How Do You Define Ordinary Course of Business?

from International Fiber Journal / Vol. 2

ITMA 2023 Exhibition Space Fully Booked

By Len LaPorta Managing Director of Investment

Banking, Wiley Bros.-Aintree Capital, LLC

Len LaPorta is a managing director of Investment Banking at Wiley Bros.-Aintree Capital, LLC – a 75-year-old firm, located in Nashville, TN, focused on investment brokerage and underwriting municipal bonds for utility districts in the state of Tennessee. Len brings to the Firm experience in crossborder M&A transactions between USA and Europe, advises business owners on sell-side and buy-side transactions, capital advisory, and valuations. Len is a graduate of the U.S. Naval Academy with MBA from Boston College and a veteran of the U.S. Navy. He is also a member of INDA’s non-woven Technical Advisory Board. llaporta@wileybros.com or (615) 782-4107.

As March Madness of bank rescues continues across the financial community, the impact on the business community is far from understood. This unexpected March Madness just added another business obstacle to the existing and challenging global headwinds of 2023.

What is considered “ordinary” in 2023?

Let’s look at one example. The business owner walks down the hall to congratulate the new electronic technician for passing her licensing exam. This owner is “old school” and understands that a firm handshake, heartfelt congratulations and providing a $250 bonus leads to building a trusting and loyal business culture. Over the course of the year, nearly 50 employees are congratulated in a similar manner (the award differs among recipients) and everyone’s W-2 reflects this personal touch and generosity of the owner.

Many of you believe in different motivational practices for your employees and perhaps some subscribe to the practice utilized in this example. It is the responsibility of your M&A banker to understand your culture, to listen to your method and to relay these key pieces of information in discussions with the potential buyers of your business.

Continuing with our example. It turns out that the business owner adopted this motivational practice over a decade ago and his method has long since become entrenched in the culture and ultimately the success of the business. The employees have no idea when they will be rewarded, but they know good work does not go unnoticed and therefore there is no retention issue at this firm. This is simply another part of the overall benefits package.

In fact, this model was so successful, the new buyer “adopted” the business practice.

Would you consider this “ordinary course of business”? Maybe you would and maybe you would not, but I am certain you have some of your own unique touches, within your “ordinary course of business” that make your business and employees thrive.

Purchase Agreement – Ensuring Ordinary Course of Business Remains

The Buyer’s legal team will ensure the section in the Purchase Agreement (absence of certain changes and events) will protect and enforce that your company’s core and cultural business practices will re- main in place following the closing transaction. A typical definition is below:

Since the date of the Balance Sheet, Seller has conducted its business only in the ordinary course of business and there has not been any:

(a) change in the identity of Seller’s equity owners or the proportion of shares in Seller owned by them, grant of any option or right to purchase shares of Seller or issuance of any security convertible into such shares;

(b) amendment to the Governing Documents of Seller;

(c) payment (except in the ordinary course of business) or increase by Seller of any bonuses, salaries or other compensation to any current or former shareholder, director, officer, general partner, limited partner or employee or entry into any employment, severance or similar Contract with any current or former director, officer or employee;

(d) adoption of, termination of, amendment to or increase in the payments to or benefits under, any Employee Plan or grant of any equity or equitybased awards;

(e) damage to or destruction or loss of any Asset, whether or not covered by insurance;

(f) entry into, termination of or receipt of notice of termination of (i) any license, distributorship, dealer, sales representative, joint venture, credit or similar Contract to which Seller is a party, or (ii) any other Contract or transaction involving a total remaining commitment by Seller of at least $50,000;

(g) sale (other than sales of Inventories in the ordinary course of business), lease or other disposition of any Asset or property of Seller (including the Intellectual Property Assets) or the creation of any Encumbrance on any Asset;

(h) cancellation or waiver of any claims or other rights with a value to Seller in excess of $50,000;

(i) indication by any customer or supplier of an intention to discontinue or change the terms of its relationship with Seller;

(j) change in the financial accounting methods used by Seller;

(k) entry into any loan arrangement, credit facility or other indebtedness by Seller;

(l) entry into any guarantee, indemnity or other agreement to secure any obligation of a third party by Seller;

(m) waiver or compromise of any indebtedness of Seller;

(n) (i) election (other than in a manner consistent with the past practice of Seller) or rescission of or modification of any election, or change in accounting method, by or with respect to Seller, the Assets or the Business relating to Taxes, (ii) closing agreement (pursuant to Code Section 7121 or any similar provision of state, local or foreign law) entered into with respect to Seller, the Assets or the Business (iii) amended, refiled or otherwise modified Tax Return filed by or with respect to Seller, the Assets or the Business; or

(o) Contract by Seller to do any of the foregoing.

Closing the M&A Transaction in 2023 Among Current Economic Challenges

The Chicago Board Options Exchange’s Volatility Index (VIX) measures market expectation of nearterm volatility conveyed by stock index option prices. It signals the level of fear or stress in the stock market and is widely known as the “Fear Index.”

The higher the VIX, the greater the level of fear and uncertainty in the market. Note the March 2020 levels when the VIX topped out around 82.

Keep an eye on this index to gauge volatility in the markets that could impact your transaction.

Good luck closing your transaction!

This article has been prepared solely for informational purpose. This article does not constitute an offer, or the solicitation of an offer, to buy or sell any securities or other financial product, to participate in any transaction or to provide any investment banking or other services, and should not be deemed to be a commitment or undertaking of any kind on the part of Wiley Bros. –Aintree Capital, LLC (“WBAC”) or any of its affiliates to underwrite, place or purchase securities or to provide any debt or equity financing or to participate in any transaction, or a recommendation to buy or sell any securities, to make any investment or to participate in any transaction or trading strategy. Any views presented in this article are solely those of the author and do not necessarily represent those of WBAC. While the information contained in this commentary is believed to be reliable, no representation or warranty, whether expressed or implied, is made by WBAC, and no liability or responsibility is accepted by WBAC or its affiliates as to the accuracy of the article. Prior to making any investment or participating in any transaction, you should consult, to the extent necessary, your own independent legal, tax, accounting, and other professional advisors to ensure that any transaction or investment is suitable for you in the light of your financial capacity and objectives. This article has not been prepared with a view toward public disclosure under applicable securities laws or otherwise.

RadiciGroup Launches 100% Naturally Sourced Yarn

Biofeel ® Eleven is a naturalsourced yarn born of a story that begins in India. In Hindi, “Eranda” is a small bean from which the perfect oil is extracted for the biopolymer from which everything begins. And it is castor oil that is the source of these new 100% sustainable yarns, which can be used for fabrics and fine garments in many sectors, from fashion to sports, from automotive to home textiles.

RadiciGroup, the only European producer of this material, has chosen the “Performance days” trade fair that took place in Munich in March to unveil this yarn with excellent technical and environmental performance.

Today, 80% of the world’s castor oil plantations are in India, particularly in the Gujarat region, due to its favorable climatic conditions. In this area, local people can earn an additional income by cultivating semi-arid land that does not compete with food production, and by applying the skills they have acquired over time to this work. Over the years, thanks to research, development and innovation in the value chain, the seeds from which the oil is produced have been selected and certified to ensure the finest quality, also in terms of end uses.

Castor beans contain around 45% oil, rich in ricinolein, from which the bio-polymer polyamide 11 is derived. This is the polymer RadiciGroup uses for its Biofeel® Eleven yarn. What remains after the first pressing is a highly effective bio-fertiliser that is returned to the soil. In short, a true example of circularity and “zero waste.” www.radicigroup.com

Cone Denim Establishes a Certified Supply Chain for Recycled Cotton in Mexico

Cone Denim® has established a certified supply chain for recycled cotton in Mexico. The company’s Recycled Claim Standard (RCS) certification now includes a closed-loop process for recycled cotton, providing customers with verification and documentation of recycled cotton used in the manufacturing of Cone Denim fabrics in the Western Hemisphere.

“While both of our mills in Mexico are already RCS certified for fabrics, we went a step further in having our fiber supplier certified,” said Cone Denim President Steve Maggard.

Cone Denim identified and engaged with a third-party supplier in Mexico to certify their process for recycled cotton. The supplier was required to meet the certification standards established by Textile Exchange and certified by Control Union.

Cone Denim received RCS certification with this new process in March and will undergo a yearly audit to maintain its standing. www.conedenim.com

Trützschler Marks 75 Years in Mönchengladbach

It’s time to celebrate for Trützschler: 75 years ago, the family business founded its headquarters in Mönchengladbach-Odenkirchen, Germany.

Now, it looks back on a long tradition of training young people. The site in Mönchengladbach is officially threequarters of a century old – and is still a dynamic place to work. To keep it that way, Trützschler is looking for motivated young employees.

Trützschler is what one might call a hidden champion. Experts from the textile sector know the company as the world’s market leader for spinning preparation. However, people outside this industry are often unaware of what happens behind the walls of the headquarters in Mönchengladbach. And those people include school and university students, as well as young professionals.

Trützschler textile machines don’t make jeans or T-shirts. Instead, they play a key role at the beginning of the textile value chain. Their goal is to clean, blend and structure raw materials like cotton to make a uniform sliver that is then spun to create a yarn.

The company’s main customers include spinning mills from all over the world who use Trützschler technologies in a wide range of different applications. Trützschler supports its customers with recycling textiles and producing sustainable yarns from production waste or old textiles. The company also provides its customers with advantages when it comes to digitalization, which plays a central role in global markets. Examples include intelligent and self-optimizing machines, as well as digital platforms for optimizing processes and saving resources.

www.truetzschler.com

Celliant with Repreve Earns Prestigious Recognition

Materials science company Hologenix announced that CELLIANT® with REPREVE®, a performance fiber made from recycled materials and enhanced with IR technology, has been shortlisted in the Drapers Sustainable Fashion 2023 Awards.

Introduced with global textile solutions provider UNIFI® makers of REPREVE®, CELLIANT with REPREVE is honored in the Sustainable Textile Innovation Category of the awards. The Drapers Awards recognize the strides that are being made in reducing the industry’s environmental impact and creating fairer working conditions across the supply chain. Drapers, which is a leading authority on fashion retailing since 1887, said the quality and quantity of entries were higher than ever this year. Judging was underpinned by the UN-backed Sustainable Development Goals. Winners will be announced at a ceremony on May 25 at The Brewery in London.

This recognition is the second award for CELLIANT with REPREVE since its launch in the fall of 2022. Previously it was named a Selection in the Fibers & Insulation Category of ISPO Textrends Fall/Winter 2024/25. This is also the second year in a row that a Hologenix innovation has been shortlisted in the Drapers Sustainable Fashion Awards.

www.repreve.com

U.S. Producers to Plant 17% Less Cotton Than Last Year

The producers of U.S. cotton intend to plant 11.4 million cotton acres this spring, down 17.0 percent from 2022, according to the National Cotton Council’s 42nd Annual Early Season Planting Intentions Survey.

Upland cotton intentions are 11.2 million acres, down 17.3 percent from 2022, while extra-long staple (ELS) intentions of 184,000 acres represent a 0.5 percent increase. The detailed survey results were announced today during the 2023 National Cotton Council Annual Meeting.

Dr. Jody Campiche, the NCC’s vice president, Economics & Policy Analysis, said, “Planted acreage is just one of the factors that will determine supplies of cotton and cottonseed. Ultimately, weather and agronomic conditions are among the factors that play a significant role in determining crop size.”

Using five-year average abandonment rates along with a few state-level adjustments to account for current dry conditions, Cotton Belt harvested area totals 8.8 million acres for 2023 with a U.S. abandonment rate of 22.6 percent. Using the five-year aver-

Purecare Launches Premium Celliant Viscose Bedding

Purecare, the wellness-focused bedding essentials manufacturer and category leader, has launched sheets and pillowcases with CELLIANT® Viscose, the first time the fiber has used been in luxury bedding products in a new offering aptly named the “Recovery Collection.” CELLIANT Viscose, which converts body heat into infrared energy, promotes local circulation and helps regulate body temperature so you sleep more comfortably and wake up refreshed and rejuvenated. It is also a unique combination of nature and performance, as the CELLIANT bio-responsive minerals are embedded into plantbased fibers.

Developed by materials science innovator Hologenix®, creators of CELLIANT, and Kelheim Fibres, the leading manufacturer of viscose specialty fibers, CELLIANT Viscose is the first in-fiber sustainable infrared viscose. This sustainable solution provides all the benefits of being a viscose fiber – lightweight, soft, highly breathable, excellent moisture management — as well as the fiber enhancements from CELLIANT infrared technology. CELLIANT has been clinically demonstrated to promote faster recovery and restful sleep, as it improves local circulation and cell oxygenation, enhancing thermoregulation and comfort.

Offered at retailers across the nation and online, the collection is available in five popular colors: dove gray, ivory, clay, moss, and sage in Queen through Split California King sizing and Queen and King pillowcases. The Precision-Fit® corners on the fitted sheets have a one-inch elastic cuff to ensure that they stay securely on the bed. The sheets are also compatible with adjustable base mattresses. The Recovery Collection sheets and pillowcases are also treated with Antimicrobial Silver Product Protection (AgCI).

www.purecare.com age state-level yield per harvested acre generates a cotton crop of 15.7 million bales, with 15.2 million upland bales and 466,000 ELS bales. www.cotton.org

The NCC questionnaire, mailed in mid-December 2022 to producers across the 17-state Cotton Belt, asked producers for the number of acres devoted to cotton and other crops in 2022 and the acres planned for the coming season. Survey responses were collected through mid-January.

INDA Announces Vibrant Program for World of Wipes

NDA, Association of the Nonwoven Fabrics Industry has announced the program for the World of Wipes (WOW) International Conference, July 17-20, Atlanta, Georgia. Key topics include: Plastics policy: closing the ‘intention-action’ gap, sustainable manufacturing practices, what consumers think about sustainability and how they are driving cultural change, supply chain transparency, wipes advancements, flushability developments, and a special CEO panel sharing their organizations’ approach to inflation, supply chain challenges, and capacity/ demand balance.

Among the leading organizations presenting at this year’s event are: Berry Global, Birla Cellulose, Bringabouts, Bureau Veritas, Diamond Wipes, Freudenberg Performance Materials, Glatfelter, Goodwipes, Kimberly-Clark Corporation, National Cotton Council, Mango Consulting, Plastics Industry Association, Rockline Industries, Sharon Laboratories, and Trützschler Nonwovens. Program and speaker details are available on the WOW website.

Two new features at WOW this year are Lightning Talks and Lunch Around. Lightning Talks are an opportunity for tabletop exhibitors to highlight their innovations in “supersized elevator speeches” to WOW participants. Lightning Talks will take place before the tabletop exhibits open Tuesday and Wednesday evenings. The Lunch Around opportunity connects participants and thought leaders from the wipes industry at select downtown Atlanta restaurants on Tuesday and Wednesday. Space is limited and is first-come, first-served.

WOW kicks off with the Wipes Academy, a comprehensive course including elements of market research, materials, chemistry, converting, and regulatory filing. This course has been redeveloped to include all aspects of wipes development from concept to commercialization.

The Wipes Academy is led by Heidi Beatty, chief executive officer, and Paul Davies, Ph.D., Consultant, Crown Abbey LLC. Ms. Beatty and Mr. Davies bring decades of practical experience to give participants real-world solutions for product development challenges and tools to improve processes.

Registrations and tabletop exhibit reservations are open with early registration discounts offered until June 5. Nominations will be accepted for the World of Wipes Innovation Award until May 5, 2023. For more information or to nominate, visit: www.worldofwipes.org