spotlight

The rapid pickup in new Private Equity Buy-side engagements caught us a bit by surprise this year. PE sponsors are keen to make up for lost time from a tough 2022-2023 M&A market. Our buy-side approach provides a rapid response team to find, engage and execute acquisitions. Buy-side now represents more than half of our firm.

Harbor View’s buy-side practice has always been an important part of client solutions since our founding 16 years ago. We primarily serve PE firms and their portfolio companies seeking to accelerate growth and innovation through programmatic M&A. Our body of work includes a diverse range of over 50 niche markets ranging from Insurance Distribution, Revenue Cycle Management, Wellness – Aesthetic Care, Sales Enablement and many types of Industrial Service

We approach buy-side as the intersection of management consulting and investment banking. Our teams work intimately with the portfolio company’s leadership and PE team to develop an actionable target list, where the power of the combination is articulated in a compelling way to targets. We consistently achieve 30%+ response rates to our outreach – often hearing: “I get a lot of inbounds, but yours stood out”. We then collaboratively help build the business cases – with guidance on valuation, market and target company readouts, and inputs to the PE team’s investment committee needs. And, as directed, work with the portfolio company team to diligence the target to close.

Over the years, we’ve been able to narrow down our strategy and adjust the tech and tools used in everyday processes. We continue to evolve and find ways to best serve our clients, allowing them to maintain a market-leading position in their industry.

SITUATION: Our Private Equity client wanted to expand their portfolio company’s offerings and geographic market presence with a growth-through-acquisition strategy, although they lacked the bandwidth to source and diligence targets. Moreover, the portfolio company’s leadership was skeptical that any new, viable targets could be found in this specialized niche market – particularly outside of North America.

CHALLENGE:

The global grocery technology market was new to the Harbor View team. We needed to collaborate with our client’s team to narrow our funnel, engage with actionable targets and move expeditiously to acquisition proposals. Additionally, our client’s team had limited bandwidth for M&A. Harbor View needed to play a more active role in diligence: managing third parties, organizing internal functions, and providing perspective to negotiations where appropriate.

OUTCOME:

We were able to leverage Harbor View’s Industrial, Consumer, and technology expertise to quickly understand the industry landscape and identify potential targets. We engaged a uniquely qualified European target, based in Sweden. While the target’s founders were engaged in the combination’s potential, their investors were reluctant and initially held out for a well-above-market premium valuation. As expected, our client’s CEO/CFO took the lead in negotiating with Harbor View playing a facilitator and consular/challenger role in the discussions. Due to client bandwidth constraints, our role expanded from simply sourcing to full execution support through transaction negotiation, structuring, diligence, and closing. Despite the target Board’s reluctance and push for a formal sell-side process – the target’s leadership was convinced that the power of this combination outweighed the alternatives. Together, the team overcame the challenges of a three-country transaction to get a successful transaction completed, within valuation expectations, to terms and timing that met expectations.

IN SUMMARY:

Harbor View was retained by a U.S.-based Private Equity client to help execute a growth through acquisition strategy for their Canadian portfolio company that operates in the GroceryTech/fresh food inventory management & sustainability space. Food waste management is an emerging and highly fragmented industry undergoing unpredictable regulatory shifts & innovations.

Our client’s portfolio company aimed to expand their product offerings and total addressable market (TAM) through acquisitions in the U.S. or Europe. In Europe, ESG initiatives and food waste management regulations are estimated to be more advanced.

A uniquely positioned Swedish target was identified for the potential synergies and cultural fit. The Harbor View team worked persistently with all parties to develop a compelling business case to overcome the target’s initial reluctance. The combination provided a path for more rapid expansion for both entities. The turning point in the transaction was when the target’s founders were successful (with our influence) in rejecting their investor’s insistence to conduct a sell-side process and/or raise additional capital and accepted a more reasonable valuation and terms.

Our team at Harbor View lead our client and their first add-on acquisition to a successful outcome. As a result of our collaboration in engaging, negotiating and due diligence, our client completed a coveted transaction, at a market multiple well below the target investor’s starting point. Post-close, the combination is off to a rapid start.

Vertical Spotlight

Industry Focus: B2B Technology & Services

Technology is rapidly changing the way companies manage human capital, engage in commerce, outsource critical functions and transform operations. At Harbor View Advisors, we have been at the leading edge of this change, helping to navigate transactions for companies in the B2B sector. Our experience ranges from Vertical SaaS to Human Capital Management and Sales & Marketing Solutions, Outsourced Professional Services, Staffing & Recruiting and IT Services. Our clients provide solutions across the B2B spectrum and deliver their offerings through SaaS or tech-enabled service models.

“Digital transformation is forcing companies to reconsider their business models – ‘What technologies should we adopt?’ … ‘Where can we leverage outsourced services’? This is creating both opportunities – and a fair amount of anxiety, as executives fear falling behind the market in terms of service or profitability.

Priorities are shifting at internal strategy meetings, and elevated M&A chatter continues as companies consider either taking on a financial partner to support evolution and growth or joining forces with a more scaled, better-capitalized company in their industry.

Given our focus on core areas of the enterprise, HVA is at the heart of the conversation – we have a breadth of perspective across B2B and are well-positioned to help clients navigate what’s next

-Jonathan Hollis, Director

Three Mega Treads

1. DEMOGRAPHICS

As Baby Boomers retire and Millennials anticipate limited support from current social programs, there is a shift in investment behavior towards earlier and more aggressive strategies. This change is creating opportunities in the retirement industry, as both generations seek products and services to address their evolving needs. Policymakers are implementing measures like mandatory auto-enrollment and cybersecurity requirements to bridge the Retirement Gap, leading to new avenues for product development and technological integration. To remain competitive, companies in the industry are focusing on scaling, digitizing, and expanding their capabilities.

In our recent conversations in these markets, we have seen one of two strategies in play. The first, a horizontal strategy where players are trying to capture the entirety of the wealth cycle or a vertical strategy, where players are creating specializations within a sector of the industry. Either way, strategies are in play to maximize investment in the changing landscape.

This mega trend has also affected those in the labor force. As the Baby Boomers continue entering retirement, a large population of skilled knowledge workers are exiting the labor market. This in combination with low fertility rates has resulted in stagnate labor market growth. Thus, companies will need to navigate the challenge of doing more with less man-power to reach productivity goals in the long term. In response, innovations have taken place within the human capital management markets, creating ways to engage the underutilized labor markets, maximize the current workfaorce and drive productivity.

This shift has brought with it new innovative technologies fueled by eager investors. For example, AI has taken hold of many industries, including the HR Tech space, but there has also been a rise in no-code and low-code tech. This has allowed companies access to these technologies without having to invest entirely into the coding space.

Acquired by

2. SUSTAINABILITY

in recent years, sustainability considerations have emerged as a significant factor shaping mergers and acquisitions (M&A) strategies across industries. With a growing global focus on environmental, social, and governance (ESG) factors, companies are increasingly integrating sustainability goals into their business operations.

Moreover, regulatory changes and government initiatives aimed at promoting sustainability have further influenced M&A decisions. Companies engaging in mergers may assess potential regulatory risks and opportunities associated with environmental and social responsibilities, ensuring compliance with evolving standards. In some cases, M&A activities are driven by the need to adapt to new regulations or to position the combined entity as a leader in sustainable practices, thereby gaining a competitive advantage in markets that increasingly prioritize ESG considerations.

This theme was particularly relevant with two of our recent opportunities. The acquisition of Complete Recycling Solutions by Terracycle marks the growth and interest within the recycling sector.

Moreover, the cross-border acquisition of WhyWaste by Invafresh was a unique opportunity within the sustainable grocery space.

3. OUTSOURCED BUSINESS SERVICES

Fractional leadership and outsourced services have proliferated. Companies are turning to subject matter experts to add value and capacity across the enterprise. Outsourced technology development or call center solutions have been mainstays of business process outsourcing; however, there is increasing demand for and consolidation among solutions adding value across the C-suite.

Within the office of the CFO, outsourced accounting and finance teams can add strategic expertise to improve operating visibility and plan for growth. Supply chain and manufacturing subject matter experts create value by optimizing processes, operating models and technology solutions. Suites serving the Chief Revenue Officer create and execute marketing strategies, generate leads and provide visibility into the sales funnel.

M&A activity is particularly active among companies serving private equity and venture capital backed companies. Institutionally backed companies must invest for growth throughout economic cycles given typical 3–5-year timelines to return money to investors. Delivering value within one investment may lead to business with others in the portfolio. Serving the private equity channel results in more revenue visibility and a greater “one to many” effect than other business development strategies.

Acquired

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People & Events TEAM HIGHLIGHTS

2023 SUMMER INTERNS ACCEPTED POSITIONS TO JOIN THE HVA TEAM IN 2024

A CORNERSTONE TO OUR TEAM RETIRES

For 15 years, Lori has been the first person anyone would see upon entering our office – and she was always welcoming, positive and ready to help. She will be missed as a big part of the heart and soul of our firm. Lori is that unique combination of work ethic and professionalism all wrapped in a personality of sunshine and positivity. We have been blessed by her contribution to our firm, its people, and our clients, and all who have crossed her path. She has been there on late night deadlines, on early morning meetings and even for an all-nighter that supported our charity fund-raising for a 100 mile ultra-marathon! Always with a smile, grace and good natured patience as we strive to serve our clients and community. Lori is our rock. Thankfully, she returns for visits now and then to keep us on our toes.

Lori, we will miss you so much! We wish you the best with your next endeavors –the Harbor View family is better because of you

Aidan Moran Carson Lubin

Isabel Alliance

Margaret McCormick Director

Celebrated 10 years at HVA

Nick Mignone Senior Associate Celebrated 5 years at HVA

Andrew Moore Analyst Joined the HVA team in Fall of 2023

EVENT SHOWCASE

In 2024, our team attended a variety of conferences across the country and beyond. We focused a lot on internal growth – investing in both individuals’ skill sets and our sector expertise.

Our Consumer practice lead, Anthony Sehnaoui, attended IPEM Paris in September. The International Private Equity Market (IPEM) brings together the PE ecosystem and a variety of practitioners in M&A.

The American Retirement Association hosts a variety of conferences throughout the year, and this year our Financial Services team attended both the National Association of Plan Advisors (NAPA) 401(k) Conference and the American Society of Pension Professionals & Actuaries (ASPPA) Annual Conference.

Our B2B Tech & Services team attended HRTech in October. Every year we attend to connect with leaders from around the globe in HR and IT.

Our Industrials team attended the Corporate Growth Conference in November. The event is designed for operators and investors across the environmental services industry and provides market segment insights and opportunities to connect.

Our Associates traveled to Washington D.C. for a Training in the Street course. Training in the Street provides global finance and business training courses, and helped our team brush up and expand upon their existing technical skillset.

Alex, our Marketing Manager, traveled to Boston for HubSpot’s Annual INBOUND conference. The conference provided in depth training sessions on HubSpot’s CRM & Marketing software, and covered the practical use of AI and the gradual integration of it in their product offerings.

FIRM AWARDS

Wall Street in the 904

Our people are what make Harbor View successful. We want to serve our clients well and that means caring for our team. For us, collaboration is more than just a buzzword; it’s the secret that elevates our services and makes the sum of our work greater than the individual parts.

“I began my career at Harbor View as a Summer Intern and now serve as an Associate on our Industrials team while co-leading our Internship recruitment and program. I have benefited tremendously from the ability to grow into my role while also being given the opportunity to expand my responsibilities and further impact the future of the firm. Harbor View has a special culture that has continuously challenged me to learn, step into new positions to lead within the team, and develop a rewarding career. I’m grateful for the opportunity to build a thriving career in a place that I love.

-Suzi Felix, Associate

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Enjoy our Wall Street in the 904 HVA storypopcorn optional.

We’re Proud to Support

Our clients span the country, but we also pay attention to what’s important at home. Harbor View is dedicated to building a vibrant, inclusive business community in Jacksonville. Whether through sponsoring events, helping new grads, or serving on boards, we strive to give back and get involved.